The $1.57 billion in annual cost cuts that drugmaker GlaxoSmithKline announced in October will take a more definite shape, possibly as soon as Wednesday, with Philadelphia-area employees among those at risk of losing their jobs.
Like other major pharmaceutical companies, GSK is still trying to adapt a decades-old business model to new realities in the complex health-care marketplace without forsaking the profits that investors of all sizes still expect.
"The aim of this program is to improve performance by taking unnecessary complexity out of our operations and establish a smaller, more focused, organization, operating at lower costs, that supports our future portfolio," GSK spokeswoman Mary Anne Rhyne said in a statement. "Each business unit is currently deciding how to respond to this challenge. When we do have proposals, we will first share those with our employees."
GSK, which is based in London, had 99,451 employees at the end of 2013, according to its annual report, with about 17,000 in the United States. More than 1,000 work at the Navy Yard. Others are employed in Upper Providence (Montgomery County), Upper Merion, Conshohocken, Marietta, Pa., and Pittsburgh, and in Parsippany, N.J. Most divisions of GSK are represented in at least one of those facilities, and sales representatives work in this area.
GSK also has about 4,500 employees in North Carolina and at a research facility in Boston.
In a conference call with financial analysts in October, CEO Andrew Witty said that "given the new pricing dynamic we're experiencing, particularly in the U.S.," the new restructuring would predominantly be in "commercial operations, R&D and support functions." He said there were no plans to cut the sales force, which was reduced in a previous round. Witty said the cuts would be completed by the end of 2016.
This year, GSK and Novartis signed a three-pronged deal that had GSK sending its current oncology-drug portfolio to Novartis in exchange for vaccines, cash, and a majority stake in a joint venture to sell nonprescription consumer products. Shareholders will vote on that deal Dec. 18, but it is unclear how employment numbers will shake out.
Witty took over in 2008, as a years-long Justice Department investigation of the company's selling practices began its final phases. In 2012, GSK paid a record $3 billion fine and admitted to criminal and civil charges.
Witty hired Deirdre Connelly as head of North American pharmaceuticals to help him install a compensation plan for sales representatives that reduced the commission-oriented incentive to sell medicine for unapproved uses, which helped lead to the problem. Philadelphia-based Connelly might address U.S. employees Wednesday, Bloomberg News first reported, though Rhyne declined to comment on that issue.
"We remain resolutely committed to our incentive compensation model and are on track to roll out this approach globally," Rhyne said Monday.