Merck Initiates Major Workforce Reduction as Part of Cost-Cutting Strategy

Pharmaceutical giant Merck has begun implementing its recently announced cost-cutting initiative, starting with significant layoffs at its New Jersey headquarters. The move is part of a broader industry trend of major pharmaceutical companies streamlining operations in response to market pressures and patent expirations.

Merck's Workforce Reduction Plan

Merck has started its 8% workforce reduction plan by laying off 58 employees at its Rahway, New Jersey headquarters. This initial round of cuts, reported in a state Worker Adjustment and Retraining Notice (WARN), will take effect on November 14. The layoffs are part of Merck's larger strategy to reduce its global workforce by approximately 6,000 employees, affecting administrative, sales, and R&D positions.

The company aims to save $3 billion annually by 2027 through these cost-cutting measures. Merck has stated that it will eventually "hire employees into new roles across strategic growth areas of the business," indicating a shift in focus rather than a simple downsizing.

Industry-Wide Cost-Cutting Trends

Merck's actions reflect a broader trend in the pharmaceutical industry, with several other major players also implementing significant cost-reduction strategies:

• Bayer has reduced its headcount by more than 12,000 over the last two years, aiming to save 2 billion euros ($2.3 billion) through 2026.
• Bristol Myers Squibb has launched a "strategic productivity initiative" targeting $2 billion in cost savings through 2027.
• Pfizer has increased its cost-cutting program, now aiming to save $7.7 billion through 2027.

These industry-wide efforts underscore the challenges facing pharmaceutical companies as they navigate patent expirations, increased competition, and evolving market dynamics.

Merck's Market Challenges

The workforce reduction comes as Merck faces significant market challenges. The company is preparing for biosimilar competition to its blockbuster cancer therapy Keytruda, which is expected to begin in the U.S. in 2028. Keytruda's dominance in Merck's portfolio was highlighted in recent financial results, with the drug's quarterly sales of $8 billion accounting for more than half of Merck's total revenue of $15.8 billion.

Additionally, Merck is grappling with a sharp decline in sales of its HPV vaccine Gardasil. Second-quarter sales of Gardasil plummeted to $1.1 billion, down from $2.5 billion in the same period last year, primarily due to decreased demand in China.

Despite these challenges, Merck emphasized its continued commitment to New Jersey, stating that it still employs more than 8,000 people in the state and has invested nearly $3 billion there since 2018.