Tuesday, June 10, 2008

GSK whacks its employees, hard

"The results of a stupid person performing the functions of a smart person will be mostly stupid." - Felix Fulmer.

Apparently, GSK's senior managers believe the Path to Greatness is through downsizing.

At "GSK: Money-Green Outside, Pink-Slip Inside", medicinal chemist and blogger Derek Lowe reports massive layoffs today and tomorrow at GSK, largely in R&D. What is interesting is a near complete radio silence on this; for example, as of 10 PM EST June 10, Google news shows nothing about this on the query "GSK."

Some of the comments made by readers of Lowe's "In The Pipeline" blog caught my attention. These are:

anon on June 10, 2008 1:23 PM writes...

Apparently, this [the layoffs - ed.] may have been foreshadowed by someone back in October 29, 2007: see http://www.cafepharma.com/boards/showthread.php?p=1969761

10-29-2007, 10:11 PM

An honest insider post, the REAL future at GSK.....I have had access to executive level discussions regarding the GSK layoffs. I am posting this information from an anonymous "business center" computer location. I won't say anymore, except that my credibility is legitimate.

I understand that rumor, speculation, and misinformation is running rampant right now through out the entire GSK organization. I feel that the lack of communication with our sales force regarding the true intentions of this company is regrettable. I personally know quite a few of the excellent employees of GSK that will be terminated.

I am dismayed that executive level management has so little regard for the employees welfare. Yes, I remember the Zantac Hawaii trips! This is why I am being honest with you.

GSK is planning a second round of layoffs that will occur immediately before second quarter earnings are announced in 2008. Projected sales forecasts for Avandia family over the next six months are dire.

The current layoff scenario has been structured to appease shareholders and Wall Street analysts.

The layoff in 2008 will be attibuted to the new management team. They hope to be given credit by the Street for taking decisive action in the face of declining revenue. This may shore up the stock price at that time.

So you ask, "Why not just lay every one off now?" There is a good answer. The GSK Senior Executives very closely studied the Pfizer layoff from last year. Do Executives from different companies talk with each other? Yes, they do. Pfizer management noted that after the layoff, a significant portion of the sales organization was demoralized. This resulted in many subsequent resignations as Pfizer sales people found new jobs on their own. This resulted in Pfizer not having to pay these people severance packages. The net: Pfizer saved a tremendous amount of money by having a layoff followed by enhanced attrition.

GSK is planning the same situation. This is why the current layoff in not as large as it really needs to be. Two smaller layoffs is more cost effective than one large one.

I have been honest with you. If you survive the current layoff, there is no guarantee you will survive the next one in June 2008. Plan for your future accordingly.

I realize on Cafe Pharma some people will bash this information as false. However, you might be surprised how many people in VERY senior management read this board. They need to know that some managers still care about the employees. The point is, do what is best for you and your family.

I have to admit, it is sad to see what has happened to this once great company. I really hope GSK can recover, but nothing is guaranteed. Best of luck to all of you.

Apparently, this "leak" was quite real.

This also caught my eye, though it is quite severe in its characterizations:

satan on June 10, 2008 2:33 PM writes...

This is what happens when MBAs and other sociopathic losers run any company. Unfortunately most traditional industries in the US and the western world are affected by these sociopaths. Some may object to that term- but let us call this particular evil by it's real name.

They infest companies, destroy the existing good stuff, stop real innovation, bring in their helpers, pillage it for their bonuses, kill the host and move on - not unlike viruses. However most people, including shareholders, do not see it for what it is - parasitic infestations. They still bask in the BS about creative destruction in capitalism.

Wake up, this is about oligarchy, extreme short term profit for a select few and control. In the end it will ruin everyone, including those who initially profited from it.

But I guess ultimately human beings get the society they want and deserve.

The pharmaceutical industry is indeed in sad shape. Why this is so is no mystery.

Mismanagement in such a complex industry by people often seemingly more interested in short term profit and their own personal gain, and in kissing the ass of Wall Street instead of long term goals of actually discovering, developing and marketing innovative new drugs and advancing the frontiers of science, is apparently a feature of the landscape.

While there are many rationalizations about why we have such a situation, and while some of the rationalizations contain many reality-based truths, you'd be nuts to believe such an arrangement could actually produce good results.

I can only hope the GSK people responsible for the informatics debacle here: link - got the axe.

I have been speaking with policy makers with a major role in overseeing the pharmaceutical industry recently. If I am able to work with them, one of my first goals will be to convince them that an essential effort required to salvage the industry will be to promote rigorous scientific, informatics and other competency qualifications for the leadership of the companies, and for the leadership of the regulatory agencies.

-- SS

Addendum: Lowe at "In the Pipeline" blog reports the numbers coming from Reuters were low overall. However, Lowe offers additional criticism that is worth reading.


Anonymous said...

This issue needs to be looked at in the broadest terms, and while the GSK example highlights one company, we see these short comings in the entire industry. The June 3d WSJ highlights Pfizer's ability to maintain it's dividend. Issues include the coming end to the statin cash flows. Lack of new product, and some interesting business decisions that will make it hard for Pfizer to tap existing cash.

Pfizer's problem is it holds large cash positions off shore. Patents being intellectual property are moved to countries with favorable tax treatment. We also see production being moved off shore resulting in profits being held out of country to avoid US taxes. The only support for the current stock price is the dividend. This after the American people are told they must pay more for their medications in order to support not only R&D, but the corporations supplying these new wonder drugs.

We need to look at the downfall of major medical centers such as UCLA, UPMC mentioned in the comments, and most recently Harvard, covered in a number of articles including the WSJ Health Blog,June 9, 2008, Harvard Psychiatrists Under Fire for Drug-Company Funding. Here we have doctors who have lied to their patients by not informing them of the large financial support they are receiving from pharma. They have lied to their employer's by not revealing these payments, even when asked specifically to do so. going back through hcrenewal we see this pattern repeated time and time again.

Five years ago, at 48, I was presented with a laundry list of drugs by a doctor with no test and no exam. When questioned as to the why, the doctor informed me my insurance would require me to take these medications by 55 regardless of need. The May 28th WSJ Health Blog highlights how 1.5M Brits are instantly going to qualify for statins due to new guidelines. Dr. John Crippen NHS Blog Doctor has an interesting take on this in a May 28th posting, The Statin Police, regarding personal choice and the appropriateness of guidelines.

The pursuit of financial gain has left medicine ethically bankrupt. The other side of the coin is my MBA friends and I hate meeting many doctors in social settings. The reason being is they want simply buzz word filled solutions to business problems, similar to the hype they are subject to regarding drug sales. We do not posses the depth of knowledge or time necessary to properly discuss the issues over a drink. This does not stop them from making derogatory comments about our business abilities, sighting pharma's solutions and concern for their businesses, missing the whole point of our reluctance to make grandiose proclamations about what course of action they should take.

Steve Lucas

InformaticsMD said...

The pursuit of financial gain has left medicine ethically bankrupt.

Healthcare needs an enema.