Novartis, however, plans to disclose more about the restructuring by mid-month and elaborate further in February, the paper writes, adding that the restructuring will involve some job cuts, but Vasella declined to say how many. In an October briefing for analysts, Novartis execs said there would be 240 jobs cut in US HQ functions, and 510 sales reps and 510 contracted reps positions eliminated, for savings of $230 million.
In his latest remarks, Vasella tells the paper that Novartis must become less bureaucratic to handle new challenges facing pharma - aggressive competition from generics; increasingly safety-conscious regulators; and more cost-conscious payers such as state health-care systems and insurers, the paper writes, adding that these factors hurt Novartis's earnings in the third quarter and will contribute to leaner earnings going forward.
Novartis is one of several big drugmakers to cutback - AstraZeneca, Pfizer, Bristol-Myers Squibb, Glaxo and Johnson & Johnson have all announced layoffs in the past year. And Merck and Wyeth continue to trim selectively as part of ongoing savings programs.
As the Journal reminds us, the changes at Novartis will follow recent management changes and comes after a tough year for Novartis. The drugmaker, the paper notes, faced generic competition on some of its biggest drugs and failed to gain FDA approval for two new products. Earlier this year, it also was forced to withdraw from the US and Swiss markets its drug for irritable-bowel syndrome, Zelnorm, after safety concerns.
"Now that we had quite a difficult year, a challenging year after so many years of gaining market share and growing very dynamically, we have an opportunity now," Vasella tells the Journal. "When things get tighter, and you get more pressure, then it's much easier to say, 'Look, it's just not going to continue this way. We need to rethink the way we do it.'"
One new rule Vasella has set: There should be no more than six layers of employees in any Novartis division, from the lowest-ranking person up to the division head. Novartis has four divisions: pharmaceuticals, generics, vaccines and diagnostics, and consumer health, which includes over-the-counter medicines.
Vasella says he realized the pharma division, in particular, was bogged down with bureaucracy after he had recent lunch with a group of its employees. One midlevel manager mentioned there were six layers of employees below him, which surprised Vasella. The reorganization will also cut costs from Novartis's procurement activities. One area that will come under particular scrutiny: Novartis's use of third-party companies that oversee clinical drug trials. The clinical research organizations, or CROs, are a huge expense for Novartis.
Source: The Wall Street Journal