The High Cost of Cutting Staff in Pharma if Done Improperly
The latest wave of pharma layoffs – at Moderna, at Biogen, at Johnson & Johnson and beyond – reflects the financial pressures reshaping the industry. Cuts have impacted digital departments, R&D, corporate headquarters, market access, and medical functions. And the cuts have been significant, often reflecting 20-40% of the workforce in specific areas.
These layoffs reflect two distinct forces shaping the pharmaceutical sector. On one hand, companies must adjust to natural business cycles – products lose exclusivity, some assets fail clinical trials and research programs are shut down when data doesn’t support continued investment. These are predictable risks inherent to the industry. On the other hand, companies are also responding to growing regulatory uncertainty and shifting reimbursement landscapes, which heighten financial pressures in ways that are harder to anticipate.
While layoffs may reflect difficult but necessary business decisions, how they’re executed and where companies choose to cut can have long-term consequences. Strategic workforce reductions can position companies for future success, but indiscriminate cuts risk eroding critical capabilities.
The biopharma sector has shed hundreds of thousands of jobs, and signs suggest that losses may continue to accelerate.
Beyond the numbers, these layoffs impact real human beings: scientists, researchers, and commercial teams who have dedicated years to bringing new treatments to the market. Each lost job represents lost institutional knowledge, disrupted careers and financial hardship for families.
The current wave of staff reductions largely reflects continued downward economic pressures from the government. The Inflation Reduction Act for example, has impacted the market since its passing in 2022, especially for high-cost specialty drugs. As companies assess the short and long-term implications of the IRA on their portfolios, they must make strategic adjustments to preserve margins. Lower projected returns on high-risk drugs have led to reduced investment and job losses in R&D and other areas. Companies that fail to approach these decisions strategically will find themselves at a competitive disadvantage.
Most organizations can afford a 10% efficiency cut, providing immediate financial relief, but how these cuts are made often create new inefficiencies elsewhere. In pharma, as in any complex industry, cutting jobs doesn’t just trim excess; it can undermine market value if critical roles and expertise are lost.
The real challenge isn’t just the layoffs themselves but whether they are executed in a way that strengthens or weakens the organization’s ability to compete. If done poorly, critical workflows are disrupted, institutional knowledge disappears and the remaining employees are stretched thin, leading to delays, errors, lower productivity, and employee burnout.
When entire teams disappear, so does expertise in navigating regulatory pathways, demonstrating product value to payers or making sure that promising therapies reach the right patients. Maintaining essential research capabilities is critical, especially those responsible for generating the economic and clinical evidence needed to secure higher levels of reimbursement. The bar for demonstrating a product’s value isn’t just about showing efficacy; companies must prove that new therapies offer meaningful advantages over existing options, including the standard of care. Cutting too deep into these areas could put future products at risk.
To reduce staff today and ensure sustained future performance, companies need to develop a clear, well researched and thought out strategic vision for the future. They need to employ this vision as a guidepost for re-designing their organization’s future state. They must assess whether they are eliminating roles that will be difficult to replace when the headwinds subside. Equally important, they need to make sure their assumptions about which competencies to retain in-house versus outsource are grounded in a clear understanding of market needs today and where they are likely headed.
Recent layoffs are a reminder that workforce planning must be strategic. Companies that take a measured approach, aligning talent decisions with long-term growth areas, will be better positioned for future success. While all companies across industries go through periods of transition that require difficult choices, including significant layoffs, the key is making cuts strategically.
The fundamental challenge is ensuring that workforce decisions support innovation, commercialization and value demonstration. Pharma must prove its products deliver better outcomes or lower costs to gain traction with payers and providers. Cutting headcount in the wrong areas now will put companies at a competitive disadvantage not just in the long term, but in the short term as well. Generic benchmarking across companies without clarity of functional comparison (e.g., activity value analysis, understanding the competitive set) too often leads to mediocrity because such exercises often fail to capture the nuances of what’s happening within specific functions in a given organization. Where a product is in its lifecycle determines what resources are needed, and a function that looks comparable on paper may operate very differently in practice, especially when one company relies heavily on outsourced partners for key functions.
Pharma companies need to keep their overhead expenses in line with expected revenues. To do otherwise would put their critical development projects as well as investor market support in jeopardy. But how they make these short-term decisions to manage the bottom line is critical to future success. These companies drive medical innovation, and gutting critical functions will have ripple effects for patients and the healthcare ecosystem.
While all companies across industries go through periods of transition that require difficult choices, including significant layoffs, the key is making cuts strategically. A leaner organization doesn’t always mean that what’s left has the competencies needed to meet emerging challenges. This is particularly true for pharma in the areas of Medical Affairs and Market Access, where historical biases tend to over-index on cuts to these functions in contrast to more traditional commercial or clinical development roles. Historically, Medical was seen largely as a support function with staff in these roles reacting to requests for information from prescribing physicians, presenting at Congresses, meeting with KOLs, and preparing publication strategies to support new products. The idea that Medical Affairs staff would be critical to market conditioning and instrumental as members of strategic account teams navigating the use of differentiated products to treat increasingly complex diseases is relatively new. And not all companies have an appreciation of the strategic value of Medical Affairs in representing the voice of the patient in clinical trial design. Given that business impact in pharma companies is registered in number of scripts written, a measure attributed to traditional commercial teams, the ‘value’ of Medical is often under- appreciated, and the function is subject to disproportional cuts.
Similarly, the function of Market Access is often undervalued, harking back to a time over a decade ago when it was believed that those in market access roles couldn’t make it in traditional sales functions. Negotiating contracts, especially in the U.S., 15 years ago wasn’t the complicated, data-based and nuanced challenge that it is today. To the extent that sales and marketing leaders who are tasked with making staff cuts bring a legacy mindset, Market Access will increasingly wind up being redistributed from a central core technical and strategic competency into specific brands under a commercial brand leader. Cutting edge market access expertise is likely to be diluted in a decentralized model and not seen as the tip of the commercial spear which is what it needs to be given the power of government payers globally and mega commercial payers in the U.S. Add to this the role of population based decision-makers in product adoption who are concerned about the quality of the evidence for specific products and overall portfolio negotiation rather than individual brands, the stage is set for value dilution.
Because Market Access requires a significant degree of sub-specialization, its expenses largely reflect payroll. Thus, the function is more likely to be disproportionately impacted by non-strategic benchmarking and across the board reductions. Organizations employing such approaches are most likely to trim the very staff required to obtain access and pricing that reflects the holistic value of their drugs. The risk is devaluation of future product launches.
Those executives who take a more nuanced, data-based analysis of the core competencies required to deliver short and long-term value for the products they bring to market will challenge conventional wisdom and resist efforts to take across the board cuts to get to a number. They will make surgical cuts to achieve needed savings and review functions that can be effectively outsourced while retaining critical strategic competencies. These leaders will create the right balance: managing short-term expenses while preserving the capabilities needed to navigate evolving market dynamics.
Authored by Rita Numerof, Ph.D. and Michael Ryan, PharmD.
Original article can be found here.