Abbott Laboratories said Wednesday it would eliminate 1,900 employees to keep profits up, indicating that one of the pharmaceutical industry's few success stories of recent years is not immune to cost pressures squeezing the sector.
Abbott to eliminate 1,900 employees
The maker of drugs and devices said the terminations involve U.S. marketing and manufacturing positions. The cuts, which represent about 2% of the company's work force, are expected to save the company $200 million annually in coming years. Abbott blamed the cuts on new fees and pricing pressures associated with the health reform law and a "challenging regulatory environment" at the Food and Drug Administration, which approves new drugs.
"I think the characterization of the tougher economy, pressure on utilization, pressure on budgets, pressure on pricing, pressure on access or the regulatory systems—I think all of those things continue. I would not forecast they get better," said CEO Miles White, on a call with analysts.
Abbott, based in North Chicago, Ill., has steadily increased its revenue year after year, even as most of its pharmaceutical peers have watched sales fall as patents on blockbuster drugs expire. And while the company's multibillion dollar, anti-inflammatory drug Humira continued to deliver in the latest quarter, Abbott has stumbled in efforts to develop new therapies.
The company has also wrestled with high profile safety problems in the past year. It pulled its diet drug Meridia from the market in October because of heart risks, only one month after it recalled millions of containers of its best-selling Similac baby formula because of possible contamination from insect parts.
Despite these and other challenges, the company continued to deliver double-digit earnings and profit growth in the fourth quarter, meeting Wall Street's expectations.
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