The Korea Herald

지나쌤

GSK, Pfizer reduce Korean staff to stave off challenges

Lack of R&D, poor business climate force multinationals to restructure

By Korea Herald

Published : Dec. 17, 2012 - 20:53

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Top-ranking pharmaceutical companies in Korea are expected to prune their workforces in the face of challenges both at home and abroad including sluggish economic conditions and a number of deep-seated shortcomings that are finally being addressed.

GlaxoSmithKline, the largest pharmaceutical company in Korea in terms of sales, is planning to hand out early retirement packages to up to 100 employees ― more than 10 percent of its workforce of 750 ― before the year is over. The firm is currently receiving applications.

Pfizer, the country’s top seller of prescription medicine, is also planning to trim down in size, the first such restructuring since it first entered the local market in 1969.

Others, such as Bayer Korea, have already undergone personnel streamlining this year, while Janssen Korea, Sanofi-aventis Korea and Astrazeneca Korea are reportedly pursuing regular restructuring.

Many of the smaller multinational companies are likely to follow in their footsteps, industry watchers said, mostly in the form of frequent restructuring.

Some unions, such as BMS Korea, have been raising issues with the management.

The reason behind such unprecedented restructuring is not only unfavorable business conditions, experts say, but also the gradual aging of the global population that is prompting governments to push down medicine prices.

As of April this year, about 13,800 types of medicine saw their prices slashed by 14 percent. The cut was steeper for about 6,500 types of prescription medicine.

Companies are feeling the impact, but more importantly, the restructuring was inevitable due to the lack of willingness on the industry’s part for self-betterment, says Moon Hye-sun, a research fellow at the Korea Institute for Industrial Economics and Trade.

“Pharmaceutical firms have been far from working on improving their core competence through research and development. They have not been investing enough in product development,” she added.

While medicine makers in the past had no real incentive to reform as there were enough kickbacks to go around, the market has truly become competitive, Moon observed.

In other words, the industry is facing its first real moment of truth, and it’s either reform or die.

The companies appeared to share the opinion.

“The global and local management environment is changing, and we need to change with it,” said Yang Su-jin, a spokeswoman for GSK. The decision for this change, she added, was part of the company’s global management strategies.

Pyo Ji-hyun, a spokeswoman for Pfizer, said that there were certain changes and challenges in the global medicine industry that called for the company to adapt along with them.

Pfizer, so far, had been faring pretty well, industry watchers said, thanks to a wide-ranging global portfolio that includes Viagra, the erectile dysfunction treatment that catapulted the company to fame.

Coping with generic and biosimilar medicines

However, the heyday for some of the most popular medicine may be over because patent protection expires over time.

As this happens, biosimilar and generic medicine, which differ slightly in terms of patent matters but can both be less-pricey alternatives to the original, are flying off the shelves.

One example is Viagra. Between January and April, before its patent expired in May this year, Pfizer’s Viagra had shown average monthly sales of 2.1 billion won ($2 million). But in September, monthly Viagra sales were more than halved to 910 million won, according to market research company IMS Health.

“Generics and biosimilar medicine are all here to stay, and the companies must adapt accordingly,” said Moon. “The restructuring we are currently witnessing is a critical step in the right direction, and the firms that are left standing in the aftermath will lead the markets to become healthier and more sound.”

Experts expect the industry to eventually become more specialized according to the different fields culminating in the form of each company cultivating their own, indigenous field of core competence.

By Kim Ji-hyun (jemmie@heraldcorp.com)