Consolidation: How's it Working (or not) for Big Pharma?
Posted on Fri, Aug 13, 2010 @ 11:39 AM
After the business challenges of 2009 and what remains a 
precarious economy this year, we at JFK Communications feel fortunate to be growing again in 2010. And it's starting to look like while the national unemployment numbers remain unacceptably high, the US economy is at last beginning to show signs of improvement.
To me, the US healthcare industry in general and the pharmaceutical, biotechnology and medical technology industries in particular have always been bright spots on the economic landscape, whether times were good or bad for the country overall. The past few years, however, have been a very different story as we all know.
On the jobs front, I was both surprised and disappointed to learn recently that for the first half of 2010, the US pharmaceutical industry has eliminated approximately 35,000 positions. This is on top of the nearly 60,000 pharma jobs that were eliminated during 2009.
Industry pundits will offer up many reasons for why these job cuts had to be made, not the least of which is the dire economic conditions. But the pharma bloodletting started well before the US economy tanked, and job eliminations in the pharmaceutical industry look set to continue in spite of improving economic conditions.
I think many of the industry's current woes are the direct result of the seemingly endless drive toward consolidation, attempts to create "economies of scale" and getting bigger because it seems that well, that's all big pharma can think to do right now to try to fix its problems.
Consider the following questions:
- Has the US pharmaceutical industry become a more dynamic, enjoyable and opportunity-rich place for people to work, or has it become less so as the result of increased consolidation?
- Is the world really better off without such great companies (and places to work) as Pharmacia, Lederle, Parke Davis, Warner Lambert, and Searle, to name just a few?
- Are more innovative drugs being brought to market in the US as the result of pharma industry consolidation and the existence of fewer, but larger pharmaceutical companies?
- Has industry consolidation improved the overall financial health of big pharma companies over the past 20 years?
- What about healthcare costs? Are patients paying any less for their drugs these days?
The culture of consolidation permeating the pharmaceutical industry has impacted every operational area, including how these companies purchase creative services such as advertising, public relations, market research, digital communications and graphic design. In many cases, smaller to mid-sized independent healthcare communications agencies have lost out to mega-sized communications conglomerates such as WPP Group, Omnicom, Publicis and Interpublic Group. These groups have all benefited by entering into "preferred provider" agreements with big pharma companies. I like to think of this trend as the "Walmart-ization" of healthcare communications.
Do marketing directors and brand managers at pharmaceutical companies with preferred agency networks enjoy being told which agencies they have to work with?
And last but not least, it makes me wonder: when has removing competition from the equation ever been good for business?
--David Avitabile