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Repercussions from the recent courtroom problems relating to the painkiller Vioxx and patent expiration have forced Merck to take cost-cutting action. In an effort to save money, the company has closed five factories and three research institutes, and will cut 7000 jobs.
Law suits and patent expiration take their toll
Repercussions from the recent courtroom problems relating to the painkiller Vioxx and patent expiration have forced Merck to take cost-cutting action. In an effort to save money, the company has closed five factories and three research institutes, and will cut 7000 jobs.
The company has already announced the plans for its restructuring programme, which is expected to save $4 billion a year by 2010. A new supply strategy will be implemented by the Merck manufacturing division during the initial stages of the company's restructuring in an aim to create a leaner, more cost-effective and customer-focused manufacturing model. It is anticipated that the initial phase will obtain savings of $3.5–4 billion from 2006 through 2010.
Merck makes job cuts to save money.
The job reductions will represent approximately 11% of the company's global staff, half of which will be in the US. These cuts are expected to be completed by the end of 2008. The sites identified for closure are expected to be shut by the end of 2008 subject to legal obligations.
A pilot programme is also being employed by the company in its pharmaceutical manufacturing site in Arecibo (Puerto Rico). The objectives of this programme are to reduce the on-site cycle time by approximately 50% and to condense the on-site inventory by 30%. This will start the global rollout of lean manufacturing principles that the firm will apply throughout its network.
The money-saving measures are also aimed at compensating revenues for the expiring patent on the cholesterol drug Zocor, which is estimated to drop by nearly 50% in sales this year.
Third World to receive generic drugs
An agreement has been ratified allowing generic drugs to be imported into developing countries to treat serious diseases and epidemics. The ruling by the World Trade Organization (WTO) will make permanent the temporary waiver to patent laws currently in place.
The waiver to TRIPS was introduced in 2003 and allowed poor nations with no manufacturing capacity to import generic versions of patented drugs from foreign countries under a compulsory licence system. The amendment will be the first to be made to WTO regulations in a decade. Previously, patents could only be broken on domestic drugs produced for the home market of a manufacturer.
The current system will remain in place until 1 December 2007, when all 148 WTO members should have authorized the amendment in accordance with national laws. To date, Canada, India and Norway have completed their laws, and the EU and South Korea will have the new laws in force shortly.
Under the amendment, developing countries will notify WTO of required medicines, and generic manufacturers will then have the opportunity to apply for a compulsory licence from the holder of the drug's patent. There are concerns whether the drug could be reimported for sale in developed countries instead of being distributed to the intended recipients. Safeguards against this have, therefore, been included by the organization.
The EU is supportive of the change believing that it is essential to the development package for poor countries and will help to lower barriers across many sectors. However, Médicins Sans Frontières has described the waiver as arduous and impractical, and claims that WTO has not proved that patient access to medicines will increase.
