In the last few weeks, Moderna announced that it’s cutting 10% of roles in its digital departments, just months after scaling back research spending by 20%. Biogen took a similar approach in January, reducing its research team. Johnson & Johnson laid off over 200 employees at its headquarters in October. And they’re far from alone – large pharma companies and dozens of smaller biotech firms are slashing jobs or shutting down entirely as the industry faces continued financial pressures.
These layoffs reflect two distinct forces shaping the pharmaceutical sector. On one hand, companies are making adjustments tied 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 are 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.
Unfortunately, layoffs have been a familiar reality in pharma recently, and one I have discussed in a previous column. For the past two decades, 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 done often creates new inefficiencies elsewhere. In pharma, as in any complex industry, cutting jobs doesn’t just trim excess; it can weaken productivity 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 remaining employees are stretched thin, leading to delays, errors and lower productivity.
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 in these areas could put future products at risk.
Companies must assess whether they are eliminating roles that will be difficult to replace when the market rebounds. 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.
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. Broad benchmarking across companies too often leads to mediocrity because the exercise fails 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.
