The Business of Diabetes: Diabetes OC Bloggers Influence the Media

Several weeks ago, The Wall Street Journal Health Blog wrote that the State of New Jersey had given more than $65 million in subsidies to Bristol-Myers Squibb, Pfizer and Novartis in the name of economic development over the past 11 years. But recently, those three drug makers turned around and laid off employees in the Garden State.

Unfortunately, New Jersey is hardly alone in the largess extended to the drug industry only to be screwed by the industry while company executives ran away with boatloads of stock options, cash and other perks. Yesterday, pharmaceutical company Eli Lilly and Company announced that the company would be eliminating 500 jobs in its hometown of Indianapolis. Those Indiana jobs would primarily impact affect sites that manufacture active pharmaceutical ingredients for the insulin products Humalog® and Humulin® and for the osteoporosis medicine Forteo®. Initially, the Indianapolis Star reported the news as follows:

Lilly to eliminate 500 jobs in Indianapolis
By John Russell, Indianapolis Star
April 16, 2008

Under pressure to reduce costs, Eli Lilly and Co. said today it plans to cut up to 500 jobs in Indianapolis through a buyout program.

The cuts, which will take place in coming months, would bring Lilly's headcount in Central Indiana to about 12,000, down from more than 14,000 in 2004. It represents the largest single job-reduction action by Lilly in Indiana in recent years.

Most of the cuts, up to 430 jobs, would come in the company's manufacturing operations, at facilities that make the active pharmaceutical ingredients for insulin products Humalog and Humulin as well as for the osteoporisis medicine Forteo. The remainder of the cuts, up to another 70 jobs, would come from Lilly's research and development operations.

"For several years, we have focused on strategic efforts to lower costs, increase flexibility and improve productivity across the business," said John C. Lechleiter, Lilly's president and chief executive, in a statement. "This strategy calls for reducing investments in some areas while increasing investments in others, and the streamlining decisions announced today are an example of this."

The Indianapolis based drugmaker said it is not shifting the jobs or production elsewhere, or hiring new outside vendors to take over the manufacturing. The move is designed to realign manufacturing capacity in certain products, Lilly spokesman Phil Belt said. The company's manufacturing has become efficient and productive in recent years, reducing the need for workers, here.

"It's not as if we're picking up these jobs and moving them somewhere else," Belt said.

The company's decision last month to abandon its inhaled insulin program contributed to the decision to reduce manufacturing headcount here, Belt said. The experimental drug was in late-stage clinical trials.

From a peak worldwide employment level of 45,800 in 2004, Lilly has reduced its global headcount by 12 percent, or about 5,500 people. Most of the cuts have come by not filling jobs that became vacant through retirement and resignation.

Lilly said it will take an accounting charge in the second quarter, but the amount has yet to be determined. It will depend upon the number of employees that choose to take the exit package, the company said.

Frankly, I couldn't believe what I'd read, and blaming the discontinuation of inhaled insulin was a convenient excuse, but the numbers just don't add up. As my readers know, telling locals that they aren't shifting the jobs elsewhere is a complete lie. In February, I reported that Lilly had been outsourcing the manufacture of Humulin and Humalog to Hospira, Inc.'s "One 2 One Contract Manufacturing Services" (known previously as Abbott Laboratories' One2One Global Pharmaceutical Services which was spun-off as an independent company in 2004). I made a point of posting a comment on the Indianapolis Star's article to point that out (my comment was done under the name "CScott"). Here's what I wrote:

Indiana residents have been scammed by the greedy execs at Lilly. The huge loss in Lilly's market share (down to 43% in 2005 from 82% in 2000) for insulin explains why the company pulled out of plans to build a facility in Virginia last year. But in the latest news release, the company was careful to imply that they weren't shifting these jobs elsewhere.

Since 2003 at least, Lilly has had FDA-approval for Hospira, Inc. (formerly Abbott One2One, which was spun-off as an independent company in 2004) which is based in McPherson, KS to make Humulin and Humalog for the company (the company still operates its own manufacturing facilities in Puerto Rico & France). But the outsourcing documents are on file with the Food and Drug Administration.

It's going to take more than some fancy insulin pens to turn this sagging business around, and shareholders should question the company's rosy forecasts for the diabetes business -- most of Wall Street is already skeptical.
4/16/2008 4:10:51 PM

Wouldn't you know it, the Indy Star article by John Russell was re-written to talk about how Eli Lilly and Company had been outsourcing jobs to third-parties, yada yada yada ...

Next time, I'll certainly include more personally-identifiable information so I can get attribution! I should have known better. In January, Peter Rost at the now-defunct blog BrandWeekNRx reported that mainstream media journalists monitor blogs on a regular basis, and perhaps reporters at the Indy Star read the comments posted on their articles. I don't really don't mind in this case, but next time I'll know better!