The recent spate of job cuts in the past several months is proving to be pretty painful to the medical device industry--and a band-aid isn't going to help heal this wound.
This month, medical device industry giant Medtronic was the latest to land on the layoff list in light of workforce reductions in its Memphis-based spinal division as well as across its global operations. But the medtech powerhouse, sadly, is not alone in reducing headcount as a means of cutting operating costs. Citing factors ranging from the need to offset the costs of the polarizing medical device excise tax and struggling business units to the desire to consolidate manufacturing, many medical device manufacturers are looking to layoffs as part of the solution. As we move rapidly toward the midway point of 2013, MPMN reviews some of the hardest-hitting medtech job cuts announced this year.
Following turbulent times that resulted in sweeping layoffs in 2011 and 2012, Medtronic's enduring employees were likely hoping for a smoother 2013. And yet, despite a relatively optimistic quarterly earnings report last week, the company announced that it would be slashing additional jobs worldwide. Of the estimated 2000 cuts, approximately half will be domestic and a whopping 500 positions will be axed from Minnesota alone, according to the Minnesota Star Tribune. Included in that worldwide tally, however, are the previously announced 230 domestic and overseas positions that were eliminated earlier this month from Medtronic's struggling spine business. In fact, the Star Tribune reports that 65% of the cuts have already occurred; the remaining cuts will take place in Medtronic's FY2014, which just began. Primarily affecting the company's sluggish spine and cardiac businesses, these restructuring efforts are predicted to yield somewhere in the ballpark of $200 to $250 million in annual savings. "These are never easy decisions, but are necessary in order to increase investment in our faster-growing opportunities," Medtronic chairman and CEO, Omar Ishrak, noted on the earnings call.
Setting a somber tone for 2013 right out of the gate, Boston Scientific revealed during the company's 2012 Q4 and year-end earnings call in January that it planned to further reduce its workforce this year. "The company also announces an expansion of its 2011 restructuring program intended to build on the progress made under that program to strengthen our operational effectiveness and efficiencies and support new growth investments, which we expect will increase shareholder value," the company stated in a press release. Despite dressing up the bad news in flowery language, Boston Scientific's "expansion" plan boils down to the elimination of 900 to 1000 positions worldwide through a blend of attrition and reductions. And as if this blow in what was starting to seem like an endless string of layoffs wasn't enough, tongues were wagging once again mere days after the announcement in response to a posted state report indicating that Boston Scientific had quietly eliminated an additional 500 jobs in Minnesota last August. These 2013 deeper cuts to an already ravaged workforce are expected to reduce annual pretax operating expenses by roughly $100 to $115 million by year end while the restructuring efforts--2011 through the end of 2013--are predicted to result in a savings of $340 to $375 million.
Like its powerful peers, Abbott Labs has issued its fair share of pink slips during the past few years as part of a multiyear strategic staff reduction plan. And Abbott Vascular, in particular, has been plagued by workforce reduction woes in 2013. In February, Abbott shed 200 positions from the permanent workforce at its facility in Clonmel, Ireland, while also opting not to renew a number of contract positions. Soon after, 450 workers at Abbott Vascular's Temecula, CA, plant were unceremoniously relieved of their roles. This round of layoffs came one year after a mass cut at the facility last January that left 300 medtech professionals jobless. Despite the multiple waves of reductions at the Temecula plant, the company has repeatedly emphasized its importance to the future of the business as a manufacturing site for the company's trend-setting bioabsorbable scaffold, the Absorb.
Smith & Nephew
UK-based orthopedics and sports medicine specialist Smith & Nephew handed close to 100 employees their walking papers earlier this year. While the numbers aren't quite as devastating as those of Boston Scientific or Medtronic, this particular round of layoffs nabbed headlines because it blamed the cuts on the controversial 2.3% medical device excise tax and, in turn, provided ammo to critics of the device tax. "[The tax] has impacted a number of companies across the U.S. Smith & Nephew is not immune from this added expense burden," Joe Metzger, Smith & Nephew's senior vice president of corporate communications, told The Memphis Daily News. "Unfortunately, and in order to absorb this cost burden into our business, this has meant less than 100 positions have been made redundant across various departmental functions in our Tennessee and Massachusetts sites." The catch: Smith & Nephew's CEO backpedaled a few days later, downplaying the device tax's impact and stating that the layoffs were part of its value plan.
While these layoffs may have had a significant impact in 2013 so far, they aren't the only cuts that occurred in the medtech industry. Unfortunately, they're likely not the last, either.
But it's not all doom and gloom out there. Most of these companies have stressed that, despite the strategic cuts, they do have a plethora of open positions in various divisions; opportunities are out there. Moreover, there are a few bright spots amid the clouds: Edwards Lifesciences, which specializes in heart valves and hemodynamic monitoring, has expressed a desire to double its workforce at a facility in Utah over the next few years, according to a local newspaper. So, while head counts may be down, hopefully things are looking up for the medical device community.
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Shana Leonard is the executive editor of the UBM Canon MedTech Group.