A Sign of the Pharma Times

You should have seen the job cuts coming. Merck's (NYSE: MRK) cholesterol-drug marketing partner Schering-Plough (NYSE: SGP) cut jobs last month. On top of that, Merck's best hope for recovery vanished when the FDA failed to approve its backup cholesterol-lowering drug last week.

The 1,200 positions that Merck is cutting are all in the U.S. sales department. The company hasn't mentioned how many of those were hawking its cholesterol-lowering drugs. You'd have to guess it's probably a large number of them. After all, doctors probably aren't that interested in getting information from the sales reps about Vytorin after cardiologists recommended that it be used only as a last resort.

The company gave another reason for the cuts: It has launched eight drugs over the last couple of years and some of them are at the point in their cycle where cutbacks are required anyway. Even rose-colored smoke means there's a fire to be put out.

I don't think there's any good way to spin this, except to say it's a sign of the times for big pharma -- Wyeth (NYSE: WYE) cut a similar number of sales reps in March. As drugs go off-patent and safety or efficacy data comes to light, you shouldn't be surprised by further cuts from other drugmakers.

The disappointments at Merck are going to hurt revenue for quite some time. However, it is doing what needs to be done, cutting expenses so that earnings won't be hurt as badly. Small consolation for the soon-to-be former employees, but necessary for the company. It's probably going to be a long road back, but it's one that Merck has driven before.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.