By cutting costs, Merck (NYSE:MRK) was able to increase adjusted earnings per share by 6.6% for the third quarter despite sales decreasing 2% and income from partnerships with Schering-Plough (NYSE:SGP), Sanofi-Aventis (NYSE:SNY), and AstraZeneca (NYSE:AZN) dropping a whopping 13%.

What's its new plan of attack? Cut some more. Merck is planning on cutting 12% of its workforce in the hopes of saving $4 billion through 2013. I'm all for cutting the bloat, but there's a reason why the bloat is there and Merck has had to temper its long-term profit forecast: The sales just aren't materializing.

With the exception of Januvia, which is competing really well with Takeda's Actos and GlaxoSmithKline's (NYSE:GSK) Avandia in the crowded diabetes market, Merck doesn't have many solid growers to make up for drugs as they go off patent. Sales of Vytorin and Zetia were down 15% each, and sales of human papillomavirus vaccine Gardasil were down 4%. That's just not going to cut it in an environment where Merck's blockbuster osteoporosis drug Fosamax lost half its sales because of generic competition.

The recent potential offerings from the pipeline seem to have fizzled as well. The Food and Drug Administration turned down its cholesterol-lowering drug Tredaptive/Cordaptive, and Merck has abandoned its anti-obesity drug taranabant.

It's impossible for a company to cut its way to higher growth forever, so investors should be very leery of Merck's long-term plan. It's in a generally recession-resistant industry, but I can't see Merck getting much of a pop as the economy turns around. Fat dividend or not, Merck is going to have to find a way to get more drugs onto the market or get its current offerings growing again before I'll invest.

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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.