Ann Arbor's experience offers U.S. lessons as Pfizer slashes jobs again
Pfizer, the pharmaceutical giant that slugged Ann Arbor's economy in 2007 by announcing that it would shutter its 174-acre campus here, is still slashing jobs.
Pfizer said Tuesday that it would cut another 6,000 workers, part of a continuous restructuring initiative attributable to changes in the drug industry and to Pfizer's January 2009 acquisition of fellow giant Wyeth.
The Kalamazoo region, where Pfizer still employs some 2,800 manufacturing employees, escaped cuts for now -- a welcome development for the west side of the state.
Pfizer scientists no longer lunch at the 107,000-square-foot cafeteria and office building on the north edge of the 174-acre campus in Ann Arbor, but some are still boosting the local economy.
Lon Horwedel | AnnArbor.com
But the latest Pfizer cuts -- which come weeks after the company reportedly decided to cut jobs at its New York City headquarters
-- serve as an awkward reminder of Ann Arbor's roller-coaster journey
since Pfizer abandoned the 2 million square feet of facilities in
northern Ann Arbor.
And Ann Arbor's experience offers lessons for the communities impacted by Pfizer's downsizing.
The local life sciences industry quietly took advantage of Pfizer's departure. Firms like Essen BioScience, Esperion Therapeutics and SoloHill Engineering hired ex-Pfizer scientists, capitalizing on a windfall of talent Pfizer's exodus created.
Essen
has even been altering its business model as a direct result of
Pfizer’s Ann Arbor decision. The firm, previously focused exclusively
on medical sales, is now offering clinical services to global companies
seeking to minimize their exposure to risky research. The company even
changed its name from Essen Instruments to Essen BioScience.
Essen,
which recently doubled its office space in Pittsfield Township, is now
expanding its personnel by about 30 percent annually. The firm expects
to grow from about 40 workers to about 100 within three years,
Schroeder said.
“Pfizer shutting down in Ann Arbor allowed us to
attract people to the company that have a lot of drug discovery
experience on the biology side,” said Kirk Schroeder, president of Essen. “It has been an opportunity for us.”
About one-third of the 2,100 people displaced by Pfizer's departure opted not to leave the area, according to estimates by Ann Arbor SPARK,
the region's economic development organization. SPARK has said that
ex-Pfizer employees launched about two dozen companies after Pfizer
left.
Some 15 of those companies were contract research organizations, according to a report by the Ann Arbor-based Michigan Venture Capital Association.
Ironically, CROs benefit directly from the contraction in the
pharmaceutical industry, as major companies often outsource research
and clinical operations to smaller companies.
Ann Arbor's recovery from Pfizer's departure is an ongoing effort. The University of Michigan -- which itself hired more than a dozen ex-Pfizer scientists and other workers -- acquired the campus for $108 million in June 2009, punching a significant hole in the city's tax base.
But the legacy of Pfizer's Ann Arbor cuts provides a pathway for other communities affected by the company's contraction:
--Develop a focused, strategic plan to entice workers to stay in the area and create new companies. Their expertise is a significant asset Pfizer is leaving behind. Take advantage of it.
--Find a role for a local university in revitalizing the abandoned property. U-M plans to add 2,000 to 3,000 jobs at the site over the next 10 years as it uses the complex to hasten its research expansion. Major pharmaceutical companies are no longer in expansion mode, so the chances of a global life sciences firm swooping in and acquiring an abandoned pharma property are few. In addition, the commercial real estate market has slipped into crisis mode, so redevelopment opportunities are slim without the help of a public entity that engages in early-stage research.
--Foster an entrepreneurial community that encourages risk-taking and helps laid-off workers to launch new endeavors. This type of environment is critical to ensuring that startup companies can succeed. Various initiatives by SPARK and the Michigan Small Business Technology Development Center have provided vital consulting services to Pfizer entrepreneurs.
--Don't lose hope. Even Roger Newton, who famously co-discovered Lipitor, was displaced when Pfizer exited Ann Arbor. But he regrouped, raised $23 million in venture capital and bought back his old company, Esperion, from Pfizer. Now, he has a chance to become one of the few people in the world to grow and sell the same company twice.
The ultimate takeaway is this: Ann Arbor didn't lose Pfizer.
Pfizer lost Ann Arbor.
Comments
Jen Baird
Sat, May 22, 2010 : 9:45 p.m.
Nice article, Nathan. It highlights some of the ways that the community rallied together to respond to a difficult situation. I hope that our area continues to develop its entreprenurial spirit and grows that part of our community that takes risks with the intention of making a positive contribution. Let's see if we can find the positives rather than just whining, folks! That's how the world gets better...one person, one action, one step at a time.
stunhsif
Thu, May 20, 2010 : 8:09 a.m.
@mentalnomad, Pfizer's pay and perks were/are way above the "norm" in the private sector and pay and benefits cost the compnay a lot more than the marketing of their drugs. @watchingypsi, I am in full agreement with you. I have a brother in law that worked for Pfizer for around 18 years. He held a bachelor's degree and was a research scientist. He had 5 weeks vacation, numerous personal days and never worked a friday from may through sept. He bragged about his generous 6 figure salary. He adopted a child oversees in a third world country and was provided assistance for that. At the end, he took a "buyout" which included a year of full pay a pension that pays roughtly 17 grand per year and healthcare till he dies. Not bad for 19 years. I, like you was amazed at their incredible pay and benefits. Despite all this, if that is the way Pfizer wants to do business then they will have massive layoffs when times get tough.
aa-mom
Wed, May 19, 2010 : 7:48 p.m.
I'm not sure what kind of friend you are,watchingypsi, gloating how your highly paid, low skilled friends (despite having BSs in Science) now are jobless or employed in lesser paying jobs. I was one of those BS Scientists and my work required quite a bit more than what one needed on an assembly line as you put it. The gourmet cafeteria and childcare did not come cheaply to the employees either. I couldn't afford to eat there regularly not did I have the time to do so. You must realize what a loss to the area Pfizer leaving Ann Arbor was. The employees were one of United Way's largest contributors. These 'overpaid' employees spent alot of their wages in the local businesses. Many volunteered in the local communities: I was one. I helped arrange for all the local 8th graders to come in for the SAMJAM program in which the kids got to see demos by real scientists. Many of the businesses now struggle or went under after they left. If you have a house, I am sure it is now worth much less than it was when Pfizer was here. I worked with good, intelligent people and I have no quarrel with them. Now management's idea to get rid of its most productive site, that's another story. In the 50s, all that land belonged to the UM. Now it is theirs again. So in 2007 when the decision to close down the site, there were 2100 full-time employees but there were numerous contractors, service people, security guards, cafeteria workers, etc that lost their jobs too who didn't have the 'cushy' salaries of the full-time people. Please don't gloat so much. I am sorry your drug costs you so much but a company's marketting costs are so much higher than the research costs. Don't blame the scientists.
mike from saline
Wed, May 19, 2010 : 5:56 p.m.
I can't comment on Pfizer's buisness practice's or the drugs they market and sell. I just don't have the knowledge. What I will say, is, while they were here, they were extremely generous with there money in regards to helping fund, Non Profit Arts organizations, not just in Ann Arbor, but all over Washtenaw County. In that respect, they were very good neighbors, and are missed.
amazonwarrior
Wed, May 19, 2010 : 3:40 p.m.
blueplatespecial...sounds to me like you are really in there defending the pharm companies. Are you still an employee? Own stock? Doctors are seeing an alarming increase of synovial sarcoma in the elderly, as well as other rarely seen cancers. 2 + 2 = 4?? And a doctor isn't going to be foolish enough to state that a certain drug definitely causes cancer, because the pharm company would sue their pants off. There was a report released several years ago stating an alarming increase, 1 in 1,000 patients, of obscure, aggressive cancers in people who were taking statins. Odd thing though, that report was quickly squashed and nothing more was written about the findings. Go figure. As for clinical trials, they are only done on healthy people who are taking no medications, which is not true for the vast majority of people who will eventually end up taking the drug. Yes, blueplatespecial, I am fully aware that clinical trials cost a great deal of money, (I'm not a total idiot, I was part of a clinical trial!) but the pharm companies spend and waste billions of dollars on advertising. Which in turn, cause doctors a great deal of grief because patients come in with a self-diagnosis, demanding the drug they saw advertised and the drug isn't "right" for them, but good luck convincing them of that. Personally, I've grown very tired of seeing ads on TV about erectile disfunction, arthritis and whatever else the pharm companies are pushing. I will admit that the drug companies have developed some fantastic drugs in recent years, one of which kept me from having to go through months of chemotherapy. But, I also believe that they fast track too many drugs to get them to market, without knowing the full extent of the side effects. How many drugs have been pulled from the market in recent years because it was decided that they were dangerous? A lot. You question my mother's overall health; when she was 62 she had a mild heart attack and DRASTICALLY, and I mean drastically, changed her lifestyle. She is now 83 years old and probably healthier than the rest of us sitting here banging away on our keyboards!
blueplatespecial
Wed, May 19, 2010 : 12:27 p.m.
@amazonwarrior- I am sorry to hear about your mother's illness. But before blaming Pfizer and the pharma industry, let's take a look at what you wrote. Statements like "docs weren't 100% sure" and "might have contributed" are hardly an indictment of the drug. The drug may have contributed, but so may any number of other factors. The doctors don't "know" what caused the sarcoma, so let's hold off on blame. Next, "her long term use of statins" is pretty telling. You don't mention why your mother was on statins, but I expect it was due to high cholesterol levels. Elevated cholesterol increases risk of heart disease and death. Since she was on the statins "long term" it is possible that the statins extended her life (i.e. prevented a heart attack and death). So while it is unfortunate that she had a sarcoma of unknown etiology, it is possible that she would have died before hand without statin therapy. You also fail to mention your mother's overall health and lifestyle. It is possible that your mother ate right, exercised, didn't smoke and otherwise led a healthy life and still had elevated cholesterol requiring statins (my mother-in-law fits in this category). Unfortunately many people on statins do none of these things. Instead they choose to take a pill to improve/preserve their health that they are otherwise undercutting. That is a trade-off they are making-- the risk of taking a drug versus the benefit the drug delivers. Without more information it is hard to know what trade-offs your mother made, but you should consider these before laying the blame solely on statins or the pharma industry. Cost is another issue where I believe your understanding is lacking. Drugs are expensive because it costs a LOT of money to bring a drug to market. I worked on developing an arthritis drug. The safety and clinical trials for this drug were going to cost about $120 million and take approximately 5-7 years. The kicker was that on average only 10-20% of the drugs at our stage make it to market due to safety or effectiveness. I recommend you do a search for drugs that failed in human trialsyou will be astounded by the number of failures. When you understand that millions or tens of millions of dollars are already invested into the drugs at the point they failed, you will hopefully have a better understanding of why drugs are so expensive. Further, as side effects are identified the FDA may require additional trials with more patients and longer dosing for drugs in development. This further increases the cost to bring drugs to market. Finally, once a drug is approved the company must continue to study and report any side effectsthis costs more money. I believe all of these efforts to improve safety are good and reduce the risk to patients, but understand that the trade-off is more expensive drugs.
48104
Wed, May 19, 2010 : 9:14 a.m.
"Pfizer was offerred tax abatements by other states but Governor Granholm refused to do the same." And those other states are now losing Pfizer jobs anyway. So maybe Granholm was right to not extend the ties to a company that wasn't committed to Michigan for the long-term anyway??
amazonwarrior
Wed, May 19, 2010 : 8:48 a.m.
Dan Simms - here's another side effect you can add to the list of long term side effects of taking statins - synovial sarcoma. It's an extremely aggressive, rare form of soft tissue cancer and almost cost my mother her leg. The tumor grew to the size of a jumbo egg in less than 2 months. Although the doctors weren't 100% certain, they think her long term use of statins may have "contributed" and they are seeing an increase in this disease in older people, when it's actually a "kids disease". Pretty freaking scary. I refuse to purchase Pfizer products after what they did not only to Ann Arbor, but Washtenaw county as a whole. Their prescription drugs are outrageously priced, all under the guise of expensive "research and development". Hopefully, some day soon, we will see someone buying THEM for cents on the dollar, firing the lot of them and reorganize the company into something more reasonable.
SaraMaddock
Wed, May 19, 2010 : 8:29 a.m.
Great comment, Nathan. "Ann Arbor didn't lose Pfizer. Pfizer lost Ann Arbor." So true!
mentalNomad
Wed, May 19, 2010 : 8:24 a.m.
@watchingypsi, Drugs are overpriced mostly because pharm companies over-market their drugs, not because they pay their employees well. Employee perks are not unique to pharm companies, and I wish good salaries and in-house day care were the norm instead of perks for which your friends deserve to lose their jobs over.
Dan Simms
Wed, May 19, 2010 : 7:03 a.m.
Lipitor? Read the side effects. Good riddance to big pharma. These companies produce more cancers and diseases than they treat. Note I did not say CURE. They should and have been sued and is the reason they keep moving because they are losing money as people wise up. Some side effects of statin drugs: Cataracts, muscle wasting-kidney failure-death, sleep loss, thirst loss, muscle cramps, eye disorders, memory loss, digestive disorders, sexual dysfunction.
watchingypsi
Wed, May 19, 2010 : 6:56 a.m.
I have quite a few friends that worked at Pfizer and because of this I have never said what I am about to write. I am glad Pfizer is struggling, and failed here in Ann Arbor. It made me sick knowing all the "perks" and inflated wages that my friends had when working for Pfizer. Gourmet lunch cafeteria, in work day care, free drugs, tons of paid vacations, even grants for family emergencies. And as I said, inflated salaries. Most of my friends only held Bachelor Degrees in Science and all they did was what I would call laboratory "factory work." I saw the truth behind big Pharms excuses for high priced prescription drugs. All the while I was struggling for seven years to pay full price for the only prescription I have ever needed to take daily, because there was no generic. My insurance company told me that Pfizer was overpricing this drug and every insurance company was not covering it because Pfizer would not negotiate. If low level employees got these perks, I can just imagine what the executives lifestyles are/were like. Sorry friends lost jobs, but they got what they deserved.
trespass
Wed, May 19, 2010 : 6:13 a.m.
The author missed the real lesson to be learned from Pfizer's departure; when the UM President covets your property, she will make it happen (UM obtained a $700 million property for $108 million and took it off the tax roles of Ann Arbor). Pfizer did not lose Ann Arbor, the main attraction of Ann Arbor to a company like Pfizer is access to a major research University like UM but if UM does not cooperate that advantage is lost. Pfizer was offerred tax abatements by other states but Governor Granholm refused to do the same. UM has tremendous political clout with Governor Granholm. We should ask what position UM took on the issue of tax abatements for Pfizer.
Richard C
Wed, May 19, 2010 : 6:01 a.m.
It always irks me a lttle when it is mentioned that 2100 people lost their jobs when Pfizer closed. While this is somewhat true, what is also true is that, at one time, there were close to 4000 people working at Warner/Lambert- Pfizer. My position was eliminated in 2003 along with 500 others. Then slowly, positions were eliminated over the next few years until there were only 2100 left who then lost their jobs when Pfizer closed for good.