Healthy Skepticism Library item: 11907

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Publication type: news

Stark K.
'05 vow shadows GlaxoSmithKline cuts
The Inquirer (Philadelphia) 2007 Oct 29
http://www.philly.com/inquirer/business/20071029_05_vow_shadows_GlaxoSmithKline_cuts.html

Full text:

Pa. gave $4.6 million in aid to the firm to keep jobs at a certain level. Now, the drugmaker is downsizing.

In 2005, GlaxoSmithKline P.L.C. promised to maintain 6,900 jobs in Pennsylvania. That promise came in a deal in which the drug company received $4.6 million in state grants and tax credits to refurbish a vaccine plant in Lancaster County.

Flash forward to 2007. GlaxoSmithKline’s statewide employment stands at 7,000. And the British company has just announced a worldwide downsizing to save $1.4 billion that include job cuts in sales and manufacturing and a lesser amount in research.

Company executives will not say how many jobs will be lost in Philadelphia, one of the company’s two U.S. headquarters, or in Western Pennsylvania, where its consumer drug division, which includes the new over-the-counter diet drug Alli, is situated.

But anything larger than 100 people statewide would raise the question of whether the world’s second-largest drugmaker is honoring its past commitment.

GlaxoSmithKline spokeswoman Nancy Pekarek acknowledged the company’s 2005 employment promise, part of a state aid package for GlaxoSmithKline’s flu-vaccine plant in Marietta, Lancaster County. But she could not say how large the cuts would be.

“The 6,900 is a commitment,” she said. “I feel like we’re well within that, but I can’t make any commitment on what our overall numbers are going to look like.”

Kevin Ortiz, spokesman for the state’s Department of Community and Economic Development, said “it’s too early to tell” how big GlaxoSmithKline’s layoffs will be and whether the firm will meet its commitment.

He said the state would ask for the money back if the company failed to live up to its agreement. The department has collected about $10.5 million since 2003 from firms that have failed to create or maintain jobs. The state has given $1.7 billion in assistance over the same period, Ortiz said.

GlaxoSmithKline made its job-cuts announcement last week on the same day that it announced that its third-quarter profit fell nearly 6 percent and that it would close a manufacturing plant in Puerto Rico.

The company’s leaders blamed the profit drop on increased competition from generic drugs and on the steep decline in sales of its second-best seller, the diabetes drug Avandia.

The company’s facilities include a biopharm plant in Conshohocken and a consumer-products plant in Clifton, N.J. The two plants employ about 600 people. Executives would not say if they would be affected by the planned job cuts.

GlaxoSmithKline also employs about 1,700 people in Center City, where it leases two buildings, One Franklin Plaza and Three Franklin Plaza. And it runs research facilities in Upper Providence and Upper Merion, both in Montgomery County.

In 2005, the company agreed to spend $100 million to overhaul the Marietta plant that had closed earlier. It agreed to hire 270 people there and hold statewide employment at 6,900 for five years.

In return, GlaxoSmithKline received $4.62 million from the state, including a $1.35 million Opportunity Grant, a $1.25 million Infrastructure Development Program grant, $675,000 in job training assistance, and $1.35 million in Job Creation Tax Credits. The Life Science Greenhouse of Central Pennsylvania also gave $1.5 million for relocation costs.

Pekarek, the company’s spokeswoman, said that the flu-vaccine plant was being upgraded and that the 270 jobs will be coming on time.

David Stout, president of the Pharmaceuticals Division, reiterated last week that there were no plans to change Philadelphia’s status as one of the firm’s two U.S. headquarters. The other is in Research Triangle Park, N.C., where GlaxoSmithKline employs about 5,000 people.

GlaxoSmithKline has been a large donor to charities in the Philadelphia region. For example, it is the prime corporate sponsor of the Renoir Landscapes exhibition now at the Philadelphia Museum of Art.

In 2005, the company gave $1.44 million to education, arts, civic, and health and human services, according to Pekarek. In 2006, it gave $1.7 million.

Most of the firm’s arts funding has been for arts education in the Philadelphia schools.