When Profits Mean Losses

Pharmaceutical companies probably feel that they receive an unfair level of negative attention from NGOs. By this stage, many big pharmaceutical companies may well have even developed acute victim complexes commensurate with the constant criticism they receive in relation to their policies on patents and access to life saving medicines.

However, with that criticism comes the odd flash of praise. For example, GlaxoSmithKline (GSK) was lauded last year for its decision to reduce the price of medicines it supplies to the world's poorest countries and for investing some of its profits into health infrastructure in those countries. More demands were and have been put on GSK but the backing that the pharmaceutical giant received at the time from those in the development sector was genuine.

But the criticism must start once again - this time for the way in which GSK is attempting to maximise its profits. Despite the global economic crisis, and partly due to sales of vaccines in response to the H1N1 pandemic, GSK reported a pre tax profit of $13.81 billion for 2009. However that is not enough profit for GSK who have stressed that major cost reductions continue to be required. Interestingly, the difference in profit margins between 2008 and 2009 is roughly the same value as the cuts that GSK chose to make throughout 2009. Some would argue that the company is simply reducing waste and becoming more efficient. Others however will point out that the staff that GSK may choose to let go in the near future to cut costs, never benefited from the profit margins (and bonuses) that those making these decisions gained from, but most certainly contributed to their accumulation.

2009 was a good year for GSK but 2010 may be a very bad one for its staff.