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16-Apr-2025

5 Causes Behind Pharma Layoffs in 2025

5 Causes Behind Pharma Layoffs in 2025

Summary

The pharmaceutical sector has been making headlines for large-scale layoffs, department closures, and clinical trial failures. Though the issue is complex, a few trends have emerged showing causes for this disruption: cost-cutting to counteract low profit margins, competitive pressure from imminent patent cliffs, promising drug candidates failing clinical trials, and more.
  • Author Company: ReHack
  • Author Name: Zac Amos
  • Author Email: zac@rehack.com
  • Author Website: https://rehack.com/
Editor: Zac Amos Last Updated: 17-Apr-2025

The pharmaceutical sector has been making headlines for large-scale layoffs, department closures and clinical trial failures. Some companies have even declared bankruptcy in recent months. What is to blame for this disruption? If industry professionals understand what they are up against, they can prepare accordingly.

Big Pharma Firms Are Letting People Go

Big pharma firms are letting employees go, which could be the start of a concerning trend. In 2024, the industry experienced around 192 rounds of layoffs, up 3% from 2023. At least 15,134 people from 86 companies lost their jobs. While the total increase is marginal, the number of major pharmaceutical organizations reporting layoffs increased by 281%. 

Take Novartis, for example. It plans to let over 400 people go starting in June 2025 as it nears the patent cliff for the heart failure drug Entresto, its biggest revenue source. Entresto brought in $7.8 billion in sales in 2024. Although a spokesperson named two new drugs — which could bring in an estimated $9 billion collectively — establishing a market could take several years.  

Stocks for publicly traded companies haven’t performed as well as expected, either. In January 2025, IGM Biosciences Inc. announced it was cutting 73% of its workforce after halting development of an autoimmunity drug program. Approximately 144 individuals will be affected. The announcement sent its stock down 69% in early trade. 

What’s Causing Pharma Layoffs in 2025?

This is a complex, multifaceted issue. However, several trends have emerged.

 

1. Cost-Cutting to Counteract Low Profit Margins

 

Labor is one of the largest operating expenses. Only 39% of organizations believe their pay strategy can keep pace with economic trends such as inflation; the remainder must face difficult staffing or salary choices when programs conclude or drug candidates fail. As a result, employee dismissal is a common response in the industry.

 

2. Competitive Pressure From Imminent Patent Cliffs

 

Competitive pressure has adversely affected revenue streams. Generics are only one facet of the issue. Recent legislation — like the Inflation Reduction Act of 2022 and Executive Order 14087 — lowered prescription drug costs. Although the Trump administration rolled back some of these changes, legislative uncertainty has contributed to business volatility.

 

3. Promising Drug Candidates Failing Clinical Trials

 

Research shows that 90% of drug candidates fail clinical trials. Given that they often take years and millions of dollars to develop, subsequent layoff rounds are to be expected. Businesses seeking to recoup losses or change directions typically let entire teams go.

 

4. Fines and Settlements Related to Data Breaches

 

The biotechnology company 23andMe recently filed for bankruptcy. The move comes just over one year after it laid off 40% of its workforce — a decision brought on by a class action lawsuit related to a data breach. While cyber insurance covered $25 million of the $30 million settlement, financial losses related to recovery and reputation damage were unavoidable.  

 

5. Digital Transformation Shifting Workforce Needs

 

Deloitte Consulting’s MedTech practice leader says firms have been under a lot of margin pressure recently. Companies are rethinking their portfolios, operating models, and what skills and capabilities they need. For many, the advent of artificial intelligence has been enough of an incentive to shift the workforce.

The Future Outlook for Pharma Employees

Life sciences funding skyrocketed during the COVID-19 pandemic. Since then, costs for basic components have increased and prices have plummeted off patent cliffs. This disparity between rising expenses and falling prices has put many pharma companies in a tight spot. However, pessimistic headlines don’t spell danger for the industry.

Elevation Oncology is a great example. It plans to cut its workforce by 70% and will make approximately $3 million in cash payments to cover associated costs. While that move seems desperate, its cash and cash equivalents of $93.2 million will fund operations at least partway through 2026. 

COVID-19’s bear market lasted for years — a downturn is normal. It only seems jarring because leadership likes putting layoffs off until the last minute. Even though the labor market shift will require a substantial short-term pivot, experts are optimistic about pharma’s long-term prospects. 

According to Deloitte’s 2025 Life Sciences Outlook report, 75% of life science executives are optimistic. Around 68% anticipate revenue increases in 2025, while 57% expect margin expansions. Although many are rethinking research and development, they expect the situation to stabilize within the next 12 months. 

Will Layoffs Continue Through 2025 and Beyond?

Pharma professionals aren’t dealing with industry-standard layoffs associated with mergers and acquisitions. The long-overdue consequences of COVID-era investments, policies and price changes are finally materializing. As a result, organizations are rethinking research and development streams, which affects workers. 

Since this labor shift affects real people, it can be a frightening prospect. However, it is natural. The industry is finally letting out a breath it has been holding in for the past two years. While layoffs will likely continue through 2025, they won’t last forever. Besides, jobs are evolving rather than disappearing, presenting new opportunities for those looking for work.