Novartis Announces Layoffs and Strategic Restructuring Amid Sluggish Gene Therapy Sales and Evolving Market Dynamics

With Volume-Based Procurement Becoming the Norm, Do We Still Need So Many Pharmaceutical Sales Representatives?

1. Well-known foreign enterprise, layoffs

Recently, according to Reuters, Novartis plans to lay off 400 employees and has shut down a gene therapy company that was established in the United States just two years ago, due to stagnant sales momentum for Zolgensma last year.

According to U.S. media reports, including the Denver Business Journal, Novartis closed its Longmont, Colorado facility after acquiring it from AstraZeneca in 2019. Company data shows that Zolgensma, a one-time gene therapy for spinal muscular atrophy, generated $254 million in sales in the fourth quarter, compared to approximately $291 million in the third quarter.

Personnel changes driven by poor product sales are a common practice globally, and China is no exception. In China, this primarily manifests as adjustments to sales teams for products included in volume-based procurement (VBP). Recently, several multinational pharmaceutical companies have announced personnel restructuring and layoffs, including adjustments to the sales and marketing teams for products that failed to win bids in the fourth round of VBP, with the aim of maintaining their core mature markets.

To some extent, few foreign pharmaceutical companies can “fully embrace” volume-based procurement (VBP). Therefore, if they abandon the centralized procurement market, they must inevitably recalibrate their future strategic development. The downsizing of sales teams is merely a microcosm of foreign pharmaceutical companies operating under the VBP policy.

Senior pharmaceutical sales representative “Brother Joe” told Saibailan: Currently, multinational companies’ response strategy to volume-based procurement (VBP) is to downsize teams for products likely to be included in future VBP programs, outsource poorly performing products, consolidate mature product lines, and prioritize innovative drugs.

“In fact, innovative drugs from various foreign pharmaceutical companies are now in the early stages of rapid market launch,” Joe admitted.

2. Three Adjustments in Foreign Enterprises: Personnel Restructuring Has Become Inevitable

Zhao Jiazhen, Marketing Director of Chongqing Duopotai Pharmaceutical Co., Ltd., told Saibailan: “Many foreign pharmaceutical companies are currently laying off staff; the aforementioned company is just one example. They are not only reducing their workforce but also discontinuing products. There are several main reasons for this: the advancement of the consistency evaluation has reshaped the competitive landscape for generic drugs that have passed the evaluation, and price reductions resulting from volume-based procurement have further eroded the competitiveness of foreign pharmaceutical enterprises. In fact, their core competitiveness lies in brand recognition of their products and at the patient level.”

He believes that foreign pharmaceutical companies’ product portfolios will undergo adjustments in three main steps. First, for so-called “underperforming” products—characterized by intense competition, a large number of generic competitors, and a relatively low market share for the originator drug—companies may choose to divest, outsource, or engage suitable Contract Sales Organizations (CSOs) to transfer promotional rights to other entities. This shift is further driven by the impact of volume-based procurement (VBP). Consequently, distribution channels for these products will change. Outsourcing partners will likely focus on expanding presence in the primary care sector (the “third terminal”) and even the retail market, leveraging the relatively high brand recognition of foreign pharmaceutical companies.

Second are mature products, which were previously strong sellers for the company, such as certain hypertension and diabetes therapies. These products already enjoy high patient awareness and have benefited from years of expert network development, resulting in strong brand recognition among both patients and healthcare professionals. Even if multinational pharmaceutical companies opt out of volume-based procurement, they can still strategically position themselves in the out-of-pocket, out-of-hospital, and retail markets.

Patients often consider not only the price of a product during treatment, but more importantly, whether it can effectively address their disease and resolve their health concerns. Therefore, the core focus for multinational pharmaceutical companies lies in empowering key opinion leaders and healthcare networks, as well as in patient education.

Zhao Jiazhen added: The third strategy of foreign pharmaceutical companies is to vigorously develop new specialty drugs and innovative drugs. This is because the core competitiveness of foreign enterprises over the years has been their new specialty drugs and innovative R&D capabilities.

Certainly. Currently, the initial hospital sales share of some new specialty drugs and innovative medicines is not particularly large. However, it is worth noting that if product sales experience a significant surge, they may subsequently become subject to requirements and controls under the national medical insurance program.

Therefore, given that these drugs are classified as new specialty drugs or innovative drugs, their prices are inevitably high, and they may not necessarily be covered by medical insurance in the future. Pharmaceutical companies are instead focusing more on creating new medical opportunities and addressing physicians’ pain points to provide solutions. According to Zhao Jiazhen, such sales channels primarily include out-of-pocket payments within hospitals and, secondarily, Direct-to-Patient (DTP) models.

The Three Strategic Adjustments of Multinational Corporations Will Inevitably Lead to Personnel Changes Among Medical Representatives, Bringing Forth an Evergreen Question: Will So Many Medical Representatives Still Be Needed in the Future?

Nowadays, the tiered advancement of centralized procurement—comprising national-level volume-based procurement (VBP), provincial/inter-provincial VBP, and municipal-level VBP—has become an industry consensus. Will there be further personnel changes in the future? In particular, does the normalization of volume-based procurement imply a reduced demand for pharmaceutical sales representatives?

Joe believes that future pharmaceutical sales representatives will need a broader skill set, similar to the Roche ecosystem model, where marketing, medical affairs, and sales functions are all handled by pharmaceutical sales representatives. In short, multi-skilled roles will become the norm, making workforce streamlining inevitable.