Drug distributor Bergen Brunswig Corp. said Monday that it will cut as many as 500 jobs--an eighth of its U.S. work force--in the next 18 months in a restructuring that will result in a $21-million charge against earnings.
The charge will result in the loss of as much as $14 million for the fourth quarter of its fiscal year, which ended Aug. 31, the Orange-based company said. It said it will still post a profit for the year.
Bergen, with $5 billion in sales last year, is the nation’s No. 2 drug distributor. San Francisco’s McKesson Corp., the largest, took a similar restructuring charge last year. The companies’ restructurings, analysts say, reflect a slower rise in drug prices and the widespread discounts demanded by large customers, which have forced distributors to cut expenses to maintain the same profits.
Bergen would not say Monday how it plans to cut its 4,000-person work force, but said it might include layoffs and reductions by attrition. The company employs about 600 people in Orange County.
The company expects to close three or four more of its 35 drug distribution centers nationwide. It has already closed centers in San Diego and Las Vegas and moved their operations to Corona.
“This isn’t the first drug wholesaler to restructure, and it won’t be the last,” said Don Spindel at the brokerage A.G. Edwards & Sons in St. Louis.
The depth of the restructuring and the fact that as many as 500 jobs may be lost surprised one analyst.
“This may be because margins have eroded during the quarter to a greater degree than they expected,” said Kevin E. Silverman of Kemper Securities in Chicago. “If there’s a positive, it may be they’re moving to where there’s more of a sense of urgency at the company.”
Ultimately, the slimming down of the distributors will be a good thing for the industry, analysts said. If the Clinton Administration succeeds at providing health insurance for everyone, drug sales should rise. The graying of the U.S. population also means more sales.