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Merck Job Cuts

November 28th, 2005

"Merck to cut 7,000 jobs"

In response to expiring drug patents and massive litigation over its recalled painkiller Vioxx, Merck & Co. has announced it would eliminate 7,000 jobs, or 11% of its worldwide work force, and close some manufacturing plants.

Merck said it would cut jobs from its manufacturing and other divisions by the end of 2008, and about half of the layoffs are expected to occur in the U.S. Although Merck faces about 7,000 Vioxx related state and federal lawsuits, the company''s announcement indicates the drug recall is not the only challenge it faces.

Merck CEO Richard Clark said the company faces “increased competition, cost-containment pressures and greater customer demand for value.” The cost cuts announcement comes one day before the scheduled start of the first federal trial over Vioxx.

Merck said it would not comment on the federal case, but the company has established a reserve of $675 million for legal defense costs related to Vioxx. It has yet to establish any liability reserve.

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