Markets

Abbott Blames Obamacare for 1,900 Layoffs, but Financials Tell a Different Story

By Jim Edwards

Updated on: January 26, 2011 / 6:44 PM EST / MoneyWatch

Abbott Labs (ABT) CEO Miles White is wrong to blame his latest round of 1,900 layoffs -- 2 percent of the workforce -- on President Obama's healthcare reform, judging by his own financial disclosures. Since Obamacare was enacted at the start of 2010, Abbott recorded $60 million in costs per quarter* directly attributed to reform, yet its sales nonetheless rose 13.4 percent to $10 billion in Q4 2010. On Abbott's own numbers reform isn't slowing the company's business, which is robust and growing.

Here's how Abbott explained the layoffs today:

In response to changes in the healthcare industry, including U.S. Health Care Reform and the challenging regulatory environment, today Abbott announced a restructuring in its U.S. pharmaceutical business to streamline commercial and manufacturing operations, improve efficiencies and reduce costs.

In fact, the cost of making those 1,900 job cuts will be $295 million, Abbott said, more than the cost of reform. A spokesperson told BNET:

In April 2010, we forecasted a negative impact to sales of "approximately $230 million or 11 cents per share" for the full-year as result of increased Medicaid rebates-- $60 million ($0.03 per share) of which was recorded in 1Q10. This impact to sales was not excluded from ongoing results, because it is, in fact, recurring.
In 2011, we will have an incremental $200 million impact from the pharma "industry fee" and Medicare-related rebates. All told, in 2011, Abbott will see more than $400 million in costs related to healthcare reform.

Meanwhile, Abbott recorded a charge of $1 billion for the acquisitions of Solvay and Piramal, two smaller drug companies. Although Abbott called out reform specifically in its statement on the layoffs, the only specific dollar number the company has ever given in relation to reform was in its Q1 2010 guidance, where it wrote down $60 million to account for higher Medicaid rebates under the new law. The new Q4 statement included $60 million for "specific health care reform impact on deferred tax assets." Neither the Q2 nor Q3 statements had anything specific to say about the cost of reform.

Of course, the layoffs follow 3,000 job losses, or 3.2 percent of the force, in September -- before Obamacare passed.

Bonus points if you noticed that blaming Obamacare despite reform's negligible effect on company finances is a trend. Roche (ROG.VX) and Eli Lilly (LLY) did the same thing.

*Correction: This item originally said, incorrectly, that Abbott's costs were only $60 million. That $60 million cost is recurring, not a one-off. Apologies for the error.
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Photo by Flickr user Jon Person, CC 2.0