Abbott Cuts 200 Vicodin Reps

Last Updated Jan 28, 2009 9:45 AM EST

Abbott Labs laid off 200 drug sales reps after the FDA failed to approve Vicodin CR, a longer lasting version of its generic painkiller.

The move explains a puzzle BNET pointed to in Abbott's Q4 earnings release. On Jan. 21, Abbott reported a 10 percent increase in revenues, but the overall productivity of its sales force declined by nearly 5 percent. How did it manage such a failure when in Q3 it seemed to have discovered a magic recipe: Double-digit sales increases on lowered sales costs?

Now we have the answer. It incurred staffing costs for something the FDA didn't want on the market (Interestingly, Amgen is in the same position right now on denosumab.)

It may be for the best. Even with the sales force, some believed Vicodin CR would have withered in the face of generic competition, Bloomberg noted:

If approved, the drug may face skepticism from insurers, who would be reluctant to pay for a more expensive version of a drug that has had generic competition for years, said Tony Butler, an analyst with Barclays Capital in New York.

"They don't care how many pills you take," Butler said in an interview yesterday. "We projected modest numbers even at peak sales. We wouldn't have thought sales would be much more than a couple hundred million dollars a year," he said.