Medtech Job Cuts Explained

By Kristof Schoenaerts

The medtech sector has experienced significant job cuts in recent years, with thousands of positions eliminated across major companies like Johnson & Johnson, Philips, and Siemens Healthineers.

According to Medical Device Network, these workforce reductions are primarily driven by economic pressures, restructuring efforts, regulatory challenges, and market saturation in the post-COVID-19 landscape.

Economic Pressures in Medtech

Economic headwinds have significantly impacted the medtech industry, leading to widespread job cuts.

Inflation and supply chain disruptions have forced companies to reduce costs through workforce reductions.

Additionally, changes in global market strategies, particularly in how China purchases products for its national health system, have negatively affected some companies, prompting layoffs.

These economic pressures have compelled medtech firms to streamline operations and improve efficiency, often at the expense of their workforce, as they seek to secure better returns for investors in a challenging financial landscape.

Johnson & Johnson Orthopedic Business Challenges

Johnson & Johnson's orthopedic business, DePuy Synthes, has faced challenges in recent years, leading to a significant restructuring effort.

In October 2023, the company announced a two-year restructuring program for its orthopedics division following disappointing third-quarter medical device sales.

This decision came as part of a broader strategy to improve performance and adapt to changing market conditions. DePuy Synthes, which focuses on innovations in orthopedic surgery and medical technology, has been working to enhance its product offerings and digital surgery capabilities across various care areas, including hip, knee, and shoulder replacements.

Despite these efforts, the company has had to navigate economic pressures and market shifts, prompting a reevaluation of its orthopedic business strategy to maintain competitiveness and drive growth in the evolving healthcare landscape.

Siemens Healthineers Restructuring

In November 2023, Siemens Healthineers cut 300 jobs at its Healthcare Diagnostics manufacturing facility in Flanders, New Jersey, bringing the total job cuts in the region to 750.

This move is part of a broader restructuring effort aimed at saving €300m annually by 2025, primarily by relocating manufacturing and R&D operations to Ireland.

The company's stock price rose from €47.97 to €53.60 per share following these changes.

Martin Fuhrer, a senior executive at Siemens Healthineers, defended the job cuts, stating that they were necessary to shift production closer to markets with higher demand, particularly in the EU, in response to supply chain disruptions caused by the Covid-19 pandemic.

Philips Regulatory Challenges

Philips faced significant challenges in 2023, including recalls and quality issues that led to a major restructuring initiative.

The company announced a 13% reduction in its global workforce, equating to 6,000 job cuts worldwide.

Despite these measures, Philips saw only marginal financial improvements, with losses decreasing from €1.6bn ($1.71bn) in 2022 to €115m in 2023.

These regulatory and quality-related setbacks highlight the impact of product safety concerns on Medtech companies' operations and financial performance, often resulting in substantial workforce reductions as part of recovery strategies.

Covid-19 Diagnostics Impact

The diagnostics sector experienced unprecedented growth during the COVID-19 pandemic, with governments worldwide incentivizing the development of rapid antigen tests.

However, as the pandemic subsided, many companies found themselves overextended in a dwindling market.

Attempts to repurpose COVID-19 testing investments into more varied and marketable tests have largely been unsuccessful, leading to significant job cuts.

Smaller companies that entered the diagnostics market during the pandemic boom have been particularly affected, with many being acquired by larger corporations and subsequently dissolved.

This trend of workforce reduction is expected to continue as the industry adjusts to the post-pandemic landscape and companies grapple with the aftermath of their Covid-era investments.