Legal wrangling and expiration on its blockbuster drugs have all taken its toll on Merck, which has been forced to undergo these cost cutting initiatives and restructuring plans in an attempt to recover its position as a prominent worldwide drug producer.
Analysts have stated in the past that Merck would be entering a period that would be make-or-break for the company, with some claiming that Merck's unpromising pipeline would hurt its profits more than any legal challenges in the long term.
Merck's measures are aimed at saving $4 billion (€3.4 billion) a year by 2010 and are the start of a series of long-term objectives. The job cuts represent about 11 per cent of Merck's global staff. The company said that about half the job losses would be in the United States.
Richard Clark, the chief executive who took over the troubled firm in May, called the restructuring the "first step in positioning Merck." "We still have work to do," he added.
Merck is also implementing a pilot program now under way at its pharmaceutical manufacturing site in Arecibo, Puerto Rico. Merck said it was aiming for a 50 per cent reduction in on-site cycle time and on-site inventory reduction of greater than 30 per cent.
The cost-cutting measures also aim to compensate for lost revenue, as Merck expects sales from its biggest seller, cholesterol drug Zocor, to fall from $4.5bn to $2.6bn next year as its patent expires.
Merck also warned that profits would fall again next year by more than 4 per cent on its osteoporosis drug Fosamax.
The company's problems with Vioxx have been well documented and seem unlikely to be resolved in the near future with the current number of lawsuits standing at 6400.
It was revealed in a study to show it increased the likelihood of heart attack and stroke in patients.
Merck has lost the first case over Vioxx in Texas and won the second one in New Jersey.