Flanked by the governor and a host of local VIPs, George Paz — chief executive of St. Louis' biggest company — trumpeted his company's plans to add 150 quality jobs over the next two years to the hometown economy.

"We are committed to growing in this area," said Paz, of Express Scripts, in his December announcement of the pharmacy benefit manager's plans for a fourth building on its campus in north St. Louis County.

In return, the company will collect an estimated $10 million in taxpayer-financed incentives from the county and the state, which lured Missouri Gov. Jay Nixon to the news conference. A similar scene played out six months earlier at a ceremony to mark the opening of Express Scripts' highly automated mail-order pharmacy — financed in part by at least $7 million in incentives, including state and county tax breaks, in exchange for the promise of adding 270 "next-generation" jobs.

What went unsaid on both occasions was that the company was also quietly pursuing an outsourcing strategy that meant cutting hundreds of jobs in other parts of the business, including some white-collar positions in St. Louis. Some of that work is going to faraway places such as India. Just a month before Paz spoke in December, company managers had handed out pink slips to dozens of well-paid software engineers, pharmacists and pharmacy technicians in the St. Louis area.

Nationwide, the company is laying off nearly 700 call center, pharmacy, prescription processing and computer employees at locations in Minnesota, Missouri, Ohio and Pennsylvania. Internal company documents indicate that some of the latest cuts are part of a larger company strategy to reduce its permanent work force and rely more on contract labor here and overseas.

Hardly an exception, Express Scripts illustrates one of many examples of increasing corporate outsourcing and aggressive management of labor costs in a historic downturn. And the company — whose discount drug business depends on holding down overhead — has boosted profit in recent years at rates far outpacing the modest growth in its work force. In 2004, the company made $278 million in profit and employed about 10,262 workers. Over the next six years, the company's profit jumped 325 percent — to $1.18 billion last year — with a work force that had grown just 28 percent, to about 13,170. And much of the work force increase stemmed from Express Scripts' December 2009 acquisition of NextRx, which employed about 2,000 employees.

"We are counted on to run lean and mean," said Larry Zarin, a senior vice president and chief marketing officer. "Clients hire us to reduce (pharmacy) costs, with no compromise to clinical outcomes.

"Difficult decisions have to be made all the time about the work force in ways to be more efficient or effective."

Zarin declined to specify how many employees companywide received layoff notices in 2010 or will lose their jobs this year. He acknowledged, however, that "about 70" Express Scripts employees in the St. Louis area received layoff notices last year and are being let go on a staggered schedule through April. A company memo indicates that the laid-off workers include software engineers in several departments.

In cutting at least 600 positions elsewhere, Express Scripts is shutting down its dispensing pharmacy in the Philadelphia suburb of Bensalem, Pa., resulting in the layoffs of about 365 employees including pharmacists and warehouse staff.

The company also plans to lay off 100 workers at its prescription processing center in Bensalem. The Pennsylvania operations had among the highest labor costs in the company, largely because of union contracts, company officials said.

Express Scripts announced previously that about 138 employees are being laid off at its call centers in Mason, Ohio, and Bloomington, Minn. Company spokesman Thom Gross said in October that the two call centers were being closed, and the company plans to outsource some of that work to the Philippines.

Zarin emphasized that the company's St. Louis work force actually grew last year by 265 positions, in part because of hiring at Express Scripts' new mail-order pharmacy in NorthPark business park.

"There's an ebb and a flow to how we manage our business," Zarin said. "If there's one thing that's constant, it's that our company is focused on growth. And in fact, our work force continues to grow as we grow."

But in two of the last three years — excluding 2009, when it acquired NextRx — Express Scripts has reduced its total work force each year by about 8 percent.

LOOKING OFFSHORE

Among the most successful companies in St. Louis — with about 4,000 full-time workers here — Express Scripts has major facilities in a dozen states and manages the flow of prescription drugs to clients including larger employers, private health insurers, and government agencies such as the Department of Defense.

Seven current and former employees — including information technology workers, a pharmacist and a call center worker — spoke with the Post-Dispatch about the company's recent layoffs in St. Louis, but declined to be identified because of concerns over future employment opportunities.

The computer technicians said the layoffs meant that fewer highly paid, full-time workers would do the company's IT work. Much of that work, they said, is now being done by foreign employees in India and also foreign workers who have secured U.S. visas authorizing their temporary employment in St. Louis. Some of the work is being done by St. Louis-based contractors and consultants.

"We do not hire foreign workers," Zarin said. "We have worked with a couple of contractors to supplement our work force, and they are offshoring some of those capabilities."

Zarin would not discuss Express Scripts' business ties with its vendors, which include Accenture, a global outsourcing provider, internal company records show. Jobs with clinical duties will not be sent offshore, Zarin said.

According to a former pharmacist, a delegation of Express Scripts managers flew this fall to Manila for talks there about setting up a new call center in the Philippines. Zarin said the company did not currently operate a call center there, but he declined to comment on the trip.

One IT worker who received a layoff notice called the outsourcing "the wrong thing to do."

"I had a positive view of the company before this, but they're throwing American jobs out," the worker said. "Express Scripts is doing so well, but they're chopping people. … They talk about bringing new jobs in, but what about the jobs they just cut?"

Given the importance of automatization and information technology in managing prescriptions, offshoring computer programming and other IT functions can make sense for a pharmacy benefit manager like Express Scripts, said Jeff Jonas, an equity analyst at Gabelli & Co.

"There's an awful lot of computer work involved when a (customer) changes its prescription plan," Jonas said.

Yet he's skeptical that Express Scripts would make a big switch to offshore call centers because of the technical nature of the phone calls, medical privacy issues, and a risk of customer backlash. At the same, call centers are becoming less critical to managing prescriptions as email and text messaging gains wider use, he said.

TRAINING THEIR REPLACEMENTS

At a meeting last fall, Express Scripts managers laid out a broad strategy to cut some of its full-time permanent workers in favor of contractors and lower-cost skilled labor overseas, according to a written copy of the presentation.

Zarin confirmed the existence and goals of the so-called "transformation for scale" program, but declined to discuss details. In general, he said, the strategy allows the company to more efficiently match its labor costs to a workload that routinely expands and shrinks.

John Raney, the company's vice president of corporate systems and data warehousing, told IT employees via a Nov. 16 e-mail that his department was reorganizing "to remain competitive in an ever-changing environment."

According to three employees who received layoff notices, restructuring the company's IT department included "knowledge transfer" sessions in which computer programmers and others with technical expertise were instructed to speak with offshore contractors and share in detail how they perform their jobs.

Some of these sessions were conducted in person, the employees said, but most were done via teleconference call — mainly with people based in India, who could view the computer screens of St. Louis workers.

Zarin declined comment on the knowledge-transfer sessions.

An Express Scripts computer programmer who received a layoff notice said an increasing amount of the company's IT work was "going overseas because it is so much cheaper."

But, he added, the 10 1/2-hour time difference between the Midwest and India presents a problem because "you've lost your ability as a company to make changes on the fly and respond to your clients' needs in a timely manner."

Zarin disagreed, saying that offshoring a portion of Express Scripts' "non-core" business functions would not diminish the company's responsiveness: "Our business is responding to client needs in a timely manner, regardless of where our work is done."