It is accepted knowledge that the pressure to control and reduce costs is one of the next major challenges to be faced by the pharmaceutical industry. But how is this done and what is the best approach? Understanding and controlling operating costs is a critical first step to developing or sustaining competitive advantage. Increasing generic competition, imminent patent expiries (revenue can decrease by up to 60% at patent expiry), shorter pipelines and the emergence of China as a low cost manufacturing base all contribute to constantly eroding margins. To maintain or increase margins in the future, leading pharmaceutical companies have to start taking a proactive approach immediately to understanding costs. As the pharmaceutical industry embraces these new challenges, the companies that emerge at the forefront will be those who address the issues now and are able to account for all the costs throughout their organisation. To achieve this advantage, companies have to start recognising and targeting costs today.
Research & Development (R&D) costs are spiralling as companies race to discover the next blockbuster, but where is the money to fund this research going to come from? Ask yourself the following:
- How are costs distributed throughout your company?
Where should you focus your cost reduction efforts for greatest benefit?
How are you going to use to tackle these costs?
Have you identified all the hidden costs?
How do you compare to the best-in-class?
What is your baseline and what can you achieve?
Where are you going to start?
Cost is complicated, ranging from back office through manufacturing and quality to sales. To gain real benefits a structured programme of cost identification and improvement has to be in place.
How PricewaterhouseCoopers Can Help You
When embarking on a cost reduction programme it is very difficult to be sure all factors are being taken into account. ‘Performance Improvement Through Benefits Tracking’ is PricewaterhouseCoopers’s proprietary methodology that ensures issues are considered and understood in their entirety, and consequently all benefits are realised throughout the lifecycle of the project. PricewaterhouseCoopers use this approach to develop a structured implementation programme utilising a suite of tried and tested cost reduction tools.
Activity Based Costing helps organisations prioritise areas to target, and ensure subsequent improvements are sustained. PricewaterhouseCoopers then work with existing personnel to help them identify how best to tackle each major area of cost and provide advice on how this should be done.
