CECON Blog

A question we hear at The CECON Group is “Why are pharmaceutical companies increasingly seeing the need to hire outside consultants?”

We approached Dr. Barry Bowen, CECON Vice President and Program Manager, a consultant with more than 35 years of experience in business leadership, human resources, and technical project management.  He offered his observations regarding the areas where companies are using outside consultants in the pharmaceutical industry.

Many pharmaceutical companies look at cost controls as a means of bolstering their bottom line in the face of increasing competition and external pressures to reduce the price of medications. Yet many struggle to identify and implement significantsavings. CECON consultant 1569, specializing in the formulation, manufacturing,  packaging, and dosage development of pharmaceuticals , lays out the top five reasons why.  Next week, in Part 2 of this series, we’ll provide a personal example of leading a pharma company to significant cost savings.

1. Reluctance to make changes that might create risk

Pharmaceuticals is a highly regulated industry that requires companies to use approved grades of raw materials and components in processes which must be validated and employ qualified equipment systems and facilities. Additionally, raw materials, components, intermediates, and finished products must be analyzed and released using sophisticated, qualified instrumentation and validated methods. It takes years and millions of dollars to conduct the studies necessary to establish these levels of control before a company is authorized to sell a product. Consequently, companies are reluctant to make changes that might risk the quality and commercial availability of their products.

In part two of our series on cost control strategies for pharmaceuticals,  CECON consultant 1569, specializing in the formulation, manufacturing,  packaging, and dosage development of pharmaceuticals, walks us through a personal experience where he was able to lead a pharmaceutical company to realize significant cost savings.

COST CONTROL STRATEGIES IN PHARMACEUTICALS: PART 2

1. It has been my experience that reluctance to change is one of the primary reasons that pharmaceutical companies do not actively pursue cost savings as a means of improving their profitability. It is presumed that little or nothing can be changed, so why bother looking?  Other common deterrents to pursuing cost controls:  “We have a Purchasing department that is responsible for obtaining the best pricing on all goods and services.”
   
   
2. “R&D and Operations, and Facilities know what they want, so who are we (Purchasing) to question their judgment?”

3. “Cost control is not really a viable means of positively impacting the bottom line over the long haul.”   

For pharmaceutical manufacturers, it is true that approved raw materials and components, validated processes and methods, and qualified equipment and facilities cannot be changed without significant cost and effort. Yet it is frequently (and mistakenly) assumed that these constitute all of a company’s expenses or that they cannot be modified in some way that can result in significant savings. Let me share an experience to demonstrate the fallacy that little can be changed in a regulated industry that might positively impact a company’s profitability.

A few years ago, I was retained to assess a stem cell manufacturer’s warehousing operations to see what steps could be taken to consolidate and manage their on-hand inventories to accommodate relocation to a new facility.  The new facility’s warehouse was only 3,000 ft²—about one tenth the size of the current warehouse—a challenging proposition to support expanded operations.