Pharma must take a new approach to cost management – one that emphasizes continuous growth

Pharmaceutical companies are finding themselves caught in a perfect storm. The combination of drug withdrawals, increased pricing pressures and height-
ened competition in key product classes has darkened prospects for top-line growth. The industry has responded with a renewed focus on cost efficiency. In recent years, AstraZeneca, Bayer, Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, Pfizer and Schering-Plough have all announced major cost-cutting initiatives. But even if successful, these moves would not be sufficient to safeguard Big Pharma’s economic profits and EP growth from a couple of difficult years.

A new approach is needed, one that focuses on driving systematic productivity improvements year in and year out – not just on paring cost budgets during downturns. Based on our experience in pharma and other industries, we suggest six steps that pharma executives can take to address the cost management challenge and shift the emphasis from periodic cost restructuring to continuous productivity growth.