3 Reasons Process Excellence Matters to Pharmaceutical Companies
Did you know that 90% of time is wasted waiting for equipment to free up in pharmaceutical companies and in the last 5 years R&D costs doubled? Here are three reasons process excellence matters to pharmaceutical companies.
Reason #1: Spiralling R&D Costs
The figures for the rising cost of R&D make for grim reading. According to Deloitte's most recent Measuring the Return from Innovation annual review, R&D costs increased 25 percent year-on-year from $830 million (£528 million) in 2010 to $1,048 million in 2011.
At the same time, the internal rate of return fell from 11.8 percent to 8.4 percent – in other words, pharmaceutical companies are spending more money, and getting less in return. Furthermore, non R&D costs have actually reduced, suggesting this isn't a problem which persists along the entire drug pipeline.
Further figures suggest 90 percent of time is wasted waiting for equipment to free up, and this is one area in which process excellence can really make a difference and make a dent in the R&D costs, which have doubled in the past five years.
Julian Remnant, head of Deloitte’s European R&D advisory practice, also said that many benefits can be derived through a collaborative approach to reducing waste.
"Shared drug development models will remove duplication, maximise capacity utilisation, and drive scale economies within service providers. We see R&D leaders beginning to raise their level of ambition and take the lead in this type of cross-company collaboration," she said.
Reason #2: Increased competition from generics
With competition from generics growing and some blockbuster drugs having already fallen off the patent cliff, cutting the time it takes drugs to get to market has taken on a renewed importance.
Market analysis from Datamonitor suggests growth for the top companies in the branded prescriptions sector will fall to just 1.5 percent by 2015 as generics makers jump upon expired patents.
To put this in perspective, between 2003 and 2009, a compound annual growth rate of 7.1 percent was recorded.
The analysts expect branded drugs to lose up to $100 billion in sales as a result of generics competition, and this shortfall can only be met by companies developing new therapies and getting them to market as quickly as possible.
At the same time, the amount of time it takes to get drugs approved by the relevant regulators varies widely.
Of the 23 cancer drugs approved by both the European Medicines Agency and the Food and Drugs Administration between 2003 and 2010, the median time to market for the former was 350 days, while it was 182 for the latter, according to figures from the Friends of Cancer Research.
The latest figures from the FDA also show that it was the first to approve 24 of the 35 new medicines it gave the green light to in the past year.
While this is good news for those targeting the United States, it paints a less encouraging picture for the valuable emerging markets in the East. By cutting cycle time, drug developers can compensate for these expected delays earlier in their pipeline.
Reason # 3. Many opportunities to enhance productivity and improve quality
In an industry where quality is key, efficiency exercises are likely to be viewed with scepticism. But there are numerous examples of operational excellence bringing about both positive increases in productivity and quality.
Pfizer Health AB's Bio 7 Manufacturing Facility in Sweden, winner of the 2011 Facility of the Year Award for Operational Excellence, looked at using virtually identical units to manufacture distinctly different products.
Through the initiative, the company was able to bring a new facility online with added capacity without additional headcount or extended shift patterns. Now instead of achieving its target of two batches a week, the facility produces 3.5 batches per week.
The 2010 winner of the award from the International Society for Pharmaceutical Engineering saw similar success.
Biogen Idec's global Technology Map Program was designed to deal with the infrastructure at its biologic production facilities and reduce bottlenecks downstream.
The subsequent renovation was the largest in the company's 30-year history, but the 300 percent increase it brought with it more than offset the cost and paved the way for more streamlined facilities in the future.