Cost Reductions in the Pharma Industry

by Jenny Tsai

Pharmaceutical companies are in the midst of an industry-wide struggle to reduce costs as well as reduce their production timelines to get finished products on pharmacy shelves. Increased operating costs, stringent FDA requirements, shrinking R&D budgets, and looming patent cliffs are all concerns for financial leaders of pharmaceutical companies. Many pharmaceutical plants located in the U.S. operate under foreign parent companies, many of which are becoming desperate to remain profitable in a turbulent global economy.

Most recently, India’s Committee on Health and Family Welfare released a 78 page report revealing an 18 month investigation’s findings that support a collusive nexus among pharmaceutical companies in India, the Central Drugs Standard Control Organisation (CDSCO), and independent medical experts. The report illuminates the collusive relationship in the stated parties as a means to bypass expensive and time consuming tests to push drugs into the market.

Drug manufacturers maintain that the safety trials are not necessary if the drugs were approved in its home country. India’s Health Ministry stated that the head of CDSCO has the authority to approve drugs prior to trial completion in “public interest.”

India is the world’s fourth largest pharmaceutical volume distributor, grossing over $12 billion, annually. The industry is growing 10% every year and currently boasts 10,500 drug manufacturers and services the outsourced clinical research market.

In light of this report’s findings, it is imperative that drug affectivity and safety is not compromised to boost cost savings, high profit margins, and a shortened timeline. Finding cost savings by cutting out critical processes leads to short-term results with long-term repercussions that may eventually cost more monetarily as well as in time and human capital. Sourcing and process strategies must adhere to ethical standards in order to prove its overall program success.

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