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Trends, Costs  in Healthcare

Note on Variation in Efficiency of Drug Companies

A study of the operational practices of more than 25 global pharmaceutical manufacturers finds that top ones are more than twice as productive as their average counterparts.

A look at how the leaders manage cost, quality, and speed to market offers lessons for drugmakers around the world, including large European and North American companies grappling with stagnating growth and aging patented-drug portfolios.

The rewards for improvement are significant: by matching the top players’ total labor productivity (capital productivity shows comparable results), average drugmakers would enjoy annual labor and unit-cost savings worth five to six percentage points of earnings before interest and taxes (EBIT). At the industry level, the value of that opportunity exceeds $65 billion.

The study, part of an ongoing benchmarking effort, included a detailed analysis of the financial data and operational performance of more than 1,900 production lines at 150 plants around the world.

To ensure the comparability of data, we normalized all results for factors such as differences in product technologies (coated versus uncoated tablets, for example), unit sizes (large versus small blister packs), value chain configurations, and levels of outsourcing.