Simplifying the Pharma Operating Model

Simon Thornton-Smith
As pharmaceutical (pharma) giants streamline operations in pursuit of business resilience and growth, it makes sense to rethink their capital projects approach.

Significant growth over a relatively short time has led the major pharma companies to evolve layered and often cumbersome operating models. These models are now coming under scrutiny. Initially challenged in the downturn, companies have recognized that complexity and duplication prevent swift responses to new market opportunities, as well as pushing up costs. Business agility and more flexible ways of working are needed.

Complexity in operations has been shaped by several factors. Consolidation among the global players, through mergers and acquisitions, is especially prevalent in the sector, in a bid to bolster research and development (R&D) pipelines, reduce costs by rationalizing combined sales, and minimize corporate overheads. However, there is typically a transitional phase where corporate models and methodologies need redefining.

Initially challenged in the downturn, companies have recognized that complexity and duplication prevent swift responses to new market opportunities, as well as pushing up costs.

The patent cliff – a series of patent expirations of key prescription drugs, creating a gateway for competitors to produce generics – is having a major impact on revenue. Pharma companies are forced to cut costs, increase their prices or find new sources of profit, ideally in the form of new breakthrough drugs.

The shift from batch processing to continuous production is another important driver, with ongoing investment in the continuous manufacturing process. This is set to dramatically change the pharma manufacturing landscape, enabling smaller plants, built closer to markets, with lower operating costs. A growing understanding of the capabilities and technologies available for continuous manufacturing is boosting uptake of the process. Already GSK is building a US$29 million continuous manufacturing plant in Singapore, and Amgen recently announced the use of continuous manufacturing processes in its Singapore plant.

Rethinking the business operating model has an impact on the way in which pharma companies manage their real estate and their capital works supply chain. The real estate footprint may be reshaped and potentially reduced by corporate consolidation and rationalization. Most of our pharma clients are currently implementing transformational processes and our role is to help them identify optimal portfolio strategies to meet these changing business needs.

Reducing inefficiencies in the pharma built environment supply chain makes a significant contribution to overall efficiency, both for capital projects and facility maintenance/operation. Methodology standardization brings substantial benefits, with greater clarity and visibility achieved by using the same route of engagement and contract assessment across capital programs where appropriate.

Methodology standardization brings substantial benefits, with greater clarity and visibility achieved by using the same route of engagement and contract assessment across capital programs where appropriate.

Faithful+Gould is working with several pharma companies to review their global approach to programs and projects, leading to implementation of an agile end-to-end supply chain aligned with the business operating model. The aim is typically a simpler and more efficient delivery process that responds efficiently and effectively to market changes.

There's an appetite for contracting frameworks and alliances, as these provide a faster and more direct route to market. Properly structured, these supply chain strategies support consolidation and simplification of global capital programs. Maintenance contracts also benefit from amalgamation into term service contracts, avoiding the need to tender and procure each time.

Maintaining a lean procurement model allows investment, resource and time to be channelled to the pursuit of growth, through acquisitions, entering new geographic markets, or expanding the product line. In turn, the procurement strategy will ideally also ensure that new ventures are incorporated without adding undue complexity.

Maintaining a lean procurement model allows investment, resource and time to be channelled to the pursuit of growth...

We support our clients with a range of services that promote successful change management, defining and implementing strategies to deliver continuous improvement. We achieve a close understanding of clients' individual corporate culture, working with all stakeholders to incorporate their perspectives and successfully embed the new systems.

Our global pharmaceuticals and biotechnology group has longstanding experience, with operations in the Americas, UK & Europe, and Asia Pacific. Our client portfolio includes Amgen, Bristol-Myers Squibb, GSK, Roche, Johnson & Johnson, AstraZeneca, Merck, Novartis, Pfizer and Sanofi.

Our extensive expertise spans research facilities, development laboratories and pilot plants, primary and secondary manufacturing units, biotech and sterile facilities, offices, warehouses and associated infrastructure.