Five Tips To Effectively Manage Drug Manufacturing Costs

“OUR INDUSTRY IS POISED TO TRANSLATE OUR MOST PROMISING SCIENTIFIC BREAKTHROUGHS INTO MEANINGFUL TREATMENTS CAPABLE OF TACKLING THE MOST URGENT AND VEXING MEDICAL CHALLENGES OF OUR TIMES.  WE STAND COMMITTED TO DRIVING PROGRESS FOR PATIENTS TODAY – AND HOPE FOR TOMORROW.” – KENNETH C. FRAZIER, CHAIRMAN & CEO, MERCK

Inspirational words, and worthwhile goals to aspire to in manufacturing drugs to improve the lives of countless people.Somewhere in between the idea and the bottle of pills on the shelf, there is the process of manufacturing drugs and the costs associated with that endeavor.  With the increased scrutiny of the public in regards to the cost of drugs, keeping the cost of manufacturing controlled is more important than ever before.

There are 5 key points to keep in mind to manage costs in drug manufacturing:  awareness, control, insight, efficiency and power.

1. Awareness

Knowledge of the costs associated with your product is critical in gaining the upper hand in drug development.  Of course, it seems obvious, right?  But do you actually know your true costs and the key cost drivers of your project as well as you think you do?  Often, key cost drivers are hidden or affected by process details that may not be obvious at first glance.Hundreds of millions of dollars are spent, if you’re lucky, on an asset that leads from API to manufacturing and being aware of your costs from the beginning go a long way.  Transparency within your CMC group, knowing your compound pricing before analysis and starting calculations with knowledge of where you have been and where you’re going with cost is a good start to managing your costs.

Hundreds of millions of dollars are spent, if you’re lucky, on an asset that leads from API to manufacturing and being aware of your costs from the beginning go a long way.  Transparency within your CMC group, knowing your compound pricing prior to analysis and starting calculations with knowledge of where you have been and where you are going is a good start to managing your costs.

2. Control

Now that you are aware of your costs, you can begin to control them.  Awareness eventually leads to control, but there are several moving parts in awareness. Accurately modeling the costs of a project requires knowledge and research of latest pricing, procurement pricing, manufacturing costs and when, where and how to do this properly.  In a global environment, communication and collaboration are essential to the success of your project.  The ability to gather information quickly and accurately in order to review and process with your team could be the difference between success and failure.

3. Insight

What do we mean when we say insight?  Although it is tempting to picture a magic crystal ball that will reveal the challenges your project will experience BEFORE they happen, the reality is much more complicated.  Although nobody actually believes in the “magic crystal ball theory” of drug manufacturing, most projects find their way to manufacturing without a clear understanding of the key cost drivers and the potential pitfalls in cost.  The ability to detail an accurate should cost estimate is critical in not only streamlining the current project but in considering up and coming processes.  Having insight into the should cost of key drivers aligns your model and expectations.  No one can predict the future but to hone in on what your costs should be leads to an accurate account and positive steps in cost management.

4. Efficiency

When we speak of efficiency we not only want to be efficient in the data that presents the accuracy of your cost but in the management of that data.  Storing, controlling, managing and retrieving that data quickly and accurately, is the cornerstone to becoming efficient in cost management.  Even with one project, the amount of data that piles up can be daunting.  In order to be as efficient as possible, the organization of data is critical in order to both move the project forward and manage costs.

5. Power

Power comes into play when you are able to use the 4 steps above to negotiate with vendors.  Effective negotiation allows for maximum savings.  With knowledge, control, insight and efficiency, power in managing the cost is yours in the way you can present factual information to your partners and vendors on the expected costs of supplied materials.  A well thought out model created with data for the best pricing available allows for negotiation with vendors to bring costs down both externally and internally.  The combination of the two is a powerful tool to both lower cost and maximize profit in drug manufacturing.

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