Vector Consulting Group reveals strategies for pharma firms to boost agility and cost efficiency in the US market

Vector Consulting Group, has unveiled an in-depth analysis of recent industry developments and offers actionable insights for pharmaceutical companies to enhance agility and cost efficiency amidst dynamic challenges posed by the US market. The report provides comprehensive solutions to help companies amplify operational agility, ensure perpetual quality readiness, and build rapid research & development capabilities. By adopting these strategies, firms can enhance competitiveness and ensure long-term profitability. 

The report outlines several key strategies aimed at achieving significant benefits for pharmaceutical companies. One primary strategy is to amplify operational agility. This involves shifting from traditional forecast-based inventory models to dynamic, constraint-based production systems. Such a transition allows pharmaceutical companies to better respond to market fluctuations, resulting in reduced lead times by 25-50 per cent and decreased inventory levels by 20-40 per cent. Additionally, integrating Active Pharmaceutical Ingredient (API) suppliers into the supply chain through enhanced visibility and collaboration strategies further optimises operations, leading to substantial cost savings and improvements in efficiency.

Another strategy is to ensure perpetual quality readiness. This approach requires moving beyond basic inspection preparedness to embedding regulatory compliance as a daily operational norm. By standardising quality practices across all manufacturing plants and implementing rigorous root cause analysis (RCA) and preventive measures, companies can significantly reduce Out of Specification (OOS) incidents by more than 70 per cent and lab incidents by 50-70 per cent. This proactive stance not only mitigates compliance risks but also enhances overall operational efficiency.

The third strategy focuses on building rapid research and development (R&D) capabilities. To achieve this, pharmaceutical companies should adopt project flow management principles, define capacity objectives to stagger project introductions, and implement agile planning cycles. By embracing practices such as ‘full kitting’ and agile short burst planning cycles with a strong focus on daily execution, companies can realise a 30-50 per cent reduction in R&D lead times and achieve a 50 per cent increase in project output.

As per the statement, the Indian pharmaceutical sector heavily depends on the US generic market, valued at approximately $86.9 billion, making it the largest market for Indian generic drugs. Despite its size, this market has experienced continuous price erosion due to intensified competition. However, recently, some drugs have seen price increases due to supply shortages. This uncertainty complicates market trend forecasting for companies and places them in a strategic dilemma: should they prioritise cost-cutting to maintain profitability or invest in growth opportunities to prepare for emerging market dynamics?

Dr Shelja Jose Kuruvilla – Head of Knowledge and Research, Vector Consulting Group said, “Indian companies with a significant presence in the US generic drug market often find themselves uncomfortably oscillating between cost-cutting and growth strategies. This dilemma arises because the market experiences periods of margin pressure alongside occasional opportunities for price escalations due to supply scarcity. Currently, certain drugs are defying the general trend of price erosion by increasing in price due to supply shortages. This caught some firms off guard, as they had been trimming capacity in their plants, R&D, QC, and supply chain to cut costs in response to margin pressures. Conversely, failure to optimise costs may lead to profitability issues. The solution lies in developing the ability to amplify supply chain agility significantly, rather than incrementally, while also enhancing cost efficiency.”