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.

We found a wide range of productivity levels among the companies in the study. Despite broad geographic differences—for instance, European plants are often more productive than North American ones—there are top players in every region we studied. This finding suggests that the potential for industry-wide improvement is substantial.

Maximizing the efficiency of production labor and equipment is one important way top-quartile drugmakers break out of the pack. Their rates of operational-equipment effectiveness are more than twice those of bottom-quartile companies, and when we looked closely we found that processes account for two-thirds of the difference. Low performers, for instance, are less likely than high performers to use standardized ways of measuring and controlling equipment parameters and as a result generate more than twice as much waste from unplanned speed losses caused by line stoppages.

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