How a strategic approach to COGS reduction can drive sustainable competitive advantage for generics, OTC, and mature pharmaceuticals
In ultra-competitive pharmaceutical market segments such as generics, OTC, and late-stage products, every dollar counts. Low price expectations, high rebates, and fierce competition mean continual pressure on manufacturers to reduce costs. And cost leadership often translates into scale and market leadership.
Reducing costs to gain a competitive edge continues to be an ongoing struggle in the pharmaceutical industry. The cost of goods sold (COGS) presents one of the biggest opportunities – and for good reason. COGS optimization enables more competitive pricing, and this can drive higher sales volumes and greater scale efficiencies. Better efficiency in turn leads to lower costs, and again the potential opportunity to lower pricing. It’s a virtuous cycle that can deliver a sustainable source of competitive advantage.
However, many businesses fail to realize the benefits of COGS optimization because they take the wrong approach. One-off or siloed COGS reduction initiatives deliver limited value. The key is to develop an integrated, strategic, cross-functional COGS reduction capability that can be used time and time again.
Genioo’s COGS Analysis Framework unlocks value by identifying high priority molecules with the greatest potential to drive sales volume from cost reductions. These molecules are then analyzed through a systematic 11-step approach to create a cross-functional fact base to identify opportunities not apparent in traditional cost reduction programs.
Our proven cross-functional methodology spans TechOps, Procurement, Commercial, Finance, and R&D. It typically identifies 5-15% COGS reduction opportunities for key molecules, and in highly competitive and cost-driven segments, savings on this scale can deliver huge bottom-line benefits.
What’s more, establishing an internal COGS reduction capability – inextricably linked with company-specific roles, processes and data sources – can give you a source of ongoing competitive advantage.
Delivering tangible results
Genioo worked with a leading pharma company to develop and pilot a COGS reduction framework in selected price-sensitive markets. We tested the framework across its most promising molecules and succeeded in identifying:
7-15% potential COGS savings ($1bn baseline on its top 20 molecules)
Following the pilot, we helped the business establish a permanent COGS reduction capability to assess and deliver further opportunities ongoing.
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Follow our comprehensive 11-step approach to embed a strategic COGS optimization capability in to your pharma to drive sustainable competitive advantage. Our proven methodology can help you realize 5-15% COGS savings and more efficient and scalable operations to help you lower drug prices.Find out more
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