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Breaking free from the cost-cutting cycle

New approaches for the life sciences industry

OVERVIEW

Cost control is on the mind of almost every life sciences executive, but are they pursuing the right kind of cost reduction-one that is both strategic and sustainable?

The challenge facing life sciences companies is not only in achieving cost savings but in taking cost out in a sustainable way. Accenture research found that almost all savings from traditional cost management initiatives in the industry evaporate within three years, helping contribute to a culture and mindset of “seasonal” cost reduction.

Looking toward the future, changes to existing structures, resulting in new and permanent cost control behaviors are needed to make sustainable cost management part of a life sciences company’s DNA.

Taking the right actions to reduce operating expenses can free up cash for R&D, new-product introductions and market research. All allowing for new growth and innovation; creating a sustained profitability advantage and driving competitiveness.

"100 percent of life sciences finance executives indicated that cost efficiency is currently their number-one priority."


KEY FINDINGS

Life sciences companies can focus on a variety of interventions to take out unnecessary costs, especially from back-office functions (finance, procurement, HR, IT and real estate). The four key levers that drive competitive cost structures while simultaneously achieving greater operational agility include:

Consumption – being keenly aware of consumption, making sure the focus is on expenditures where they really matter will help life science companies increase investments in R&D and commercial launch.

Supply/Price – reducing price in supply can be done in a number of ways using well-established procurement and strategic sourcing best practices.

Structure – transitioning some of the work in finance, HR, procurement and IT to a fully-integrated global business service. These functions are structured by end-to-end processes, helping to break down traditional functional silos.

Process – applying process simplification techniques and global process standards and scrutinizing the value-add of every piece of data.

RECOMMENDATIONS

The potential benefits to applying any combination of these four levers are significant. Companies that invest in one or more of the four levers can expect to see a permanent reduction of approximately 20 to 50 percent of operating expenses for in-scope functions. ​

Historically, Life Sciences companies have been able to ride out the peaks and valleys of their market, relying on high margins of a few big products, or by making temporary cuts. Today is a different era, requiring a more enduring approach to cost management to permanently fuel growth and the ability to compete and win.


Authors

Donna Peters

Donna Peters
Managing Director – Life Sciences

Cherene Powell

Cherene Powell
Managing Director – Life Sciences

Seth Rogers

Seth Rogers
Managing Director – Life Sciences

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