MIT'S PROGRAM ON THE PHARMACEUTICAL INDUSTRY


Annual Report of Research and Educational Programs
1995

Research Focus

THE STATE OF MANUFACTURING IN THE PHARMACEUTICAL INDUSTRY

RESEARCHERS

Faculty

Doctoral Students

Master's Students

In this research area, POPI continues its exploration of the key issues facing firms in the manufacture of pharmaceuticals.

The fundamental structural change being experienced by the industry is creating for manufacturing a new degree of importance among pharmaceutical executives. In the past, manufacturing was largely neglected as an area either for cost-reduction or more profound, strategic improvement. Today, this is changing.

For several years, POPI-sponsored researchers have explored the role manufacturing can play in enhancing the competitiveness of pharmaceutical firms; the degree to which firms successfully incorporate best practices into the manufacture of drugs; and what lessons from other industries might be appropriate to pharmaceutical manufacturing. New Project

Pharmaceutical Manufacturing: What is Its Role?

Research Team

This new project builds on ongoing POPI-sponsored research into pharmaceutical manufacturing. The research team starts with the finding that the pharmaceutical industry has adopted a defensive mindset regarding manufacturing. This mindset pertains both to how manufacturing is regarded by the larger pharmaceutical organization and the way manufacturing organizations within pharmaceutical firms view themselves. That defensive mindset flows from a view of manufacturing as simply being the "cost of goods sold." In turn, the cost of goods sold is considered to be insignificant.

Research method and data. The approach is based on a lifecycle analysis of a process to make a specific product. A model was developed that could account for all cost and profits over the product lifecycle. The model permits inclusion of benchmarking results and calculates the assessment of impact on profits.

Preliminary results. The results to date demonstrate the important role of manufacturing on profitability.

Benchmarking the Manufacture of Pharmaceuticals

Research Team

Working Paper

This ongoing research explores opportunities to reduce manufacturing costs substantially by improving efficiency and effectiveness through "benchmarking." This process of self-improvement allows a manager to compare performance to that of competitors or related firms on a continual basis. (Detailed descriptions of the research method and data may be found in last year's report.)

Findings and conclusions. Preliminary findings and conclusions from prior activity in this research project may be found in last year's report.

New observations over the last year allow the research team to draw several preliminary conclusions.

Future work. The research team is at present further characterizing the pharmaceutical manufacturing mindset and correlating this with performance. The team expects to enhance its database by extending this analysis to a larger number of companies, both within and outside the industry. Work will continue on development of a lifecycle model for assessing the impact of process improvement.

Further, a major effort is underway to add a new dimension to the study. In collaboration with several pharmaceutical companies, the researchers have undertaken to study the impact of technology on manufacturing performance. Discussions have begun with suppliers to gain a better understanding of their relationship with the industry itself.


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