Can PricewaterhouseCoopers Cure the High Cost of Drugs?

The consulting firm is promoting a Web-based system that could lower drugmakers' costs and help them rush their products to market.
Joseph RadiganJune 5, 2001

PricewaterhouseCoopers’ consulting arm has taken a look at the tens–if not hundreds–of millions of dollars pharmaceutical companies spend every year on research and development, manufacturing, and regulatory compliance, and says it may be able to carve a huge chunk out of those costs.

The company is in the midst of a major, global roll-out of a Web- based publishing system called GxPharma, which is built upon the 4i content management product from Documentum Inc. of Pleasanton, Calif., and at least three drugmakers are currently beta testing the system. Neither Documentum nor PwC would provide the names of the beta sites at press time.

To a certain extent, PwC is hardly the first company to come up with this idea. Alan Weintraub, a research director from Gartner Inc. in Stamford, Conn., says drugmakers have been striving to streamline their processes for years. The drug industry is already close to its goal of submitting their drugs for regulatory approval with officials in the major markets such as the U.S., Europe, and Japan the instant they close their clinical trials.

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“Basically, what has happened with PwC and Documentum is they’ve said, ‘If we come to the market with some best practices and out-of-the- box capabilities, we can get you up and running quickly,’” Weintraub says. Until recently, many implementations have been heavily customized.

Doug Dean, a partner in PwC’s office in Basel, Switzerland, expects the system to lower costs for drugmakers in their research and development, regulatory approval, manufacturing, and time-to-market with new products.

“We’re trying to make it easier to manage the digital assets around the drug’s ingredients recipe and how it is produced,” Dean explains.

Mike Lewis, Documentum’s director of global alliances, says drug companies will literally spend tens of millions of dollars on R&D and the clinical approval process for each product. The costs start piling up with research and testing documentation, and don’t end once a product is ready for the market, given the frequent revision and updating of those documents and the distribution of each revision to the manufacturing sites in each local market.

For example, notes a spokeswoman for Merck, an industry trade group, the Pharmaceutical Research and Manufacturers of America, estimates that it takes 12 to 15 years and costs $500 million before the average drug reaches the market.

PwC’s Dean says the costs in the “dosage form,” the drug industry’s term for the final stage of manufacturing where active and inactive ingredients are mixed in precise measurements for each local market, could be reduced by 10 percent to 12 percent. He estimates that manufacturing costs account for roughly half of the total costs of goods sold for a typical drugmaker.

“Approximately 20 percent to 25 percent of the annual costs are related to quality control and regulatory compliance,” Dean says. “We can cut that by 50 percent.”

Typically, each dosage form site has to adhere to a specific set of guidelines for each product it makes. For example, after all the different varieties for any common, over-the-counter painkiller are factored in, including tablets, caplets, gel tabs, extra strength, and children’s, a drug company could have several dozen versions of the same product. Each version comes with its own phone-book-sized bundle of documentation.

Even in cases whre that documentation is online, it isn’t always easily accessible on the factory floor.

Dean also says that the raft of documentation created at the R&D stage isn’t always sent efficiently to the employees responsible for getting approval from the Food & Drug Administration. From there, the documentation is usually delayed in reaching the factory floor.

Dean says this technology transfer of the documentation among the various departments accounts for 10 percent to 20 percent of drugmakers’s costs prior to bringing a drug to market. If the transfer of the documentation is smoothed out, then these transfer costs can be cut in half.

Finally, Dean says that by helping drugmakers get their products to market faster, the system can help them generate revenue much more quickly than they would have otherwise. Currently, it can take four years from the completion of the last clinical trial until regulatory approval is granted and a drug is ready to hit the market.

Dean asserts that the system designed by PwC and Documentum can slash that interval to as little as four months.

Whether drugs will indeed start hitting the market in what amounts to a blink of an eye remains to be seen, but Gartner’s Weintraub notes that drugmakers have been scrutinizing the time lag during the regulatory approval process for several years. As an industry, drugmakers estimate that it costs them $1 million a day in lost revenue while they wait out the approval.

Perhaps PwC doesn’t have the right medicine for everything that ails the drug industry, but with revenue figures like that at stake, it could cure an awful lot of heartburn.