Big Pharma Tightens Its Belt in Global Manufacturing

In the aftermath of recent restructuring, Big Pharma is sporting a reduced global manufacturing footprint while intensifying its focus to biologics and emerging markets. What will be the look of tomorrow's manufacturing networks?
Aug 02, 2009
Volume 33, Issue 8

Pharmaceutical Technology's Fourth Annual Manufacturing Rankings reveal the ongoing consolidation, facility rationalization, and shifting manufacturing priorities of the large pharmaceutical companies. Big Pharma is continuing its restructuring and cost-saving measures, and more of the same is expected in the near term as the industry awaits the closure and integration of three important megamergers: Pfizer's (New York) pending $68-billion acquisition of Wyeth (Madison, NJ); Merck & Co.'s (Whitehouse Station, NJ) pending $41-billion acquisition of Schering-Plough (Kenilworth, NJ); and Roche's (Basel, Switzerland) $47-billion completed acquisition of Genentech (South San Francisco, CA). These deals are not only critical for the individual companies involved but also reflect the industry's increased interest in strengthening its biopharmaceutical product portfolios and the resulting resource allocation to support biologic-based development and commercialization. Also, companies are making select investments in emerging markets.

Big Pharma's renewed focus

Table I: Top 50 pharmaceutical companies (Rankings 1–25)
Tables I–II list the rankings of the top 50 pharmaceutical companies by 2008 pharmaceutical sales (i.e., human prescription products and vaccines). A review of these companies' manufacturing strategies shows continued restructuring, reveals select investment in biologics and emerging markets, and raises the question of how recent mergers and acquisitions strategy may affect these plans.

Table II: Top 50 pharmaceutical companies (Rankings 26–50)
Pfizer and Wyeth. Pfizer is continuing its strategy of manufacturing-facility rationalization and supply-chain optimization as it prepares for the closure and eventual integration of Wyeth. During 2008, Pfizer completed cost-reduction and transformation initiatives that it first launched in 2005 and subsequently expanded in 2006 and 2007. A key part of those measures was to transform its global manufacturing network into what the company terms a "global strategic supply network," which consists of its internal network of plants, strategic external manufacturers, and purchasing, packaging, and distribution activities. As of the end of the first quarter of 2009, the company had reduced the number of plants to 46, down from 93 in 2003. The reduction included the sale of seven plants and related sites to Johnson & Johnson (J&J, New Brunswick, NJ) as part of J&J's acquisition of Pfizer's consumer healthcare business in 2006. Pfizer plans to further reduce its global internal network of plants to 41, according to Pfizer's 2008 financial report. With these further reductions, Pfizer will have reduced the number of plants by roughly 50% and the number of manufacturing employees by approximately 53% compared with 2003 levels. As it rationalizes its manufacturing base, the company plans to increase its level of outsourcing from approximately 24% of its products on a cost basis to approximately 30% during the next two years, according to its first-quarter 2009 financial report.

In January 2009, Pfizer launched a new cost-reduction initiative aimed at reducing adjusted total costs by $3 billion. The program is expected to be completed by the end of 2010, and the savings realized by the end of 2011. The company plans to reinvest approximately $1 billion of these savings in the business and to use the remaining $2 billion to reduce adjusted total costs.

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