Life Sciences Case Study
Practice - Strategic Sourcing
Sector - Healthcare/Pharmaceuticals
Category - Central Lab Services/Imaging Interpretation/Remote Blood Pressure Monitoring
Geography - Global
Baseline - US$ 160m
Savings - US$ 61m (38%)
Our client was a first-division European pharmaceutical and health care corporation. It has major operations in all key world regions (Europe, North America, South America, South Africa and Asia Pacific). Increasing cost pressure from insurers, both private and state-owned, was depressing its margins. Moreover, several of its key molecules were either at or nearing the end of their period on-patent, leading to a powerful cost squeeze from generic competition.
The pharmaceuticals industry has becoming increasingly competitive and challenging in recent times. “Blockbuster” drugs are increasingly scarce, and new molecules and therapies are difficult to develop, less profitable, and tend to serve niches. In consequence, pharmaceutical companies have to slash costs where possible. Bought-in goods and services are an obvious area for attention in this context.
The Triton Strategic Sourcing team used the following methodologies and levers to secure the savings and institutionalize them:
- Disaggregating the prices for the services being tendered for to a far higher degree than previously: the vendors’ service offer was broken down into thousands of different price components, each of which was put out to tender in a highly automated yet user-friendly tender document
- Using increasingly-sophisticated image and data interpretation tools to partially substitute for qualified medical personnel in interpreting the raw data for imaging and electrocardiograms and hence reduce the time required of qualified medical personnel to interpret data
- Leveraging increased competition within the supplier base, both allowing existing suppliers to bid for more business, as well as qualifying new suppliers
- Using qualified medical personnel in lower-cost countries (e.g. Russia, India) to undertake image and cardiac data interpretation
The above was achieved by a joint Triton Associates/Client team. Key elements contributing to the success of the project included:
- Massive engagement of the key stakeholders in the organisation – over 100 individuals’ buy-in was obtained
- Intensive use of “big data” analytical tools to review tens of thousands of price points and millions of permutations using “what-if” modelling techniques
- Staffing the Artemis Partners team with skilled sourcing professionals with a medical background
The results were that we obtained total project cash savings of US$ 61m (38%).
Additionally, we identified medium-term savings from demand management; this required intensive buy-in at the physician level.