A reputation for disciplined spending
There's one adjective few would apply to the pharmaceuticals business: disciplined. Big Pharma has a reputation, fair or not, for sprawl and overspending. Even the cost cutting that major drugmakers have engaged in over the past several years has come in enormous waves, with layoffs announced several thousand at a time. Nitty-gritty, detail-oriented execution, if found anywhere, is in the lab and the biopharma manufacturing plant, not administration, and certain not in marketing.
That's one reason why Novartis ($NVS) chief Joe Jimenez has attracted so much attention since he took over the Swiss drugmaker's pharma business in 2007. He started applying standard business metrics to pharma cash flow, purchasing and competitive bidding, confident that his experience in consumer goods could change help Novartis' operations for the better.
Jimenez became CEO in 2010--and the subject of umpteen executive Q&A's and profiles. He is known to be an ex-competitive swimmer, with an athlete's day-to-day dedication. His cost-cutting moves, focused mostly on marketing and administration, have come steadily, with more than a billion cut in 2010, and even more than that in 2011. Job cuts have been steady, with a few hundred here, a thousand there; just last month the company announced another 2,000 cuts to the U.S. marketing operations. The aim: Cutting spending where it's excessive ("We have spent too much money on marketing and selling our drugs," Jimenez has said) and deploying it where it's most necessary (R&D). Manufacturing efficiency is also in Jimenez's sights; only half of the company's 83 factories were being used at full capacity before the company announced some plant cutbacks last fall.
Then there's the competitor's need for speed. Early in his tenure as CEO, Jimenez said he'd noticed how slowly the industry moved. Novartis staffers tended to spend too much time on internal debate. "Decisions were not being made decisively and quickly," he told The Financial Times. "I made it a priority to speed up decision-making and change our business model to get closer to patients and customers," he said at the time. One way to do it, he said, was the "key account management" approach, which in pharma means building better relationships with payers.
Whether it's Jimenez's influence or simply an idea whose time has come, borrowing metrics and processes from other industries is becoming something of a fad in pharma. GlaxoSmithKline announced a partnership with the racing business McLaren; one of its goals is speeding up decision-making. AstraZeneca is looking to gain "lean manufacturing" know-how from Jaguar Land Rover.
Meanwhile, Jimenez has been trying to emphasize R&D, a function that's quite different in pharma. The efficiencies he's trying to create elsewhere are designed to help feed an R&D budget "at the high end of the industry," he says. Recently, he said he's looking for 58 regulatory filings and launches over the next 5 years, among them "next-generation" targeted drugs. "We remain focused on our mission of matching the right patient with the right treatment," he said.