It's now officially bad form to use the "perfect storm" cliché, but Roche ($RHHBY) CEO Severin Schwan couldn't resist while describing the state of the pharmaceutical industry. It's becoming polarized, he said, "with only companies that are truly innovative or extremely efficient makers of generic medicines being able to survive," according to a Reuters report.
The report concerns drugmakers turning to automakers for efficiency ideas, a practice going back to at least 2009. As carmakers had to dismantle their vertically integrated operations and embrace outsourcing in response to troubled times, so too is pharma's likely future. GlaxoSmithKline ($GSK) and AstraZeneca ($AZN) are among those giving it a try.
Following the auto industry model will likely be helpful as drugmakers reduce production costs, says Reto Hess of Credit Suisse, in the report. "The amount of high tech that is offered at affordable prices in today's cars is remarkable," he said in the story.
Drugmakers need to be selective in choosing the auto industry models they adopt, according to the report. Take inventory reduction, for example. Just-in-time supply tenets are most likely a poor fit in an industry already suffering hundreds of drug shortages. Pharma, of all industries, needs to avoid supply disruptions given the critical nature of the products it makes.
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