Performance improvement in pharmaceuticals operations

By Thilo Kaltenbach and Stephan Fath

Geopolitical disruption, inflation and mounting operational costs are putting serious pressure on pharma margins. Most companies have already trimmed selling, general and administrative (SG&A) expenses or pulled other obvious levers. Some are cutting back on R&D – a move that risks undermining long-term competitiveness. But it is increasingly clear that business as usual will no longer suffice. To stay ahead, pharma firms need a more strategic approach to operations – one that goes beyond cost-cutting to rethink how manufacturing, supply and innovation work together. Based on our experience supporting companies across a wide range of industries and geographical regions, we investigate four levers for sustainable cost reduction and how pharma firms can use them to compete in an era of chronic disruption.

A new playbook for pharma

While pharma companies previously relied on performance programs to help stabilize their earnings, they have largely already captured the easy gains from operational excellence. Today’s challenges – including restricted capital access, growing regulatory burdens, new tariffs, price pressure in the United States and the drive to localize supply chains – are compounding complexity and cost. Biotech and small-molecule firms have been hit hardest, while contract development and manufacturing organizations (CDMOs) are only now beginning to feel the squeeze. With the low-hanging fruit already harvested, firms should now shift focus to smarter value chain design, supply resilience and integrated, digitalized operations that deliver both cost savings and agility.

The new playbook for pharmaceutical companies is about much more than incremental fixes. Sustainable performance improvement now depends on rethinking operations at a strategic level. We identify four high-impact levers that can together reduce COGS by up to 20%:

• Network and value chain optimization: Redesigning manufacturing footprints, clarifying site roles and simplifying operations to reduce complexity and unlock scale
• OPEX 2.0: Pushing operational excellence further through digitalization, automation and data-driven planning to improve productivity and reduce waste
• AI integration: Enabling predictive maintenance, real-time quality control and smarter supply chains, giving firms a competitive edge
• Organizational and governance adaptation: Aligning functions, speeds up decision-making and embeds agility across operations, allowing faster responses to market shifts

Rewiring operations for a fragile world

As pharma companies navigate a more volatile and complex environment, the operations function needs to evolve from a cost center to a strategic engine of resilience and growth. This means embedding operations more deeply in R&D and portfolio planning to ensure scalable platforms and chemistry, manufacturing and controls (CMC)-ready processes by Phase 2 of clinical trials – critical for complex products like GLP-1s. Digital tools such as AI and digital twins can help accelerate approvals, boost compliance and improve supply chain visibility. On the commercial side, smarter sales and operations planning (S&OP) is essential to maintain supply reliability while optimizing working capital. Companies would also be well advised to work with policymakers to establish robust supply security mechanisms for critical medicines, as stockpiling alone is not a sustainable answer.

Prescription for performance: Rethinking pharma operations

To compete in an era defined by chronic disruption, we advise pharma companies to treat operations as a strategic enabler of resilience and growth. This means moving beyond isolated efficiency efforts toward integrated transformation across networks, processes, technology and governance. Smarter site configurations, digital manufacturing, AI-powered decision-making and more agile organizational models will all be critical to success. In a world where disruption is the new norm, rewired operations will be key to sustained performance – delivering the flexibility, speed and cost efficiency needed to stay competitive.

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