KEY TAKEAWAY: Rethinking pharma productivity, an article by McKinsey consulting, is full of corporate consulting gibberish and is proof that they really don’t understand the business of our industry is helping people and helping employees help patients.
Let me start with a disclosure: I’m not a fan of McKinsey Consulting. We have run across their recommendations with many clients that don’t address the real challenges of pharma companies and in some cases have led to bad decisions. One client, for example, after a McKinsey audit raised their drug because McKinsey said it was priced way below market thresholds. In the process, they lost customers to the competition and the business unit failed to look at the big picture of failing unit demand versus price increase revenue.
McKinsey’s latest article “rethinking pharma productivity” looks at pharma in terms of numbers and data, but fails to look at the real problems within the industry.
The article says “pharmaceutical companies have been striving to improve their productivity since the beginning of the new millennium. They scored early success by bringing down selling, general, and administrative (SG&A) expenses between 2004 and 2011, but more recent cost-reduction efforts have yet to reshape the structure of their P&L”. This article is partly true, but what they are leaving out is that the reason is that the culture within the industry generally remains unchanged.
Within the last decade, we say huge layoffs of pharma sales people as well as an exit of talented marketers who were told to “find new jobs” when their products came off patent even though they had great success within the organization. Is there any doubt, for example, that some of the people being laid off In Lilly’s Alzheimers unit have the talent and drive to succeed? Yet because Lilly is on a downward spiral they are told to find a place in the lifeboat as the ship goes down.
McKinsey goes on to say “while some companies have bucked the trend by achieving more impressive productivity gains, pharma as a whole still has a long way to go to match the progress other industries have made in rethinking the way they operate to cut costs and contain staffing levels”. Ha? Steve Jobs said “Great things in business are never done by one person. They’re done by a team of people.” He also said “a lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.” As with all corporate consulting companies cutting costs and personnel reductions is the way to make money. Need we remind them that pharma CEO’s are among the best paid in the world and the pharma industry has among the highest profit margins of any industry?
I ran this article past three former executives from the pharma industry and they said basically that the article failed to account for the fundamental changes that are needed which is “hire better and smarter and retain good people”. They have said what I have been saying for years, which is that too many good people are having their voices drowned out numbers people and employees who are into territory building.
Change comes from the top down, but simply saying a business cliche is not going to result in real change until the industry seeks out the rebels and pirates who can implement REAL change and ask “why would a patient trust us?”. The McKinsey article is another in a series of articles that show they know the cost of everything but the value of very little.