To Cut Production Costs, Pharma Is Rethinking the Factory, Not the Formula
Targeted therapeutics are transforming patient care, but they're also expensive. Here's how pharma leaders are delivering greater value for less.
While pharmaceutical products have historically been excluded from tariff impacts in the US, the latest executive order by President Trump puts them squarely in the spotlight on international trade, telling drugmakers to “cut prices to 'most favored nation' pricing.” The immediate impacts of the directive are unclear, but a renewed focus on cost pressures across the industry looks more than likely.
While this may seem shocking, we know pharmaceutical supply chains are resilient and agile. As leaders think about how to best respond to upcoming challenges, look at how the industry has evolved to bring new therapeutics to market, managing complexity while still maintaining costs.
The pharmaceutical industry has undergone a shift from standard "one-size-fits-all" active ingredient manufacturing and formulation to targeted therapeutics. While this has resulted in significantly improved patient outcomes, it has presented a manufacturing challenge. Targeted therapeutics production is more complex than standard small-molecule production because it is the result of a biological reaction rather than a chemical one. Facilities are specialized, reactors are highly sophisticated, and critically, production runs are often minuscule.
Despite these challenges, the global targeted therapeutics market size was $93.75 billion in 2020 and is expected to reach $162.89 billion by 2028.
So, how have biotech companies found success and profitability? And critically, how can other companies, pharmaceutical or otherwise, learn from this success?
Economies of Scale
One powerful approach to addressing the cost challenge involves creating manufacturing facilities of unprecedented scale. Samsung Biologics has emerged as the industry leader in this strategy, developing some of the world's largest biologics manufacturing facilities to achieve economies of scale that would be impossible for individual pharmaceutical companies to attain independently.
As a contract development and manufacturing organization (CMDO), they are able to overcome the challenge of small volume runs by contracting with a number of different companies, including a recent $1.2 billion contract with an Asia-based pharmaceutical company.
Integrated Supply Chains
While scale offers one solution, simplifying complex supply chains presents another powerful approach. Lonza has become a leader in developing comprehensive end-to-end services that reduce the need for pharmaceutical companies to manage multiple suppliers, simplifying logistics and reducing overall costs. By offering an integrated solution, the risk (and associated additional costs) of material movement, technology and data handoffs, and quality control is managed effectively.
In March 2024, Lonza acquired Roche's Vacaville, California facility for $1.2 billion, adding 330,000 liters of bioreactor capacity to its network, with plans to invest an additional $557 million in upgrades.
Continuous Flow Manufacturing: Amgen's Innovation
Perhaps the most innovative cost-reduction strategy comes from Amgen's pioneering work in what they call "next-generation biomanufacturing." This approach represents a fundamental reimagining of how biologics are manufactured.
Amgen opened its first next-generation biomanufacturing plant in Singapore in 2014. This revolutionary facility was completed in just 15 months – about half the time required for a conventional facility – at only a quarter of the typical capital cost. Despite its footprint being 75% smaller than a conventional facility, it delivers the same quantity of products.
A key innovation is the use of portable, smaller, and sometimes disposable equipment, providing greater flexibility and speed when manufacturing different medicines simultaneously. This eliminates costly, complex retrofitting inherent in standard facilities and allows Amgen to respond more quickly to changing demands.
Lessons for All
Three key principles from these biopharmaceutical innovations apply broadly:
- Strategic investments in scale and technology can transform economic equations, as Samsung Biologics demonstrates with its huge, purpose-built facilities.
- End-to-end integration eliminates friction points throughout the value chain, as Lonza shows by bringing specialized steps under one management system.
- Reimagining core processes can deliver breakthrough economics, as Amgen proves by rethinking traditional manufacturing approaches.
As industries face growing pressure to deliver more value at lower costs, these pioneering approaches show that innovation extends beyond products to the very foundations of production. Their creativity ensures that targeted therapeutics can reach more patients while maintaining commercial viability.