Reducing and Controlling Overhead Costs

Abstract

As research and development costs rise and pressure increases to provide drugs at a lower price, pharmaceutical companies have targeted overhead as an obvious place to make selective cuts. The purpose of the paper is to describe the sources of overhead, point out how overhead benefits the organization, and differentiate between overhead which is wasteful and overhead which adds value. Examples are provided to illustrate containment of costs in various ways, such as terminating unproductive projects quickly, maintaining continuity of corporate strategies, improving worker productivity, and minimizing waste. Improvements such as these should be applied not just to overhead functions but to all business operations. If waste reduction and improved efficiency are applied consistently across the organization, overhead functions will complement and add value to the business by improving cost-benefit of the operations overall.