Key takeaways:

• Pharma SG&A efficiency requires a broader capital allocation strategy. Managing commercial spend as a portfolio of investments helps leaders direct resources toward the brands, channels and markets with the greatest potential for incremental return.
• Commercial spend reallocation can unlock growth without increasing budgets. In a small set of ZS engagements, observed and modeled results suggested potential revenue uplift of 12%-20% from the same investment base through enterprise-level portfolio allocation.
• Context-adjusted benchmarks help pharma companies improve commercial channel performance. Comparing actual results with expected performance reveals opportunities to improve returns, while always-on measurement and clear decision rights enable continuous investment optimization.

For much of the past two decades, favorable market dynamics allowed pharmaceutical companies to prioritize growth while treating selling, general and administrative expenses (SG&A) as a secondary concern. While the industry remains highly innovative and successful, growth at the pace companies and shareholders have come to expect is less assured.

That growth is less assured in part because the economics of innovation have become more challenging. As companies pursue increasingly complex scientific opportunities, development costs continue to rise and timelines continue to lengthen, making predictable returns harder and more expensive to secure. With more capital required to generate growth, companies must manage the investment they already make with far greater discipline.

Many companies have responded by focusing on their cost base. ZS analysis of public disclosures found the top 15 pharmaceutical companies announced more than 20 cost actions from 2020-2025, representing approximately $28 billion in disclosed savings targets. But cost reduction alone will not be enough. ZS analysis of analyst consensus forecasts suggests that revenue for these companies could increase cumulatively by 25% between 2026 and 2031. Meeting that expectation requires a shift from periodic cost cutting to enterprisewide capital allocation, directing investment across brands, channels, markets and moments where it can create the greatest value.

Where SG&A investment creates commercial value

We divide SG&A into two categories. Indirect spend enables commercialization. It provides the capabilities, infrastructure and governance required to operate effectively, including insights and analytics, market research, content production, finance, IT and HR. Direct spend is deployed to influence customers and markets through field force activity, healthcare professional (HCP) engagement, patient activation, direct-to-consumer (DTC) and digital promotion.

Each category calls for a different agenda. For indirect spend, the priority is to simplify and scale the enabling engine without compromising commercial effectiveness, including through operating-model redesign, vendor consolidation and automation, while redeploying capacity toward the customer-facing investments with the highest expected return. For direct spend, the priority is to maximize incremental return.

This point of view focuses on the direct side, answering allocation questions that most directly shape revenue:

Where should capital be directed (brands, channels, markets)?

How can the investment already allocated to a brand, channel or market deliver more or be made more efficient?

Companies can improve returns from direct commercial spend in two complementary ways. First, they reallocate investment. Reallocation moves promotional dollars across brands, channels, markets and time, moving capital away from areas where returns are diminishing and toward underfunded areas with the highest marginal return.

Second, they improve channel performance without increasing their investment base. Channel performance improvement focuses on how to make each promotional channel work more effectively by closing the gap between what each channel delivers today and what leading performers achieve. This performance frontier looks beyond the company’s past results to capture the gains other organizations, brands and teams have achieved in similar contexts.

Pulling these levers requires strong analytic capability, reliable self-measurement, context-adjusted external benchmarks to establish what good looks like and clear authority to act on the results.

Reallocation widens the aperture beyond a single brand and a single year

Most reallocation today happens one brand at a time against a one-year horizon. A brand team optimizes its own fixed budget across channels such as sales force, HCP marketing, DTC and digital. That captures simpler trade-offs within a brand, but it leaves the larger opportunities untouched because the biggest inefficiencies sit between brands, markets and years—beyond the scope of an individual brand exercise.

To capture that larger opportunity, leaders must look beyond historical performance and ask a forward-looking question: Where can the next dollar generate the greatest incremental value? Answering it requires comparing opportunities across brands, channels, markets and time after accounting for diminishing returns of direct spend and broader strategic priorities.

Widening the aperture is where value compounds:

• Across the portfolio, comparing marginal return on a common basis across brands lets leaders redirect investment from brands with diminishing marginal returns toward those where incremental investment can create greater value. The higher up the organization the allocation decision sits, the larger the opportunity. In a small set of ZS portfolio-allocation engagements, observed and modeled results suggested a potential revenue uplift of 12%-20% from the same investment base at an enterprise level. The precise opportunity depends on the scope of brands and channels considered, starting allocation maturity, market conditions and organizational decision rights.
• Across time, extending the horizon beyond a single year changes the optimal allocation. Early life cycle and pipeline assets that look unattractive on this year’s numbers may create significant value through earlier market development, while mature assets nearing loss of exclusivity may warrant less than their current spend.

In practice, a top 10 pharma managing 30-plus launches within a therapeutic area in the U.S. used a portfolio-level allocation capability to identify roughly 5% of the advertising and promotion (A&P) budget for redeployment in year one and approximately $250 million in cumulative three-year impact from more efficient allocation, while still attaining the original forecast. The objective was a better allocation of commercial investment rather than cost reduction for its own sake. Capacity was redeployed toward higher-return opportunities while the revenue plan was maintained. Realizing the opportunity required coordinated decision-making and alignment across headquarters and local affiliates and across commercial, finance, analytics and technology.

What should your commercial channels be delivering?

Channel performance improvement focuses on making investment already in a channel work more effectively. It starts with a practical question: How does each channel’s performance compare with what it should be capable of?

Internal comparisons within the same portfolio are useful, but they cannot establish whether a channel is performing near its potential. A channel may outperform other assets in the portfolio and still underdeliver relative to what a comparable brand could achieve in the same context. External benchmarks can reveal performance gaps that internal comparisons alone may obscure, provided they account for the factors that shape expected response.

More useful than internal or external analog comparisons are synthetic AI benchmarks tailored to a brand’s specific profile. Advanced benchmarking models trained on promotional-response data across hundreds of products can estimate that expectation at scale using factors such as life cycle stage, therapeutic area, HCP concentration, competitive intensity and access conditions.

The gap between actual and expected performance helps leaders prioritize action by investigating the largest gaps in the portfolio, diagnosing their causes and targeting investment toward the interventions most likely to close them. With underperformance isolated and solutions identified, teams can define the intended future state and weigh the trade-offs across improvement options before committing incremental investment.

From a one-time exercise to an always-on capability

Even a one-time analysis can reveal where to reallocate budget and which channels offer the greatest opportunities for improvement. However, one-time exercises are bespoke and time-intensive, and the market keeps moving after the analysis ends. Compounding value comes from making the work continuous with an always-on capability that keeps measuring, benchmarking, diagnosing and improving as conditions change.

That capability rests on a few connected enablers:

• A common source of truth brings commercial, finance, channel, revenue and benchmark data under shared definitions, so teams debate decisions rather than whose numbers are right.
• A live view of performance and return shows how spend is flowing across brands, channels and markets and how results track against expectation.
• An early-warning system uses always-on monitoring that flags when a channel drifts below expectations and helps distinguish a local issue from a systemic one.
• A way to test decisions before committing capital uses scenario tools to compare the likely impact of shifting budget, improving a channel or both, so capital decisions are faster and easier to align around.
• A recurring capital-allocation cadence uses clearly defined forums, decision rights, thresholds and escalation paths that enable leaders to act on evidence across brands, markets and functions.

Analytics, data and tools support this management process. An always-on model means capital is revisited during the year rather than only at annual planning. Brands compete for incremental investment using comparable measures of marginal return. Material performance gaps trigger diagnosis rather than a roll-forward of prior-year budgets. Pipeline, launch and mature brand investments are considered together across a multiyear horizon. This approach also asks headquarters and affiliates to work from a shared fact base and explicit decision rights and brings commercial, finance, analytics and technology into the same decisions. For large organizations, that’s a meaningful change in operating rhythm, but it is the change that converts better analytics into faster decisions and greater capital discipline.

From a cost base to a portfolio of investments

The opportunity is to turn SG&A from a cost base that is periodically reduced into a portfolio of investments that is continuously managed. The most advanced organizations will pair better analytics with a more disciplined operating model for commercial investment, continually testing where the next dollar can create the greatest incremental value.

Done well, that creates room to fund growth even as margin pressure rises, not necessarily by spending more, but by getting more from the investment base companies already have.