Transcript Productivity and the Economics of Regulatory Compliance in

Productivity and
the Economics of
Regulatory
Compliance in
Pharmaceutical
Production
Doug Dean &
Frances Bruttin
PwC Consulting
Pharmaceutical Sector
Team
Basel, Switzerland
Declaring a Few Biases ....
Business
Manufacturing
Systems
Big pharma
2
Our Thesis
 The status quo is untenable.
 Pharmaceutical manufacturing - lots of room for
improvement.
 Traditional metrics hide poor performance.
 Compliance infrastructures are not ecomomic.
 Technologies are critical enablers - but not in isolation.
 Huge potential for industry & regulators to create a winwin.
3
Improving the Economics of Compliance
 Risk
Win - regulators & consumers
 Compliance effectiveness
 Cost
Win - business
 Shareholder returns
4
Our Business Environment - Tough & Getting Tougher
15
Real Market Growth - Slowing
10
% Market
Growth
5
0
5
Shareholder Returns - Falling
5 Year Annualised TSR (%)
34%
32%
30%
28%
26%
24%
22%
20%
Mar-98
Sep-98
Mar-99
Sep-99
6
Mar-00
Sep-00
Mar-01
R&D Productivity - Falling
70
65
60
Annual R&D expenditure ($ billion)
50
45
40
55
35
50
30
25
45
20
40
15
35
30
NCE's launched per year
10
5
25
0
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00
7
Window of Exclusivity - Decreasing
Cox-2 Inhibitors 1998/9
Invirase 1995
Recombinate 1992
Difulcan 1990
Mevacor 1987
AZT 1987
Seldane 1985
Prozac 1985
Capoten 1980
Tagamet 1977
Inderal 1968
0
2
4
6
8
Years of Exclusivity
8
10
12
Pharma Manufacturing - Unmet Performance Expectations
Utilisation levels - 15% or less
(but low levels masked).
Scrap and rework - we plan for 5-10%
(accepted as necessary).
Time to effectiveness - takes years
(not challenged).
Costs of quality - in excess of 20%
(that's the way it is).
9
Conclusions
Hostile environment.
Intense competition for resources.
Manufacturing has to contribute (à la
Wheelwright).
10
Our Findings - Problems Start in Development
 Processes are transferred that are neither fully
understood or capable at commercial scales.
 Lengthy & elaborate new product introduction exercises
that generate data but fail to provide critical information.
 50% of production costs locked in before Phase III
begins, process inefficiencies "institutionalized".
 No scientific basis for trading-off time in return for
deeper process understanding.
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EXAMPLE: Parenteral Emulsion
Product quality attribute limit
0.2AU
3 batches - 500 mB ± 10%
0.1AU
Lower
Control
Limit
Upper
Control
Limit
450
500
12
550
EXAMPLE: SVP Emulsion
0.2AU
0.1AU
Lower
Control
Limit
Upper
Control
Limit
450
500
13
550
What is the Potential for Improvement?
1. Value-added -vs- non value-added activities.
2. Measurement for accounting -vs-measurement
for productivity
3. Ability of a process to be "right first time".
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Value Added
Non Value Added Activities
Transport
Control
EXAMPLE: Value Added -vs- Non Value Added Process Time
Cost
1%
94,7%
Delays
Time
15
3 Days
EXAMPLE: See It to Fix It - Value-Added Time Only 3 Days!
100%
Packaging
Cost
Coating &
Branding
Comp
Gran.
0%
Disp.
3 days
Time
16
35 days
Measurement Shows Potential for Improvement
100%
Cost reduction
Time Compression
0%
3days
Best Practice: VA Ratio 50%
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35 days
EXAMPLE: Traditional MRP II Measurement - For Accountants.
Scheduled
Downtime
Losses are “planned in”
80 hrs/wk
Total
Available
Time
Allocation for:
Traditional
Losses and
Other
Unexpected
Losses
Conversion Time
Operational
Uptime
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Result
Asset Utilisation
30-40%
EXAMPLE: Measuring for Productivity - Reveals Potential
24 hrs/day, 7 days/week
Scheduled
Downtime
168 hrs/wk
Total
Available
Time
Unpredicted loss of
production time
Unscheduled
Downtime
Conversion Time
Delays & poor
planning
Not right
first time
Operational
Time Losses
Uptime
Operational
Uptime
Scrap & Reprocess
Time
Effective Uptime
Time spent using the assets!
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EXAMPLE: Sigma - Getting it Right First Time.
 Quantifies process ability to generate defect-free output.
 Allows comparison of any two processes.
 Higher sigma values indicate better processes.
 Should be the scientific basis for process transfer.
Pharma
Semicon
Sigma ppm Defects
Yield
69.2%
2s
308,537
93.3%
3s
66,807
99.4%
4s
6,210
99.98%
5s
233
99.99966%
6s
3.4
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Cost of Quality
25-35%
20-25%
12-18%
4-8%
1-3%
Measure Spread & Variability
GOOD: High Capability
Lower
Specification
Limit
Upper
Specification
Limit
Lower
Specification
Limit
Upper
Specification
Limit
BAD: Low Capability
Lower
Specification
Limit
Lower
Specification
Limit
This process is capable
Upper
Specification
Limit
Upper
Specification
Limit
This process is not capable
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Calculating The Purely Business Benefits
Reduce cost of compliance.
Eliminate non-value add activity.
Decrease by scrap reduction.
Material Cost + Period Cost 

Unit Cost = 
Efficiency x Planned Volume 
Increase by raising process yield.
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Raise process capacity.
A Thought Experiment - 5 Sigma Pharmaceutical Production
 Cost of quality & compliance - 3% of period costs.
 Unit cost of production 60% lower than 2.5 sigma competition.
 Cycle time - 5 days (down from 30).
 Newly introduced processes immediately effective.
 Key enablers:
 Process understanding
 Parametric profiling of production processes.
 Process capability hurdle levels governing development promotion
 NIR analysis for raw materials and in-process control.
 Continuous high-volume microwave sterilization.
 On-line measurement supported by sigma tools..
 Enterprise Manufacturing Execution System with EBR capability.
 Enterprise Document Management System, shared with R&D.
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Benefits - Increased Effectiveness of Compliance Infrastructure
Cost
2s
Direct Cost Recovery
5s
Compliance Gain
0%
Level of Compliance
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100%
How this is a Win-Win
High
5
6
4
QUALITY
3
2
1
Low
Low
High
PRODUCTIVITY
25
6s - World Class
5s - Superior
4s - Healthy
3s - Average
2s - Not Capable
1s - Not Competitive