Managing Director & Senior Partner
It’s proving very hard to move the needle. Over the last several years, the biopharmaceutical industry worldwide has intensified its focus on quality in manufacturing—but with little to show for it. Manufacturing quality levels remain well below those in other industries, such as semiconductor manufacturing and aerospace. And major recalls are still all too common. From 2010 through 2014, 11 of the top 15 biopharmaceutical companies (by revenue) received warning letters from the US Food and Drug Administration. Such problems can come at a steep price—in some cases, hundreds of millions of dollars in lost revenue, remediation costs that run in the tens of millions of dollars, and a big hit to the company’s reputation.
There are a number of reasons for the persistent quality challenges. First, the focus on quality has itself too often meant racing to put out fires when compliance issues surface, instead of addressing the root causes of quality problems. Increased investment in areas such as quality personnel or software can help in the short term, but the resulting improvements are rarely sustained and are not always commensurate with the investment. Second, when a company does implement a program aimed at delivering long-term results, it is often rolled out in a rigid, one-size-fits-all manner that ignores differences among manufacturing plants and their progress in improving quality. The result can be programs that are poorly matched to individual facilities and that miss the root causes of their quality problems. Further, such programs typically reside exclusively within the quality function and fail to address organization-wide processes that can have a major impact on quality.
It doesn’t have to be this way. Companies can improve the effectiveness and efficiency of their quality efforts by crafting and implementing a comprehensive program that takes the entire supply chain into account, from the materials provided by key vendors to production, packaging, disposition, and distribution. To do so, they need to squarely address the factors that drive success in the three phases of
a quality improvement program:
In embracing this approach, biopharmaceutical companies will be following the example of other industries in which such strategies have had powerful results.
In some ways it is not surprising that quality in biopharmaceutical manufacturing tends to lag that of other industries. The time line for drug development is long, and changing manufacturing processes can entail regulatory issues; as a result, many of the processes for manufacturing drugs are 10, 15, or even 20-plus years old. Industries in which product lives are shorter can revamp and improve manufacturing more frequently.
But pressure is building for biopharmaceutical companies to up their game in quality. The FDA is working with the industry to identify metrics that the agency can track across all companies and manufacturing plants—a move that will allow for greater insight into quality issues and trends.
This is happening as companies face a wave of patent expirations on blockbuster drugs, creating the need to reduce costs in order to preserve margins. While some in the industry assume that higher quality inevitably comes with higher costs, in fact the opposite is true. Certainly the investment in quality is significant: by our estimates, the biopharma industry spends about 2 to 3 percent of revenues annually, or $10 billion to $15 billion, on the quality organization. But an effective quality program is a crucial way to reduce costs, cutting the waste and other costs associated with poor quality. We estimate that moving the industry to a 3.5 sigma level from the current estimated level of 2.5 would yield significant cost savings—up to $25 billion annually—as less defective product is produced and the greater reliability of manufacturing allows companies to lower inventory levels.
Biopharmaceutical companies are launching ambitious quality improvement programs, often involving investments in new tools and technologies for tracking quality. But while some companies are successfully addressing some of the areas we have identified as crucial to a quality transformation, few are systematically addressing all of them.
The experience of companies in industries that operate at sigma levels well above those of the biopharmaceutical industry shows the power of a strategic approach to quality. A leading automaker, for example, struggled for years with quality challenges. After a number of false starts, management embarked on an ambitious quality program that addressed the critical elements within each of the three phases outlined above: it drew multiple functions into the effort, closely tracked key quality outcome metrics, and embedded a culture focused on quality. The company now boasts customer satisfaction ratings well above the industry average. We believe that biopharmaceutical companies that likewise adopt such a comprehensive strategy can expect analogous results.
In order for quality efforts to deliver maximum impact, they must involve more than just the quality organization.1 They must embed the initiative across all relevant functions, including manufacturing, engineering, and planning, distribution, and logistics. That means drawing these groups into every phase of the quality effort, from designing and delivering the program to ensuring that it is sustained and continually improved. (See the exhibit.)
There is no doubt that companies across the biopharmaceutical industry have taken measures to up their game in quality. But it’s time to acknowledge that current approaches are not delivering improvements quickly enough. At the heart of the problem is the fact that quality efforts are often insufficiently tied to data on outcomes, are too rigidly designed to be implemented successfully across the manufacturing network, and are isolated within the quality organization rather than integrated across the entire supply chain.
But this reality creates tremendous opportunity. Companies can drive major gains in quality programs by assessing where they stand today and redesigning their approach to be centered on results. This includes establishing the infrastructure and systems needed to track and measure progress, ensuring ownership of the effort across the organization, and building a quality-centric culture. Such an approach will amount to a redefinition and reinvigoration of the quality effort—one that requires a well-crafted strategy for moving the quality needle.
To Contact the Authors
The authors would like to acknowledge Jennifer Bratton and Frank Cordes for their contributions to this report and Nyemba Mbekeani and Frank Bressau for assistance with research. They also thank Kathryn Sasser and Amy Barrett for their help in writing the report, and Katherine Andrews, Gary Callahan, Kim Friedman, Abby Garland, Gina Goldstein, and Sara Strassenreiter for contributions to its editing, design, and production