Productivity and the Economics of Regulatory Compliance in Pharmaceutical Production

Transcription

1 Productivity and the Economics of Regulatory Compliance in Pharmaceutical Production Doug Dean & Frances Bruttin PwC Consulting Pharmaceutical Sector Team Basel, Switzerland

2 Declaring a Few Biases...!Business!Manufacturing!Systems!Big pharma 2

3 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

4 Improving the Economics of Compliance! Risk! Compliance effectiveness Win - regulators & consumers! Cost Win - business! Shareholder returns 4

5 Our Business Environment - Tough & Getting Tougher 15 Real Market Growth - Slowing % Market Growth

6 Shareholder Returns - Falling 34% 5 Year Annualised TSR (%) 32% 30% 28% 26% 24% 22% 20% Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 6

7 R&D Productivity - Falling Annual R&D expenditure ($ billion) NCEs` NCE's launched per year $Billion 7

8 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 Years of Exclusivity 8

9 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

10 Conclusions!Hostile environment.!intense competition for resources.!manufacturing has to contribute (à la Wheelwright). 10

11 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. 11

12 EXAMPLE: Parenteral Emulsion 0.2AU Product quality attribute limit 3 batches mb ± 10% 0.1AU Lower Control Limit Upper Control Limit

13 EXAMPLE: SVP Emulsion 0.2AU 0.1AU Lower Control Limit Upper Control Limit

14 What is the Potential for Improvement?! Value-added -vs- non value-added activities.! Measurement for accounting -vs-measurement for productivity! Ability of a process to be "right first time". 14

15 EXAMPLE: Value Added -vs- Non Value Added Process Time Value Added Non Value Added Activities Transport Control 1% 94,7% Delays Time 3 Days 15 Cost

16 EXAMPLE: See It to Fix It - Value-Added Time Only 3 Days! 100% Packaging Cost Coating & Branding Comp 0% Disp. 3 days Gran. Time 35 days 16

17 Measurement Shows Potential for Improvement 100% Cost reduction Time Compression 0% 3days Best Practice: VA Ratio 50% 35 days 17

18 EXAMPLE: Traditional MRP II Measurement - For Accountants. 80 hrs/wk Scheduled Downtime Losses are planned in Total Available Time Conversion Time Allocation for: Traditional Losses and Other Unexpected Losses Operational Uptime Result Asset Utilisation 30-40% 18

19 EXAMPLE: Measuring for Productivity - Reveals Potential 24 hrs/day, 7 days/week Scheduled Downtime 168 hrs/wk Unpredicted loss of production time Total Available Time Conversion Time Unscheduled Downtime Uptime Delays & poor planning Operational Time Losses Operational Uptime Not right first time Scrap & Reprocess Time Effective Uptime Time spent using the assets! 19

20 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 2σ 3σ 4σ 5σ 6σ ppm Defects 308,537 66,807 6, Yield 69.2% 93.3% 99.4% 99.98% % Cost of Quality 25-35% 20-25% 12-18% 4-8% 1-3% 20

21 Measure Spread & Variability GOOD: High Capability BAD: Low Capability Lower Specification Limit Upper Specification Limit Lower Specification Limit Upper Specification Limit Lower Specification Limit Upper Specification Limit Lower Specification Limit Upper Specification Limit This process is capable This process is not capable 21

22 Calculating The Purely Business Benefits Decrease by scrap reduction. Reduce cost of compliance. Eliminate non-value add activity. Unit Cost Material Cost + Period Cost = Efficiency x Planned Volume Increase by raising process yield. Raise process capacity. 22

23 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. 23

24 Benefits - Increased Effectiveness of Compliance Infrastructure 2σ Cost Direct Cost Recovery 5σ Compliance Gain 0% Level of Compliance 100% 24

25 How this is a Win-Win High QUALITY σ - World Class 5σ - Superior 4σ - Healthy 3σ - Average 2σ - Not Capable 1σ - Not Competitive Low Low PRODUCTIVITY High 25