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Quality Manufacturing a Blockbuster Opportunity for Pharmaceuticals Quality manufacturing A blockbuster opportunity for pharmaceuticals An Economist Intelligence Unit white paper written in co-operation with Oracle Quality manufacturing A blockbuster opportunity for pharmaceuticals Preface Quality manufacturing: a blockbuster opportunity for pharmaceuticals is an Economist Intelligence Unit white paper, sponsored by Oracle. The Economist Intelligence Unit bears sole responsibility for this report. The Economist Intelligence Unit’s editorial team conducted the interviews, wrote and edited the report. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. John du Pre Gauntt is the author of the report. Our research drew on desk research and in-depth interviews with senior executives and government officials in the field of pharmaceuticals. Our thanks are due to the interviewees for their time and insights. September 2005 © The Economist Intelligence Unit 2005 1 Quality manufacturing A blockbuster opportunity for pharmaceuticals Abstract Pharmaceutical manufacturing is shedding its “poor cousin” image and gaining in importance relative to R&D and marketing. Decades of regulatory and industry standard practice in manufacturing are being reworked to help push operating efficiency in pharma closer to other “normal” industries such as semiconductors, industrial chemicals and even consumer packaged goods. Early reports from the field suggest that progress will require massive change across organisations beyond the factory floor. However, the potential improvements in efficiency and regulatory oversight are too great to ignore. 2© The Economist Intelligence Unit 2005 Quality manufacturing A blockbuster opportunity for pharmaceuticals Introduction changing how it intends to approve pharmaceutical manufacturing applications by emphasising a “quality by design” model of regulatory approval compared with a “quality by test results” orientation that it used until recently. This change is likely to have an extremely significant effect on the entire industry, he pharmaceutical industry is transforming the because every global pharmaceutical player runs mass production of drugs. More complex substantial operations in America. Tcompounds, impatient regulators and increased Another factor that is affecting manufacturing market pressures leave little doubt that manufacturing techniques is changes to the “blockbuster” business will no longer be viewed as a standalone activity, but model that has sustained the industry to date. will join with research, clinical trials and marketing as Pipelines of new, patented compounds are thinning as the most important business processes executed by a large pharmaceutical manufacturers face growing drug company. competition from generic-drug manufacturers, who Such an overhaul is sorely needed if the drug are matching and even exceeding the technical industry is to become efficient again. The sophistication of their larger brethren. In the US drug uncomfortable truth about pharmaceuticals is that market, generics account for more than one-half of all despite warning letters, consent decrees, and fines prescriptions filled, up from one-third in 1990. totalling in the hundreds of millions of dollars, In addition to shifts in the regulatory and economic product quality at an industrial scale remains variable environments for drug companies, the scientific pace for many of the world’s top drugmakers. This situation of discovery continues to run at breakneck speed. In was highlighted in a September 2003 front-page the past decade alone, the biological science article in The Wall Street Journal, in which revolution has opened significant opportunities to pharmaceutical manufacturing techniques were shown reach smaller, albeit more lucrative, markets through to lag far behind those of potato-chip and laundry- targeted treatments (Targeted treatments and the soap manufacturers, not to mention those of the prospects for pharmaceuticals, Economist Intelligence electronics industry. Unit white paper, January 2005). However, the move Efficiently industrialising lab discoveries has towards biologics requires mastery of completely new become critically important for many of the world’s fabrication techniques that have more in common with leading pharma companies. Best practices in food and beverage manufacturing than classic manufacturing such as Lean Manufacturing (“Lean”) chemical production. and Six Sigma from industries such as automobiles, As a result of these regulatory, commercial and petrochemicals and consumer packaged goods are scientific changes, pharma manufacturing is in a state being studied and applied across the drug industry. of flux. New technologies, methodologies and Recognition of the problem is a necessary but not regulatory regimes are being introduced, while sufficient condition for improved efficiency among previously sacrosanct practices and models are being drugmakers. For a start, pharma is one of the most re-evaluated. How the industry and regulators heavily regulated industries. In the United States, the respond to these challenges will determine whether world’s largest pharmaceutical market by far, the Food drugmaking catches up with other manufacturers in and Drug Administration (FDA) is in the midst of the 21st century. © The Economist Intelligence Unit 2005 3 Quality manufacturing A blockbuster opportunity for pharmaceuticals A cottage industry As part of its efforts, the agency’s Science Board held meetings with industry representatives, where it discovered that many of the factory processes used for drug manufacture made little sense. “One of the largest drug companies discussed with us an informal company policy they called ‘Don’t Use Don’t Tell’ with iven the exotic names of pharmaceuticals and respect to anything innovative in manufacturing”, popular images of technicians in lab coats, it is recalls Dr Hussain. “The ‘Don’t Use’ policy implied that Gdifficult to imagine that pharmaceutical they were so reluctant to alter production processes manufacture is unsophisticated. Yet compared with because of regulatory uncertainty that they would other industrial sectors such as petrochemicals or stick with old technologies and processes that were semiconductors, there has been a very slow rate of clearly obsolete. The ‘Don’t Tell’ policy covered those introduction into pharmaceuticals of modern process situations where they changed something to improve design principles, measurement and control production but decided not to tell the FDA because technologies, and knowledge management systems. they didn’t want to incur the cost of seeking a Many current production techniques and some supplemental approval.” technologies are decades-old, with some standard The Science Board meetings combined with procedures dating back to the 19th century. “If you benchmarking studies by Massachusetts Institute of look at a lot of our blending technologies, they are Technology and PricewaterhouseCoopers uncovered little better than a giant KitchenAid”, notes a problems on a large scale. The studies revealed that production executive at an international generic-drug the total cost of the current manufacturing manufacturer. “So from a technical standpoint, the infrastructure exceeded that of research and capital equipment technologies have not evolved at development (R&D) by two- or threefold. Equally the rate they have in other industries.” disturbing were reports of equipment utilisation rates There are several reasons for this situation. From an in the range of 15-20% for manufacturing. According industry perspective, the very high profit margins (in to a report by the FDA’s manufacturing science some cases exceeding 90%) on branded drugs largely working group entitled Innovation and Continuous obscured the financial impact of low manufacturing Improvement in Pharmaceutical Manufacturing, world- efficiency. Regulators focused more on improving wide cost savings from raising manufacturing clinical trials than on delving into the state of efficiency could run as high as US$90bn annually, the pharma’s manufacturing infrastructure. But this has equivalent of the current cost of developing 80-90 new changed in the past few years, owing to a large drugs. “That means that the pharmaceutical number of product recalls and reports of drug manufacturing infrastructure we have is a significant shortages. According to Dr Ajaz Hussain, deputy drain on the economy and has a bearing on the high director of the Office of Pharmaceutical Science at the cost of drugs”, concludes Dr Hussain. FDA, the sheer number of warning letters and the fact Pharma’s low manufacturing productivity is not that nearly every major company was operating under entirely caused by regulations and industry practices. some sort of consent decree prompted the FDA to act. The reality is more complex. Follow-up discussions at In 2001 the agency began to try to pinpoint some of FDA’s Science Board, scientific workshops and the causes of the high error rates and low efficiency conferences uncovered the following factors: levels in pharma manufacturing. 4© The Economist Intelligence Unit 2005 Quality manufacturing A blockbuster opportunity for pharmaceuticals Pharmaceutical Manufacturing 101 Most pharmaceutical plants are relatively small com- ● Extraction—producing pharmaceutical products by pared with the sprawling installations common to auto- extracting organic chemicals from plant or animal tis- motive, semiconductor or food-processing industries. sues. Nearly all pharmaceutical
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