Manufacturing has been traditionally regarded as a "Cinderella" function in the R&D-based pharmaceutical sector, and has been managed with an internally neutral "cause no problems" mentality. This attitude has caused the growth of inefficiencies in several areas, resulting in today's unacceptable high cost of compliance. With dosage form facilities spending 20-25% of annual operating budgets to ensure that no compliance-related problems occur, this is an expensive insurance policy. With such an expensive insurance premium, it could be assumed that senior management has clear visibility of the component costs and is able to state, based on objective criteria, whether the company is over or under insured. One would also assume that management should be in a position to state with confidence if incremental investment in compliance infrastructure (to reduce risk still further) makes economic sense. Evidence from the industry, however, indicates that this is seldom the case Despite the significant spend on compliance the more frequently encountered situation is instead one where senior management searching for operational cost reductions are informed by QA&QC professionals that higher, not lower, levels of compliance are required with associated increases, not decreases, in costs. This often creates a sense of senior management dissatisfaction given the feeling that costs are high; interpretation of GMP requirements is black art; and the level of compliance problems seems to remain constant anyhow, independent of the amount of compliance-related spend. The Status Quo Based on our research in the sector, it is our opinion that this is because: ■ Most pharmaceutical companies do not know what their total cost of compliance is, or what cost components contribute significantly to the total. The Problem As a consequence, management often has great difficulty objectively answering three critical questions: ■ Is more investment in infrastructure warranted to reduce existing compliance-related risk exposure? ■ Does the level of compliance currently being delivered by the infrastructure present good value for the money spent? ■ How could compliance costs be reduced while maintaining, or improving, the level of compliance? These issues of excessive compliance costs and ineffective compliance infrastructures have been a topic of discussion in the industry for some time. In our experience, an integrated risk management approach to these questions of quality and regulatory compliance is necessary to enable business senior management gain visibility of compliance costs and manage them effectively. Integrated Risk Management Risk management is fundamentally concerned with: Integrated risk management examines risk across functions and disciplines with the knowledge that risk exposure may not always occur at the organizational location of risk generation. Risk reduction efforts may lead to zero sum improvement if efforts are not consolidated and coordinated in this manner The Approach to Regulatory Risk Management Regulatory risk within pharmaceutical manufacturing is primarily concerned with GMP compliance. This involves product fitness for use and compliance with regulatory controls. Product fitness for use is an attribute which most companies, irrespective of industry, need to assure. Although product fitness for use is more than product quality (safety and efficacy as well), we identify this category as "Quality". Compliance with regulatory controls, however, maybe regarded as the incremental effort needed to satisfy the requirements of the regulatory agencies. This is the incremental cost of doing business in strongly regulated industries such as pharmaceutical manufacturing. We identify this category as "Regulatory" Compliance Risk = Quality Risk + Regulatory Risk Risk Identification The first step requires profiling the state of quality and regulatory infrastructures as potential generators for compliance risk. Risk Quantification The next step establishes the current compliance levels in terms of process inputs, processes, process outputs, and operational practices. A number of methods exist to measure these levels, incl. process capability indexing, and sigma profiling or performance benchmarking against best practice profiles Quantifying Costs The third step involves quantifying costs using techniques such as Activity Based costing (ABC). A detailed and complete discussion of ABC will be subject to a later edition of our Newsletter. Briefly however, the technique assesses cost based on completion of activities performed by employees in a given time period. Further, each activity has a result, and may consume additional resources that are also identified. ABC cost maps provide a level of detail that is missing in traditional departmentally allocated costs. For example, it becomes obvious that quality costs occur not only in the quality department, but also in production (re-work) and customer relations (complaint investigation). With a clear view of the cost structure, senior management are now in a position to determine performance levels of compliance infrastructures, and decide if they are under or over-exposed to regulatory risk. Conclusions Identifying and quantifying regulatory risks levels and costs of compliance infrastructures make the sources and consequences of regulatory risk transparent. This allows management to make knowledge-based, rather than subjective, decisions on compliance infrastructures, and reduce compliance costs significantly. Free Consultation We will provide satisfying, understandable answers. Simply contact Factorytalk and "Call in for a Coffee" for a free consultation. We are located at : Factorytalk Pte Ltd E-mail Address : |
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