For years, we have seen pharma send more of its critical operations, including manufacturing, offshore, to Puerto Rico, and, more recently, to India and China. While cheering the growth of economies abroad, there has also been some understandable concern about the erosion of local innovation and the loss of local jobs, and its potential impact on the industry.
Critics often point out that other regions of the world came later to the regulatory sphere than the U.S. or Europe, and are less concerned about and less able to maintain quality standards than domestic facilities.
Critics can point to the heparin recall, to GMP violations in Puerto Rico, and notably the consent decree and DOJ fine involving GSK's Cidra plant, Ranbaxy's and other company's cGxP failings as evidence. Some companies have even responded to risk management concerns by bringing some operations, and jobs, they'd offshored back onshore.
But it's too easy to point the finger at "pre-GMP" environments. These same problems are also occurring at home, and with distressing frequency.
Recently, an article in the Journal of Operations Management dissected quality risk in offshoring, and came up with some interesting insights. In the end, it all boils down to the way knowledge is managed and transferred.
The article, “Quality Risk in Offshore Manufacturing: Evidence from the Pharmaceutical Industry” (available via ScienceDirect), is authored by researchers from Ohio State University's Fisher College of Business and Clemson University's Business School, studied 30 pairs of regulated pharmaceutical manufacturing plants in the U.S. and Puerto Rico and, in the end, concluded that, despite the high skill levels of employees in both locations, the plants in Puerto Rico operated with significantly higher quality risk than matching plants operated by the same firms in the U.S.
They also suggest that the risk of GMP noncompliance increases with distance from the parent plant headquarters, aggravated by such factors as:
• greater potential for expropriation of assets and intellectual property
• political, social, and currency instability;
• issues related to insufficient worker experience and infrastructure;
• more pronounced cultural issues, language, and communications incompatibilities.
Achieving a level of quality risk management comparable to that in onshore facilities, the authors write, involves handling an "intra-firm knowledge transfer problem."
Tacit or complex knowledge, they write, is more difficult to transfer than codified knowledge. The ease of communication between recipient and source of knowledge also has an impact. The problem is that effective quality management relies on cross-functional capability, which, in itself, involves a considerable amount of tacit knowledge.
Further, the paper states, quality risk operation depends heavily on the extent to which production knowhow is codified, and the process' stability.
It may be difficult to monitor employee behaviors in a distant plant, the authors write, particularly where compliance with procedures is costly or could delay product delivery. As a result, employees may choose a subtle lack of compliance with procedures over an action that will impact delivery and cost.
The situation becomes even more challenging in operations where processes are inherently unstable. In such cases, the authors write, operators will tend to deviate from procedures simply because they often encounter situations where following procedures may cost more, in terms of measurable outcomes, than bending the rules.
The same problems occur in facilities closer to home. We saw them in a number of 483's this and last year, at over-the-counter, generics, and name-brand drug manufacturing facilities alike.
The key to avoiding these types of problems is "walking the talk," and managers who convey the message, every day, that compliance, safety, and quality come first.
Another key is ensuring that expert knowledge is transferred. Yet another is ensuring that data is available, in a form most useful and meaningful, to people in every functional group within the organization. Data management, the subject of this month's cover story, is the key to enabling continuous improvement and Quality by Design (QbD). It becomes very difficult to develop cross-functional quality systems or to communicate tacit or even codified knowledge when it exists in different forms and is difficult to access.
In Pharmaceutical Manufacturing’s September 2011 issue, a team from Janssen Pharmaceuticals discusses how it has taken an engineering-based approach to data and knowledge management, to present a single version of the truth, in a usable format, to different functional groups within the organization. This approach took time, upfront, and the use of data warehousing and other tools, but promises to improve R&D efficiency and overall quality management.
But data management is only part of the problem. The rest involves cultural change. How is your organization managing and transferring its knowledge? Please write in and let me know at firstname.lastname@example.org.