Ensuring ROI from Your RMM

If you’re heading towards the adoption of rapid microbiological methods, you’ve got to be able to make a business case.

By Michael J. Miller, Ph.D., Microbiology Consultants, LLC

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The implementation of rapid microbiological methods (RMMs) has been gaining momentum for years. For the most part, the pharmaceutical industry has acknowledged that regulatory agencies are accepting of RMMs and encourage their use, and that PDA Technical Report #33, USP <1223> and EP 5.1.6 all provide sufficient guidance on validation strategies. 

Although the industry has the necessary tools for putting alternative microbiology technologies in place, a perception that the long-term benefits will not outweigh the short-term costs persists among manufacturing site heads and senior management teams. For many companies, this has resulted in a significant delay or abandonment of meaningful RMM implementation plans.  Therefore, it is imperative that the industry understands how to develop a comprehensive business case and economic analysis of the proposed RMM, and link this information to the long-term technical benefits that the new method will provide.

This paper will provide an overview of the financial components that should go into an RMM business strategy, and practical examples of how to calculate the return on investment and payback period for a real-time RMM.

The Perception

It is understood that the costs associated with the purchase, installation, qualification, and implementation of RMMs can be significant. This should not be a surprise, as most new manufacturing technologies, including those used for PAT applications, require an initial upfront investment in time and expense in order to successfully commission the technology and put it in place for routine use. Unfortunately, many senior leaders in our industry dismiss the potential long-term benefits and only “see” the upfront expenses, such as the capital cost, the validation and calibration fees, the maintenance contracts and headcount dollars required to conduct the validation studies and installation activities. Furthermore, as soon as we bring in the microbiology perspective and start talking about changing the manner in which results will be reported and the century-old colony-forming unit (CFU) becoming a thing of the past, the communication process shuts down, and the word “rapid” is used only to demonstrate how quickly we end up cancelling an exceptional RMM idea.

It is this author’s view that the industry is missing out on a great opportunity for moving microbiology out of the laboratory and onto the manufacturing floor, as several RMM technologies now offer real-time or close to real-time results, single-cell detection, enhanced accuracy and precision, higher throughput and superior data handling and trend analysis capabilities. If we are to tear down the RMM implementation barrier and remove the financial fears associated with implementing these new technologies, it is necessary to fully understand both the costs associated with the initial investment as well as the longer-term financial benefits.  We can do this by developing a comprehensive economic analysis that will clearly demonstrate that the long-term benefits far outweigh the short-term expenses.

Return on Investment (ROI) and Payback Period (PP)

ROI is the ratio of money gained or lost on an investment relative to the amount of money invested. For RMMs, the cost of performing the conventional method (CM) with the cost (and savings) of using the new method can be compared. The resulting data is reported as a percentage (%) and usually represents an annual or annualized rate of return. The ROI is calculated using the following formula:

The PP is the time required for the return on an investment to "repay" the sum of the original investment. In the context of RMMs, this equals the time (usually in years) required to realize sufficient cost savings to pay for the initial investment of the RMM capital equipment, qualification and implementation activities. The formula used to calculate the PP is the inverse of the ROI formula:

In order to effectively use the ROI and PP models to economically justify moving forward with an RMM purchase, validation, and implementation plan, it is necessary to gather the appropriate information that will go into the models’ formulas. This information will include the operating costs for both the proposed RMM and the current method (e.g., cost per test, cost of labor, depreciation, overhead, preventive maintenance), the RMM investment (e.g., capital purchases, validation costs, training) and the cost savings or cost avoidances realized with the RMM (e.g., reduced testing time and testing costs for product release, a reduction or elimination of off-line assays, laboratory overhead, resources and equipment, lower cost of product sold, decreased re-sampling, retests and deviations, reduction in rework, reprocessing and lot rejections, and a reduction in plant downtime).

There may also be some regulatory filing costs associated with the RMM; however, if the existing microbiology method is an in-process test or is not specified in an NDA or marketing authorization, a formal regulatory submission to implement the change may not be required.  Monetary values for each cost component can be entered into the ROI and PP formulas. The ROI can be calculated for the first year (when the initial capital investment will be made) and then every year thereafter. The rate of return can take on any value greater than or equal to -100%; a positive value represents an investment gain, a negative value represents a loss, and a value of 0% corresponds to no change. The higher the ROI value is, the greater the return will be on the initial investment. Finally, when the information entered for the PP is based on annual values, the PP result will be reported in years.

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