Value Delivery’s Next Chapter

Enabling pharmaceutical manufacturing process robustness

By Kangyi Mao, Phil Berk, Frank Cordes and Gideon Walter, The Boston Consulting Group

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The case of biotechnology pioneer Genzyme highlights an undisputed fact: companies that stumble when it comes to building robust manufacturing operations pay a steep price. In 2008 when Genzyme attempted to scale up production of Myozyme, a treatment for a rare condition affecting the heart and skeletal muscles, the Food and Drug

Administration (FDA) determined the manufacturing process deviated enough from the original that a new Biologics License Application was required. This setback was followed by other manufacturing issues, and the cumulative effect of the problems triggered declines in Genzyme's stock price, opening the door for the company's acquisition by Sanofi in 2011.

Though always a critical issue, process robustness — the ability of a manufacturing process to produce acceptable quality and performance levels despite variability in inputs such as raw materials or operator expertise — has become a mounting priority within the pharmaceutical industry. Among the reasons for the shift: cost pressures, increasing product complexity, and intensifying quality requirements from regulators. The payoff from improving process robustness is significant, with as much as $25 billion in potential savings in cost of goods sold industry-wide and a comparable boost in revenues due in large part to a reduction in product shortages. For a newly launched drug, that could amount up to about $400 million in additional cost savings and revenue upside over the product's patented life.

Turning that opportunity into reality, however, requires a new approach. Using extensive client work and detailed modeling of how various factors affect the supply chain, the Boston Consulting Group has identified supply lead-time volatility (SLTV) — the variation in the length of time it takes to produce a product, from receipt of the order through final quality release — as a key metric for tracking supply chain performance. High SLTV is often due, either in part or entirely, to low process robustness. Investigating the root causes and business impact of low supply-chain performance can help companies identify the best opportunities for improving process robustness.

As process robustness grows in importance, operational executives should ask themselves a few tough questions:
• Is the company making adequate investments to enable the development of process robustness capabilities?
• Are discussions on process robustness occurring at the right levels of the organization, across operations, R&D, and commercial?
• Are efforts to enhance process robustness prioritized appropriately according to the overall financial impact of improvements?
• Where process robustness is low, are adequate inventory or capacity buffers (or both) in place to minimize the consequences?

Answers to those questions are crucial to driving a systematic and coordinated strategy for optimal process robustness.

It is no secret that the pharmaceutical industry’s process robustness trails that of other industries, including semiconductor and automobile manufacturing. This stems from three factors. First, companies must manage the tension between the need for robust process and other considerations, including the focus on speed to market due to significant commercial value being at stake and the risk of overinvestment in early-stage product development given high R&D failure rates. Second, a strict regulatory environment has made companies conservative in adopting new robustness-enhancing technology that may trigger extensive regulatory approvals. Finally, the expertise required to deliver systematic robustness improvements is scarce and management has often seen process robustness as a technology "black box," one they should leave to company engineers or Six-Sigma experts.

That mind-set, however, has shifted dramatically over the last decade. For one thing, companies are under pressure to cut costs, putting manufacturing efficiency in the spotlight. At the same time, company portfolios have grown increasingly complex, with the addition of biologics and products with novel delivery mechanisms as well as the shift in demand from developed markets to developing countries. Finally, global regulatory bodies are setting ever-more-stringent quality requirements, including a focus on "quality by design."

The industry stands to see a big boost if it responds aggressively to these pressures. We estimate that moving the industry to a 3.5 sigma level from the current estimated level of about 2.5 would yield significant cost savings — up to $25 billion annually — as less defective product is produced and the greater reliability of manufacturing allows companies to lower inventory levels. Revenues could see a similar boost as companies experience fewer product shortages. (The cost savings are split between innovative and generic drugs, whereas the bulk of the revenue boost is projected to come from innovative drugs because of their higher margins.)

The key to improving process robustness is understanding where opportunities lie. Traditionally, companies have tracked process robustness through measures such as batch failure rate. These metrics offer insight on the overall success rate of a manufacturing operation but do not provide insight on the variation in effort required to reach a successful batch. Consequently, SLTV can be an invaluable complement by factoring in the consistency requirements in manufacturing.

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