EZ Pass Testing, Coercion and Buck Passing: A Tale of Broken Pharma QA and QC. Sound Familiar?

Aug. 31, 2010

Just read Mina Kimes' enlightening account of the J&J McNeil quality disaster in Fortune. Forget about the fact that the adulterated products did not and most likely would not have harmed consumers, the problems cited are very serious and go straight to the heart of GMP's.

Just read Mina Kimes' enlightening account of the J&J McNeil quality disaster in Fortune. Forget about the fact that the adulterated products did not and most likely would not have harmed consumers, the problems cited are very serious and go straight to the heart of GMP's.

They also point out pharma's fundamental problem: the fact that its top managers continue to insist that manufacturing, the industry's second biggest cost center, is not strategically important, can be cut out, "rightsized", outsourced and sent offshore . . . despite the exponential increase in the level of risk and uncertainty that each of these moves entails.

Most noteworthy is the typical pharma CEO's complete detachment from manufacturing issues. If a clinical trial or marketing practices are in question, they're right there on the spot, with a Bloomberg sound bite. When cGMP's come into play, they have to be there . . . however, it's  usually "someone else's" problem . . . time to pass the buck. "Off with their heads!" "Fire the entire Quality department!"

Who set up the systems that rewarded those Quality people for their substandard performance? These companies aren't manufacturing widgets, but drugs that human beings, trustingly, ingest. Shouldn't assuring such quality be a top CEO priority?

Does any other industry operate this way?

Fortunately, FDA may be bringing this noble aloofness to an abrupt end. There has been much buzz recently about how the Park Doctrine might be applied to force CEO accountability for cGMP's, even in cases where top management was not informed of problems.

Should FDA have to remind you of your duties? Isn't it any chief executive's job to become informed?  As Toyota said, Go and see. Walk the floors. This is where your product and your company's reputation--and yours--are made, or broken.

Or, take a lesson from Harry Truman. Clearly, the buck passing has to stop.

It's not just a question of compliance problems . . . consider the industry's quality and Lean performance, which, despite all the talk of Deming (whose techniques began to be used decades ago) remain at exactly the same level they were 10 years ago, when visionaries within FDA, industry, MIT and other universities pointed the way to stop all the waste generated by drug manufacturing ($50 billion per year or more). Industry profits are still humming along, but how long can that be sustained without a serious investment in quality systems and smarter tools such as PAT and QbD?

Is it any wonder that Ajaz Hussain left the entire industry?

Let's look at Lean indicators like stock turns, which, Tunnell's Robert Spector points out, haven't changed in nearly 10 years. Click here for his analysis.

Consultant Ken Leiper in the U.K. recently sent me a copy of Ray Scherzer's 2002 presentation to FDA, outlining problems. Click here to read. And tell me, has ANYTHING changed?

But, back to compliance . . . which establishes the lowest baseline level of quality performance.

Below are some highlights from Fortune's must-read piece.

And a question: Are problems like this going on in a pharmaceutical factory near you, perhaps a facility that's undergone a merger recently? Will they just will continue to grow, undetected, until FDA inspectors show up at the door?  And until pharma's CEO's grasp the importance of manufacturing and cGMP's, and getting them right?


". . . McNeil's quality-control department thrived for a few years. Then, not long after Larsen retired in 2002, it began to slowly weaken. The culprit was a familiar one--cost cutting--but in a subtler form. There were no wholesale layoffs in quality control. Instead experienced staffers were repeatedly laid off and replaced with newbies who mostly lacked technical pharmaceutical experience. By 2008 the analytical laboratory, formerly staffed almost entirely by full-time scientists, was half-full of contract workers, according to a former manager there.

Once stricter than a schoolmarm, the department grew lax. The team that tested the production lines was dubbed the "EZ Pass system," according to a former quality-control employee. In one instance an engineering flaw on a line made it difficult to clean liquid-medicine bottles. Rather than find a way to fix the problem, an engineer says, the team instead tried to simply eliminate that check from the test. "They were trying to take a lot of short cuts," she says..."

One day in 2005 a batch of more than 1 million bottles of St. Joseph aspirin failed a quality test because a sample didn't dissolve properly, according to two employees involved in the testing process. Following company procedures, the employees blocked the batch from being shipped. Their manager then called the two into his office. "He said, 'You like working here?'" one of the workers recalls. "'This should pass. There's no reason this should fail.'" Ultimately the two quality workers were ordered to retest the drugs, then average the new scores to arrive at a passing grade so that the pills could ship. Says one of them: "You get to the point where, like me, you end up doing what you're told."

". . . Whichever individuals were at fault, quality oversight declined. An Aug. 21, 2007, internal memo, obtained by Fortune, presented a harsh assessment. It cited "the high percentage of operator errors in every work center" and found that the quality team put "very little effort" into analyzing its own processes. It didn't act properly on test data, and it used "very little" rationale to justify when and how it sampled for flaws. To anyone who saw the report--which was routed at least as high as Miller, according to an employee who worked on the memo--it was obvious that serious problems were brewing. But McNeil's executives were focused on other matters.

A merger and lay-offs give way to lax oversight...The merger dramatically altered McNeil's position. It had previously been part of the pharma unit, but after the deal it was folded, along with the Pfizer group, into J&J's consumer sector, headed by Colleen Goggins. According to former executives, the difference between divisions was both cultural and financial. "The people who ran pharma understood the requirements associated with [regulatory] compliance and the investments required to keep that up," says a former executive. Consumer relied more on marketing, or "smoke and mirrors," as an ex-McNeil director scoffs. Perhaps the most striking difference was in profit margins. Companies in the consumer group typically had margins around 10%; McNeil generated more than twice that.

McNeil staffers were furious at their loss of independence. It wasn't simply a matter of pride: Their new consumer bosses were now in charge of reducing McNeil's spending so that the company could meet the merger targets. Goggins looked to squeeze every cost, former employees say, and her team leaned heavily on McNeil, with its juicy margins, to absorb the cutbacks. "I was given savings goals that were mind-boggling, unheard-of," says one former executive. "They were raised by 25% to 30%." Another executive estimates that McNeil's margins have risen five to six percentage points since the merger. (McNeil asserts that it raised spending on quality control from 2006 to 2009.)

Because the consumer executives lacked pharmaceutical experience, former McNeil employees say, they demanded ill-advised operational reductions. One VP remembers arguing with one of Goggins's chiefs about how much it would cost to transfer Pfizer production lines to McNeil's Fort Washington plant, an arduous process that is heavily regulated. "The normal cost to do a transfer for a product like that might be $600,000 per product," he says. "Those folks would say, 'That's way too expensive. It's only going to cost $250,000.'" McNeil employees knew it would be nearly impossible to meet those demands, he says, without screwing the process up. But they did it anyway for fear of being fired.

That same year, 2007, J&J announced it was laying off more than 4,000 people across the company. One of the casualties, according to former employees: the corporate compliance group, the SWAT team meant to keep the quality-control groups in line. According to tax records filed with Whitemarsh Township, where Fort Washington is located, McNeil's workforce in the township was slashed by about 32% between 2005 and 2009. The biggest cuts, employees say, occurred on the factory floor. As the production staff shrank and equipment budgets were slashed, more and more mistakes began to pop up. Gaskets blew, metal punches broke, processes failed. "Those guys were getting worked a lot. They were always understaffed, always behind schedule," says a former quality employee. "They had about 10 things to do, and two people to do it."

"The whole dynamic was very stressful," she adds. "It wasn't Do your job the right way, it was Do your job fast. Make it look good, and get it done as fast as possible."

For the entire riveting piece, click here.

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