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Best of Pharmaceutical Manufacturing

BEST OF PHARMACEUTICAL MANUFACTURING


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Generics Industry Under Pressure page 3

Coming of Age page 11

Uncommon Sense in Execution of Process Simulations page 17

The Case for Global Supply Chain Standards page 22

Harnessing IT to Strengthen Relationships page 26

Statistics: Ask the Right Questions page 31

Additional Resources page 32

contents

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“It Is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change,” ex-plained Charles Darwin in Origin of the Species, his treatise on natural selection and its role in evolution. For the generic drug industry, this universal maxim is hard at work, and it’s clearly evident the industry’s players are busy adapting to the pressures the current commercial and regulatory environ-ment is presenting.

What does the future hold for the generic drug “species?” Time and profitability will tell, but it is obvious that some entities will thrive and prosper, while others less blessed with scale, cost-efficient operations, competitive agility and financial health will go the way of the mastodon — weakened by poorly understood or controlled processes and risk prone to expensive quality and compliance excursions — destined to be hunted down by faster, more efficient predators.

Global market warmInGTotal spending on medicines globally is projected to rise to $1 trillion in 2013 and to $1.2 trillion by 2016, says IMS Institute for Healthcare Informatics. For generic drugs, the market was worth $110.8 billion globally. In the report “Generic Drugs: World Market 2013-2023,” pharma industry analyst firm Visiongain predicts it will reach $156.9 billion by 2016, reflect-ing a compound annual growth rate of 5.5%. Visiongain set the U.S. market at $43.1 billion for generic drugs in 2011, making it the world’s largest national market for generics, followed by Germany, a distant second, at $8.6 billion. Visiongain says “the generics market is expected to achieve significant revenue growth over the forecast period owing primarily to the greater demand for cost-effec-tive generic medicines.” (see sidebar: Generic Drugs: Cost Effective Indeed)

Reacting to growing regulatory, competitive and financial pressures, the generic drug industry’s quickly evolving to survive and thrive in its fast-changing environment

By Steven E. Kuehn, Editor in Chief

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2012: a pIvotal yearFor the generic drug industry 2012 was a pivotal year. In 2012, more than 40 branded drugs represent-ing some $35 billion in sales lost patent protection. Reporting for the New York Times, pharma industry observer Katie Thomas said the value of drugs scheduled to lose patent protection will be cut in half to some $17 billion and, consequently, have a negative impact similar to the effect patent expirations are having on the branded industry. While the ultimate effect of a constricting pipeline of ge-neric drug patent expiration oppor-tunities remains to be seen, generic producers, contract manufacturing operations (CMOs), excipient suppli-ers and other players are responding to market and competitive pressures, evolving and adapting to challenge adversity and win opportunity.

Some are seeking to exploit niche markets and technical acumen by focusing on producing difficult formulations. Others seek market share, global production assets and strategic therapeutic category positions through acquisitions, partnerships and alliances. When one starts looking across the supply chain, it’s obvious this behavior is being repeated again and again. A recent visit to CMO DSM Pharmaceutical Products affirms the pervasive view among industry players that smart collaborations and well-ordered alliances will provide longer-term advantages and healthy revenue streams. According to Wayne Weiner, vice president of Business Development, “DSM is establishing strategic alliances worldwide which build on our technical, manufacturing and regulatory expertise with partners’ understanding of patient needs to bring generic and specialty medicines to market in a reliable and sustainable way; and consistent with

DSM’s Quality for Life program.”Noteworthy, and with a certain

irony, large generic pharma is also looking to secure positions in branded pharma to support strategic business goals and attain longer-term financial and business success, pursuing a hybrid business model to help assure sales and revenue, as well as investor returns. Of course, big branded pharma has also, over the years, been busy staking out its territory in the generics space.

bIGGest fIshLast October, Watson acquired Activis, adopted its name and in the process made itself the third largest generic maker in the world. Seven months later, Valeant Pharmaceuticals was reported to be chasing Activis, as was Mylan which offered $15 billion for the Parsippany, N.J.-based com-pany — an offer it rejected according to a May 14 Reuters report. Just over a week later, media reported that Ac-tivis agreed to acquire specialty phar-maceutical company Warner Chilcott Plc. in a $5 billion deal. A Wall Street

Journal piece May 21 provided insight: “The Warner Chilcott deal would help Activis — whose core generic-drug business faces difficult market condi-tions — further diversify into pat-ented, brand name drugs.” According to the report, Activis said the Warner Chilcott acquisition would strengthen its portfolio and boost annual revenue to about $11 billion.

Other companies are creating alliances and defining new partnership models, as well as closely examining, then trimming asset costs or looking to divest noncore assets to achieve similar ends. Teva, widely acknowledged as the global generic drug industry’s leader (ranked 10th by IMS as among the top 20 pharma manufacturers in 2012 by sales of $24.8 billion), has been responding to business environment pressures, busy restructuring itself to compete in the generics industry’s fast-changing environment.

In April, Bloomberg reported Teva is reducing manufacturing operations as part of a $2 billion,

At every point in the processing line where

human activity might impinge on quality,

the BD Rx team and its technology suppliers

sought technical solutions to remove direct

human interventions from the process.

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5-year cost-cutting effort, with most of the savings under the plan coming from lowering procurement expenses. Teva CEO Jeremy Levin offered this assessment: “Some parts of manufacturing will be affected, but this is not the major thrust of this,” said Levin.

Teva is also pursuing the production of difficult formulations as is Mylan (ranked 20th on IMS’ top 20 list with $10.5 billion in 2012 revenues) — both looking to create generic versions of Advair, a tough nut to crack because it combines two APIs delivered via a specialized inhaler.

headwInds and undercurrentsMacro market themes aside, there are numerous under-currents and headwinds buffeting the generic drug indus-try challenging large, medium and small companies alike. Despite its market successes, several generics producers and suppliers in recent years have been troubled by well-publicized product recalls, process quality excursions, bioequivalency issues and even industrial accidents.

Ranbaxy provides the most recent, if not spectacular, cautionary tale. In May, Ranbaxy pleaded guilty to federal drug safety violations and forced to pay $500

million in fines to settle claims it knowingly sold drugs that fell short of FDA required standards. According to the Justice Department, the settlement is the largest in history involving a generic drug manufacturer and drug safety. The settlement comes in the wake of the FDA’s consent decree issued to Ranbaxy after officials identified a rash of manufacturing lapses at plants in the United States and India, as well as finding that it knowingly submitted false data to the FDA. A New York Times report on the announced settlement noted that “Ranbaxy’s troubles have not been limited to lapses outlined in the federal settlement. Last November the company halted production of generic Lipitor while it investigated why glass particles turned up in pills distributed to the public.” In fact, among the prosecuted violations, the company admitted that in August 2007, batches of gabapentin tested positive for unknown impurities and that the subsequent recall involved some 73 million doses.

Do Ranbaxy’s problems shine a light on poor oversight of overseas generic drug producers by the FDA? Perhaps. The New York Times reported that off-shore plants are inspected once every 7 to 13 years compared to domestic

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At BD Rx, maintaining 100% sterile conditions throughout the process has been accomplished by closing it to humans. Shown here is a BD RX Vapor

compression station for pharmaceutical grade water production.


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plants which are inspected every two years. Certainly not optimal and the agency recognizes it: The FDA’s recent budget request included an additional $10 million for inspections in China for fiscal year 2014.

more or less?Do the recurring reports of quality and bioequivalency lapses support the notion that there is actually more regulatory scrutiny or is it that manufacturers have become more lax in managing quality? Nigel J. Smart, VP & man-aging partner for Smart Consulting Group, proposes that “One shouldn’t over-generalize because there are a lot of things going on in the industry right now. Remember the regulatory climate is always an evolving situation, so one must continuously upgrade what one is doing to maintain a state of compliance.”

Smart explains that, like other federal agencies, the FDA is going about enforcing the laws on the books and is using its resources to assure compliance so the public is protected. “One must remember that in the last few years we’ve had a number of unfortunate situations with poorly manufactured drugs and medical products, some from overseas, and this always causes Congress to ask questions of the FDA. Domestically when things change, generic companies don’t always have the resources to respond quickly enough and that’s why these companies fall out of compliance. Process validation is a good example of this changing landscape and it’s taking time for companies to adapt from how they’ve been working for the last 30 years.”

At GPhA’s annual meeting in February, FDA commissioner Margaret Hamburg set the table for the agency’s renewed focus on generic drug quality oversight in her speech to attendees: “Year in and year out we say much about safety and efficacy. But without product quality, none of us can feel confident that the product will be either safe or effective ... and unfortunately, we’ve seen far too many quality lapses throughout the pharmaceutical industry over the past few years. Quality concerns are not exclusively the province of generic drugs, as you well know. I’m sure you’ve cringed when you heard some of the stories — glass shards and other particulates in products, ... bacterial or endotoxin contamination found in products manufactured in an aging sterile injectable facility, and concerns about prescription meds mixed in with bottles of over-the-counter medication. These are not the norm, but they are warning signals that we can and must do more.”

And the FDA is doing more. Between 2009 and 2010 the number of warning letters sent by the FDA increased 42%. Recent regulatory zeal is also causing drug shortages (see sidebar “Caught Short”). Between 2010 and 2011, the

In the United States, the generic drug industry is hav-

ing a tremendous impact on per capita spending on

medicines. In its May 2013 study “Declining Medicine

Use and Costs: For Better or Worse,” IMS finds that

the total dollars spent on medications in the U.S.

reached $325.8 billion in 2012, which translates to an

$898 per capita expense, down $33 from 2011. Accord-

ing to IMS, the reduction in per capita drug spending

was the result of a number of influences, but driven

to a large degree by the increasing availability of

viable generic alternatives. “In addition to lower uti-

lization of branded drugs, the primary drivers [of the

reduction] were: the increased availability of lower

cost generics.”

Over the last decade or so, the savings on drugs

consumers and the healthcare industry is experiencing

has been dramatic. In IMS’ recent study “Generic Drug

Savings in the U.S. 2012,” the Generic Pharmaceutical

Association (GPhA) finds that its industry saved the

U.S. health care system more than $1 trillion over the

last 10 years, achieving $192.8 billion in savings alone

in 2011. “Against the backdrop of escalating costs,

the generic drug savings analysis shows conclusively

that the use of lower cost generic prescription drugs

is a vital component of holding down the growth rate

of health care spending.” Given that the National

Health Expenditure Accounts (NHEA) is reporting the

average annual growth rate is expected to be 6.2%

per year and that national health care spending will

reach $4.4 trillion by 2018, the braking effect of lower

drug spending due to the increased availability and

demand for generics will help hold down the cost of

health care significantly. The bottom line, says IMS,

is that in 2012 per capita spending on U.S. medicines

fell 3.5% due to generics, which now account for 84%

percent of all prescriptions.

Offering a bit of historical context, the GPhA report

explains that “This remarkable record of savings over

the past decade dwarfs initial savings estimates made

in 1984 when the Hatch/Waxman Act established

the modern-day generic industry. At the time, it was

projected that generics could save up to a billion dol-

lars over the 10-year period following the enactment

of the bill.” After the bills enactment, actual savings

over the next 10 years had reached nearly $10 billion.

“Today,” says the GPhA report, “that amount is being

saved every 18 days.”

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number of warning letters increased 156%. According to Sigfried Schmitt, principal consultant and QBD practice lead for contract research provider PARAXEL, “For many makers, some prominent compliance issues are related to unreliable or even falsified records. Warning letters and 483s are clear indicators of this widespread issue.”

A review of the Food & Drug Administration’s Inspections Citations data supports Schmitt’s assertion. Most compliance issues in 2012 point to gaps in process understanding and from poor or non-existent documentation.

Bikash Chatterjee, president and CTO of Pharmatech Associates offers context and perspective to help better understand the emerging generic drug regulatory environment. “Generic manufacturers have been operating under a quality model that was first established in the mid-80s. Despite admonitions from the FDA and other regulatory bodies to adapt and evolve, little has changed in the scientific level of product development and quality assessment. The level of enforcement we see today is much more in line with brand drug manufacturers and that is why there is more regulatory action of generic drug manufacturers. However, the agency is in a pickle: With a mandate from Congress to drive down payer costs while maintaining public safety and meeting the demands of the marketplace, the inevitable drug shortages from regulatory actions hurt everyone.”

survIval of the fIttestThe pressure to succeed and thrive in this industry is enormous; the stakes are high, but superlatives aside, the rewards are there to reap for companies able to leverage the tools and the technological resources required to achieve business success manufacturing and marketing generic drugs. The market (which at its heart, are millions of people seeking better health and longer lives through the therapeutic consumption of medicines) is demanding the generics industry deliver ever increasing quantities of safer, more effective and less expensive drugs. The industry, in turn, is seeking to supply this demand within the context of capitalistic free enterprise, but due in part to its grow-ing complexity, technical density and scale, is struggling to achieve the almost mandatory perfection demanded by regulators, society and the financial community.

For the most part, the industry’s major issues of supply, quality, formulation, purity, batch and process understanding, compliance, profitability, etc., all tend to point to gaps and disconnects across the manufacturing continuum and the slow adoption of applied processing science and supporting technologies. Following this are regulatory imperatives that are insisting the industry invest in and integrate what producers can prove

empirically are current good manufacturing processes that assure product quality by process design.

Controlling process variability and assuring product quality in real time (RTQA) is the desired state of pharma manufacturing as prescribed by regulators. The focus on QBD is prompting pharma manufacturers to make larger investments in the means of production earlier in the product development lifecycle. The strongest, if not the fittest, are indeed recognizing that the road to redemption for some, and long-term financial health for others is paved with GMP and QBD methodologies. Successful companies are investing time, resources and especially capital to implement these tools, not merely for survival commercially, but to move themselves and their organizations further up the generic drug industry food chain.

Companies adept at sensing opportunities in the market’s dynamics are moving into generics with a competitive agility that leverages their technical and business acumen achieved in other segments of the pharmaceutical industry supply chain. For example, in March, BD (Becton, Dickinson and Company) announced the FDA approved its first drug to be offered in the just-launched BD Simplist™ product line of ready-to-administer prefilled injectables to be commercialized by BD Rx, its wholly owned subsidiary.

As recent regulatory actions suggest, producing high volumes of sterile injectables is neither easy nor very profitable if not done with high-volume precision. Delivery systems are also evolving in response to medication errors stemming from a number of issues involved in the physical administration of injectable drugs. For BD Rx, “Our initial goal was to create a new value proposition for injectable drugs,” says Mark Sebree, president, BD Rx, , “that merged the idea of what an original container would be with what the final delivery device would be.” Sebree notes that a lot has changed in the environment, the call for companies to transition away from older technologies, for instance, and especially away from older manufacturing processes.

In pursuit of scale, quality and flexibility, BD Rx created its new facility to integrate high-order GMP and QBD principles to process the formulations and package them in an innovative and safer form. Tracy Hottovy, director of operations, says that early on they wanted to take a ground-up approach. After taking a close look at existing processes and facilities they concluded that “what we wanted to go after was to put in place the best manufacturing process we could … to ensure the best quality of products in the supply.”

Hottovy explains that risk always comes from variation and that inevitably, that variation is caused by humans. At every point in the processing line where human activity

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might impinge on quality, the BD Rx team and its technology suppliers sought technical solutions to remove direct human interventions from the process and designing in critical control parameters and quality control attributes right from the start. “So what we really did, says Hottovy, “was develop an innovative process … a closed manufacturing system.” How closed? “Closed meaning from the time our process starts; bringing the API into the facility. We dispense it; do our compounding, filling sterilization, inspection, assembly, packaging … all that is within our control.” Hottovy explains that the new BD Rx processing line is technically a batch process, but incorporates continuous principles once the batch is in process, and that risk from human-introduced variation or contamination is virtually 100% eliminated. “We actually put in place a … continuous process that starts the batch; and all of our … materials move through the entire plant without people moving them. That creates a great opportunity for us to get very rapid feedback … on the manufacturing process and detect any variation that could come at any time.”

leadershIp by the leaderAccording to Uri Hillel, head of R&D Quality and Corporate Quality & Compliance for Teva Pharmaceuti-cals, Teva has worked on implement-ing the FDA guidelines defining Quality by Design (QbD) guidance and has adopted the QbD philosophy in its development of generic prod-ucts. “For Teva, this means under-standing the products, formulations and processes in depth, and submit-ting appropriate applications to the authorities using a more systematic development approach.”

Hillel explains that Teva implemented a global training program to train scientists and engineers on QbD methodology

Robust FDA oversight and enforcement is a force for good, but like most gov-

ernment intervention there are often unintended consequences. Of growing

concern is the controversy surrounding critical drug shortages, almost exclu-

sively involving sterile injectables produced by generic drug manufacturers. An

IMS study “Drug Shortages: A closer look at products, suppliers and volume,”

finds the problem is highly concentrated with more than 80% of the products

generic and more than 80% involving injectables. In June 2012, the U.S. House

of Representatives Committee on Oversight and Government Reform issued

the staff report “FDA’s Contribution to the Drug Shortage Crisis.” According

to the report, the widespread shortages of generic injectable medications are

due to two main factors: “The first is growing market concentration over the

past decade, which was accelerated by a provision in the Medicare Moderniza-

tion Act (MMA). The second is increased FDA enforcement and regulation.”

In a nutshell, the effect of the MMA was to first, cut the reimbursement

rate for injectables. Three primary chemotherapy drugs, Carboplatin, On-

dansetron and Irinotecan experienced price declines of approximately 90%

in just their first year off-patent. The effect of these artificial and forced

economics was chilling, essentially driving smaller producers out of the

market and concentrating the remaining production capacity with smaller

number of large producers with the scale to manufacture large lots of ster-

ile injectable drugs at razor thin margins.

The congressional report blames the FDA’s “prodding” for compounding the

crisis, pointing out that in response to warning letters, the major producers,

responsible for manufacturing the lion’s share of these drugs, took their inject-

able manufacturing off line. The House Committee supported their criticism

noting in the report that none of the drug maker’s lapses identified by FDA

inspectors posed a demonstrable threat to public safety or harmed consumers.

Of the 219 drugs listed on the American Society of Health System Phar-

macists (ASHSP), said the report, 58% of the drugs on the shortage list

were produced by at least one facility undergoing FDA remediation. “Prior

to these actions, Bedford Laboratories, Hospira Pharmaceuticals, Sandoz

Pharmaceuticals and Teva Pharmaceuticals were producing nearly 1 billion

units of generic injectable products per year. Facilities at these companies are

currently operating at about 700 million units per year.” Further exacerbating

the problem, said the report, the shutdowns occurred simultaneously with

competitors taking their capacity off line as well.

At A lossNot surprisingly, the market conditions forced on the industry pushed many

manufacturers to produce these high-demand drugs at a loss — in spite of short-

ages. “The Committee asked America’s largest manufacturers of generic inject-

able medications whether they were losing money on oncology drugs, which

tend to be administered in non-hospital settings. Most companies indicated

they were producing several oncology drugs at a loss.” One company, noted the

report, said that it was producing three quarters of its nearly two dozen oncol-

ogy drugs at a loss. The congressional report concluded that: “The MMA had

the large and negative unintended consequence of increasing concentration in

the generic injectable drug market and reducing company incentives to invest in

upgrading manufacturing capabilities for generic injectable drugs.”

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principles and applications. Teva also developed internal QbD Guidelines as well. “Design of experiments methodology and statistical tools have been successfully implemented at global R&D sites,” says Hillel, and “R&D is interactively working with operations, regulatory and QA on the manufacturing process prior to production of the registration batches [while] identifying and proposing mitigation to risks at scale up, reviewing together the proposed control strategy, operation ranges and product specifications.”

Achieving appropriate quality outcomes is the generally understood goal of prevailing regulatory guidance, and those companies that adopt both QbD and (ICH Q10) Pharmaceutical Quality Systems will achieve the “desired state” of pharma manufacturing. Teva’s Hillel agrees: “By implementing QbD (ICH Q8, 9) together with ICH Q10 (which is an integrated part of QbD implementation) we can reach the ultimate goal: providing uninterrupted supply of affordable, high-quality medicines to our patient. This is the desired state for the customer and for the industry, while enhanced product and process understanding will facilitate substantial efficient tech transfers, higher rates of successful validation and timely introduction of new medicines to the patients.”

proper knowledGe used properlyThe FDA has coined the term “Design for Manufac-turing” to describe the use of process information to achieve acceptable quality standards. For Teva, says Hillel, “Proper prior knowledge utilization is one of the main tools for successful QbD implementation in the generics industry. Having such a variety of in-house ca-pabilities and product developed, it is critical to utilize this accumulated information and data to gain better

understanding for future developed products.” At Teva, data-mining techniques are being utilized for histori-cal data trending and modeling in order to identify potentially critical process parameters and materials attributes, or any additional sources of variability. “In addition,” adds Hillel, “based on knowledge and experi-ence gained, an internal database of Ishikawa diagrams for each unit operation was created in order to stream-line the Risk Assessment process.”

evolutIonAccidental changes which occur in the sequence of DNA result in mutations. Mutagenic chemicals, radiation, viruses, etc., all can cause mutation in the DNA of a cell, as well as errors from Meiosis or replication of DNA during cell division. Many times these errors are induced by an organism through what is known as hyper muta-tion. Most understand now that mutations can be good or bad. Depending on the environment and circum-stances, mutation-caused changes in protein sequence can improve an organism’s chance of surviving changes to its environment. For many generic drug processors, the environment is forcing change, but is it causing positive mutations at the “DNA” level to sustain commercial suc-cess? There is certainly evidence out there supporting the theory; the fittest are adapting, integrating new tools, and science-based process understanding to survive the tec-tonic lurches in the plates of the pharmaceutical market and changes to the business climate’s temperature. The fittest will survive because companies are evolving, and it’s coming from something inside.

Company 2012 Sales* Location Employees MFG. Facilities

Teva Pharmaceutical Industries Ltd. $10.4 billion Israel 46,000 75

Sandoz $8.7 billion Germany 25,000 30

Activis $5.9 billion Switzerland 10,000 30

Mylan Inc. $5.8 billion United States 20,000 9

Hospira $4.1 billion United States 16,000 14

Sanofi $1.8 billion France 110,000 112

Ranbaxy $2.3 billion India 14,600 8

Aspen Pharmacare $1.5 billion South Africa 3,100 17

STADA Arzneimittel 1.5 billion Germany 7,800 14

Sources: About.com, company financial statements, GlobalData, EvaluatePharma * Currently available figures

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State of the induStry 2013

Coming of Ageby angelo depalma, ph.d.

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It’s been 10 years since the fDA released Pharmaceutical GMPs for the 21st Century and the industry’s had some growing up to do—but with age comes wisdom and opportunity

as of Feb. 20, 2013, the U.S. Food and Drug Adminis-tration’s Pharmaceutical GMPs for the 21st Century – A Risk-Based Approach is 10 years old. Originally met with a mix of relief, hope and skepticism, this blueprint for pharmaceutical development has inspired more commentary than any FDA strategy position. Like most 10-year-olds, it is very much a work in progress.

GMPs for the 21st Century has profoundly influenced how drug companies manage risk, particularly but not exclusively with regard to manufacturing. The risk-based approach becomes particularly challenging given the backdrop of merger and acquisition activity and a heavier reliance on outsourcing for manufacturing and R&D. For manufacturing, this means negotiating the moving targets of productivity and supply chain demands.

While specifically covering risk, quality by design, and process analytics, GMPs have invigorated science-based process development, nudging it away from what is merely comfortable to what is possible.

QualIty by desIGn Adoption of PAT and QbD, promulgated as part of FDA’s 2003-2004 GMPs for the 21st Century, was slow at first but is accelerating.

QbD required effort in terms of analytics and modeling (designing-in vs. testing-in quality), not to mention the implications of any “risk-based approach” for a risk-averse industry. Despite common belief, neither PAT nor QbD are mandated.

QbD case studies describing “home run” successes are increasing. Most involve what in many other industries would be viewed as common-sense measures for reducing cost and improving regulatory compliance.

QbD’s practical benefits to manufacturers include fewer failed batches, less regulatory friction, process understanding, more efficient control of change, etc. Each of these benefits may be broken down further, but all at some level reduce to an improved bottom line. The real benefit to patients is not necessarily improved safety or efficacy, but more reliable supply and the optimal allocation of resources to research and development.

QbD uptake has followed reasonable timelines, says Mike Thien, Sc.D., SVP for Global Scientific,

Technology, and Commercialization Operations at Merck (Whitehouse Station, NJ). “QbD represents a paradigmatic shift in how companies develop products,” he explains. “It’s a framework that focuses where companies will allocate resources in developing science and methods for a product. It’s no surprise it has taken this long.”

Merck was a QbD pilot participant, and soon decided to adopt the strategy for most of its new products. Like any company facing paradigm shift, Merck first aligned its R&D, commercialization, quality and regulatory leadership, then trained everyone else to exploit the tools of the QbD framework. After factoring in development and approval times, “10 years seems about right” to have reached this level of deployment, Thien says.

Merck’s QbD initiative resembles six sigma frameworks employed in other industries. As an early adopter, Merck management believed that if structured, risk-based quality initiatives worked for other industries, they could provide similar benefits for pharmaceuticals.

During the mid-to-late 2000s, industry leaders based their public rationalization of QbD on patient needs, which at the time seemed like a stretch. QbD was, after all, primarily a manufacturing exercise. Weren’t top companies already producing safe, effective products?

Yes, but as Thien explains, successful QbD begins rather than ends with the patient. It starts with identifying a patient’s needs, translating them into technical specifications for products and processes, and locating (and mitigating) risks that threaten fulfillment of those product/quality objectives. “We made great products in the past, but we were unable to focus resources as acutely, or immediately, on risk areas in light of specifications of patient needs. QbD enabled us to aim our best science at those highest-risk areas.”

Merck’s direct manufacturing benefits include processes that are more robust and reliable, with significantly fewer process-related deviations. For example, fewer assays are now required during release testing because quality assurance and modeling occur throughout the process, in real time, thanks to PAT. This results in lower cost of goods, a benefit that grows

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with product volume. “In some cases, PAT has enabled process viability, and thus led to the greener and higher-yielding processes that we now enjoy running at scale,” Thien says.

One could argue that corporate-wide initiatives like QbD are fine for well-heeled companies. That may have been true a few years into the initiative. Today, with best-in-class firms sharing their experiences at conferences, small and mid-sized manufacturers receive what amounts to a free education. Thien believes QbD’s prime benefit is its scientific, heads-on treatment of risk. “Risk assessment narrows your focus, to home in on where to invest resources to understand the process better, and the science behind it.”

Companies tend to create QbD programs in their own corporate image. At Janssen Pharmaceuticals (New Brunswick, NJ), QbD falls under the umbrella of “design to value” (DTV), a more encompassing quality initiative. According to Paul McKenzie, Ph.D., VP of Manufacturing and Technical Operations for Janssen Supply Chain, DTV assures the right mix of priorities around the “triangle” of R&D, commercial, and operations (including manufacturing and quality). “The other component is how we work towards standardizing our technology. Savings from standardization go to innovation, and further improving the QbD effort.”

Direct patient benefits are more easily ascribed to quality initiatives under the broader DTV concept than with conventional QbD, which is, after all, a manufacturing strategy. One success story involved creating a sustained-release form of an antipsychotic medication within a therapeutic category where non-compliance is legendary; the other involved a similar strategy for an anti-HIV medicine. “As patients get value, Janssen gets value,” McKenzie says.

contInuous manufacturInGQuality, supply and regulatory uncertainties are the most-cited reasons for the slow adoption of manufac-

turing innovations for new processes, and even slower uptake for existing ones.

Although common in other process industries, continuous manufacturing has long been shunned by pharmaceutical manufacturers. That is changing in a big way.

Novartis and the Massachusetts Institute of Technology are engaged in a 10-year program that hopes to integrate all steps of pharmaceutical production

— from synthesis to dosage form — within one over-arching process. The Novartis-MIT Center for Continuous Manufacturing (CCM) hopes to replace discrete unit operations with a seamlessly continuous process.

“Continuous manufacturing will speed com-mercialization of new medicines because it does not involve interruption,” says Juan Andres, Head of Global TechOps at Novartis.

Potential advantages of continuous manufacturing include smaller production facilities, lower capital costs, energy and waste minimization, raw material economies, process and market flexibility, and the potential to incorporate process analytics and quality by design.

“Once you go to continuous, you begin to have continuous monitoring, so it’s much easier

to control quality,” says MIT chemical engineering professor Klavs Jensen, a CCM participant and developer of the flow chemistry used in the project.

Continuous manufacturing could produce tablets in as little as a few days. By employing smaller systems and built-in waste minimization, continuous manufacturing has lower environmental impact as well.

CCM successfully completed a prototype process in 2011, and by 2012 had fully integrated a control system to automate the continuous manufacturing process. Researchers are focusing now on scaling up production with the plan to ultimately implement continuous manufacturing technologies across the entire Novartis portfolio.

Writing in Industrial & Engineering Chemistry

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Research in 2011, Spencer Schaber and co-authors analyzed the potential cost savings for producing 2,000 tons of a pharmaceutical product through continuous vs. batch manufacturing. Although yields were somewhat lower for the continuous process under investigation, product recycling and lower equipment requirements more than compensated. Additionally, capital expenses were between 20% and 76% lower for the continuous process, while operating expenses fell by 40%. “Even when yields in the continuous case are lower than in the batch case, savings can still be achieved because the labor, materials handling, CapEx, and other savings compensate,” Schaber wrote. These savings are in line with CCM’s estimates of 15% to 50%.

“We see the future of pharmaceutical manufacturing as continuous,” says Bernhardt Trout, Professor of Chemical Engineering at MIT and Director of CCM. “That includes continuous flow together with a systems approach, integration and advanced control. We can use a lot of chemistry in continuous that we couldn’t use in batch.”

The CCM project involves “new technologies across the board,” according to Trout, from new, high-yield chemistry exclusive to continuous manufacturing, to novel work-up, drying, and dose-forming technologies, including coating. “These approaches are model-based and incorporate end-to-end process control, leading to a huge reduction in total process time, greater energy efficiency and lower cost.”

Continuous processing involves a change in mindset, with significant shifts for process developers who must now view plants holistically rather than as a string of unit operations. But few limits exist, either on scale or molecule type. “It just needs to be done,” Trout says. “A key will be selecting the first molecule to process continuously.”

University-industry manufacturing collaborations are not new, but their frequency appears to be increasing.

One focus of Rutgers University’s NSF-funded Research Center for Structured Organic Particulate Systems (C-SOPS) is the efficient production of active pharmaceutical ingredients. When the center opened in 2006, its director, Fernando Muzio, deemed prospects for continuous pharmaceutical manufacturing “debatable.” But much has occurred in the last seven years.

“Process Analytic Technology is now widespread, QbD is increasingly becoming part of the standard language in process development, and modeling methods are spreading rapidly,” Muzio says. “Continuous manufacturing is now identified by the FDA as a manufacturing megatrend for the next 25 years.”

flexIbIlIty and InflexIbIlIty One of GMPs’ most exciting after-effects has been a more flexible approach to manufacturing that encom-passes the entire product portfolio, including anticipat-ed products through mergers and acquisition activity. High-value core products should remain within large companies, advises John Linder, Life Sciences VP at Celerant Consulting (Richmond, England), while mar-ginal product lines may be more profitably outsourced. Companies should therefore prepare for a complete reconfiguration of their supply chain footprint.

Improving manufacturing agility, while closely managing core products and competencies, is not a new idea. Innovator firms have farmed out packaging, formulation, printing and over-the-counter (OTC) manufacturing for decades. Linder extends this strategy to reducing “SKU” creep — the proliferation of products around a specific active ingredient or set of actives, particularly for OTC medicines or off-patent molecules. Companies should view this type of redundancy in the same way as non-core activities, products and therapeutic areas: outsource, divest or partner-out.

Thus, the conflict between marketing, which seeks greater complexity, and manufacturing, which prefers streamlining. Commercial experts were taught in business school, to expand product lines horizontally, and increase the footprint as much as possible.

“But that creates unwarranted complexity for manufacturing. Rather than producing 57 varieties in various sizes, packaging and formulations, consider consolidating the footprint for groups of these products and consider which should be retained and which should be moved externally,” Linder advises.

On the flip side, many processes now employ platform strategies that supply consistency and predictability. Currently all the rage in biologics manufacturing, particularly for monoclonal antibody manufacture, platform processes employ identical unit operations, and often nearly identical culture media, for molecule classes.

“Platform processes help speed deployment of products from R&D out through commercial,” explains Janssen’s McKenzie, “not only from the perspectives of time and cost, but for reliability and reproduceability.”

At Janssen, platforming is not restricted to therapeutic proteins. The manufacture of Zytiga, the company’s small-molecule prostate cancer drug, is based on platform methods. So is Janssen’s ibrutinib, another non-biologic indicated for blood cancers. Ibrutinib, that has received one of FDA’s

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first “breakthrough therapy” designations, which accelerates development of drugs for serious diseases that show substantial improvement over existing medications.

One of Janssen’s initial QbD platforming successes was the successful move from perfusion cell culture (how Remicade is produced) to more standard fed-batch cultures. “This enabled us to standardize the entire process, down to raw ingredients,” McKenzie says. Another improvement leading to quality and consistency was the move from animal product-derived media ingredients to animal component-free media, a move that the biotech industry has been slow to adopt.

Platforming has carried over to “visualization” of all process steps, upstream and downstream, from the number of chromatography columns to the quality bar Janssen sets for aggregates and other impurities. “Every unit operation is specified, using the same vocabulary every time. This is something I hope we can continue to expand on, not only as a company, but as an industry. We want our products, not how we run our centrifuges, to serve as our differentiators.”

m&a strateGyFrom a strategic standpoint, mergers and acquisitions occur to realize pipeline and therapeutic area compli-mentarity. Depending on how strategists account for the incremental production capacity such dynamics could affect manufacturing and supply chain strategy as well. Companies operating in advanced economies simultaneously face flattening domestic demand and competition for emerging markets.

Combined, these factors create moving goalposts for manufacturing-based pharmaceutical firms that must continue to meet shareholder-value goals while navigating labyrinthine regulations while minimizing supply interruptions.

Compare this situation to just 20 years ago, when everything was static and predictable, where reasonable inefficiencies were tolerable and asset utilization could hover around 50% without causing much concern.

So the conundrum for today’s pharmaceutical manufacturing and supply chain strategists is they no longer have clearly defined targets set in stone. “Technical operations, manufacturing, and engineering people have difficulty fathoming this,” Linder notes.

Mergers and acquisitions provide opportunities to optimize product footprints — as opposed to merely expanding them. From a manufacturing perspective, they force companies into consolidating manufacturing capacity (as well as other services) across locations,

therapeutic areas and product groups. Lessons learned from these exercises apply to new and existing facilities as well, including those outside the merger “corral.”

You may have noticed that the last decade’s mergers and acquisitions have not all proceeded swimmingly. “Without a robust integration process to bring together thought leaders and functions, and assure that backup services are well integrated, the apparent profit and margin benefits of acquisitions can become diluted,” says Linder.

redefInInG objectIvesMany of the “seismic” shifts in the pharmaceutical and biotechnology industries over the GMPs decade affect manufacturing either directly or indirectly: the dearth of New Chemical Entities, mergers and acquisitions, outsourcing, biosimilars, emerging markets, safety-re-lated regulation, and quality initiatives, reimbursement and profitability issues, to name just a few.

This has led top firms to redefine their business objectives, Linder says, away from selling individual products towards fully servicing therapeutic areas through a combination of drugs, services and devices. Examples include a diabetes drug, free counseling and partnership with a device company specializing in home-based glucose monitoring, vs. simply selling the medicine.

“The analogy with IBM’s shift from hardware to hardware plus services is striking,” Linder says, although he rues that in pharmaceuticals that transition is occurring “in fits and starts.” Pharma manufacturers have a good deal of catching up to do, as they have not been as engaged as payer-providers in understanding the value of holistic value beyond selling core pharmaceutical products.

Part of the equation involves value-based pricing models, what a cynic might describe as “really, really, really expensive drugs.” The idea is actually not so sinister: Rather than pricing products based on cost and margins, charge according to therapeutic value.

Health plans already do this in effect, and in reverse, through formulary listings for both generic and branded products, which inevitably leads to a misalignment of expectations between manufacturers and insurers, and of the meaning of the term “value” itself.

“Cost-benefit is creating a different dynamic for evaluating portfolios, where companies invest, and how manufacturing should configure its supply chain,” Linder says.

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There are a number of areas where interpreting published information and applying it in the real world has proven to be problematic

By James Agalloco, Agalloco & Associates

Uncommon Sense in Execution of Process Simulations

the aseptIc process simulation (or media fill test) has been a compliance expectation for aseptic processing op-erations since the 1980s. Industry guidance from the Parenteral Drug Association (PDA), Pharmaceutical and Health-care Sciences Society (PHSS), International Standards Organization (ISO), Food and Drug Administration (FDA), European Medicines Agency (EMA) and Pharmaceutical Inspection Cooperation/Scheme [PIC/S] regulatory outlines have endeavored to establish the “what” and “how” of their execution. The PDA’s latest guidance outlined the subject in a comprehensive manner addressing all of the major elements of the simulation design and execution.7 It might be ex-pected that given the extent of the available content, that no controversies or confusion would exist regarding process simulations. Unfortunately, that is not the case. There are a number of areas where interpreting the published informa-tion and applying it in the real world has proven to be problematic.

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anaerobIc medIa fIllsThe sterility test uses two media, Soybean-Casein Di-gest Medium (SCDM) and Fluid Thioglycollate Medium (FTM), to mimic the potential growth conditions present in the human anatomy. Early guidance documents on pro-cess simulation indicated that both media were to be used in evaluating an aseptic process. More recent guidance has largely eliminated FTM from consideration recognizing that true anaerobic conditions cannot be attained in the vast majority of conventional aseptic filling operations — even those with inert gas purges and/or lyophilization. An-aerobic conditions (oxygen levels NMT 0.2%) can only be attained in isolator systems with a total inert gas environ-ment. For all other installations, SCDM should be the only media used, and oxygen should be substituted for inert gas. This approach will detect facultative anaerobes, which are the only microbes capable of growth in FTM.

contaIner sIze Standard practice in the design of process simulation is to bracket the vial sizes normally processed on an individual filling line. Thus, a filling line used for 1, 2, 3, 5, 6, 10, 12 and 15 mL would ordinarily use the 1 and 15 mL vials in the simulation. Consider, however, that several of the containers might differ only in height, thus the 3 mL vial might have a higher center of gravity than either the 1 or 2 mL containers and be more susceptible to tipping over requiring added human intervention. Its inclusion in the media fill program design is essential to support the added activity necessary. The smaller 1 mL vial might present its own set of unique difficulties and also warrant inclusion. The preferred approach would include both the 1 and 3 mL vials representing the lower end of the range. Size alone should not dictate the simulation design.

contaIner/closure handlInGAs noted, the selection of process simulation test com-ponents is commonly driven by container size. Handling considerations have recently been given mention to ensure that those components requiring added handling for proper feeding are considered. In order to make such a determination, data must be gathered on the performance of components on the filling line. Filling batch records should require the collection of intervention data in a man-ner that allows for the identification of those components that cause the highest frequency of corrective interventions on the filling line. This must extend to both containers and closures, and perhaps their combination to ensure that the program design incorporates the materials that create the need for greater operator intervention.

InterventIonsThe core concerns in all manned aseptic processes are the activities performed by the operators. As the gowned oper-ators are universally acknowledged to be the predominant source of microbial contamination in the entire activity, it stands to reason that everything the operator comes into contact with is placed at risk. There are three categories of operator activity in aseptic processing:• set-up — the preparation of the line from individually

sterilized components • inherent interventions — the activities required to oper-

ate the line, i.e., component replenishment, environmen-tal monitoring, etc.

• corrective interventions — the steps taken in response to a system failure, i.e., vial breakage, stopper jam, etc. 10,11,12 There are important considerations to be taken in

each of these areas that would benefit from clarification. The specifics of each activity should be reviewed from a microbial contamination potential, operator safety and cGMP conformance perspective to provide a “best practice” approach to their execution.

lIne set-upThe task of assembling/positioning and adjusting the individual sterilized filling parts should be considered a specialized and singular inherent intervention. Its execu-tion by an experienced operator is the first aseptic step in the process and often entails extensive interaction with sterilized materials. The steps taken to ready the line for use should be detailed and the operator proficient in the entire sequence. The last portion of the set-up includes: introduction of container/closures; confirmation of their proper feed through the line; adjustment of fill weights/vol-umes, closure placement/seal force; and removal of the set-up units. Preference should be given in equipment design and selection to filling equipment that simplifies any aspect of the set-up to reduce the interventional activity. Environ-mental monitoring should be performed during the set-up, and personnel monitoring upon completion.

Inherent InterventIonsThere are tasks involved in operating a filling line that can-not ordinarily be eliminated in which the operator must interact within the critical zone. These tasks are ordinarily repetitive and/or periodic in nature and include: feeding components, taking environmental samples, operator breaks, etc. The execution of inherent interventions should be performed in a singular manner by all operators. The operators’ location, hand placement, speed/sequence of execution and all other aspects of them

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should be nearly identical on each execution regardless of the operator. A parallel can be drawn to the first ball thrown in each frame in bowling. Regardless of who is throwing the ball, it must arrive in the 1-2 or 1-3 pocket to achieve the ‘best practice’ result of a strike. Allowing operators to perform inherent interventions in differ-ent ways invites contamination as compared to the “best practice” procedure they have been instructed on.

The frequency present in inherent intervention should be considered flexible. Where a filling machine has demonstrated outstanding weight/volume control, the interval between weight sampling can be lengthened. Similarly, superior environmental control might provide an opportunity for less frequent invasive environmental monitoring. Automated equipment such as in-line weight checkers and electronic adjustment can replace operator interventions for both sampling and adjustment of fill weight, in much the same way the introduction of the dry heat tunnel can eliminate the need for operator transfer of vials depyrogenated in a dry heat oven.

correctIve InterventIonsThe need for corrective interventions is largely driven by faults in the system. These can be the result of several fac-tors including: inadequate equipment, deficiencies in the set-up, and component handling (resulting from lax qual-ity standards). Corrective interventions are never desirable and their incidence rate in any lot can vary substantially given the number of potential causes for them; they are also variable with respect to the location and severity.

Consider the following scenarios relating to a fallen vial and the expected operator corrective intervention: • Vial falls over — Remove the vial, leave everything else

on the line alone to the extent possible.• Vial falls over and breaks — Remove the vial and glass

fragments; remove any other potentially impacted vials.• Vial falls over, doesn’t break, but spills — Remove the vial,

any other potentially impacted vials and remove liquid.• Vial falls over, breaks and spills liquid — Remove the

vial, glass fragments, any other potentially impacted vials, and remove the liquid.

Each of these interventions might be performed differ-ently on different parts of the fill line. It should be im-mediately evident that corrective interventions have to be approached with greater flexibility in mind. The operators will need flexibility in dealing with corrective activi-ties, and their training/execution must provide for more general guidance. The procedures for corrective interven-tions should be more principle-based to allow adaptation to varying circumstances.

One aspect of wrong-headed corrective interventions

is a mandate for the removal of a specific number of units or clearance of a specific zone. Blanket statements of this nature should be avoided, because they can result in increasing the duration/risk of an intervention by mandating more operator activity in the critical zone. The direction should be to remove the least number of units possible focusing only on those that are potentially impacted. If a single vial falls over or has a misaligned stopper, its removal may be sufficient to correct the fault. Removing adjacent units only serves to increase the risk of contamination to additional units. Holding to that practice suggests that the entire line be cleared one unit at a time, which is clearly an absurd response to a minor failure. The incidence rate for all corrective interventions should be recorded for each lot with continuous improvement practices defined to reduce the rate over time.

The last consideration of corrective interventions that needs to be considered is whether a particular corrective intervention should be simulated at all. There may be instances where the execution procedure represents a contamination potential that is excessive. Just because something can be done, doesn’t mandate that it should. It might be preferable to terminate any filling process when an extraordinary situation presents itself rather than undergo some heroic measures to execute it once, and then endeavor to support it over time.

Addressing interventions in media fill programs is actually quite simple. The set-up and inherent interventions associated with the media fill should be virtually identical to those in routine filling. The only differences that would arise with these should be the result of the process simulation itself: media introduction, replacement of inert gases with compressed air, etc. With respect to corrective interventions, the process simulation should incorporate

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The set-up and inherent interventions associated with the media fill should be virtually identical to those in routine filling.

these (real or simulated) at a rate that matches that observed in routine filling. This can be supported in interventions/number of units, intervention/time or interventions/batch. If the corrective interventions are properly recorded in routine operation, their inclusion at the proper frequency is straightforward.

The criticality of interventions in aseptic processing and their simulation is such that the following bear repeating. • Interventions always mean increased risk to the patient.• There is no truly safe intervention• Interventions are to be eliminated if at all possible; if

they can’t be eliminated, then their frequency should

be reduced as far as possible; simplified with respect to their execution in all instances.

• The “perfect” intervention is the one that is designed out or eliminated from the process!

duratIonThe length or duration of a media fill has always been a point of regulatory concern. In the 1970s, media fills rarely exceeded 3,000 units.1 When the statistical implica-tions of using an acceptance criterion of a maximum 0.1% contamination rate were understood, media fills started to exceed 4,700 units. The FDA’s 2002 draft Aseptic Processing Guideline brought an increase to 5,000 units.13 More recently, there have been EMA and FDA expecta-tions for media fills that exceed the maximum batch size allowed on the line. This premise behind these increasing size simulations is apparently rooted in the regulatory belief that the microbial conditions on the line slowly de-teriorate over the course of the fill such that units filled at the end of the batch have a higher potential for contami-nation. There is ample evidence that this is not the case, and if one considers the fundamentals of aseptic process system design why such a concern is incorrect.14 The typi-cal manned aseptic filling line whether conventional or RABS is designed to continuously eliminate contamina-tion by the unidirectional downward flow of air through the critical zone. There are no reports of microbial contamination trending upward during an operational day, and clear support to the contrary. The appropriate duration for a process simulation should be longer than the operators’ continuous presence in the fill room, or 5,000 units — whichever comes first.

IncubatIon temperatureOne of the more puzzling aspects of process simulation execution is the continued use of 2 different (20-25°C and 30-35°C) incubation temperatures for seven days each for the filled units. The trouble lies in the dichotomy of the temperature sequence. Industry surveys beginning in 1980s indicated that the industry was split almost equally among firms that incubate first at 20-25°C and then at 30-35°C, and those that began at 30-35°C and then switched to 20-25°C. The arguments posed for doing this in either fashion are largely theoretical. Noting this, PDA sug-gested and FDA agreed to the use of a single temperature

between 20-35°C with an allowable range of ±2.5°C.7 Using a single temperature simplifies the execution, eliminates the need for large incubators and more closely mimics what occurs with many products anyway. The persistence of the antiquated practices across the industry is puzzling given the operational advantages and regula-tory acceptance of a single temperature.

partIcIpatIonPerhaps the most confusing aspect of all with respect to media fill execution is that of operator participation. The FDA’s 2004 aseptic guidance includes the following:

“All personnel who are authorized to enter the aseptic processing room during manufacturing, including technicians and maintenance personnel, should participate in a media fill at least once a year. Participation should be consistent with the nature of each operator’s duties during routine production.”7

On the surface, this seems completely clear. However, what exactly does “participation” in this context mean? For those individuals that do not perform interventions in the critical zone, the expectation is actually excessive. To mandate that supervisory personnel participate to the same extent they routinely do means they should stand to the side and little else. For other gown-qualified personnel sanitization staff, instrument mechanics and so on, that do not intervene on an operating line they should also be exempted from any direct involvement in the media fill program. That leaves the set-up personnel (if different from the operating staff), line operators and environmental monitoring staff (if present) as those whose participation is necessary to meet the regulatory expectation.

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The implementation of the regulatory desire is still not without some difficulty. In a single line facility, with a staff of four, two media fills would afford ample repetitive opportunity for the four operators to perform each of the permitted interventions without difficulty. Applying the guidance to a larger plant is far more complicated. Consider the following real world parenteral facility — eight filling lines, two operating shifts and approximately 50 line operators. Ignoring the participation concern, the facility would perform 32 media fills per year (8 lines X 2 shifts X 2 fills per year = 32). If there are 10 interventions to be included and they are performed on average five times each in the media fill, then 1,600 total interventions would be performed each year. Considering the 50 qualified operators, that converts to an average of 3.2 interventions per operator per year! Those 3.2 interventions would in theory support each operator’s participation on all lines for all of the different interventions. The confidence provided by this approach is clearly compromised and an alternative approach is necessary. Increasing the number of media fills to match the intervention numbers performed in the smaller facility would require 400 media-fills-per-year levels and is not a realistic alternative.

The most appropriate means to address participation at larger sites is reliance on procedural conformance. If the means to execute the intervention is sufficiently detailed and the operators well trained in the procedure, then the aseptic process should be considered

adequately qualified despite every operator not having performed every intervention on every line multiple times. As the individual operators can be gown-qualified and separately demonstrated to be proficient in the aseptic techniques necessary, their participation is assured through the procedural controls.

The execution of process simulations is an essential part

of the sterile product compliance demonstration. The details of their execution have been addressed in industry guidance documents, however the structure of those documents precludes detailed examination of the methods as afforded here.

Editor’s Note: For the complete list of references associated with this article visit: www.pharmamanufacturing.com


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The Case for Global Supply Chain StandardsAgreement around common supply chain standards and supporting processes could revolutionize the healthcare sector

By Thomas EBEl, KaTy GEorGE, EriK larsEn and KETan shah, mcKinsEy & co.

the healthcare supply chaInremAins frAgmented, with limited vIsIbIlIty and InterconnectIon

ImaGIne a world where a patient’s records capture the brand, dosage and lot number of each drug and medi-cal device she uses, along with the name of the physician who ordered the product and the nurse who administered it; where bedside scanning confirms that she gets the right product in the right dosage at the right time; where hospitals and pharmacies know the exact location of short-supply medical devices and drugs and when they can be delivered; where regulators can recall adulterated products with accuracy and speed from every point in the supply chain; and where manufacturers can moni-tor real-time demand changes and shift their production schedules accordingly.

In this world, patients would enjoy consistently safer and more effective healthcare, with fewer mistakes and shorter average hospital stays. Redundant activities and costs would be driven out of the system — reducing the cost of healthcare to society and enabling broader global patient access to cutting-edge medical technologies. Opportunities for innovation would open up — enabling new progress in personalized medicine, customized devices and mobile health.

This world is technologically possible today. But the reality is a long way from the ideal. Major pain points in the current healthcare value chain range from patient outcomes to supply chain efficiency, including the prevalence of medication errors, inefficient and ineffective product recalls and bloated inventories. The healthcare supply chain, from manufacturer to patient, remains fragmented, with limited visibility and interconnection. Certain channel partners are making progress by collaborating, and individual companies and even countries are documenting excellent results with cutting-edge practices. But only a few players are making these innovations and advances.

To build a world of interconnected, cost-effective healthcare, the healthcare industry could align around a single set of global standards that support the processes and capabilities required to achieve the kinds of benefits outlined above. The consumer and retail industries have demonstrated the value of this kind of standards alignment with their adoption of GS1 standard barcoding, which has reshaped these industries and created billions of dollars in value. While new processes,

tools and systems were required to deliver this value, use of one single global standard was a critical prerequisite.

This year, McKinsey & Company carried out a research effort, with the participation of more than 80 healthcare industry and regulatory leaders around the world, to estimate the potential value of adopting a single global standard in healthcare. Taking a conservative approach, our models suggest that cost could be reduced by $40 - $100 billion globally (see exhibit), mainly from reduced follow-

on cost of medication errors ($10 - $60 billion), cost from improved inventory management (financing, processing, obsolescence cost reduction of $30 - $40 billion), and reduced data management cost ($1 - $2 billion). The final figure may even be substantially higher, because global standards may deliver a variety of smaller benefits that are more uncertain or difficult to quantify.

Those are compelling numbers, but to make standards work, individual players in the healthcare value chain must have the confidence that the direct rewards will be worth the necessary investment. In this article, we will focus specifically on the costs and benefits of adopting such standards for pharmaceutical manufacturers.

the busIness caseFor our models, we took the case of a representative

global pharma manufacturer, with 25 packaging lines, annual revenue of $4 billion, and earnings before taxes of $720 million, (18% of sales, in line with McKinsey industry benchmarks). We assume 70% of revenue is earned in developed markets and 30% in developing markets (used to estimate exposure to high-counterfeit markets).

The key elements of global standards are product identification, location identification, and master data synchronization. Manufacturers would be required to make investments to implement these standards. The precise size of that investment depends on many factors, including the type of identification adopted (basic

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Impact of global standard

mio patients/Us$ billion

reduction in percent

patient health and safetyMillion cases

Medication errors -15-31 ~30%

ADE -5-17

~50%Patient disability -1-105

Lives lost ~0.05

Health care costUS$ billion

Medication error cost -9-58 ~50%

Recall handling cost ~-1 30-40%

Inventory financing cost -4-6 10-20%

Inventory mgmt cost -6-8 ~15%

Obsolescence cost -19-27 35-55%

Data management cost -1-2 40-45%

total ~-40-100 25-35%

Global standards enable substantIal patIent health benefIts, and total healthcare cost reductIon of 40-100 usd bIllIon

product identification including batch number and expiry date information, or separate serialized identification of each individual unit), whether barcoding is applied to primary or secondary packaging, and the state of the manufacturer’s current IT infrastructure to be extended to accommodate global standards. Our analysis suggests that such costs would range from $150,000 to $500,000 per packaging line and between $1 million and $5 million in licenses and software integration costs for the organization for our representative manufacturer.

Do the potential benefits justify the cost? We believe so. By adopting global standards in partnership with its trading partners, our representative pharmaceutical manufacturer might expect a range of benefits worth about $40 - $60 million annually, which represents about 1-2% of base revenue and about 5-10% in earnings before taxes. These benefits arise from a variety of sources, including reduced obsolescence, lower data

management costs and improved transaction accuracy, and potentially a reduction in sales lost to counterfeits. In addition, a one-time cash flow benefit of about $90 million would accrue due to reduction in inventory assets, enabled by improved supply chain visibility. Accumulating the benefits and both one-time and annual costs over 10 years, we expect barcoding at the secondary packaging level to deliver about 20-25 times more

benefits vs. costs. Serialization would have approximately a 4X benefit/cost ratio.

Beyond these significant financial advantages, standardization has the potential to greatly simplify and streamline many aspects of operations and customer interactions for pharma companies. Automatic master data synchronization would greatly reduce ad hoc customer requests for product information, decreasing the burden on manufacturer staff to respond to these requests and allowing them to spend more time on value-added customer service.

Generating reports could also become more efficient. Global manufacturers face significant challenges in rolling up data across divisions and regions. One executive told us that his finance, local and hub planning locations and various other functional units could create as many as five identification numbers for a single product within the same company. Leading organizations could potentially generate valuable insights from data faster than their competitors and gain competitive advantages in an increasingly data-driven world.

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Finally, there is potential for manufacturers to contribute greatly to patient safety through adoption of global standards in three areas:1. Raising the bar for counterfeiters by serializing prod-

ucts, to allow authentication at dispensing and usage points

2. Faster, more efficient recalls by capturing standard location identification and batch number information, and tracking how products move through the supply chain

3. Reduction of adverse drug events due to medication errors in hospitals by placing standardized barcoding at the primary packaging level so that bedside scanning can ensure the Five Rights.

GettInG from here to thereIn the 1970s, the grocery industry formed a committee of leaders of major manufacturers and retailers. In consum-er packaged goods, a few global players worked together tirelessly to align on GS1’s single global standard for the in-dustry. More recently, the Consumer Goods Forum organized senior executives to define require-ments for global data synchronization. These leaders worked together across the value chain, and their decisions drove adop-tion throughout the sector.

Healthcare industry leaders who are convinced of the benefits of global standards are in a position to work across competitive and customer-supplier relationship boundaries to agree on a common vision and approach. Customers, vendors, competitors and regulators will have to act and collaborate in new ways. Their aim will be to create interoperable systems; these are the enablers for change.

However, healthcare is a more fragmented and regional industry. Unlike consumer packaged goods, in healthcare the manufacturers are the largest and most global players, and can therefore play a unique role in driving adoption of a single global standard. On the other hand, they will bear significant incremental costs if, instead of a single global standard, requirements proliferate across customers and countries. The cost

of managing the resulting complexity in packaging operations and distribution centers is significant — particularly considering the indirect costs of maintaining quality and compliance requirements. McKinsey estimates that if manufacturers are required to comply with two standards, instead of just one global standard, investments could increase by 15 - 25% (additional equipment and implementation) and operating expenses (conversion cost) by 5% (shorter production runs, more or longer changeovers, cost of supplies).

Manufacturers could realize significant benefits if they work together to shape processes, industry norms, channel partner agreements and data management responsibilities to create greater visibility to their products’ end-to-end supply chain and demand patterns. In retail, manufacturers benefited from access to point-of-sale data about shelf space, stock and retail forecasts, which enabled a second wave of supply

chain optimization, including optimized assortments and delivery frequencies, collaborative forecasting and replenishment, and improved on-shelf availability. Healthcare manufacturers could also benefit greatly if they improve control over their products’ shipment and usage conditions,

protect brand reputation and improve patient safety and effectiveness outcomes.

The healthcare industry is at a crossroads, and our research suggests that the case for alignment on a single global standard is compelling at both the total industry level, and for individual companies. More importantly, the case is compelling in terms of numbers of lives saved and medication errors averted. Industry leaders could seize the moment to create a true win-win opportunity, both for the industry and for patients.

Editor’s note: A complete description of the models, costs and benefits associated with global standards can be found in the white paper “Strength in Unity – The Case for Global Supply Chain Standards,” at www. mckinsey.com, under Client service/Operations/Latest thinking.

mckinsey.com

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Connecting key information systems assures your suppliers all pull in the right direction

By Doug Bartholomew

Harnessing IT to Strengthen Relationships

Quality management

It’s 2013. Do you know where your drugs are on that other guy’s plant floor? You should. Unfortu-nately, pharmaceutical companies often lack the vis-ibility they need to carefully manage their contract manufacturers and contract development organiza-tions’ performance.

That’s surprising, considering the benefits pharma manufacturers can reap by connecting key IT systems enabling the sharing of critical information about product quality and manufacturing efficiency. First and foremost, meshing quality, manufacturing, laboratory, and other business information systems can help accelerate understanding of potential quality problems and support a faster resolution of plant floor issues. In other words, by expanding the flow of information between pharmaceutical companies and their contract drug manufacturers, both entities stand to gain. The payoff is greater visibility into operations, better information on which to make business decisions and easier tracking of manufacturing exceptions.

As pharmaceutical firms’ dependence on contract manufacturers has increased, the need to expand and speed up connections with suppliers has intensified. While many of the most prominent pharmaceutical companies have connected business systems such as enterprise resource planning systems (ERP) with those of their outsourcing partners for supply-chain purposes, those that have connected other pharma-related IT systems — CAPA, LIMS, QMS, MES and enotebook systems — tend to be far fewer.

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another factor driving the

increased use of technology for

information sharing is the need

to provide serialization.

mInorIty reportOf the 173 pharma industry professionals who responded to a Pharmaceutical Manufacturing magazine survey last year, only a minority reported that their firms had con-nected their various internal quality systems with those of their outsourced manufacturers.

For example, about one-fourth (24%) said they had integrated their corrective and preventive action (CAPA) systems with those of their suppliers. Only a limited number of respondents (13%) said they were using technology to connect their quality management systems (QMS) or similar IT platforms with those of their contract suppliers. Finally, one-fifth indicated that they had set up dashboards to electronically monitor key performance indicators (KPIs) for their contract partners.

Clearly, by strengthening connections with their contract suppliers through better, more extensive integration and application of various IT systems, pharmaceutical manufacturers stand to reap a host of benefits. One of the most obvious places to start is automating the workflows supporting various processes.

“The more you use technology, the better off you are in terms of efficiencies,” says Tee Noland, chairman of Pharma-Tech Industries, a pharmaceutical contract manufacturer in Royston, Ga. “Connecting our ERP system with our customer Johnson & Johnson saves a lot of time for them, because we do a lot of the supply planning for them. For instance, with Johnson & Johnson, we manage our inventory in their distribution centers,” Noland says. “It saves a lot of time for them, because we do a lot of the planning. And of course, if they have a promotion, we have to boost our inventory to meet the increased demand.”

Pharma-Tech, which uses an ERP system from Syspro, depends on it for a variety of information essential to the company’s successful providing of services to its customers. “Our ERP system gives us information on inventory, scheduling, production, production efficiencies, and materials ordering, as well as financial information,” Noland explains. “We also have our own homegrown databases to track quality issues and any non-conformances.”

Each shipment from Pharma-Tech to Johnson & Johnson is accompanied by an electronic notification that the shipment is en route. In a similar fashion, once each week, Johnson & Johnson sends Pharma-Tech an XML-formatted file containing a forecast for the products

the contract firm needs to provide. “I take their forecast and import it into our system, and we use that to schedule our production,” says Kristin Brown, customer service and planning manager at Pharma-Tech. In the next step, Brown uses the electronic forecast to do the materials planning for the customer. “We receive the forecast file and then go in and do the planning for them,” she says. She connects with the Johnson & Johnson SAP system through the pharmaceutical company’s SAP portal. “We see their inventory and sales, and then we do the planning and supply chain work for them,” Brown adds.

Still, many of Pharma-Tech’s customers are smaller drug makers that continue to use purchase orders, sales forecasts, and other non-electronic means of communicating with the contract firm. For quality-related issues, Pharma-Tech’s quality department sends the appropriate forms to the customer’s website or portal.

“For the most part, with our smaller customers,” Brown says, “they email us their purchase orders, and we manually

type them into our system. For a broad supply chain view, it’s better to have all the information imported directly into our system.

“Overall,” she adds, “If we had more electronic connections with our customers, it would bring improvements, including better planning, better decision making— for our own company and for the customers as well — greater

visibility, and the ability to order in bigger chunks. And it gives us better flexibility in scheduling the workload.”

Pharma-Tech also is able to share certain financial information with customers. For instance, the company shares pricing data for raw materials used to manufacture their products. If the cost of raw materials goes up during the year, Pharma-Tech is able to recover the variance in the purchase price by pulling the purchase information out of its database into a spreadsheet that displays the variances. “If there are price changes during the year, we want to get the money back if the cost of goods went up, or we may have to reimburse them if the costs were lower,” Brown explains.

Another factor driving the increased use of technology for information sharing between pharma companies and contract manufacturers is the need to provide serialization of products to facilitate tracking and tracing. For instance, some larger pharma companies are using their ERP systems to provide the serial numbers to be used by CMOs, which in turn, communicate back to the pharma OEM a status report.

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“The CMO will provide an overall ‘statusing’ of which codes were used, which were not used, and which were for products that were pulled for quality sampling, or where the labels did not come out right and the product was scrapped,” says John Danese, Senior Director of Life Sciences at Oracle Corp., one of the leading ERP vendors.

Despite the apparent benefits, many pharmaceutical companies have been somewhat slow on the uptake to embrace the sharing of various kinds of information with contract suppliers. “I think the bus is about half full, with some pharmaceutical companies yet to get on board,” Danese observes. “For some CMOs, their idea of advanced communications is a fax. There is a broad spectrum of maturity among companies in the way they deal with their partners.”

Looking ahead, Danese believes that in the next few years, the industry will more fully embrace the electronic sharing of product quality information between pharma companies and their outsourcing partners. “The exchanging of quality information electronically is a bit down the road,” he says. “I think we’ll see a larger uptake in the next three to five years.”

In fact, the sharing of quality data has historically been an area where pharma firms have lagged. While most pharmaceutical firms have a CAPA system in place, those systems’ lack of connectedness or integration to larger systems such as ERP has been a serious stumbling block to information-sharing between drug manufacturers and outsourcers. One reason is that CAPA systems often are not connected with other plants or with systems that can measure overall process effectiveness.

Nonetheless, connecting CAPA with ERP promises huge potential benefits. The chief goal is to ensure that

everyone who needs to know about — or act upon — production miscue or quality problems, has easy and immediate access to the necessary data. The ability to both trace a batch of material to the source as well as to access all documents associated with it through the production journey can be very helpful in correcting and preventing future occurrences of similar problems.

Compared to the pharmaceutical industry, the high-tech industry is light years ahead in terms of information sharing with contract partners. Of course, outsourcing has long been a way of life for electronics firms, which often have little or no manufacturing of their own, but instead depend on an entire ecosystem of semiconductor foundries, assembly makers, and test providers to handle production. Many high-tech companies outsource logistics and warehousing as well, and some even outsource every aspect of their business.

But in a highly regulated industry like pharmaceuticals, there is an even greater need for information sharing and stronger ties between manufacturer and CMO. “We see pharmaceutical companies sharing quality data both ways, manually and electronically,” says Elaine Schroeder, vice president of sales at Pilgrim Software, a provider of quality and compliance management systems.

From a quality standpoint, OEMs must first certify the supplier through an audit to determine that the contract firm adheres to standard operating procedures and GMPs. For instance, if a packaging non-conformity has been identified at the CMO, the pharmaceutical company may require the outsourcer to report on the problem electronically. “Pharma companies that have a quality management system may require the packager to respond through their supplier portal,” Schroeder says. “But some respond through faxes or other means,” she adds.

“Usually if the pharma company issues a change in supplier materials, they will communicate this through a supplier portal,” Schroeder points out. On the sharing of CAPA data, Schroeder says, “It’s not all that complex to have one CAPA system feed another CAPA system.”

Yet another challenge facing many pharmaceutical firms is, ironically, an internal one — too many versions of the same ERP system that have yet to be consolidated into one. This lack of consistency within an organization inhibits the smooth sharing of data with outsourcers. “We have a well-known medical device company with three versions of SAP that don’t communicate with each other,” Schroeder says. “Another client has more than 60 versions of their

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call-center software, so they are not even treating their customer complaints in any homogenous way.”

Companies that have a manufacturing execution system (MES) in place have a leg up when it comes to collaborating with contract suppliers, Schroeder explains, because they have more detailed production data already on tap. Certainly in the high-tech industry the use of an MES with web-based access at both the electronics manufacturer and the contract outsourcer provides:

• Demand signs to the contract partner• A view of current production status at key points• Quality data• Data for measuring supplier performance

Much of the impetus to adopt these technologies in the pharmaceutical business can be attributed to action on the part of regulatory agencies. “I think the regulatory bodies are providing the push in certain sectors of the industry, such as in the medical device area,” Schroeder says. Device makers are required to do electronic submission of product deficiencies or non-conformances to a regulatory agency, she adds.

“There is a great deal of interest in expanding connections between pharma companies and their contract manufacturers,” Schroeder adds. “But the contract manufacturers look at it as a way to get a competitive advantage by having a QMS in place.”

Still another stumbling block preventing the industry from fully embracing more IT systems for collaborative purposes is a widespread concern among pharma companies over exposing their proprietary information to others. “The pharma industry still has a real fear of exposing their quality systems to suppliers,” says KR Karu, pharmaceutical industry solution director at Sparta Systems, a provider of quality management systems.

“When it comes to the business systems, there is a back-and-forth of data sharing between systems,” he says. He cites just-in-time ordering data utilizing shared inventory information, shared purchasing information and other supply-chain data that is routinely provided by pharma companies to their outsourcers, and vice-versa. Not so, however, with product quality data, which often is kept within the manufacturer’s systems.

By contrast, Karu points out, “In the high-tech world, the electronics firms’ partners are in their systems as if they work there.” Although most pharma companies adopted quality management systems years ago for use inside their own firms, few were willing to share that data with their contract suppliers. The result has

been that many drug companies now find themselves handling quality issues the old-fashioned way. “Now that the industry is moving to more of a real supplier base, pharma companies are dealing with quality problems through phone calls, faxes and emails,” he says. “There are quality issues falling between the cracks, I am sure, as a result.”

The gains to be had by sharing quality data, however, far outweigh any concerns over data security, asserts Sparta’s Karu. “For example, when you have a manufacturing deviation, you are not sure what the cause is, and having all hands on deck throughout the supply chain is important,” he says. “You need visibility and transparency across the organization. If you have a supplier that fails, you need to know right away, so you can find another supplier somewhere in the world who can provide this service.”

Standardization of data is another key area for collaboration between the pharma firm and the contract provider. “One of the top life sciences companies is working with us to take standard procedures and standardized data so that everyone is doing things the same way,” explains Ken Rapp, managing director and senior vice president at Accelrys, a provider of lab execution and management systems. “As a result, we are now getting real transfer of process data between systems.”

This kind of connectivity between systems at different partner companies has been extremely difficult up until now, Rapp asserts. “It’s been nearly impossible to get the job done in the past, but I think there is change afoot,” he says. “Today we have tremendous pull between the supply side and the partner side to get this done.”

As an example, Rapp cites a pharmaceutical client that depends on Accelrys to keep close tabs on what’s happening at its suppliers’ labs. “We have a customer with three contract suppliers that they monitor closely. They run a dashboard every day to see what’s going on with the manufacturing process at their three partners,” he says.

“It’s become a critical need for our customers to know what’s going on,” Rapp adds. “They want systems that include process informatics, and they want them faster, easier to deploy, and with shorter times to get to the benefit. We need to broaden the number of companies that can take advantage of these systems.”

about the authorDoug Bartholomew is a journalist specializing in manufacturing, tech-nology and finance. His articles have appeared in New York Magazine and Los Angeles Times Magazine, and he is a former senior technology editor for IndustryWeek and senior writer at InformationWeek.

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a recent interview in this magazine (June 2012, p. 37-43) with Rick Friedman and Karthik Iyer of the FDA included a discussion of the subject of “cGMPs and Statistics.” Friedman and Iyer point out that statistics is a necessary tool, and yet many pharma organizations do not make proper use of the tool.

Many of the reasons for the slow adoption of statistical thinking and methods in the past are no longer relevant today (Hoerl and Snee 2012). The Internet, combined with effective software and new learning and application methods, has greatly broadened and increased the use and effectiveness of statistical thinking and methods.

Failure to use any effective tool is often due to insufficient understanding of the tool itself or the benefits of using it, or how to implement it. This lack of understanding is evident when we hear questions like: “What statistical tools should my company be using? What statistical methods do the regulators want us to use?

Better questions to ask are: 1. “How do we use data to design our products and operate our processes?” 2. “What statistical tools can help us collect and analyze our data more effectively?” Answers to the first question include:

• Design products, processes and measurement systems• Control and improve processes/measurement systems• Maintain stable and capable processes• Create robust products, processes, measurement systems• Conduct product stability studies

Once we know what the objective is and what the need is, we can figure out which statistical (and non-statistical) tools can help us meet our objective. For example, if we want to design or improve a product or process, the concepts, methods and tools of statistical design of experiments are very useful—critically essential if your goal is to use QbD approaches. If your goal is to maintain and sustain stable and capable processes over time, the concepts, methods and tools of statistical process control and process capability have been shown to be effective.

People typically avoid applying something they don’t know how to use. Fortunately, we have experience to draw on. The Lean Six Sigma community, of which I have been a practicing member for more than 15 years, has some effective solutions to this problem (Snee and Hoerl 2003).

I believe that we can take the learning and application approaches used by the Lean Six Sigma community to broaden and deepen the use of statistical thinking and methods in the design control and improvement of pharma and biotech products and processes.

First, it is critical to focus on the purpose of using the tool rather than the tool per se. Why are we using the tool? Is it to improve a product, to control a process? The chosen purpose and an understanding of the data

involved lead one to the right tools to use. Next, we recognize that in most applications there is

more than one tool involved. In such cases roadmaps are available (or can be developed) for how to fit the tools together, regarding sequence and linkage; how the output of one tool becomes the input for one or more other tools. Such roadmaps enable users to learn the approach more quickly, remember the approach over time, thereby speeding up project completion.

A common fear in applying statistical tools is the use of the wrong formulas and not getting the calculations right. Fortunately this is much less a problem today with statistical software such as JMP and Minitab, which uses the correct formulas and gets the calculations correct. The analyst’s job is now to collect the right data to answer the posed question, select the right analysis procedure in the software and then properly interpret the resulting output.

Information on the tools and their use is much more available in this Internet era. Webinars on statistics and its use in solving the needs mentioned above are available. Universities are offering online courses; books are available online. These trends will continue to grow.

The combination of software and project-based learning—using roadmaps to link and sequence statistical and other tools —is a major contributor to the success of Lean Six Sigma projects. Scientists, engineers and other professionals learn the methodology quickly and complete projects at the same time, returning significant bottom-line savings.

Statistics: Ask the Right QuestionsOnce you know what the objectives and needs are, you can figure out which tools can help meet your goals

By ronald d. snEE, Ph.d, snEE associaTEs

project-based learnInG, tool-usaGerOAdmAps And sOftwAre will brOAden statIstIcal thInkInG and methods.


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best of pharmaceutical manufacturing 2013 · 2013-12-20 · to a may 14 reuters report. just over a...

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