Financial Justification for QbD and Cost of Regulation Compliance

QbD (Quality by Design a.k.a. having a robust and repeatable process which produces quality product without rework or re-testing) is financially important for the pharmaceutical industry and highly beneficial for the consumers; as it will ensure quality all the time, potentially alleviate shortages and lower costs. In order for QbD to become part of pharma landscape “C” and “E” levels of the companies need to have a very clear understanding of cost of regulatory compliance and financial benefits of QbD. Even with the understanding, timely implementation will need considerable cajoling within each company. I am not being opportunistic or pessimistic but being realistic.

I have discussed some of the ways to drive to QbD in my earlier articles ^(1,2,3). I have deliberately not been explicit about the methods because I want the companies to find their own justifications. Pride of ownership is an excellent driver. I have, however, eluded on “how to” methods and ways. In this article I have further expanded on my perspective and source of QbD justification funding.

Unless QbD related costs are financially justified, especially for the existing products, not much will change. One source of funding is to pass the costs through drug sale price increase. That might be very difficult. The other source of funding can be the savings achieved from lower compliance cost expenditures once the QbD processes are in place. I expect that once the QbD based processes are in place and companies have rationalized their manufacturing practices and strategies, they will have significant savings which will offset their QbD effort. Regulatory bodies and the regulators at the companies might not agree with me about lowering compliance costs but besides yield improvements this is an area in the manufacturing hemisphere where I believe significant cost saving opportunities exist. There are other cost saving areas and each company has to define and identify them.

Companies have to think QbD for the new products from the start. If it happens, it will be a win-win for the companies and patients.

Basic premise of regulations is that we have to be able to track everything we do in the manufacture of drugs and the processes have to be reproducible and repeatable. Pharmaceutical industry should have taken the lead to track, control and monitor their processes. Since self-policing did not happen on a dependable basis, regulations had to be established to ensure product consistency and quality. With the establishment of regulations companies have focused on how to satisfy the regulatory requirements and in turn have lagged and are stifled on manufacturing technology innovation. Since the associated regulatory and compliance costs are passed on to the customers, need to have the best and sustainable manufacturing technology has not been a primary concern.

Since pharmaceutical products are for human consumption, they have to have the highest quality. However, the producers have not been proactive in exceeding quality or regulatory standards. To achieve quality for the active pharmaceutical ingredients and formulated drugs they have relied on QbA (repeated analysis) methodologies. This practice has delivered quality product but it is an expensive way to comply. Even with such effort poor quality products have ended up in the market, had notable recalls and product shortages are an ongoing saga.

Due to lack of significant movement toward QbD based processes, regulatory bodies are establishing additional regulations. These regulations will force the industry to have robust processes that are optimum and sustainable. Industry will blame regulations but will have to comply, increasing drug costs. Had the industry seen value in QbD it would have seen touting the benefits in print.

Industry has spent money on “how to comply” rather than how to innovate and have processes that will exceed the regulatory guidelines. The current regulatory guidelines are minimal at best and the industry should not have any trouble complying or exceeding but has had on going issues as discussed above.

In order to offset QbD associated costs, total “compliance costs” incurred at a company site or associated with every drug have to be completely understood. It is my conjecture that majority of the “C” and “E” levels do not know their actual compliance costs including costs associated with every quality related mishap. They are probably buried in the accounting maze and different department budgets.

For QbD to happen and if it happens, it is very possible that eventually it could result in some thinning of the workforce. The very thought of such a scenario in the current environment is not an exciting perspective. Could the work force reduction possibility be a QbD deterrent? I do not know the answer. I believe that QbD implementation will presents opportunities at the pharmaceutical companies and should create jobs at universities and companies who create methods and products to advance manufacturing technologies. 

I believe that going the QbD path could also reduce the workload of the regulatory bodies and actually allow more to be done. Approval process could be shortened. Penalties for poor product quality and non-compliance have to be stiffer than what they are today.

Strategic manufacturing, technology innovation, higher profits and shortened time to market are the QbD drivers. Industry should have been there fifty plus years ago. The current blockbuster business model absorbed all of the manufacturing deficiencies. Shareholders got accustomed to the fast paced introduction of new drugs and profits. With the drying product pipeline, companies are looking at different methods to shore up their profits. Higher profits through better technologies and lowering compliance costs could be one additional and simpler way.

Biotech processes have to be carefully reviewed to ensure that they do not fall into the existing manufacturing technology mold that has been around for the small molecule drugs. What I have read so far does not seem very innovative. We have to have processes that produce quality products by design rather than analysis.

Is it time to relinquish the current practices?

Are the recent increasing recalls, 483 citations and plant shutdowns due to lack of industry’s proactive stance to produce quality products or their stance to barely meet regulatory guidelines? These incidences suggest that the industry is having a difficult time meeting the minimum established guidelines to manage their manufacturing practices. This clearly begs a question. Does the industry fully understand their raw materials, equipment and manufacturing practices or have they put a square plug in a round hole with the hope that all will be OK at the end if they monitor every step of the manufacturing   process? If all the above is true then the pharmaceuticals are the prime candidates for creative destruction ⁽⁴⁾ and/or disruptive innovation ⁽⁵⁾ or their combination.

As long as humans will live they will need drugs. Costs related to drug approval will not go away. Costs related to regulations outlined in 21 CFR 210& 211 and others that control and track manufacturing are here to stay. Pharmaceutical industry has to figure out how to innovate, manage and control these costs while complying and/or exceeding what is expected. Pharma might have to move from the “blockbuster model and “me-too model” to some other model ⁽³⁾. Strategic bets are needed ⁽⁶⁾. 

Manufacturing processes that are based on fundamentals of chemistry, chemical engineering and sound economic principles do deliver quality products. They could fit the QbD definition. Processes that are inefficient require repeated quality analysis and their products cost more. To lower compliance costs companies have to have complete command and control of their manufacturing practices. This can only happen if they understand physical and chemical properties of the chemicals they use, their nuances and implication of any raw material changes. In addition, they have to be able to exploit them to create economic and sustainable processes. Understanding and exploitation starts as soon as the process development begins in the laboratory and stays through the life of the product.

Funding for QbD

If regulations become mandatory companies will need funding to move their existing processes to QbD mode. There are two sources for such funding.

1.     Pass the costs to the patients

2.     Pay for the costs through cost reductions

The first alternative is not going to work in today’s increasing government cost controls, declining/drying new product pipeline and the customers asking for lower prices. The other alternative is to offset some of the current expenses. This can be achieved by having processes that are efficient (improved yield, sustainable and better asset utilization) and do not require current levels of handholding. Processes will have to exceed current regulatory guidelines at lower cost.

Record keeping is not going to go away. With that in mind, manufacturing processes, strategies and technologies need a total revamp. Industry has to take the lead rather than someone outside the organization i.e. a regulatory body telling them how to walk. Companies have to sprint the course and win the race regulatory bodies are asking to walk. It will reduce quality issues, recalls, shortages and many of the 483 and other citations ⁽⁷⁾ if we do prepare for the race correctly. QbD also will improve cash flow and un-necessary and unproductive capital investment.   

Since I have not seen any published cost of compliance monetary numbers, I am presenting my perspective as to where the savings can come from. They are based on certain assumptions. Companies can plug in their own numbers to see what is possible and doable. Global pharmaceutical sales are expected to be around $1.1 trillion ⁽⁸⁾ in 2014. Table 1 illustrates saving based on my assumption.

Global pharmaceutical revenue, $ billion (Year 2012)	900
Cost of Sales @ 30% (avg. an assumption (9)) of revenue, $ billion	270
R & D @ 20% (avg. an assumption (9)) of revenue, $ billion	180
Sum of Cost of Sales and R&D, $ billion	450
Assumption: About 30% (assumption) of the Cost of Sales and R&D money are Cost of Compliance. Total cost of compliance, $ billion	150

                                                            Table 1

I have used 30% sum of cost of sales and R&D as cost of compliance. I believe this to be a conservative number. It can include costs related to current methods of achieving quality, paper work, quarantine costs, cost of inventory, cost of recalls, infrastructure costs to quarantine materials and litigation, recall, rework and disposal costs. If I have missed any other item, the costs will change accordingly. If any one has a better number, I would appreciate knowing about it.

If through better process technologies i.e. improved yield, reduced in-process quality checks (elimination/reduction of QbA), sustainable processes, plant consolidations (economies of scale: batch vs. continuous), improved asset utilization (e.g. moving from 30-40% to 60-75% asset utilization) and better record keeping companies can save 40 to 50% of the “cost of compliance” as speculated in Table 1, we could be saving between $60.00 to $75.00 billion per year.

As I stated earlier, if my assumption can be on the lower side and the savings dollars could be higher. If anyone has a better number for cost of compliance, it would be wonderful to share. These savings relative to the total pharmaceutical sales revenue might not seem much but still raise a challenge to all of us “Has the time to excel and exceed quality using innovative manufacturing technologies come in Pharmaceuticals?” I believe so. Magnitude of savings outlined above can create many new millionaires. It might even create few new billionaires.

It is my firm belief that if we incorporate fundamentals of chemistry and chemical engineering in our processes to manufacture products from the day we start developing new manufacturing processes our products will meet quality standards the first time and every dollar that is not spent on compliance will drop to the profit before tax line. Pharmaceutical industry has to change its modus operandi. There are no alternates left.

Girish Malhotra, PE

EPCOT International

1.   Malhotra, Girish: Who or What killed QbD? And is there hope for resuscitation? Pharmaceutical Processing, May 2011, pg 10-14

2.   Malhotra, Girish: A Guide to QbD for APIs, Pharmaceutical Processing, Volume 27, No. 4 May 2012, pg 46-49


3.   Malhotra, Girish: Focus on Physical Properties To Improve Processes: Chemical Engineering, Vol. 119 No. 4 April 2012, pgs. 63-66

4.   Schumpeter, Joseph A. Capitalism, Socialism and Democracy, Chapter VII: The Process of Creative Destruction 3rd Edition 1950, Harper Torchbooks, New York, 1962

5.   Christensen, Clayton M., The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business, Harvard Business Press Books, Jun 11, 1997. 

6.   Charan, Ram and Sisk, Michael, Strategic Bets, Strategy+business May 24, 2011

7.   FDA Citations FY 2010 Inspections, Compliance, Enforcement, and Criminal Investigations Accessed May 15, 2012

8.   Global Pharma Sales Steadily Growing Despite Rise of Generics Accessed May 15, 2012

9.   Based on Annual reports of different Pharmaceutical companies.

Can the Combination of Creative Destruction and “Steve Jobs’ Traits” Lead to Pharma QbD Spring?

The answer to the question of whether there could be a revolution to bring about Quality by Design (QbD) in pharmaceutical manufacturing, unequivocally, is yes. But we need some outsiders who can conspire with the insiders to be the flag bearers within pharma companies. Outsiders can be the counsels/co-conspirators to the insiders for the coup-d’état. Chemists and chemical engineers associated within the industry need to review what is happening in their process development, commercialization and manufacturing practices. They need to pick one process for their revolution. Success there would spread like wild fire within the company and in the industry. We need small successes to create the full blown ‘spring.’

Insiders need some tools. Some of these have been discussed in my earlier blogs but I wanted to discuss some specifics that might assist their creativity and imagination.

Recently, I expressed my views how to improve and innovate processes by exploiting physical and chemical properties (Chemical Engineering, Vol. 119, No 4, April 2012 pgs. 63-66) of the raw materials that produce products that are use to produce different products.

Besides exploiting [chemical] properties there are other avenues that are available to us to improve technology and manufacturing methods. However, due to tradition and what we learn during our education and professional life, circumstances and company culture, either we overlook or do not consider situations that could simplify technology and manufacturing practices. No one is at fault as most of us are tradition bound and have not experienced creative destruction or exploited our “Steve Jobs” traits. I have seen many different interpretations of Steve Jobs traits. However, I liked the ’10 Traits of Steve Jobs That Can Make you a Better Street Photographer’ most as they encourage simplicity, imagination and creativity. Cases of creative destruction are well documented as business cases in literature.

Steve Jobs was a creative destructionist. He was able to accomplish what he wanted. Many pundits will question his methods but he changed the playing field for years to come. Multiple revolutions and most of us love Apple products. It is ironic that he stumbled at first, was ousted from the company he created - a humiliating experience - but he did not lose his vision for simplicity and innovation.

Going back to how, what and why innovation is possible in pharmaceuticals, chemicals and other related industries requires developers, engineers and scientists to be continuously thinking out of the box while living in the box. The tools and methods are available to us. They are around and in front of us. We are either intimidated or are afraid to say why we are doing what we are doing. Questioning what delivers profits can be considered counterproductive. However, better understanding of what we do catalyzes improvements.

I believe that challenging the status quo and “what if” exercise can be an important place to start simplification and innovation of every process. Following are two illustrations related to challenging the status quo of chemical reactions i.e. Active pharmaceutical ingredient (API) manufacturing. They can be extended to any formulation. This discussion is no reflection or criticism of any company or its people, practices or processes but examples of alternate possibilities that are simple, safe and environmentally friendly.

Chemical reactions

1. Acetylation of p-Aminophenol (PAP) to acetaminophen:

This is an age-old reaction where acetic anhydride is reacted with PAP to produce the product. However, since acetic anhydride has become a controlled substance, thanks to the producers of methamphetamine, regulations control its usage. The process as executed needs neutralization of the excess materials and by products. However, there is an alternate method staring at us that can produce the product at higher yield with lower effluent. Due to intellectual property considerations I am not able to discuss the alternate process. Alternate chemistry is part of the textbooks but we have not practiced or tested it because it is not mentioned in our textbooks or taught in our classes. We have missed to see what is in front of us.

2. Sodium salt of ring closed of o-phenol amines:

In these reactions traditional chemistry involves diazotization of the corresponding amine with sodium nitrite and an acid. After the ring closure, the product is washed, distilled and added so that the appropriate concentration of sodium salt solution is produced. All this is very traditional. NOx emissions and effluent have to be managed in the existing process. Process yield has room for improvement.

In an alternate process, appropriate stoichiometric amounts of amine are reacted under pressure with sodium nitrite at elevated temperature to produce the corresponding sodium triazole solution. Yield is much higher than the diazo route process mentioned earlier. It is a cleaner process with minimal emissions and effluent. This chemistry is not discussed in the textbooks, at least I have not seen it, but it is applied commercially.

My point of illustrating the above examples is to highlight that methods not mentioned in the textbooks or literature should be considered. They can create simple, sustainable and cost effective processes. Literature and patents are full of many such ideas that give us clues to improve processes.

Cost sheets:

The development of product cost sheets is an excellent tool that can lead to process simplification and innovation. Every cost sheet has two segments; raw material cost; and conversion cost.

A ‘what if’ exercise with alternate yield and stoichiometry can show us the impact of process technology improvement. They coax us to imagine, create and eventually assist us in developing better technologies and sustainable processes.

Raw material prices have significant influence on the total product cost i.e. profitability. Most of the time people think that we do not have much influence on the suggested price from suppliers. I would beg to differ. If we understand how the needed raw materials are produced, we can estimate supplier’s costs and profit margins i.e. our purchase price. This might sound like a very cumbersome exercise and it can be a challenge, but since our profitability needs to be maximized, such an exercise is worth the effort.

Conversion costs consist of various costs segments such as labor (hourly and salaried), utilities, maintenance, depreciation and miscellaneous items. How we operate the plant can influence the contribution of each element and their influence on a product’s cost.

Over the years while doing ‘what if’ exercises I have developed some guidelines that are useful to me. They are my rules that have helped me to develop a starting point for process simplification and improvements. These can be altered based on the chemistry and complexity of the process.

The process yield of any process step should not fall below 66%. If the yield is below this benchmark, the chemistry and its execution need help. Since there can be multiple steps for the whole process, the overall yield can drop significantly. A five-step process each having 66% yield will have an overall yield of about 12.5% (0.66 x 0.66 x 0.66 x 0.66 x 0.66=0.125), suggesting significant opportunities. My goal is to maximize the yield for the whole process to above 85%. This might look unattainable but unless we strive to get there we will not achieve our objectives.

Another rule that I have developed is that ratio of raw material cost - to - conversion cost ratio should be around 1.5 - to - 2.0. Depending on the complexity of the process there can be some variation. As we edge closer to one or less, the process needs significant work to improve its processing methods and execution time. We are also encouraging and creating an opportunity for the competition and we have done that in pharmaceuticals.

Consulting companies such as McKinsey are using cost sheet exercises to assist clients in improving their profitability.

My conjecture is that with the pharmaceutical companies losing billions of dollars/year due to patent expiries, poor product quality recalls, and increasing citations, the time for a ‘Pharma QbD Spring’ has come. As I stated earlier, we need to be cognitive and selective about which products we need to consider and innovate. We need small successes that need to be publicized and they will have a domino effect on the industry and our spring will then have arrived.

Girish Malhotra, PE

President

EPCOT International

Neglected Tropical Disease (Infectious Diseases) Drugs: What are they telling us about Innovations!

During my career I have been involved in process simplification and cost reduction of different chemistries, chemicals and processes. When I am discussing any process, my mind always races to understand its chemistry, manufacturing process and how the cost lowered and the profit improved. This blog is a follow up of an earlier blog (December 2011 Drugs for Infectious Diseases, Funding and Opportunity).

I have used three NTD (Neglected Tropical Diseases)/Infectious Disease drugs [Tenofovir (Antiretroviral), Praziquantel (schistosomiasis) and Isoniazid (tuberculosis)] as an example to see what cost reduction opportunities exist. Observations of the analysis answer a question many of us have. “Can the new technologies be easily introduced for the existing products.?”

My intent is not to criticize practices of any profit making organizations, charitable foundations or governments involved in caring and prevention of diseases. Along with benefits of technology innovation (lower cost, higher profit, better quality) companies will have to overcome regulatory re-approval hurdles. Lower costs can extend the reach of donations to additional people or time. Donor fatigue could be lowered. I am sure all of us want to help the needy.

Methodology used to calculate price of API.

May 2011 The Wall Street Journal ⁽²⁾ discussed lower cost of Tenofovir. Its chemistry intrigued me. The article also suggested how the funding could run short for the care of the needy. I have used the current selling price of the drugs to reverse calculate the selling price of the active pharmaceutical ingredients. The numbers are approximate. Chemistries in the public domain are used to make my observations. These chemistries or manufacturing methods are not optimum, thus suggest opportunities. If someone disagrees then I would like to discuss “the why not”. However, I see regulatory hurdles.

Tenofovir:

Tenofovir is an antiretroviral used for AIDS. Price of Tenofovir (May 2011) from ⁽¹⁾.  

           

Supplier
Cipla
Price, $/yr.	83.00
Tablet, mg	300
Price per tablet per day	$0.227
Price, $/milligram/day	=83/(365*300) = 0.0007579
Allowing for formulation efficiency, profit margins at API level and dosage level, it is assumed that API part of the tablet cost is about 40% of the tablet price.
API manufacturing cost $/mg	=0.4*0.0007579	=0.0003031
API selling price, $/kg		303.10

Table 1

API selling price of $303.10 per kilo (Table 1) might not sound high or outrageous to pharmaceutical company personnel but to a family (in the developing country) living on $2.00-5.00 per day, 23 cents per day for a tablet can be a considerable burden. It can be a matter of food for the family vs. medicine for an individual ⁽³⁾.

The Wall Street Journal article and literature suggest that the yield of the Tenofovir process has been improved from 13 to 24%. On percentage basis this is a significant improvement. A review of the chemistry and the process suggests that the yield can be improved further and the solvent consumption reduced i.e. the process could be made more productive and sustainable. If the yield can be improved from 24% to a much higher number e.g. 48%, the dollar savings for the governments and charitable foundations would be in millions of dollars. Yield of 48% might be a wonderful improvement but why not 66 or 75% would be my question.

If we can lower the cost of the API through better manufacturing technologies and economies of scale to $200.00 per kilo (which I think is still high) down from $303.00 per kilo, the cost of each tablet would drop to about 15 cents per day. This would be enormous relief for the needy and huge savings for the governments and non-profit foundations.

Table 2 illustrates API need at different population levels. If only 50% of the infected population was taking Tenofovir and the cost could be lowered by $100.00 per kilo (many will say it cannot be done and I would like say: let us figure out how it can be done) the savings would be about $192 million dollars per year. 

Population with AIDS (4)	35,000,000
Daily need	One tablet @ 300 milligram
Percentage population using Tenofovir	Population served	API Production Kilo/yr.	Number of companies for Tenofovir = 8, Kilo/plant
80%	28,000,000	=300*365*28,000,000=3,066,000	383,250
50%	17,500,000	=300*365*17,500,000=1,916,250	240,000

Table 2

Praziquantel (PQZ):

Praziquantel is the preferred drug for Schistosomiasis. Analysis similar to Tenofovir suggests the opportunities but there are hurdles also. I have used price of 10 cents ⁽⁵⁾ per 600 mg for a tablet when purchased in bulk by WHO or similar organizations. If the API cost is 40% of the selling price of the tablet, the API cost of about $67.00 per kg. If we use 400 million tables ⁽⁶⁾ per year as the need, the total need for humans would be  about 240,000 kilos per year. Praziquantel is also used for animals but their dosage is low compared to humans. I estimate PQZ demand of about 300,000 – 400,000 kilos per year to cover most of the needs.

PQZ is being sold at about 20 cents a tablet in Kenya. Compared to the bulk purchase this is a significant markup to cover the cost of distribution and related profits.

Review of the chemistry suggests that the yield and the manufacturing process can be improved. Site consolidation and manufacturing innovations can also lower the API price by 20-25%. Savings of about $5.00 to 7.00 million per year could be expected. A single plant can produce the global API need and be very profitable.

Isoniazid:

Isoniazid is one of the drugs used for tuberculosis. Since patients can develop side effects, I have assumed only one third of the global population can use the drug ⁽⁷⁾. This pegs to about 3 million patients who will take 200 mg (adult/child average) dose for 270 days. We will require about 165,000 kilos of the API to serve the needs. Using API being 40% of the selling price of the API, the cost of API ⁽³⁾ would be about $40.00 per kilo. Total API revenue would be about $6.6 million per year.  

Chemistry is simple and a single plant can produce the product using a continuous process. Such a process and plant can lower the tablet cost. Since the total API revenue is not stellar, I have doubts if any one will make any effort to have an innovative process. Even if there were 30% savings and since the drug is being produced by many companies no one is going to make a change in their process as re-approval costs are an unknown and could exceed the total savings.

Conclusions:

On a consolidated site basis there are savings for PQZ and Isoniazid. However, no one would be interested in consolidation. Cost reduction at each site due to technology improvement may not be sufficient to overcome R&D, process modification and regulatory re-approval costs. Improvements and changes at each producing site will have to be evaluated on a case by case basis.

Incorporation of better technology for Tenofovir is definitely a possibility and should be explored. It is up to individual companies to decide their course. It might be necessary for the foundations to get involved in technology innovation.

Above observations can be extended to every existing API. For any new API, it is best to incorporate every possible improvement in the process before any paper work is filed for regulatory approval, has to be the motto. I expect that same will be true for formulations. All this suggests that move from Quality by Analysis "QbA" to Quality by Design "QbD" is going to be a challenge especially for the existing products. 

                                                                                                  

1. Tenofovir Disoproxil Fumarate http://utw.msfaccess.org/drugs/, accessed Feb 23, 2012
2. Researchers Manipulate Drug's Chemistry in Bid to Lower Treatment Cost, The Wall Street Journal, May 13, 2011
3. Malhotra, Girish Drug Prices: Food vs. Medicine, A Difficult choice for Some or Many June 22, 2011
4. www.avert.org/worldstats.html accessed February 23, 2012
5. Private communication with Charles H. King MD, Professor of International Health Center for Global Health and Diseases, Case Western Reserve University, February 26, 2012
6. Hotez, P etal, Africa is desperate for Praziquantel, The Lancet, Vol. 376, August 14, 2010 pg 496-498
7. WHO Tuberculosis Facts http://www.who.int/tb/publications/2011/factsheet_tb_2011.pdf accessed Feb 28, 2012

Drugs for Infectious Diseases, Funding and Opportunity

Spread of infectious diseases such as HIV/AIDS, malaria, schistosomiasis, and tuberculosis are cause of a global concern. Pharmaceutical companies have and continue to develop and market drugs that are effective for their cure. Patients in the developed countries have been able to use their respective healthcare systems for their needs. However, similar healthcare systems are not available in the developing and underdeveloped countries. The number of patients in these countries is very large. Patients are not able to afford these drugs (1). Governments in these countries do not have the funding to educate and distribute the necessary medicines to cure and control their spread.

Many governments [notably US], NGOs, organizations and foundations [prominent among them are Clinton Foundation and Bill and Malinda Gates Foundation] through financial contributions are making significant effort for the cure and control of these diseases. This is being done through education and distribution of drugs.

Prices of the new medicines are set at a level and specifically designed for patients in the developed countries that have healthcare programs. Many patients in the developing and economically stressed countries cannot afford these drugs. Governments and companies in India, China and other countries are using compulsory/voluntary licensing along with emergency declaration to manufacture some of these drugs to fulfill the needs. The prices of the drugs in these countries are significantly lower compared to the prices in the developed countries but still can be high for these economies.

Every effort is being made to make a dent in the spread of these diseases. President Clinton (2) recently suggested use of emergency criterion even to distribute these drugs in the developed countries. With the current global financial crunch, funding is strained but the needs persist. There could be a financial shortfall also.

Mileage of the existing funds can be extended is by improving the process yields and manufacturing technologies of the active pharmaceutical ingredients and their formulations. Yields of the existing chemistries can be improved through their review and review of their manufacturing practices. Chemical process yield of many active pharmaceutical ingredients is less than 66%. There are many products in this category. Low yields are cost improvement opportunities.

Efforts to improve Tenofovir (part of the AIDS drug cocktail) conversion yield (3) have had good results. Its yield was improved from 13% to 24%. This has resulted in lowering the yearly cost to less than $90.00 per year. However, there are significant opportunities if the yield can be doubled to 48% or higher. Better execution of the process chemistries can also reduce the costs. Savings will improve the mileage of the contributed monies.

Based on published information yearly need for Praziquantel (4) (for schistosomiasis) is around 500,000 pounds per year and about one million pounds for Tenofovir (5) (for AIDS). Multiple plants are producing these products. Since the cumulative quantities are being produced at many sites, value of economies of scale and better technology are diluted. A consolidation opportunity exists.

Consolidation will force best of the chemistries to be used at few plants that will have best of the manufacturing technologies. Production costs will come down. Profits for the companies that will be producing them can be better than they are today.

Improved manufacturing methods can enhance productivity and reduce process cycle time i.e. improve asset utilization. This can be achieved at no or minimal cost. Improved productivity can result in better manufacturing technologies through economies of scale. Process sustainability can also be improved. All or part of the cost reductions can be passed on and funding monies will extend their mileage. There could be left over philanthropic dollars that could be used for other worthy causes.

Thought of external process and technology review and continuous process improvements does not prevail in pharmaceuticals manufacturing. Every inefficiency cost is passed on. If one or two companies break out of the pack and they will change the landscape for the whole pharmaceutical industry. Supply chain issues could be addressed and resolved. That would be a win-win for all.


Girish Malhotra, PE
EPCOT International

1)Drug Prices: Food vs. Medicine- A Difficult Choice for Some
2)http://www.washingtonpost.com/national/health-science/obama-proposes-helping-more-people-get-access-to-aids-drugs/2011/12/01/gIQAxa5qHO_story.html
2)Ripin etal, Process Improvements for the Manufacture of Tenofovir Disoproxil Fumarate at Commercial Scale, Organic Process Research & Development, 2010, 1194-1201
3)WHO publication WHO/SCHIST0/89.102 Rev. l
4)Francoise Renaud-Théry and others, Utilization Patterns and Projected Demand of Antiretroviral Drugs in Low- and Middle-Income Countries AIDS Research and Treatment, Volume 2011, Article ID 749041, 8 pages doi:10.1155/2011/749041

Does the Pharmaceutical Industry Need A Steve Jobs?

Little over a month ago Steve Jobs passed away and tributes that have been forthcoming are breathtaking. This is in spite of his early career shortcomings. Besides creating amazing products he was a “simplicity” genius.

He took an industry that was looked complex to all of us in a different direction. In sixties and seventies computers were complex monsters humming in air-conditioned basements. He just simplified them. There were many contributors who participated in his simplification process, but his vision changed how the world interacts and socializes. He mesmerized us with simplicity of complex products. He created a progressive revolution and we all waited for the next storm when he came on stage. We anticipated the next best thing. He always had one last thing, we waited for it and he delivered. 

Apple products are simple and intuitively operated without a written manual. Yes there are people who do not like what he did but its very likely they own some of his products. Complexity to simplicity became Steve Jobs’ hallmark.

We need a similar simplicity revolution or “creative destruction” in pharmaceuticals. Actually pharmaceuticals need a double revolution that have to be carried out in parallel, first in API manufacturing and second in formulation of a drug dose.

Is a pharmaceutical manufacturing technology revolution possible?

Yes it is and it has to start in the laboratory where we react chemicals to produce the API (Active Pharmaceutical Ingredient) and mix it with inert excipients to create a dose. Many will say we have been successfully doing this for over 50 years and the processes work. Yes the processes do work but we go through many hoops, iterations and gyrations to produce quality product. We recognize these deviations and anomalies and explain them using different acronyms. We are enamored with them and discuss them at every opportunity. We overlook how these can be eliminated and what is possible. There are many proposals on how to get out of the rut but there is more talk than action. If there was action we would see results and instead of discussing various acronyms will be discussing the results.

If we step back, look and listen to the chemicals, we will realize that they individually and collectively are telling us how to create a simple process. We are ignoring their shouting and hand waving as we are influenced by what our text books tell us and what we are practicing in the laboratories. All of this is being manifested by stoichiometry and yield of the process.

Text books teach us general principles. We have to combine what is in the text books and what the chemicals are telling us along with our own creativity to develop a process that is simple and creates a product that is exactly same irrespective of who and where on the planet it is produced.

Our inability to react to what the chemicals are telling us has led to processes that are inefficient, unsustainable and complex. Since our customers have no choice for cheaper alternates we have passed our costs to them. Our comfort with our profits does not give us any incentive to simplify our processes.

I suspect and it is inevitable before long some “pharmaceutical nerd” will come along and challenge the pharmaceutical manufacturing technology status quo and will create pharma-iPod or iPad. It could be by someone from any of the developing countries who are on tail of the developed countries. It would not be surprising if it happens sooner rather than later.

Steve Jobs would say to us pharmaceuticalites “Stay Hungry. Stay Foolish".

Girish Malhotra, PE

EPCOT International 

Drug shortages: Causes and Cures

Lately we have been reading and hearing shortages of many drugs. As a matter of fact the US FDA on a routine basis publishes the list of drugs that are in short supply. Families and doctors of patients who need these drugs have a cause of concern. Hospitals, where some of  these drugs are needed, have become creative to determine what possible approved substitutes could be used. This can be a challenge. It would be worth reviewing the cause and cure of the shortages.

Before we begin to discuss the reasons for the shortages, I would like to clarify one point. We cannot and do not have any reason to blame any of the global regulatory bodies for these shortage. Regulations are minimal and might be a challenge who do not follow them and/or do not have equipment that is suited for the process. If the companies cannot follow these minimal standards then their being in the business should be a cause of concern.

Since drugs are manufactured, the shortages can be created by any or combination of the following. There can be other reasons also but I believe the following generally are the most important.

1. Raw materials
2. Process equipment
3. Product quality
4. Manpower

The above individually and or collectively can and will cause product shortages in any business where products are manufactured and/or are assembled. The reasons outlined above are not new. Every business and engineering curriculum, where manufacturing processes are discussed, review the effect and cause of the above four.

Since pharmaceuticals are highly regulated to protect patients, regulatory bodied particularly the US FDA proposed good manufacturing practices "cGMP". They have become the global benchmark. Some may consider them to be difficult to incorporate in their manufacturing routine but they are minimalist. Science and engineering curriculum teach us methods that if applied properly will exceed the "cGMP" guidelines and will cost less than any one can imagine. We just have to do the right things in the first pass. We all know that second or additional passes to achieve quality will cost additional money and there are no assurances that each subsequent pass will produce quality product.

Some of the steps to avoid shortages are well known. Occasional review helps.

Raw materials:

To ensure raw material supply, developers have to qualify more than one supplier who can supply materials on a timely and as needed basis. In addition, the process developers have to make sure that the materials from each alternate supplier can be converted to quality product. Such an exercise can minimize availability and scheduling issues.

Process Equipment:

If the equipment used to produce a product is not designed for the process, product quality issues will come up.

Another cause of delays can be equipment availability. We need to recognize that due to low dosage, API/formulated drug volume per batch per plant are generally low compared to the volume of fine/specialty chemical products. Since the API/drugs due to their toxicity cure a disease, it is necessary that the equipment be very clean to prevent cross contamination. This, due to low production volume, can result in equipment availability and scheduling challenges individually and/or collectively. All these can lead to product shortages. There are ways to eliminate these situations and requires a revamp of manufacturing and business strategies.

Product Quality:

Product quality is dependent on process robustness. However, in pharmaceutical manufacturing especially in the manufacture of API, due to low dosage resulting in significantly low volume of API per batch per plant economies of scale i.e. the best processes are not possible unless an effort is made to have designated equipment for the product. With the current methodologies and manufacturing set up engrained in our thinking the problems of shortages will persist. This can only be eliminated if we overhaul of the process development and manufacturing strategies. However, due to high profitability such a shift might not be in the offing.

Manufacturing technologies used in the pharmaceutical manufacturing are borrowed from the chemical industry. Chemical industry believes in process of continuous improvement, lean manufacturing, six-sigma and quality first through competitive innovation. Pharma has not done so and needs to do that. There is significant discussion and all seems to be focused at formulation of drugs. Many might not agree but API manufacturing, heart of every drug, is generally not considered part of the pharmaceutical manufacturing. This adds to the problem.

Manpower:

Why and how manpower enters into the quadratic shortage equation as it should not? Reason it does is due to very infrequent runs of the same product. Since many different products are produced using the same equipment, there is constant juggling of materials and methods. All this can lead to errors i.e. potential product shortages. Constant manpower training can add to manufacturing delays and lack of it can cause “off-quality” product resulting in shortages.

Companies need to consider and invent methods that will eliminate shortages. This could be higher production volume per run or better technologies so that different products can be produced in the same equipment. Re-training of manpower if needed would be more organized.

One solution can not fit every product or company. Each company has to review its situation and has to take steps to minimize shortages. They can be minimized if we want to.  

Girish Malhotra, PE

EPCOT International