Pharma firms manufacturing waste costs $50bn, report warns

By Emilie Reymond

- Last updated on GMT

Related tags Industry Fda

The US pharmaceutical industry could be wasting more than $50bn
(€39bn) per year in manufacturing costs due to inefficient
processes, a new research has warned.

The study - which claims to be largest ever conducted on the industry - analysed not only manufacturers' practices but also the US Food and Drug Administration (FDA) monitoring policies and found a number of factors that had an influence on drug makers' performances.

"We wanted to show how the way the FDA regulates and pharmaceutical manufacturers produce drugs had an impact on manufacturing costs,"​ Jackson Nickerson, professor of organisation and strategy at Washington University in St. Louis and co-author of the research, told

"We found that if we change the way both manufacturers and regulators operate, the industry could save an average of 15 per cent of manufacturing costs".

In their most recent research, Researchers at Washington University and Georgetown University collected and analysed data from 42 pharmaceutical manufacturing facilities owned by 19 manufacturers and identified five key areas of waste in the manufacturing industry that, if addressed, could lower drug costs or leave more funding for research and development.

The waste areas identified in the study are insufficient information technology (IT), over-centralised decision making, unwise outsourcing, either too large or too small a size and range of manufacturing, and the adoption of a new technology called process analytic technology.

The study also found that facilities that did not create waste in these areas generally displayed better performance.

Furthermore, the research suggests that factors including product, process, manufacturing site location, firm reputation and experience, and organisational structure and incentives of pharmaceutical manufacturing have an effect on manufacturing performance and the likelihood and type of FDA enforcement efforts.

In the previous part of the study, the researchers analysed data from the FDA and found that that regulations also have cost implications on drug manufacturers, as, for example, it was found that individual regulators were not identical in how they inspect a facility.

"Firms tend to be risk-averse in terms of manufacturing practices because of regulations,"​ he said.

The researchers said that they were now prepared to propose solutions to improve regulations so that the FDA and pharma companies start taking a risk-based approach.

"We think that by increasing yield and reducing cycle time and deviation, firms have opportunities to save on costs, but these opportunities are difficult to capture,"​ said Nickerson.

In the past, pharma regulations have looked at safety issues but haven't looked at costs and as far as drug manufacturers are concerned, the big money has always been spent on the discovery of new compounds, which can partly explain present issues, he added.

The FDA told the research team that it found the report very useful and that it would "take actions to improve the situation."

However, the research, which took several years to complete, received no funding from either the pharmaceutical industry or the FDA.

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