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Keith Symmers is vice-president of Best Practices, LLC, and can be reached at Ksymmers@best-in-class.com. For more information about mergers and acquisitions, check www.best-inclass.com/pharma.
Consider the following real-world scenario: Feb. 28-Apr. 14, 2000. Third-party auditors warn Schering-Plough (SP) of problems with product quality, including lack of quality control (QC) and high staff turnover. Dec. 20, 2000. SP's stock price reaches a high of $60 per share. Jan. 19, 2001. FDA completes an in-depth inspection of SP production facilities, identifying significant, repeated, and widespread QC violations dating to 1998. Several production lines are shut down and the Clarinex (desloratidine) launch is delayed.
Consider the following real-world scenario:
Feb. 28-Apr. 14, 2000. Third-party auditors warn Schering-Plough (SP) of problems with product quality, including lack of quality control (QC) and high staff turnover.
Dec. 20, 2000. SP's stock price reaches a high of $60 per share.
Jan. 19, 2001. FDA completes an in-depth inspection of SP production facilities, identifying significant, repeated, and widespread QC violations dating to 1998. Several production lines are shut down and the Clarinex (desloratidine) launch is delayed.
Feb. 15, 2001. SP announces FDA warnings and plans to increase quality staffing 30 percent by the end of 2001. Its stock trades at a low of $38.20 per share.
Mar. 1, 2001. Public Citizen urges FDA to consider criminal charges against SP, alleging the possibility that SP was aware of QC problems while shipping defective inhalers (59 million units were recalled in the previous 15 months).
Aug. 13, 2001. SP adds 500 people to its QC and production division to address FDA-identified deficiencies.
Dec. 24, 2001. Clarinex receives FDA approval-a delay of almost 12 months because of SP's need to resolve manufacturing and quality issues. The overlap of patents between Clarinex and Claritin (loratidine) is ultimately cut in half, significantly affecting transition plans.
May 17, 2002. SP signs a consent decree with FDA, pays a $500 million fine, and agrees to stop manufacturing 73 products and to operate under tighter scrutiny through 2005. Its stock trades at $24.75 per share.
October 2002. News of the impending precipitous drop in Claritin sales and the largely ineffective switchover to Clarinex drives SP's stock price down to $18 per share.
Nov. 13, 2002. Schering-Plough CEO announces plan to retire.
SP's troubles serve as a cautionary tale for the industry. A quality-control department under fire can do immense damage to a company's reputation and shareholder value-and may even affect patient health if substandard products reach the market, new products are delayed, or products become unavailable. Such a department, if understaffed or poorly directed, can bring an entire pharma company to its knees.
Although manufacturing design and production procedures have a sizable bearing on consistent product quality, the single most important factor in maintaining consistentency is the staff. Many companies have faced FDA scrutiny for quality issues in recent years, but others consistently maintain exceptional reputations with few or no major observations or "483" warning letters. Understanding what those companies are doing right is critical to staying on the leading edge of product quality and avoiding the pitfalls of sub-par performance.
Although staffing decisions vary from company to company based on product complexity and diversity, executives can learn a great deal by studying QC department staffing parameters and tactics used by other top companies. Through in-depth interviews with executives at eight of the top ten pharma companies and leading medical device manufacturers, Best Practices uncovered cutting-edge strategies of successful quality departments. They include:
Current good manufacturing practices (GMPs) and FDA-approved processes are constantly changing, often resulting in regulations that lose clarity as they become more complex. Executives must carefully evaluate the company's mechanisms for staying ahead of regulatory changes, continuously review QC vulnerabilities compared with known or plausible deficiencies, and develop action plans to root out deviations. Therefore, the first step in properly staffing a QC organization involves arming employees with the knowledge they need to anticipate changes in the dynamic landscape, then reallocate roles and responsibilities to address the elements that have the greatest potential to compromise product quality.
Such systems must incorporate both internal and external perspectives to ensure maximum compliance. Internally, most companies rely on intranet postings and annual corporate quality meetings to disseminate best practices. A robust system to share best practices between manufacturing sites ensures replication of the most efficient and effective QC tactics and reduces variability-a key source of quality deficiencies.
Savvy companies also strive to identify and disseminate information about weak areas so that sites can check their own operations for similar deficiencies. Such companies have a culture that encourages employees to quickly identify and resolve QC problems across the board-rather than bury them to avoid putting a site "on report."
It's also important to extend the QC division's scope beyond a company's own facilities. Successful QC functionaries collect information about manufacturing problems at other pharma companies. Key sources for such data are FDA releases (including inspection results, warning letters, or consent decrees),
F-D-C Reports publications (especially the Gold Sheet, which details QC reports for the pharma, biotech, and device industries), conference proceedings, and trade group interactions. (See "Suit the Action to the Information.")
The corporate staff can then consolidate information into e-mails and send them out once or twice a day to all QC staff members throughout the company. The quality-control leaders at each site should analyze their operations to ensure that weaknesses found in other companies' plants do not exist within their own facilities. Sites can then correct any vulnerabilities identified within a reasonable period-say, 30 days-or include the proposed corrective measures in an action plan. Completing the circle, the corporate compliance group, in turn, should oversee the execution of all management action plans, ensuring that all sites systematically eliminate potential problems.
Most high-performing companies tend to have a sizable contingent of QC personnel at corporate headquarters. That group consolidates many of the audit and oversight tasks, ensures consistency of practices from location to location, disseminates information gathered from external sources, and manages continuous improvement. Studies show that companies that maintain a top-notch
QC system year after year generally have most of their quality-control personnel at headquarters. (See "How They Stack Up," page 62.)
Highly profitable companies with good quality-control reputations generally have one QC person for every four manufacturing personnel. Although staffing is a predominant cost driver of quality control, companies with only one QC person for every six or more manufacturing personnel must seriously evaluate their operation to ensure that they cover all pertinent QC roles and responsibilities.
Another indicator of appropriate quality-control staffing is the ratio between the number of products produced at a facility and the number of QC personnel assigned there. Research shows that companies with good quality reputations generally produce fewer than two products (based on formulations) per quality department full-time equivalent (FTE) employees. One top company reported 500 site quality FTEs and a production of 300 different product formulations at its facilities, yielding an effective ratio of 1.7: 1. Again, staffing levels can be highly dependent on product complexity (large versus small molecule) and diversity (wide versus narrow range of products). To properly evaluate staffing levels, companies should make a detailed comparison of similarly tasked facilities or product lines.
Overcoming staff shortfalls with the right personnel is an important challenge. Ideally, people brought into the QC organization should have either considerable pharma experience or exceptional quality-control experience from other industries. The "Experience Counts" chart (below) can help companies evaluate their QC staffs, based on their professional background.
Companies with exceptional quality-control reputations have a relatively even spread of employees with experience across the four different bands. Those that have a high percentage of staff with less than five years experience must provide considerable training and oversight to overcome that situation. That might include more floor supervisors leading junior personnel, added training hours, and reduced responsibilities until such employees are further up the learning curve. A low percentage of employees with more than 20 years of experience may indicate that the company faces career path and retention issues, requiring more attention and incentives to keep experienced workers motivated.
In hiring new QC personnel, companies also must consider employees' educational backgrounds. "Background Check By Profession" (page 66) shows the considerable variety of academic disciplines represented in companies' QC divisions.
Best practice companies generally find an ideal candidate, then try to replicate that candidate in each of their new hires. That tends to create a high concentration of individuals in one or more disciplines. Several reputable companies report a high number of employees with chemistry degrees, and one has found considerable success through a significant staff of engineers.
Depth of education is another important parameter in evaluating new hires. "Background Check by Degree" (page 66) shows the wide range of educational levels among pharma companies' QC staffs. Although individuals have different needs, companies with a significant percentage of degreed employees should have a training program that builds on such education. Jobs and activities for this group typically include more creativity, flexibility, and growth potential.
Several companies take a different approach, keeping staff costs in check by employing a significant number of QC personnel (up to 33 percent) without college degrees. Such a staff should have training programs more rooted in basic science and standardized job assignments until employee experience grows and they prove their capabilities. QC managers must regularly review, update, and follow employees' development to encourage them to gain the proper skills and maximize their value to the company.
At one pharma company, the systematic use of a personal development plan program helps QC employees move in a career direction that suits their individual experiences, skills, and ambitions. Frank discussions between managers and employees help both parties plan for the future by creating succession plans for the QC function and determining the best methods for training employees. Personal development plans, prepared for each employee, should include the following:
Current assessment. Managers and employees discuss the employee's current skills and abilities.
Ultimate goal. Employees and managers work to define long-term skills goals for the employee and, if possible, targets for advancement within the company.
Development opportunities. Managers discuss the skill sets necessary for each quality control area. To visualize these, imagine a graphic matrix. Down the vertical axis are the skills necessary for employees in the quality-control function. Along the top of the horizontal axis are the six QC employee levels from entry level to senior vice-president. In the various cells of the matrix are details on what aspects of a given skill are needed at each level. Thus, a quality-control engineer's matrix would emphasize strong statistical skills, process excellence knowledge, and analytical and communication abilities. As the position level increases, technical skills become less important and the need for communication and interpersonal skills becomes greater.
Action plan. Managers and employees should discuss how the employee will develop the skills necessary for advancement. That may include internal and external courses, rotations within the current division and function, and rotations to outside divisions and functions.
That kind of extensive career planning can have a significant bearing on how well companies retain their quality-control employees. High turnover should be a red alert signaling a system that requires immediate attention. Beyond a development plan, other retention tactics include tying QC success to compensation, expanding responsibilities and accountability to motivate employees, and staying on the leading edge in QC certification and systems to create a sense of pride in the company.
Most employees respond positively to an objective compensation system that rewards them for maintaining high standards. Top companies recognize that tensions may exist between a company's desire to hold employees accountable for performance and the realization that many factors are outside of individuals' control. The companies address that challenge by aligning employee compensation with metrics and performance goals that their behavior affects directly. Therefore, it is important to balance individual and company goal achievement measurements when tying employee compensation to performance metrics.
One top company measures the individual performance of QC employees in five areas: organizational development, financial, product improvement, regulatory compliance, and new product development. At the onset, the company sets individual performance standards based on each person's job description. Individuals fall into one of four quartiles in performance, ranging from "needs development" to "superior." The supervisor reviews the employee's performance, then the overall rating translates into the merit portion of any annual salary increase. A superior rating, for instance, might translate into a 6.5 percent merit increase.
The system also integrates flexibility for changing priorities during the course of the year. "My performance and merit increase is based on my ability to meet the goals from the beginning of the year," explains an executive with the company. "That's how 90 percent of it works."
If a critical project comes along and resources need to be shifted, success on the unplanned yet key project can earn a superior rating as well. "That list of goals is not set in stone," he says. "You can still get a superior performance rating for something like that."
Another company tracks individual performance metrics complimentary to overall corporate goals, then uses the measures to determine salary increases, bonuses, and stock option distributions for QC employees. It uses these programs to determine bonuses:
All QC employees. All employees at a site are eligible for performance bonuses for obtaining site-wide targets in the areas of quality, safety, and customer service.
Manager level and above. These employees also may receive incentive awards of 10-50 percent of their salary based on a combination of individual and company performance metrics.
An example of appropriate performance measures used to assess the company's success include manufacturing cost index, compliance, talent advancement, process excellence, line item fill rates, inventory, sales, and on-time product launch.
Another retention tactic is the expansion of responsibilities and accountability to motivate employees in the QC division. One leading pharma company has built a career path for its personnel that targets the expansion of responsibilities over time. (See "Up the Quality Control Career Ladder.")
From the start, the goal is to move only seasoned professionals within the company into QC roles. The company believes that incoming employees already should have a well developed knowledge of the company's processes and products. Such employees generally have at least three years of experience and move from operations positions in the manufacturing plants to QC roles. A typical career might progress as follows:
Plant quality analyst. Employees moving into their first QC function usually spend two years as entry-level analysts at plants. In that role, they must develop a grasp of process and product vulnerabilities so they can identify potential QC concerns.
Batch record review. After two years as a plant QC analyst, employees normally move into batch record review roles. This position involves more oversight and responsibility, ensuring the overall quality and appropriate documentation of each batch produced.
Cross-functional rotations. An employee typically moves every three to five years into progressively more responsible positions. Those positions might cross several different units, including technical operations, lab management, change control, and operations. The company encourages employees to move between operations, technical operations, and QC roles so they can develop different strengths and perspectives. Good management believes that experience creates employees who can appreciate quality-control issues regardless of their function.
To help plan for future roles, employees and supervisors are expected to include career rotation goals in each employee's personal development plan. The plans also should indicate what training an employee will need to make such a career rotation feasible.
The final retention tactic mentioned-maintaining a leading-edge QC system-clearly benefits both employees and the company. Many of the newest quality-control standards and programs are being adopted from European systems, including ISO (International Organization for Standardization) and CE mark (European Community safety and quality standards program) certifications, while other companies are finding great success with Six Sigma implementation and American Society for Quality auditor certification.
As an example, a UK employee who is responsible for ensuring the suitability of drugs for market has the title of "qualified person." A QP typically has a graduate degree in chemistry, biology, or pharmacy as well as additional training for that highly responsible role. Applicants for certification in the United Kingdom must demonstrate extensive knowledge across 12 dimensions. (See "The UK Approach," page 68.)
As pharma and medical device companies strive to improve their manufacturing operations in the face of increased regulatory scrutiny, dynamic standards mandate that companies pay extraordinary attention to their QC functions. Missteps in that area can lead to manufacturing shutdowns, product launch delays, and supply disruptions. Each of those can have significant bearing on patient health, company reputation, and corporate profitability.
Pharma executives must understand and implement world-class practices and performance for QC standards. From the identification of necessary activities to the assignment of, and follow-through on, roles and responsibilities, companies can only execute superior product quality with a dedicated, well trained, and experienced QC staff. Anything short of that places them in serious jeopardy.