Business Efficiency and Regulatory Compliance

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology-11-01-2005, Volume 2005 Supplement, Issue 6

Information technology can streamline compliance and increase operational efficiency and quality.

Compliance in the pharmaceutical industry used to be virtually synonymous with compliance with the US Food and Drug Administration current good manufacturing practices (CGMPs), which date to the late 1970s. Once a manufacturer validated its processes and systems, it discouraged any changes that would require a time-consuming and expensive revalidation process. Manufacturing productivity, innovation, and product quality often fell victim to this approach.

The compliance challenge has become more complex in recent years as a result of significant changes at FDA and other federal government agencies, ranging from new electronic signature regulations to new manufacturing best practices. There also have been significant changes in the world market such as the increased international trade of drugs, increased drug counterfeiting, and the threat of terrorist acts targeting the food or drug supply, which have a highly visible impact on public health. In addition, increased industry consolidation makes compliance more challenging at huge multinational corporations, which have grown through the acquisition and mergers of companies with disparate compliance initiatives and approaches.

In addition to dealing with manufacturing compliance, pharmaceutical companies today grapple with at least three other sets of requirements, including:

  • General regulations. All companies must comply with many cross-industry regulations relating to employee health and safety, patient privacy, and financial integrity. Examples include Occupational Safety and Health Administration regulations, the protection of patient-related data under the Health Insurance Portability and Accountability Act, and Sarbanes-Oxley requirements.

  • Customer requirements. Increasingly, customers require compliance with quality assurance standards as part of their contractual agreements. For example, they may require certificates of conformance or analysis to accompany each shipment and may base future agreements on both quality performance data and on-time delivery. To remain competitive, manufacturers must efficiently manage these stringent vendor agreements as well as data-exchange requirements.

  • Internal rules. To lay the foundation for compliance with external requirements, internal rules must be built, maintained and documented. These rules include equipment safety procedures, standard operating procedures, nondisclosure rules, and procedures for product launches.

In the pharmaceutical industry, validation requirements and good manufacturing practices have fostered the status quo and thus have been one cause of the industry's manufacturing inefficiency. The rule of thumb has been, Once a system or process has been validated, don't touch it.

Increasingly pressured by competition from generics and public pressure to lower the cost of drugs, many innovator companies see the need to abandon the status quo to focus on improving productivity, efficiency, and quality. Unfortunately, they have often been constrained by the very regulatory processes put in place to protect the public.

Companies operating in the United States may soon get some regulatory relief, thanks to a shift in the way FDA plans to regulate the industry, emphasizing a quality-by-design model as opposed to its historical quality-by-testing results approach and encouraging a risk-based approach to compliance and enforcement.

Thus, pharmaceutical manufacturing is in a state of transition, as the industry evaluates long-standing practices and new technologies and FDA introduces new regulatory paradigms. Increasingly, information technology is playing an important role in helping companies streamline compliance and improve operational efficiency throughout their supply chain, manufacturing, and distribution operations.

Historical barriers to compliance

A solid regulatory program aims to ensure compliance and quality by formalizing policies and procedures, instituting administrative controls to ensure procedures are followed and creating alerts that indicate when procedures are not followed. All of these components must work together for an organization to achieve and maintain compliant operations.

Historically, compliance has been a time-consuming and expensive task for the industry—largely as a result of the sheer volume of data that must be collected, managed, and maintained, as well as the multiple and often simultaneous steps in the manufacturing process. Other factors contributing to the complexity of compliance include:

  • Underestimating the effort required. There are many models to estimate the cost of validating IT systems. The rule of thumb in the early to mid-1990s was that validation costs were ~20–30% of the projected costs of implementing an enterprise resource planning (ERP) system. By the late 1990s, however, validation efforts became more integrated with implementation, rather than being handled as a separate, sequential effort. In the last several years, risk assessment has been widely leveraged, lowering validation cost estimates to 15–20%. Regardless, validation remains a large proportion of implementation costs, and companies sometimes are tempted to skimp on validation to save money.

  • Misinterpreting the scope of the requirement. In many instances, manufacturers had given a similar level of scrutiny to all areas of risk, regardless of their potential to negatively affect quality. Because of this failure to prioritize their efforts, companies often wasted valuable resources with minimal return. In recent years, risk-based approaches to validation—as recognized by the GAMP Forum in its good automated manufacturing practices guide (GAMP 4) (1) and encouraged in the United States by FDA and worldwide by members of the Pharmaceutical Inspection Convention and the Pharmaceutical Inspection Cooperation Scheme (PIC/S)—have put the focus on doing the right things well rather than using a one-size-fits-all approach to validation (2, 3).

  • Paper-based processes. Traditional manual documentation processes are expensive, time-consuming, and often inaccurate. For example, it is difficult to circulate standard operating procedures and keep records up-to-date with paper-based systems. In addition, a given procedure may have multiple data sources, leading to confusion, inconsistency, redundancy, and increased risk.

  • Siloed-approach to compliance. Traditionally, compliance has been managed in "silos" dedicated to specific requirements. This approach leads to the duplication of efforts and often precludes analysis that would improve efficiency or quality control.

Risk-based approaches have significantly improved regulatory compliance in recent years. Increased automation of compliance controls and reducing paper systems offer additional opportunities for cost reduction and improved risk management.

The regulatory paradox

A discussion of the high cost of regulatory compliance would be incomplete without describing how an inflexible regulatory environment has negatively affected productivity and quality in manufacturing.

In spite of the industry's focus on quality, pharmaceutical manufacturing has failed to keep up with other industries in terms of efficiency and productivity, largely because of the cost and burden involved in revalidating any process changed for the purpose of improvement. The industry, as a result, is still largely focused on manual inspection for quality control. In this context, it is interesting to consider that the number of drug recalls has more than doubled in recent years (4). Although it is also true that the number of drugs on the market increased between 1998 and 2002, the reject percentage in the pharmaceutical industry ranges from 5 to 10%, compared with 0.0001% (1 ten-thousandth of a percent) in the semiconductor industry. This reject percentage costs the pharmaceutical industry approximately $4.5–9 billion per year (4).

Although research and development (R&D) is generally considered a major cost for the industry, manufacturing quietly accounts for more than twice the expense of R&D—representing, on average, 36% of a pharmaceutical company's costs (2) (see Figure 1). The true cost of manufacturing becomes even more apparent when one considers the portion of manufacturing costs attributed to non-value-added activities and waste: 80% and 50%, respectively (2).

Figure 1: Estimated breakdown of manufacturers´ spending. Contrary to popular belief, manufacturing accounts for more than twice the expense of research and development (2).

FDA's renaissance: opportunity for change

The good news for pharmaceutical companies is that they may soon enjoy regulatory flexibility that will give them the freedom to progress from the status quo into a new era of quality, productivity, and efficiency. In recent years, FDA has recognized that the industry is strangled by controls that impede manufacturing advances. FDA also has acknowledged that IT systems can improve processing efficiency while helping companies attain and maintain a compliant state. In a recent white paper, The Economist Intelligence Unit explains this change:

"The FDA discovered that pharma companies were freezing their manufacturing processes based on approved Standard Operating Procedures (SOPs) on the assumption that they could control the quality of raw materials at the front-end and catch any defects through inspection at the back-end. However, this method of controlling quality doesn't take into account the day-to-day variation in raw materials, the aging of manufacturing equipment, or the institutional knowledge of staff.

Dependency by drug companies on "quality by inspection" runs counter to decades of improvements through 'quality by design' among other manufacturers. (5)"

In recent years, FDA has also begun promoting a risk-based approach, focusing on inspecting processes with the highest potential to risk public health and sites with spotty compliance records. It is also working to ensure that risk mitigation strategies are in place and that companies with clean records are rewarded with more freedom to change processes.

Integrated IT presents a path forward

Process analytical technology (PAT) is an important part of FDA's quality-by-design focus. PAT provides a process and technical tool kit for building-in quality improvements on the factory floor. FDA defines PAT as:

"a system for designing, analyzing, and controlling manufacturing through timely measurements (i.e., during processing) of critical quality and performance attributes of raw and in-process material and processes with the goal of ensuring final product quality." (6)

To leverage PAT, a manufacturer must be able to monitor the status of ingredients and a batch as they move through various manufacturing and distribution steps. Nonetheless, internal, regulatory, and operations data are often fragmented, and companies often have separate data files in different IT systems at various sites. This siloed approach precludes a comprehensive view of the enterprise and a quality-by-design focus.

Information technology is helping manufacturers gain enterprise-wide visibility into their operations to enable more efficient compliance and improve operational efficiency, and PAT implementation. By implementing comprehensive IT solutions, pharmaceutical companies can:

  • Create a single source of truth. A key to streamlined compliance is complete confidence in the integrity of an enterprise's supply-chain, manufacturing, and distribution data. A single source of data, which replaces information silos, can significantly improve confidence in the data. By eliminating duplication and outdated information, a single data source accelerates decision-making and lowers administrative costs.

A single data source also provides a clear audit trail, which reduces risk. For example, if a bad lot of drug product is introduced to the market, a manufacturer can quickly establish where the lot was produced, which equipment was used, the source of the ingredients, and the locations to which the compound was distributed. A single source of data eliminates the need to synchronize multiple sources of redundant data and manage various technologies—which increase risk and complexity. This advantage is especially critical in regulated industries, which must review data across operations quickly and effectively in a regulatory agency audit.

  • Capture more data from in-line technology. Adopting PAT allows companies to capture and process in-line data, which can help them understand the effects of raw materials on the chemical and physical properties of drug products and then use that information to improve formulation and processing. Thus, by using PAT to collect data from every part of the supply chain and manufacturing process, companies can understand sources of product variability.

For example, a probe might capture the particle-size distribution of a batch during a granulation process. To make adjustments to improve product quality or consistency, the manufacturer must determine how the particle-size distribution compares with previous batches and standards—a process that depends on capturing and analyzing in-line and benchmarked data. Integrated IT systems available today enable manufacturers to capture such secure, analyzable, and actionable data that can transform their operations.

  • Increase automation and build quality into the process. Process and workflow automation—which allow manufacturers to build quality into a process—is IT's single greatest contribution to streamlining compliance. An integrated IT infrastructure enables management to rely less on manual checks—which present greater risk and variability—and more on automated checks that can be audited easily by regulatory agencies. For instance, automation can enforce electronic signature checkpoints during batch processing (see Figure 2) and automatically notify key personnel of nonconformances so that reviews can be undertaken quickly.

Figure 2: Automated controls and approvals help build quality into the product lifecycle. Information technology systems can streamline and improve compliance by automating controls and approvals. Red checkmarks indicate checkpoints for 21 CFR Part 11-compliant electronic records.

Automation also can help standardize, implement, and enforce business processes and procedures. Traditional barriers to internal process controls have included varying working practices for the same procedure; unclear organizational structure and responsibilities; multiple and conflicting sources of data; and manual processes, including physical signatures for approvals. IT can drive automation that standardizes business processes and procedures; establish and document enterprise-wide organization structure and responsibilities; and create a single source of truth—all of which can streamline compliance and enhance operational efficiency.

With effective IT systems, automated systems can be validated more quickly and cost-effectively. Today, many organizations still rely on the "brute force" approach to compliance, which involves voluminous manual processes and recordkeeping. With the right blend of technology and administrative and procedural controls, companies can begin to automate compliance and build quality checks directly into the workflow.

IT and automation, however, do not replace the need for ongoing training. To achieve and maintain compliance, organizations must educate their employees regularly about the procedures and systems with which they work. Even FDA concedes that no system is perfect, but the right combination of procedures, administrative controls, secure systems, and employee training implemented in a pragmatic manner will stand up to a rigorous audit.

Greater automation reduces compliance and validation costs because standardized workflow and controls can be built directly into a process (see Figure 3). For example, a manufacturer can dictate that a batch requires an electronic signature before continuing to the next step in the cycle. In materials management, automation can enforce business rules that require materials to go through certain quality tests before they reach a customer, instead of relying on paper documentation that testing was done. Automating controls also reduces complexity, redundancy, the potential for operating error, and, ultimately, waste.

Figure 3: The benefits of automating compliance. Greater automation can reduce compliance and validation costs by standardizing workflows and controls directly into a manufacturing process.

  • Identify and mitigate risk areas. Information technology that delivers a single source of truth and automates processes can help companies quickly identify and mitigate potential risks in several ways. First, an integrated IT infrastructure that enables the visibility of supply-chain, manufacturing, and distribution data across the enterprise allows organizations to spot exceptions more rapidly, thus facilitating root cause analysis and corrective and preventive actions. With enterprise-wide visibility, managers can quickly spot when something out of the ordinary happens (e.g., an out-of-tolerance in-process control value) and build an analysis thread so that root-cause analysis can occur. The same integrated system can enable the manufacturer to restore all noncompliant processes or links in the chain and document all communication that has occurred around such events.

In the case of a problem or sabotage, an integrated IT environment allows manufacturers to gain rapid access to lot tracking. It can also be used to efficiently track maintenance and recalibration of plant floor equipment, which represent potential areas of risk.

  • Enable electronic recordkeeping. Paper records are cumbersome and expensive to circulate for review and approval when multiple staff members or departments are involved in the process. This challenge is compounded in a global enterprise in which stakeholders are dispersed across many countries. Faster and cheaper product development, manufacturing, and quality assurance turnaround are possible with the electronic routing of signature requests anywhere—instantly.

Whereas paper records are local and isolated, electronic records can be stored in a single, secure, globally accessible database. Individuals with proper credentials can access important information in the electronic records quickly and easily from anywhere in the world.

Regulations require that organizations retain manufacturing records for at least one year after the product batch expiration date, which is often several years (7). Thus, it is easy to see how maintaining production batch records alone—even for a short-lived product—can become quite cumbersome. Because individual batch records can exceed 100 pages, storing these records electronically saves space and reduces cost.

Electronic recordkeeping also improves accuracy. Apart from rigorous and time-consuming manual checks, there are limited ways to prevent users from entering invalid data on paper forms. Sophisticated electronic record systems, however, can reduce data errors by providing users with lists of appropriate values from which to choose and by validating data formats before accepting or saving the data into files or tables.

In addition, electronic records facilitate advanced searches and analysis. Information on paper is static and standalone. With paper records it is also very difficult, or even impossible, for organizations to find trends. Enterprise systems based on advanced relational database management systems allow managers to search data records to find trends and patterns across many records.

  • Search vast quantities of data to reveal trends that can drive compliance, quality improvement, and increased operational efficiency. Many companies possess massive quantities of data on processes as far ranging as purchasing office supplies and gas chromatography. Many, however, cannot analyze or interpret the paper-based or siloed information to yield important trends needed to make informed regulatory and manufacturing decisions.

A single source of data, coupled with advanced analytics, today enables analysts to run real-time reports that yield the kind of business intelligence that reduces risk, helps to ensure compliance, and improves operating efficiency. For example, a manufacturer can use advanced analytics to conduct quality analysis, risk assessment, yield analysis, and processing efficiency comparisons between multiple plants, to name just a few of the endless possibilities.

Figure 4: Materials and resource traceability. Integrated IT systems facilitate enterprise-wide access to manufacturing data, making product recalls faster and less costly and improving public safety. Materials also can be traced to analyze vendor quality.

Manufacturers also can use data to expeditiously comply with GxP and safety regulations by improving responsiveness to lot quality problems, thereby minimizing the cost of product recalls (see Figure 4). With the ability to search vast quantities of data, managers gain the ability to provide answers to critical questions such as:

  • Which products were delivered to which customers?

  • Which other customer shipments may be at risk?

  • What were the quality test results for this lot of product and its ingredients?

  • Which supplier lots could have been the source of the contamination?

  • What other material was stored near the contaminated material?

  • Which lots of product passed through this refrigeration unit whose temperature dropped out of tolerance last Tuesday?

Today's complex requirements are forcing pharmaceutical manufacturers to adopt more formal business processes and stricter reporting methods. The positive result of this activity is that companies can more accurately and rapidly spot inefficiencies, overlaps, and duplications of effort, thereby reducing production cost and enhancing competitive advantage. To succeed, however, organizations require greater visibility into business operations, which cannot be achieved with paper-based processes. As a result, pharmaceutical manufacturers are increasingly relying on integrated IT infrastructures to embrace quality-by-design principles and enable increased productivity and quality, along with the flexibility that allows management to rapidly recalibrate and stay on course.

Doug Souza is the vice-president of Process Manufacturing Development, John Danese is product strategy director for Life Sciences, Dennis Constantinou* is senior industry director for Life Sciences Strategy and Marketing, all at Oracle, 611 Anton Blvd., Ste. 700, Costa Mesa, CA 92626, tel. 714.445.4657,

*To whom all correspondence should be addressed.


1. International Society for Pharmaceutical Engineering (ISPE), The Good Automated Manufacturing Practice Guide for Validation of Automated Systems in Pharmaceutical Manufacture (GAMP 4) (ISPE,Tampa, FL, Dec. 2001).

2. US Food and Drug Administration, Pharmaceutical CGMPs for the Twenty-First Century—A Risk-Based Approach (FDA, Rockville, MD, Sept. 2004), (accessed Oct. 19, 2005).

3. Pharmaceutical Inspection Convention and the Pharmaceutical Inspection Cooperation Scheme (PIC/S), Good Practices for Computerised Systems in Regulated "GXP" Environments (PIC/S, Geneva, Switzerland, July 1, 2004), (accessed Oct. 19, 2005).

4. L. Abboud and S. Hensley,"New Prescription for Drug Makers: Update the Plants," The Wall Street Journal, Sept. 3, 2003.

5. D. Souza, J. Danese, and D. Constantinou, "Quality Manufacturing: A Blockbuster Opportunity for Pharmaceuticals" (white paper written in cooperation with Oracle, Economist Intelligence Unit, London, UK, Oct. 6, 2005).

6. FDA, Guidance for Industry. PAT — A Framework for Innovative Pharmaceutical Development, Manufacturing, and Quality Assurance (FDA, Rockville, MD, Sept. 2004), (accessed Oct. 19, 2005).

7. Code of Federal Regulations, Title 21, Food and Drugs (General Services Administration, Washington, DC, April 1, 1973), Part 211, Subpart J.