The Cost of Quality Failures

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Are pharmaceutical manufacturers really serious about ensuring the quality of their medicines? And do they recognize that cutting corners on controls and quality management can be tremendously costly in the long run?

Problems that lead to shortages, recalls are much more damaging than a few lost lots, say industry and FDA experts.

Are pharmaceutical manufacturers really serious about ensuring the quality of their medicines? And do they recognize that cutting corners on controls and quality management can be tremendously costly in the long run?

Those questions dominated the recent conference on “Redefining the ‘c’ in cGMP,” co-sponsored by FDA and ISPE (International Society for Pharmaceutical Engineering). The ongoing wave of serious drug shortages and recalls, together with rising pressure on pharma companies to cut costs, has elevated concerns about lax oversight of supply chains and outsourcing arrangements.

Although FDA and industry have come a long way since the launch of FDA’s quality intuitive in 2004, the desired state “is a mirage,” commented Janet Woodcock, director of the Center for Drug Evaluation and Research (CDER). She remains hopeful that manufacturers can achieve high quality drug production without extensive regulatory oversight, but acknowledges that’s still a future goal. Some innovator companies are “widely adopting QbD” as way to decrease product variation and eliminate waste, Woodcock noted, but others are not. Unprecedented shortages that continue to plague industry reflect a “complete failure of firms’ quality management systems,” she said, noting that manufacturers still think more about meeting FDA regulatory standards than establishing a commitment to high quality production.

One response from FDA and industry is to better quantify the costs of quality failures: lost revenue, lost jobs, damaged reputations and, in some cases, loss of the company, Woodcock said. FDA also is looking closer at the root causes of failures, which may reflect management inattention, deliberate company decisions to defer investment in modern production facilities, or corporate disregard for the quality department. Companies take calculated risks with such approaches, she said, and should consider whether the savings are worth the cost to the firm. “We need the business side to become convinced that a commitment to quality can avoid costly failures.”

Steven Lynn, acting director of the Office of Manufacturing and Product Quality in CDER’s Office of Compliance, delved further into the cost of non-compliance with GMPs. Direct costs may arise from increased scrap and lost raw materials. But a huge investment may be needed to rebuild noncompliant facilities, settle consent decrees, and manage a crisis situation involving recalls, discards and suspended operations.


Attorney Cathy Burgess of Alston & Bird described the value of supplier management programs and formal quality agreements with contract manufacturers to clarify responsibilities for quality production and avoid costly failures down the road. “I’m truly amazed,” she said, “when I find that clients don’t have quality agreements” with contract manufacturers and just rely on simple check lists of responsibilities. These often lack provisions for enforcing quality requirements tailored to the specific product and company. “Companies cannot outsource quality compliance,” she asserted, echoing a common FDA theme.

Andrew Skibo, executive vice president for operations at MedImmune, emphasized the even greater importance of maintaining quality on products that are injected directly into vulnerable populations. Quality failures “may be okay if you make sneakers,” he said, but not for vaccines and drugs.

Shifting production to regions with low labor costs may appear to offer potential savings, he noted, but such gains can disappear if production output falters or the scrap rate increases. A clear red flag for Skibo is a company’s decision to shift manufacturing and supply chain functions from under the CEO to the chief financial officer, with its inherent focus on managing budgets. Cost containment is important for low-margin products such as seasonal flu vaccine, but a company must understand “its true cost structure before savings targets are even considered,” he advised, adding that such initiatives should be directed at specific targets that don’t impact quality.

This first joint FDA-ISPE conference in Baltimore attracted 300 attendees, plus additional participants for ISPE training sessions and a subsequent meeting on global supply network challenges and solutions. The joint conference examined FDA’s focus on global regulatory issues and changes in the CDER Office of Compliance, as well as international approaches to ensuring drug quality. The larger aim, said ISPE president Nancy Berg, is to work more collaboratively to focus on even better quality solutions and provide resources to address global risks.