Abstract This paper seeks to provide a prospective on the pharmaceutical industry concerning the coordination of production planning among multi-product and multi plant procurement using multiple published articles that report on results from research conducted on online (Internet) concerning the topic. Important issues that managers and researchers must address do that production and inventory decisions can be determined for all plants in a manner optimal for the organization as a whole. Introduction.
The pharmaceutical industry can be defined as a complex of processes, operations and organizations involved in the discovery, development and manufacture of drugs, medications and multiple medical devices. The World Health Organization (WHO) defines a drug or pharmaceutical preparation as: Any substance or mixture of substances manufactured, sold, offered for sale or represented for use in the diagnosis, treatment, mitigation or prevention of disease, abnormal physical state or the symptoms thereof in man or animal; [and for use in] restoring, correcting or modifying organic functions in man or animal.
Organizations are increasingly confronting the stringent balancing of organizational income and disbursement. Procurement is a difficult and quite complex process that involves several steps, vendors, agencies, wholesalers, R&D, manufactures and the government. Existing government policies, rules and regulations for procurement as well as institutional structures are frequently inadequate and sometimes hinder overall efficiency in responding to the modern pharmaceutical market.
In an increasingly competitive global market, organizations have considered ways of improving manufacturing practices. Attempts in this direction have focused, on improvements on performance measures, levels of inventory and work-in-process (WIP); and responsiveness of the production process through reduced manufacturing lead times, we also learn of the priorities of the pharmaceutical industry, problems with effective cost for research and development, procuring the most cost-effective drug cost in right quantities, managing excessive stock, and problems with drug shortages on the industry.
Severe competition forces shorter life cycles but in the pharmaceutical industry regulation and safety will not allow this. In the future, organizations will continue to devote considerable resources and time towards choosing strategies which provide good performance. Multi-plant coordination and priorities of the pharmaceutical industry The intense global competition and rapid development of new pharmaceuticals today increase the difficulty of production planning coordination for multi-pant companies.
The multi-plant organizations need to take appropriate actions so they could remain competitive in the global market situation. Multi-plant organizations are a type of those supply chain, which behaves like a single toward a mutual goal. The production planning coordination of activities across a network of plants becomes critical to quickly respond to dynamic market conditions, reduce costs, faster response times more rapidly and effectively.
To address multi-plant coordination problems many rely on the strengths of third parties in each location. The challenge is meeting the respective objectives of each plant. ERP initiatives are put in place within these organizations to maintain both local business and corporate management that helps link together critical business needs. From a corporate perspective, tracking and managing financial and operational activities for the entire organization is a much needed asset to any company.
Modern science has been able to research and develop cures for most illness and disease, yet, politics and corporate greed affect who can benefit from this, resulting in what a French newspaper, Le Monde, describes as apartheid of pharmacology. Among the controversial issue that have arisen in health policy in recent years, none has been more contentious-or engaged public attention more vigorously-than the accelerated growth of pharmaceutical use and spending and related concerns about drug prices. Tom Croghan of RAND and Polly Pittman of Academy Health address the issue of pharmaceutical productivity from a different angle.
Decision making in this industry allots sizable resources to the production of lifestyle and “me-too” drugs despite burden-of-disease data showing that it would be socially useful to target other priorities such as emerging infectious disease, the problem of drug-resistant infection and shortage of treatments for chronic conditions. The author looks under the hood of the decision making process to shed light on how priorities might be reordered and identify several policy levers that might be used to redirect energy and resources toward objectives that would produce the biggest payoffs in terms of human welfare.
Two powerful megatrends – dramatic deceleration in U. S. market growth and significant restructuring of the healthcare system are at play in the U. S. pharmaceutical industry. On the one hand, market growth in “developed” markets (mostly the U. S. , Western Europe and Japan) are significantly lagging the pharmaceutical markets (mostly China, India, Brazil and Russia), exerting enormous margin pressure on global pharmaceutical companies. The U. S. healthcare market is restructuring how healthcare is cost-effectively developed, delivered and reimbursed to improve the overall health of the population.
In a shifting global market and evolving healthcare landscape will require pharmaceutical companies to adopt innovative business models focused on novel strategies including: •Emphasis on “economic” outcomes: More attention to the “economic value” of a therapy as a determinant for research funding and commercialization. •Personalized medicine: shifting from “block-buster drugs” to personalized health and wellness” •Externalization and collaboration: More reliance on external partners, academia, industry consortia and entrepreneurs for innovation, productivity and global expansion.
•Globalization: Rapid expansion to pharmaceutical countries for scientific talent and new markets. •Health IT adoption: Investing in new technologies to enable innovation and drive efficiencies. The future of U. S. pharmaceutical industry will depend on whether companies can overcome structural shifts and adopt operating models aligned to new business priorities. For example, some companies are implementing strategies that respond to structural shifts by diversifying products and services to address global demand, and others are rethinking their operating models by leveraging externalization as a means to boost R&D productivity.
Regardless of whether one follows a single multi-pronged approach, it is imperative for U. S pharmaceutical companies to develop strategies in response to these megatrends and take steps to sustain their next phase of growth and competitiveness in the global market. According to a report by IMS Institute for Healthcare Informatics, the global pharmaceutical market is expected to reach $1. 1 trillion by 2015. The anticipated growth is mostly driven by spend in pharmerging countries and on generic.
“The Office of the Assistant Secretary for Planning and Evaluation (ASPE) is the principal advisor to the Secretary of the U. S. Department of Health and Human Services (HHS) on policy and development, and is responsible for major activities in policy coordination, legislation development, strategic planning, policy research, evaluation, and economic analysis. On December 17, 2010, “The ASPE Issue Brief is yet another testament to the valuable role generic prescription pharmaceuticals play in reducing the cost of health care for American consumers, the federal government and state-sponsored drug benefit programs.
As the brief points out, because generic drugs cost significantly less than their branded counterparts, the high rate of generic prescription has resulted in billions of dollars of savings for the U. S. health care system. ’ “The ASPE brief also notes that with more than $209 billion in annual branded drug sales projected to go off patent between 2010 to 2014, ‘Maintaining or improving the generic prescription rate is an important tool in efforts to control health care cost. ’ The report also cited the potential cost savings that will come from implementing an abbreviated pathway for approving biosimilar drugs. It noted that the U.
S. had $59 billion in sales in biologics in 2008 and the federal government, primarily Medicare, could save several billion dollars by creating an approval pathway for biosimilar products. All products and services have certain life cycles. Today’s current challenge with the pharmaceutical industry is to focus on Product Lifecycle Management (PLM) and it is a business transformation approach to manage products and related information across the industry. The product life cycle is also an important priority in the pharmaceutical industry. The product life cycle describes the sales pattern of a product over time.
Generally, the time span begins with product introduction and ends with its obsolescence and replacement. While the form of the life cycle is fairly standard, it is subject to variations. The concept underlying the premise of product life cycle is that all products pass through the stages. The basic stages in the product life cycle are: •Development stage •Growth stage •Maturity stage •Decline stage. The first of these stages, the development stage, represents a slow growth period. It is assumed that newly released products require some time to gain market acceptance, so sales in the initial periods are slow.
If the product introduced successful, rapid growth stages are reached and sales increase markedly. According to the concept of the life cycle, the market for any product is limited, and sales will generally fall short of their potential. When this point is reached, the market enters the maturation stage. This life cycle goes further to assume that each product eventually is replaced by another or that initial rapid growth will end in decline. If a product enters a market that has already moved into the mature stage, competition is intense because the product must compete for a share of an existing market that is not experiencing growth.
Once the market enters that decline stage, new products are not entering the market and demand levels are falling. The objective is to increase market share to maintain stable sales. The stages of the life cycle form a framework that can be used to analyze the dynamics and the primary factors that can impact a market segment and product sales. The stages of the expanded product cycle are: 1. Research 2. Product introduction 3. Development of the market 4. Exploitation 5. Market Maturation 6. Market saturation 7. Market Decline
To measure at what stage of its life cycle a given market is the following parameters need to be measured and monitored: •Investment in R&D by year •Number of competitors in the market by year •Number of competitors that entered the market by year •Numbers of competitors that left the market by year •Market growth rate by year •kfkkfppIndustry profitability by year •Investment in marketing (such as advertising, trade shows, and direct sales force) by year. The complexity of business processes required in this highly regulated environment of the pharmaceutical industry needs all elements analyzed to quickly address industry challenges.
In managing the entire product lifecycle form product to inception to phase out, the simple fact is that many pharmaceutical organizations suffer from silos of information across the different functional areas to different complexities. Due to a variety of different data sources and lack of collaboration across the organization often results in disparate, redundant and inaccurate product information depending on functional area. Research and development of drugs that are brought to market can be costly and there are strict regulations and requirements that companies must follow in most countries.
Addressing excessive stock with key elements of pharmaceutical quality system These are remarkable and challenging times for the research-based pharmaceutical and biotechnology industry. Rarely have political, economic, regulatory, and scientific forces converged on the industry to the degree we are seeing today, forcing companies to reevaluate outdated R&D strategies and practices, and adopt new systems to bring innovative products to market in an efficient and cost-effective manner. For decades, the pharmaceutical industry has managed its business by focusing most of its resources on the next blockbuster drug.
With changes in regulation, declines in drug approvals and a shift toward developing high value biologics, today’s manufacturers must begin to refocus and address current processes, practices and systems, and take a hard line on improving their overall quality and compliance efforts. The bullwhip effect occurs when the demand order variability’s in the supply chain are amplified as they moved up the supply chain. Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies.
Companies can effectively counteract the bullwhip effect by thoroughly understanding its underlying causes. Industry leaders are implementing innovative strategies that pose new challenge. But there are many questions if the bullwhip effect is a determiner in the pharmaceutical environment. With many pharmaceutical companies that offer emergency medications and materials, they would need to keep stock on hand for the variety of customers, such as: hospitals, clinics, pharmacies and rural surgical areas.
With the need it is impossible for pharmaceutical companies to be concerned with excessive stock. With •Market growth rate by year ••Market growth rate by year •Industry profitability by year •Investment in marketing (such as advertising, trade shows, and direct sales force) by year. The complexity of business processes required in this highly regulated environment of the pharmaceutical industry needs all elements analyzed to quickly address industry challenges.
In managing the entire product lifecycle form product to inception to phase out, the simple fact is that many pharmaceutical organizations suffer from silos of information across the different functional areas to different complexities. Due to a variety of different data sources and lack of collaboration across the organization often results in disparate, redundant and inaccurate product information depending on functional area. Research and development of drugs that are brought to market can be costly and there are strict regulations and requirements that companies must follow in most countries.
Addressing excessive stock with key elements of pharmaceutical quality system These are remarkable and challenging times for the research-based pharmaceutical and biotechnology industry. Rarely have political, economic, regulatory, and scientific forces converged on the industry to the degree we are seeing today, forcing companies to reevaluate outdated R&D strategies and practices, and adopt new systems to bring innovative products to market in an efficient and cost-effective manner.
For decades, the pharmaceutical industry has managed its business by focusing most of its resources on the next blockbuster drug. With changes in regulation, declines in drug approvals and a shift toward developing high value biologics, today’s manufacturers must begin to refocus and address current processes, practices and systems, and take a hard line on improving their overall quality and compliance efforts. The bullwhip effect occurs when the demand order variability’s in the supply chain are amplified as they moved up the supply chain.
Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies. Companies can effectively counteract the bullwhip effect by thoroughly understanding its underlying causes. Industry leaders are implementing innovative strategies that pose new challenge. But there are many questions if the bullwhip effect is a determiner in the pharmaceutical environment.
With many pharmaceutical companies that offer emergency medications and materials, they would need to keep stock on hand for the variety of customers, such as: hospitals, clinics, pharmacies and rural surgical areas. With the need it is impossible for pharmaceutical companies to be concerned with excessive stock.
With Industry profitability by year •Investment in marketing (such as advertising, trade shows, and direct sales force) by year. The complexity of business processes required in this highly regulated environment of the pharmaceutical industry needs all elements analyzed to quickly address industry challenges.
In managing the entire product lifecycle form product to inception to phase out, the simple fact is that many pharmaceutical organizations suffer from silos of information across the different functional areas to different complexities. Due to a variety of different data sources and lack of collaboration across the organization often results in disparate, redundant and inaccurate product information depending on functional area. Research and development of drugs that are brought to market can be costly and there are strict regulations and requirements that companies must follow in most countries.
Addressing excessive stock with key elements of pharmaceutical quality system These are remarkable and challenging times for the research-based pharmaceutical and biotechnology industry. Rarely have political, economic, regulatory, and scientific forces converged on the industry to the degree we are seeing today, forcing companies to reevaluate outdated R&D strategies and practices, and adopt new systems to bring innovative products to market in an efficient and cost-effective manner. For decades, the pharmaceutical industry has managed its business by focusing most of its resources on the next blockbuster drug.
With changes in regulation, declines in drug approvals and a shift toward developing high value biologics, today’s manufacturers must begin to refocus and address current processes, practices and systems, and take a hard line on improving their overall quality and compliance efforts. The bullwhip effect occurs when the demand order variability’s in the supply chain are amplified as they moved up the supply chain. Distorted information from one end of a supply chain to the other can lead to tremendous inefficiencies. Companies can effectively counteract the bullwhip effect by thoroughly understanding its underlying causes.
Industry leaders are implementing innovative strategies that pose new challenge. But there are many questions if the bullwhip effect is a determiner in the pharmaceutical environment. With many pharmaceutical companies that offer emergency medications and materials, they would need to keep stock on hand for the variety of customers, such as: hospitals, clinics, pharmacies and rural surgical areas. With the need it is impossible for pharmaceutical companies to be concerned with excessive stock. With pharmaceutical companies being at the bottom of the list with lean objectives it would be beneficial in progressing.
Lean management represents one of the most favored business improvement programs today. It was pioneered by Toyota in the 1950’s. It aims to eliminate waste in every area of the business, including customer relations, product design, supplier networks and factory management. The objective includes using less human effort, less inventory, less space, and less time to produce high-quality products as efficiently and economically as possible while being highly responsive to customer demand. Although there is no universally accepted measure of an organizations “Leanness”, inventory turns are a reliable indicator.
The trend of inventory turns over time indicates how well a company is progressing in terms of becoming more Lean and improving its processes. The pharmaceutical industry is ranked at the bottom compared to other industries. By adopting lean practices, pharmaceutical companies can increase inventory turns and not only achieve significant financial benefits but also enhance competitiveness in the all-important areas of speed, quality and cost. Inventory turnover defined as the cost of sales (also known as cost of goods sold) divided by the average inventory level over some time period-is a convenient proxy measure of leanness.
The goal of leanness is to achieve improvements in the competitive edge elements of speed, quality and cost. Lower levels of inventory directly correlate to improvement in these competitive edge factors. Inventory turns also straightforwardly with the bottom-line measure of business success: cash flows. Reduced inventories mean more cash in the bank, freeing up cash that can be used for other purposes. However reducing inventories are beneficial only if the reduction derives from process improvement-the core of Lean.
If a company cuts inventories without improving processes, then stock-outs and lost customers will far outweigh any benefits of increased cash flows. Determining the health of quality manufacturing systems is needed by assessing the current quality systems, and to develop key performance indicators while learning the best practices to address all high risk areas. A quality system is the organizational structures, processes, procedures and resources used to manufacture pharmaceutical products in accordance with applicable regulations.
This is done by effective quality planning, quality control, quality assurance and quality improvement for achieving consistent product quality. The objective if a quality system is to achieve product realization, establish and maintain a state of control and facilitate continual improvement across the different lifecycle stages. The major components of a product lifecycle are pharmaceutical development, technology transfer, commercial manufacturing and product discontinuation.
The elements of a pharmaceutical quality system, as described in International Conference on Harmonization (ICH) Q10 Pharmaceutical Quality System Guidelines, outlines the effective quality systems for the pharmaceutical industry. The systems are designed to be used throughout each stage of the products lifecycle. The quality system consists of these four key elements: Process Performance, Product Quality Monitoring, Corrective Action and Preventive Action (CAPA), Change Management, and Management Review of Process Performance Product and Quality.
A process performance and product quality monitoring system ensures that pharmaceutical companies are operating in a state of control. The system should provide assurance that the processes and controls produce products with safety, efficacy and quality. These systems include risk management, statistical tools, quality control, process excellence tools, supplier/material management, internal/external source review and validation. According to pharmaqpd. com, a process performance and product quality monitoring system are Key Performance Indicators (KPIs).
Once a company has a system in place that identifies and monitors gaps in its system, a systematic approach should be taken to handle the issues. Corrective Action and Preventive Action System (CAPAs) are the systematic investigation of the root cause of non-conformities in an effort to mitigate the issue or prevent their recurrence. As a regulatory requirement, the CAPA process must consist of the following key elements: ? Having documented procedures in place to define how an organization will track records; ? Performing an investigation to determine the root cause once a nonconformance has been identified ?
Identifying the corrective and/or preventive actions after the root cause had bee determined; ? Having an established and approved action plan; ?Implementing the action plan; ?Having actions that support continuous improvement within the CAPAs; ? Completing all documentation and proper notifications; ?Evaluating the effectiveness of the actions performed after implementation. There are several tools that can be used for the measurement and analysis of the data against establishing parameters. The analysis will allow a manufacturer to identify nonconformity and identify an area that needs further investigation.
The manufacturer will be able to fully establish a preventive action process, allowing them to address a potential problem impacting the product or multi-products. The analysis can be performed using several, methods such as analytical tools, and a team of experts or process owners. Technology transfer is a part of any multi-plant pharmaceutical quality system. The goal of technology transfer continues to be a valuable step in the development life cycle leading to successful commercial manufacturing. This is done by taking all gathered knowledge and use it as the basis for the manufacturing control strategy.
The approach to the process qualification and on-going continuous improvement helps the transition of the product/process/analytical method knowledge between development and manufacturing sites. This is done to ensure variability of process and parameters are controlled and sufficient in the face of the rigors of a commercial production environment. To verify parameters established during development are still within the determined design space and/or adjusted at scale-up. The change management system should provide management and documentation of adjustments made to the process during technology transfer activities.
Aspects of management review should be performed to ensure the developed product and process can be manufactured at commercial scale. The key elements of technology transfer include: Documentation/Information: ?Consistent and controlled procedures for technology transfer and for running your process ? Assurance of clear documentation of all process/product knowledge ? Understanding of prior knowledge from similar products Personnel: ?The integrated interdisciplinary team of cross functional experts: Operations, Tech Operations, CMC, Supply Chain, Analytical, Quality, R&D etc.
?Roles and responsibilities of development group and the site are defined Technology Evaluation and Development: Assure have well understood, robust process, and corresponding analytical methods ? Well designed and well understood equipment train ?Identification and verification of all important parameters. Using a sound scientific principal based approach (QBD) to development supports the development of a safe product. The approach to development requires a certain degree of rigor to enable a robust technology transfer commercialization.
The development can be continually improved through processes in conjunction with pharmaceutical quality systems assures meeting or exceeding GMP requirements. This is a collaborative effort with research and development, manufacturing, technology operations, quality, and manufacturing. Each is needed to assure a successful technology transfer for a final manufacturing product. Organizations must be committed to enhancing its workplace safety and environmental performance and improving the transparency through reporting.
This is accomplished by measuring the performance, setting improvement targets, and disclosing publicly. Importance of procuring cost-effective drugs in the right quantities The first objective is that the organization first and foremost is responsible for procurement. It doesn’t matter if the organization is public, private non-profit or private for-profit, it is important to figure an essential drug list for the most cost-effective are purchased. This list is maintained so that excess stock is not accumulated. There are many steps in the procurement process.
The list for these essential drugs is needed and the following procedures should be in place including: •To select the most cost effective essential drugs to treat commonly encountered diseases; •To qualify the needs; •To ensure good product quantity; • To monitor the performance of suppliers and the procurement system It is important to keep appropriate access to drugs. Without an appropriate procedure list, this can lead to lack of access to appropriate drugs and to waste. In many public systems and multi-plants breakdown regularly occur at multiple points in this process.
If there is an appearance of special influences on the selection of products and suppliers or if the procurement process is not managed in an efficient and transparent manner, interest among suppliers in competing for procurement contracts decrease, leading to fewer choices and higher prices for drugs. Pharmaceutical companies have contributed to people’s improvement health and prolonged life. In order to procure the most cost-effective drugs, the organization is responsible for procurement if they are private non-profit, public, or private for-profit. An essential drug list will be developed of most cost effective drugs are purchased.
Procurement quantities must be accurately estimated to have continuous access to the products selected without accumulating excess stock. It is imperative that public sector drug procurement take place in the context of both the local pharmaceutical market and the international market and globally. Globally some public health officials have limited experience in designing an optimal procurement system to fit their market. Special influences to use a specific selection of products also must be monitored globally. Practices such as special interest among suppliers in competing for procurement contracts is an example of actions.
The procurement process must be run effectively to ward off such practices. If a guaranteed system is not in place there may be drugs that are unavailable public use that can result in major drug shortages that can be harmful globally. Another disruption to the procurement process is external financing from the public sector by international agencies, bilateral donors or development banks. The donors or banks may have conflicting policies and regulations regarding drug procurement, which may conflict existing laws and regulations. In these situations it is extremely difficult to carry out procurement in a timely and efficient manner.
It is the responsibility of the company to be more consistent with the policies of each country. There are twelve operational principals for good pharmaceutical procurement. Each organization should have four strategic objectives to coincide with the universal operational principals. Both are relevant to any public sector drug supply system. The four strategic objectives of pharmaceutical procurement are: 1. Procure the most cost-effective drugs in the right quantities This strategic objective makes all companies responsible for procurement within their organization whether they are public, private, non-profit, or private for-profit.
The organization should develop an essential drug list to make sure they are purchasing the most cost effective drugs. Procedures must be followed to ensure accurately estimated procurement quantities in order to have continuous access to the products selected without excessive stock. 2. Select reliable suppliers of high quality products The next objective is that there are reliable suppliers of high quality products must be pre-selected, and that active quality assurance programmes involving both surveillance and testing must be implemented.
3. Ensure timely delivery The third strategic objective is that the procurement and distribution systems must ensure timely delivery of appropriate qualities to central or provincial stores and adequate distribution to health facilities where the products are needed. 4. Achieve the lowest possible total cost The last objective is that the procurement and distribution systems must achieve the lowest possible total cost, considering four main components: ? The actual purchase price of drugs?
Hidden cost due to poor product quality, poor supplier performance or short shelf life; ? Inventory holding costs at various levels of the supply system; and ? Operating costs and capital loss by management and administration of the procurement and distribution system. Operational principals for good pharmaceutical procurement have several steps that include: 1. Efficient and Transparent Management 2. Procurement procedures should be transparent, following formal written procedures throughout the process and using explicit criteria to award contracts. 3. Procure.