In their efforts to embrace the new quality by design paradigm, drug manufacturers are being encouraged to focus more on establishing the business case as the upfront cost and complexity of the requisite engineering design studies becomes more apparent and the regulatory incentives languish.

The use of quality by design has spread, though not as much as some might have hoped it would back in 2005, when FDA's Janet Woodcock articulated her oft-quoted vision of an efficient, agile, flexible drug manufacturing sector, FDA launched its CMC pilot program and the International Conference on Harmonization approved its Q8 guideline on pharmaceutical development.

Full QbD approaches still account for less than 10 percent of new drug applications, estimates Christine Moore, acting deputy director of the Office of New Drug Quality Assessment in FDA's Center for Drug Evaluation and Research.

Even so, Moore told the recent CDER on CMC meeting in Bethesda, Md., "A lot of our applications are having more detailed information than what I saw in applications five, 10 years ago." This means manufacturers are doing more process development work to better understand critical quality attributes and control strategies as they transition incrementally toward the QbD paradigm, she suggested.

Still, there are signs that the flurry of excitement around QbD is abating somewhat as manufacturers encounter difficulties implementing it.

A consortium of pharmacy and pharmaceutical engineering schools says the transition to quality by design is being frustrated by a lack of basic science.

Because the science is not there, process development requires expensive and time-consuming experiments. Similarly, the lack of science makes FDA chemistry, manufacturing and control reviews difficult and uncertain, says Prabir Basu, executive director of the National Institute for Pharmaceutical Technology and Education.

NIPTE aims to build a scientific understanding of pharmaceutical manufacturing that is based on first principles, Basu told "The Gold Sheet."

Looking Beyond Regulatory Flexibility

FDA has laid a foundation for drug manufacturers to use in adopting quality by design, Helen Winkle, director of CDER's Office of Pharmaceutical Science, told the Oct. 20-21 CDER on CMC meeting, which was sponsored by FDA, the American Association of Pharmaceutical Scientists and the University of Rhode Island College of Pharmacy.

"Now it's really up to industry to figure out how best to move ahead," Winkle declared, adding that this will involve establishing and articulating the business case.

In contemplating the future, industry needs to look beyond regulatory flexibility, Winkle said. "It's amazing how many meetings I attend where everybody says, 'when are we going to have regulatory flexibility?'" While such flexibility is an important way of saving resources, both for industry and FDA, she said, "the more important thing is that the industry really sees the benefits of quality by design, and the benefits to them as a business, and this is really where we need to spend some of our effort so that industry is comfortable as they move ahead."

Participants in a workshop at the CDER on CMC meeting on FDA's CMC pilots agreed that the pilots have proven helpful in thinking through the QbD process and clarifying the terminology.

However, there were lingering questions about the business case for QbD that the pilots had not resolved, Moore indicated in her summary of the workshop.

"The drawbacks that were perceived have to do with business drivers," she said. "It was acknowledged that QbD approaches, process analytical technology for example, are not always cost effective. And it is especially difficult to justify for legacy products where you don't have any manufacturing issues."

Also, some manufacturers may find it especially difficult to invest in QbD, she said. "Oftentimes it's difficult to make a business case, especially for smaller companies."

There were also questions about when the QbD approach is appropriate - and when it is not.

Discussions often returned to one of the greatest challenges in establishing the business case for QbD: the difficulty of estimating avoided costs.

"It's easy to say when you have a product that failed what the cost of that failure was, in terms of your loss of material, your lost time to market, your time spent in investigating and correcting that failure," Moore said. "But if you did quality by design and you didn't have that problem in the first place, how do you put a dollar figure on the money you saved by not having the problem? That's difficult to tell, so it's difficult to use that to support your business case."

There was a sense that it could be possible to estimate at least the regulatory cost savings, she suggested. "You can use the cost of implementing a quality by design program and compare that [to the] the labor and the regulatory submission cost and maybe use that as a comparative to help sell the business case."

Why Quality by Design is Good for Business

The business case for QbD is tremendously compelling but little understood within the quality community, suggested Ted Fuhr of the management consulting firm McKinsey & Company in a presentation that was very similar to one he and NIPTE's Prabir Basu had made to FDA earlier last year.

"The concept of quality by design has been out there in the industry for about six years now," he told the CDER on CMC meeting. "But in reality, it hasn't been taken up on a mass scale."

Woodcock, who is FDA's CDER director, had reminded the conference that "there was never an expectation that this would happen overnight," Fuhr acknowledged. However, he said, "The rate of uptake has not been as fast as you could imagine."

One of the key issues raised by his clients is the question of the business case for implementing QbD.

Fuhr, who previously worked for Pfizer in pharmaceutical sciences, said he joined McKinsey two years ago "to get a broader perspective on the overall business environment and to understand senior executive issues."

He brought that broader perspective to bear on the business case for QbD, showing that, compared to other industries, there is a lot of room for improvement in pharmaceutical process development.

He went on to estimate that the pharmaceutical sector stands to gain $20 billion to $30 billion from QbD, almost exclusively due to business rather than regulatory drivers.

Product and process design, conducted in parallel with clinical development, "impacts many business factors - it impacts the launch timing, it impacts the eventual cost of goods, it impacts the differentiation of the product from other products going into the market, so it's really a key business driver," Fuhr said.

Plus he said product and process development accounts for much of a drug maker's R&D costs - about 15 percent to 30 percent. It also significantly influences as much as half of all R&D costs.

Noting that product and process development goes by many names such as CMC and pharmaceutical science, he added that it can significantly impact both cost and revenues.

"If you have better process development you can actually launch faster to the extent that the development process is on the critical path," he said. "You could also supply the market more rapidly if you have flexible processes that can respond to market demand. You can also differentiate your products from others on the market."

On the cost side, he said, "If you can improve your development process, you can actually reduce that portion of the overall cost." Plus technical development "is the key factor in determining the eventual cost of goods of the drug when it gets to the market."

Fuhr takes issue with the contention often voiced by his clients that cost of goods is not important to an innovator pharmaceutical company. "If you look at the cost of goods across the industry, it averages about 25 percent of sales." In an industry with $600 billion of annual sales, that puts the cost of goods at $150 billion - "a little bit more than the overall R&D budgets for those same innovator pharma companies. So the cost of manufacturing is a significant driver of the financial returns of pharma companies."

Pharma Suffers in Comparisons

Pharmaceutical development projects are not the largest compared to those of other industries. "They're complex and they take a long time," Fuhr said, "but as they fall in the spectrum of industries, they're in the middle."

The lengthiest, most complex development processes are those of the civilian aerospace industry, he said. "The Boeing 787 was a six-year development process. It took over 10,000 man-years to complete. We know that there are issues with the launch of that product, it's been very public, but it's extremely complex. There are over 1 million unique parts on that plane. I know of no pharmaceutical that approaches that level of complexity."

Pharmaceutical development projects typically run four to eight years, require an R&D capacity of 500 to 1,000 man-years and cost some $500 million to $1.5 billion, he said. "These are large projects and they're complex but they are manageable, and other industries have shown that."

Despite its merely mid-range complexity, pharmaceutical development lags that of the other industries in terms of performance measures that operations professionals deem important, he said.

"The aerospace industry is regulated equally if not more than the pharmaceutical industry is," he said. "The controls on aerospace are extremely tight. If you want to change one rivet on a plane, there are all sorts of paperwork and controls that you have to go through to do that. From concept all the way through launch, the controls are as tight as pharmaceuticals."

Likewise, consumer packaged goods are very similar from a unit operations standpoint.

But on seven key measures, the aerospace, consumer packaged goods, automotive and computer industries outshine the pharmaceutical sector.

The other industries rank 50 percent to 90 percent in overall equipment effectiveness, or the percent of scheduled runtime that a piece of equipment is producing good product. For pharmaceuticals, the range is 10 percent to 60 percent. Fuhr added, "From my experience, the average is about 20 to 30 percent."

Another key indicator is labor value-add time. "Of the total time that they are actually being paid, in their eight-hour day, how much of the time are they actually adding value to the product?" Fuhr asked.

"This runs about 20 percent in the typical pharmaceutical factory. In automotive, you're looking at 60 to 70 percent." One client, a generic pharma CFO, was stunned that the labor value-add time for an automotive parts supplier he visited was 80 percent. "It gives you an idea of the level of differentiation between our industry and other industries that have been on this quality journey far longer," Fuhr noted.

The direct to indirect labor ratio is another eye opener. "In the typical pharmaceutical plant, what you see is roughly equal proportion of direct labor to indirect labor," he said. "As a matter of fact in many biopharma plants, you see a higher number of indirect labor than direct labor at the plant."

He observed that in contrast, "typically what you see is a ten to one ratio across these other industries between the people that are actually doing the work on the line and the management, the quality infrastructure, the engineering, etc."

The Advantage of Quicker Process Development

Drug makers could follow the lead of other industries and increase profits by using QbD methods to speed up process development, Fuhr said.

David Afzali of IBM had told the conference just before Fuhr took the podium about a $2.5 billion upgrade of IBM's East Fishkill plant in Hopewell Junction, N.Y., that reduced the time required for new product introductions from months to hours.

Fuhr observed that the process at East Fishkill, "where they've been able to go from lab scale to commercial scale almost instantaneously, seems unimaginable in a pharmaceutical environment."

Under pressure from Japanese imports, the U.S. auto industry dramatically reduced development times for new models in the 1980s from 60 months to 35 months, Fuhr noted. They did it by investing heavily in simulation technology, he said, "and in understanding from both empirical data and the basic science how to design a car in a virtual way."

This enabled them to shift from several prototype cycles to just one. "It took them a long time and lots of investment in order to do this. But they were able to go from having a 50-month development time to 30 months. And it took about 15 years to achieve that. So this is not something that happens overnight, but it's something that the leadership invested in over a long period of time because they knew it was important. … It was an imperative for the business."

[Note: Fuhr's remarks preceded the U.S. auto industry's latest crisis, which stems from a broader liquidity crisis in the U.S. economy rather than competition from higher-quality imports.]

If drug makers could reduce the time required for process development by half, they could wait until after they have clinical outcomes before proceeding with it, Fuhr suggested. "You could actually leverage the speed in a way that would change the whole paradigm for how you actually develop pharmaceuticals. That's where the industry can be in 10 years."

Consultant John Berridge chimed in on that point during the Q&A session. "You're going to see increasingly companies doing perhaps what might be called a two-stage development process, whereby they have as little investment as is reasonable to get to proof of concept because it's about managing the risk. The risk is extraordinarily high pre-proof of concept, so it's a very light investment until proof of concept, after which you've de-risked the program so much that you can now afford to invest more heavily."

Fuhr agreed that "if you look at the attrition profile of the typical compound, when you reach the Phase 2a proof-of-concept stage, most of the risk is taken out of the development process."

Furthermore, he said, "you can actually prove mathematically that it actually pays to wait to hold onto the process and product development investment until you've passed proof of concept. And then once you've actually passed proof of concept, you double down on the investment in the development."

Key Challenges QbD Can Address

Fuhr noted several QbD-related challenges in the industry:

· Products often are not optimized for production when launched.

· There is a lack of product and process understanding, so "we don't understand the complex physiochemical relationships that are occurring in some of the unit operations. We have an empirical understanding … but we don't actually understand if I varied individual components, what impact that would have on the overall process. What is actually happening inside the vessel?"

· There is a high failure rate in both launch and manufacturing.

· There are long development timelines.

· Resources are not always deployed on the highest net present value topics.

Fuhr showed a slide breaking down how optimizing technical development through QbD could add 30 percent to 50 percent to a drug product's lifetime value both by making it more valuable and reducing its cost.

QbD could enhance a drug product's revenues by increasing its value and enabling differentiation and alternative dosage forms.

Increased value could result from three factors:

· A faster launch, to the extent that the product and process development is on the critical path, for example after clinical development and prior to commercialization;

· A better launch, with the ability to adjust to actual market demand, which often runs much higher or lower than forecasted;

· An increased exclusivity period due to innovations in production and formulation processes.

QbD also could reduce development and commercial production costs.

On the development side, "you can actually shorten your time between development steps, reduce your cycle time in your development process and," he said, "you could reduce the number of resources that you have deployed against your portfolio if you're spending less time doing these activities."

On the commercial production side, "you could have more efficient processes with higher yield, you could utilize lower cost raw materials if you understood the impact of the raw material on the finished product, and you could shorten your cycle times as well, which is a major impact."

Although it would be unrealistic to expect a 50 percent gain in net present value for all of a company's drugs, "we have seen examples of some strong improvement," Fuhr said.

Four Case Examples Shared

In one case a large pharmaceutical manufacturer seeking to compete in emerging markets achieved a 65 percent cost reduction for an over-the-counter product by using QbD tools to redesign the process, the product, the supply chain and the marketing approach.

The key was establishing what the target product profile "really should be," Fuhr said. "The product was over-designed for what the market actually required. So they did some market analysis hand-in-hand with development, determined what attributes they should measure that had the largest impact on cost. Then that research led to the flexibility to remove some of the highest-cost attributes of the product. In the end, they were able to get a large cost reduction and become far more competitive in the markets that they wanted to be in."

In another case, a large pharmaceutical company cut technology development costs by 33 percent by selectively delaying development activities.

This company had a culture of "front-loading," or developing manufacturing processes in advance of the clinical activities. It would produce Phase III clinical supplies during Phase II, even though the product may never reach Phase III, just to be ahead of the game and stay off the critical path.

The practice makes sense for products that are very likely to go to market and where the extra cost is low, he said. "But this company was doing it across the board."

The company re-designed its investment paradigm "to reflect the actual risk and the cost in the portfolio, and that led to a one-third reduction in the technical development cost." This involved applying some financial knowledge and very strict project management and project governance to the portfolio, he said, "and that allowed them to focus on really high-value activities."

In another case, a drug maker increased sales by 45 percent by designing a pediatric liquid "to attack a market niche that their competitors weren't in." The company had found through surveys and interviews that the market would pay more for a liquid formulation. Sales jumped to $370 million from $250 million.

In the final case he presented, a biotech firm that was falling behind in development used a "white smoke" session to accelerate key product development timelines by a year. This involved putting all the decision makers, including senior management, in a room with instructions to significantly accelerate CMC and clinical timelines without increasing the project's risk or resource consumption - and to do it in time to present their solution to the senior VP of R&D by the end of the day.

How QbD Can Add $30 Billion to Profits

Extrapolating from those four cases and others, Fuhr said McKinsey estimates that if the industry fully implements quality by design, it will bring $20 billion to $30 billion of additional profit.

"The bulk of that is actually by the reduction in the cost of goods, and that is primarily through reduction in cycle time, improvements in yields and improvement in quality of the production processes," he said.

"The next largest chunk is actually the productivity of the technical development activities," Fuhr said, adding that other benefits include reduced risk of regulatory citations as well as increased sales through better launches, improved product design and differentiation.

The potential savings are:

· $15 billion to $25 billion from reducing the cost of goods sold;

· $4 billion to $5 billion from improving the productivity of technology development;

· Zero to $2 billion from reducing the risk of regulatory citations such as Form 483s and warning letters; and

· Zero to $4 billion from increased sales through better launches and improved product design.

Looking more closely at the cost of goods sold, Fuhr said QbD could save some 10 to 20 percent of the $145 billion to $166 billion the pharmaceutical industry spends in this area.

Notably, cost savings from the use of design space to reduce regulatory submissions, which is often discussed as if it were the holy grail of QbD, accounts for just a sliver of the potential benefit - just $300 million to $400 million.

"The value here is alleviating compliance burden and having greater manufacturing flexibility in reducing the number of submissions," Fuhr noted. "As you can see, it's a relatively small financial benefit by our analysis, but it's an important one."

Meanwhile, few talk about cycle time reduction, the area where QbD yields the greatest reduction in cost of goods sold - some $5 billion to $8 billion.

"I often get questioned why cycle time is so important," Fuhr said. "The impact of cycle time is if I can reduce the amount of time that a manufacturing process takes then I can actually run more manufacturing on the same piece of equipment with the same number of people, so I can get more productivity out of the same line, the same factory."

Typically, the deeper understanding that comes with QbD can enable reductions of 40 percent to 70 percent in cycle time. "I'm actually working at a client now where we're reducing the cycle time by more than 70 percent for their most important product that's coming out of a very large factory. So the opportunities are there and the impact is quite large."

QbD would achieve major additional savings of $4 billion to $6 billion through fewer defects, Fuhr said. "You would reduce the quality control burden that exists on the industry and also reduce the amount of waste that exists in the industry as well."

By increasing yields through greater process understanding, QbD would save another $5 billion to $7 billion in the cost of goods sold.

And by improving commercial scale-up through greater process understanding, industry would save an additional $1 billion to $2 billion.

McKinsey's analysis of the potential QbD target for reducing the cost of goods sold breaks down like this:

· $5 billion to $8 billion from cycle time reduction;

· $5 billion to $7 billion from higher yields;

· $4 billion to $6 billion from fewer defects;

· $1 billion to $2 billion from better ramp-up; and

· $300 million to $400 million from the use of design space to reduce the regulatory burden.

QbD Toolkit Required

A QbD program requires tools to address product and process development challenges, Fuhr noted.

Optimizing concepts pre-launch requires tools such as value chain mapping. Understanding mechanisms of action requires design space and process analytical technology tools. High failure rates can be addressed through root cause analysis or failure modes effects analysis.

Another requirement is having "the management infrastructure to govern the overall process," he said. That means "actually having the governance in place, the project management in place, and the key performance indicators in place in the development organization."

Finally, he said, a cultural shift or "mindset shift" is needed, particularly within management, to succeed in the "long journey to achieve quality by design."

Journey to First Principles

But without first principle understanding, the quest for quality by design could be a long journey indeed, according to NIPTE's Prabir Basu.

"The real bottleneck in implementing quality by design in our opinion is that the science needs to be there," he told "The Gold Sheet."

"Right now quality by design is purely empirical. That means one has to do design of experiments and develop a design space. It's totally focused on getting operating flexibility," said Basu. "It can be a pretty expensive proposition, and it can take a lot of resources, and very few companies can afford to do quality by design."

This approach to QbD would only make sense for major blockbuster drugs, he suggested. But the most economical way to design quality into products is to do it during development, before they become commercial successes.

"So how can we speed up the process of quality by design? How can it be done much earlier, and much faster and with a lot less resources?"

The key, he said, is to enable predictive modeling and avoid costly, time-consuming experiments.

He compared it to heating water in a tank. "I don't need to do any experiments to say how long it's going to take to heat 100 gallons of water in a 100-gallon tank, because I have heat transfer equations," he explained. "This science has been developed, it's been well proven. I can go to a book, there's an equation there. I can use it. I don't need any validation."

Even if he moved a water heating facility from a coastal site to the mountains of Colorado, he could still calculate how much time it would take despite the lower air pressure.

"But in the case of pharmaceuticals right now, everything has to be done through experimentation. Imagine if every time I had to heat water in a tank, I had to do several experiments to do a design space," he said.

"NIPTE is trying to develop those kinds of equations, those kinds of models, that kind of science … by which one can quickly develop the process and predict how it's going to work in manufacturing."

Basu warned that, "If we don't put our effort on the science, quality by design is not going to survive very long."

NIPTE's goal is to serve as a sort of National Institutes of Health for pharmaceutical science.

"The discovery science is reasonably well-funded by NIH … to the tune of $29 billion, whereas the science of pharmaceutical product development and manufacturing is not funded at all," he explained. "In fact the only funding that's available right now is through industry sources," and it's usually focused on solving practical problems of an immediate nature.

With just $50 million a year for five or 10 years, "we can change the industry," by providing the fundamental research that has been missing, he said.

NIPTE only accepts public funding so that it can avoid the constraints on research direction and publication that often accompany private funding.

"Our goal is to do fundamental research and then publish our results in the open so that it's accessible to all, anybody whether small or large companies or generics or brand name companies," Basu explained.

NIPTE works closely with FDA, which recently awarded it two research contracts ("The Gold Sheet," November 2008, p. 20). Although the organization has been focusing on small molecule drugs, it is turning its attention to large-molecule drugs as well.

NIPTE's members are Duquesne University, the Illinois Institute of Technology, Purdue University, the University of Puerto Rico, the University of Connecticut, the University of Iowa, the University of Kansas, the University of Kentucky, the University of Maryland, the University of Minnesota and Rutgers University.

See chart: "Also see "FDA Scrutiny Prompts Closer Look at Supplier Quality Agreements" - Pink Sheet, 1 October, 2009.".

- Bowman Cox (b.cox@elsevier.com)

Attention Turns to the Business Case for Quality by Design

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