The list is getting only longer, Wockhardt, Ranbaxy, Cipla, Jubilant Life Science, Orchid, Sun Pharmaceuticals Industries, Zydus Pharma, Aurobindo etc. Quality complaints, negligence, non-co-operation with regulatory teams, data integrity issues, compliance issues etc. all seem to be suddenly coming to the notice of FDA.
Let’s start with Quality. Websites of almost every pharma company hail their respective high quality standard. Then, what’s gone wrong suddenly with everybody getting suspicious about Indian Pharma Industry? Fingers are being pointed almost on every aspect of business. We can point finger at management, people, greed, negligence, culture, behavior etc but that does neither help us in identifying the core problem ailing the industry nor equipping us with the right remedy. What is certain is that Indian Pharma Industry is long due for big change in the way it operates.
Traditionally, there are two reasons why dramatic change happens: 1. A situation of crisis and 2. Able Leadership. If there is anything to read in the corridors of pharma industry, there was not ever any bigger crisis than the present one. On the leadership front, there are able leaders in Indian Pharma Industry, who have shown remarkable sense of urgency and forthrightness in moving their business by leaps and bounds. But it looks like the two are not sufficient for turning around the industry to better situation. This time, it seems that Indian Pharma Industry needs the third factor. Let’s spend some time on it.
Before we say anything about the current situation, first and foremost, we must believe that people are good and that they work in the best of their intentions to make quality and safe medicines. This belief will help us in moving away from blame game and take us working towards the right solution.
Pharmaceutical industry is still the best bet for investors as not many industries come closer to its EBITDA margins. However, there has been an ever growing expectation on pharma companies to do justice with their historical performance. And remember that the Patent Cliff that let Indian companies make copy cats of off-patented drugs, is just around the corner and has been luring Indian Pharma Industry to exploit the ‘never again to come’ best opportunity to make money.
In trying to run after the gold (dollar) rush, an average Indian pharma company has grown too much in complexity. A look at the product portfolio displayed on their websites with respect to their size would show this aspect. Per block in API and per line in Formulation plants, number of products produced are many times more than you would generally see elsewhere. While there is an ongoing rush to push more products into the same plant, running too many products in a common space results in too many non value added activities and distractions.
When too many products are run in a line and there is a pressure to exploit a never before and never again opportunity, often there is a tendency to pack too many batches of too many products into the plant (work in progress, WIP). Fundamentals of TQM tells that pushing too many batches into shop-floor leads to chaos like the traffic jams on a busy road. An unavoidable result of such chaos is thinning down of attention of people who work in the plant. This increases the chances of making avoidable mistakes. My friends in India are pretty much aware of a hit here and a scratch there on their cars as different vehicles try to better others during rush hour on the road. One can imagine, what would happen to batches of drugs when there is a regular practice of traffic jams (high work in progress, WIP) on the shop-floor.
When chaos persist on shop-floor, multiple priorities operate the flow of batches. Batches are worked upon based on whims and fancy of different people and situations. In fact, often there will be quite a few batches that wait for weeks at intermediate stages, since everybody is busy in operating on other products. Regular change in demand of too many products only help to worsen the situation. There is a saying in shop floor, ‘batches that get delayed once will only get delayed further’. Not for nothing, a huge load on QC teams is often, ‘the retesting’ of such aging batches before they are pushed ahead. And when there is too much load on QC, their effectiveness does not remain much at their best.
Now when there is often such turbulence in the flow of batches on the shop floor, not just quality, but safety, health, delivery, throughput and profitability too get adversely affected. But all this chaos and the following avoidable errors occur despite the good intentions of people. Unfortunately, all these deviations are masked in the still quite a high margins enjoyed by the industry.
We should not be naive to forget that at first instance, Pharma Industry is one of the poorest in terms of operational parameters. An average pharma plant is pegged at less than 3 sigma of quality performance. What does it mean? It means that the flow of value in the industry is inherently full of variability and disruptions; and you would expect the type of issues being highlighted not just in pharma plant but in any other plant with such a poor maturity level of operations. Yes, if you got it, then you know that the recent news may be just a tip of the iceberg.
So, What does pharma industry need to do?
Trying to identify each and every problem and trying to solve every one of them through a major dictat would seem a logical conclusion. But that would be too simplistic and dangerous way of addressing a chronic and cancerous situation. The reason is that just because a situation of crisis is at hand and because we have proven leadership, does not mean the current situation can be retrieved by dividing the problem into small parts and solving each micro problem with perfection. The situation has changed dramatically; and the complexity inside the plant and outside has become too much to handle for the current level of leadership. Perhaps, today’s leadership need to take a new look at solving this problem.
When complexity is overwhelming and things change too often around us, leaders need to be on ground to improve their understanding of the situation and coach their people in dealing with the emerging situations. This requires a new business and operational model.
Recently, over 100 practitioners made an attempt to look into this aspect. Their work on dealing with complexity and chaos in pharma industry is now documented in a just released book, ‘The Path – Leveraging Operations in a Complex and Chaotic World‘. The Path provides a real life case study on how a pharma company (Terra Pharma) operating in a chaos finds its own path of excellence.
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