Quality Management in Pharma Comparing

Quality Management in Pharma

Comparing Pharmaceutical Companies' Quality Management Processes

Comparing the quality management processes of global vs. domestic pharmaceutical organizations yield significantly different results. The two companies included in this analysis include Johnson & Johnson, a global leader in the pharmaceutical industry and Mylan, a domestic producer of generic drugs. Supplier quality management strategies of each follow a comparable framework that includes reverse logistics which enables traceability (Kumar, Dieveney, Dieveney, 2009). Both companies are also continually evaluated by the Food & Drug Administration, which has the approval of the federal government to launch onsite audits, unannounced, any day of the year (Murray, McAdam, 2007). Quality management and compliance are critical for risk reduction, not just from a governance standpoint but from an operating expense reduction one as well (Fiscus, 2009). The process of traceability, which is critical for quality management and compliance, is compared between these two firms.

Traceability

The following diagram provides a process-based analysis of traceability. The functional areas of an organization are listed as rows, with the traceability process defined by specific steps. Figure 1, Traceability Process Workflow, illustrates how collaborative and integrated the entire traceability process is within a pharmaceutical producer. This level of integration is critical from a process standpoint as government-defined quality standards require traceability throughout any pharmaceutical organizations' supply chain (Murray, McAdam, 2007).

These process steps vary in terms of their depth and global scalability by the two companies included in this analysis. For Johnson & Johnson, the need for managing global traceability and recalls is critical, and as a result their distributed supply chain management systems and manufacturing centers have upstream traceability procedures defined while Mylan does not. Upstream traceability for Mylan is not necessary as they are a generic drug manufacturer and rely on a direct sales force. Johnson & Johnson also has automated the supplier batch traceability function and is piloting the use of Radio Frequency Identification (RFID) to more efficiently manage their supply chains (Hook, 2010). Mylan is not planning on adopting RFID for warehouse management, and is instead concentrating on regulatory compliance and reverse logistics. Mylan is also defining supplier quality management metrics of performance and has invested heavily in supplier audits and Six Sigma quality management.

Figure 1: Traceability Process Workflow

Sources: (Connolly, 2007) (Hook, 2010) (SAP Practice on Life Sciences Supply Chains)

Mylan sees themselves as a process goods producer in the pharmaceutical industry while Johnson & Johnson has a more diverse series of products and divisions, with 57% of total revenues in the last fiscal year from pharmaceuticals. Due to this difference in their business models, raw materials and components supplier auditing, a key functional areas of the traceability process, is much more diverse and requires even greater auditing than the comparable process within Mylan. Johnson & Johnson must also be very vigilant regarding how quality impacts their corporate and product brands while Mylan is often labeled as a generic drug by distribution outlets including grocery and mass merchandiser chains. Quality as a product differentiator must be an explicit goal in defining audit objectives in highly regulated industries if manufacturers are to retain and grow the trust of their suppliers and distribution channels (Schnoll, 2008).

How Traceability Contributes to Great Competitiveness

Traceability is essential for both companies to be in compliance to domestic and global pharmaceutical standards and laws, yet this is just the baseline from which both companies analyzed here begin from. For traceability to be effective in contributing to greater competitiveness, the process shown in Figure 1 must be seen as always being improved. The tangential processes that are related to traceability, from reverse logistics and supply chain management to pricing and brand management, all have a major impact on each company's ability to maintain its pricing structure and business model. In effect this process is pivotal to each company attaining its strategic goals. Traceability also connotes accountability and responsibility, both of which are critical if a bad lot of ingredients are delivered. In the unfortunate event of this occurring the speed of response in tracking the source of the materials to isolating which products and the distributors stocking them are affected is critical. To not have this ability would seriously cripple the reputations and trust of companied who don't have answers to these tough questions when they arise during a product recall.