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Article: The Cost of Failure Part 1: Too High a Price

By Michael Fleischer

Quality assurance is a primary concern for any service provider. The concept of quality is embedded into every process that takes place within an organization; from how a product is produced, the resources used in production and finally, the finished product itself.

While true in all industries, in pharmaceuticals, the cost at stake is much higher. Not only is it far more difficult to determine the solution to the problem following a quality lapse — namely the decision to administer, reengineer or remanufacture the drug in question, but due to the numbers of stakeholders and processes involved, numerous additional costs—not directly associated with the manufacturing processes—accrue along the way.

Attributing the cost of total product loss might seem an easy way to calculate the failings of a quality lapse, with more stakeholders involved in the discovery of a damaged drug and its replacement, the overall price accumulated by the sponsor is much higher. Consider these three primary financial impacts:

1. Crises Costs

To determine usability of the damaged product following an excursion requires a Quality Assurance (QA) team to intervene. This team needs to be employed to investigate whether or not the product is:

  • safe to use
  • needs to be re-engineered
  • needs to be re-manufactured entirely

The length of their decision-making process will reflect the time necessary to perform an adequate risk assessment and this ‘due diligence’ alone may cost upwards of $10,000 per excursion — whether or not the product is deemed usable.

Other crises mitigation factors include the rescheduling or cancelling of patient appointments. Should these appointments not be rescheduled, lost appointments and wasted clinical resources will need to be accounted for. Additional costs for patient interventions may also accrue should stabilizing their condition be necessary following a missed dosing.

2. Product Costs

Taking the worst case scenario of total product loss following the QA assessment —meaning the product is found unsafe to administer—initial costs to the sponsor would be lost revenue from un-billable product.

In addition to these are the product costs for making the therapy in the first place — the raw materials and their sourcing, as well as the manufacturers responsible for producing the therapy. At this stage we also realize the cost of employing new manufacturing resources to remanufacture the product. All resources: human, operational and otherwise, will need to be rescheduled and reimbursed.

3. Remediation Costs

Finally, to prevent further damage, unsafe drugs need to be moved and destroyed and new drugs re-transported to clinical sites. These costs can come at a premium to the sponsor as they accumulate expertise, timely transportation and timely rebooking of resources.

Additionally, if the damaged drug were part of a clinical trial study, staff and patients may be lost— inconvenienced by delayed treatment or as a result of a loss of faith in the study. Sponsors should therefore expect to lose further costs recruiting new staff and study patients, or otherwise in potentially running a useless study or cancelling the study entirely.

The True Cost of Failure

Industry analysts set the 2014 total annual loss to the healthcare industry from temperature excursions at approximately $35 billion1. Much of these costs come from: lost product cost ($15.2 billion), root cause analysis ($8.6 billion), clinical trial loss ($5.65 billion), replacement costs ($3.65 billion) and wasted logistics costs ($1 billion).

While a common perception in industry is that increasing quality increases costs, this addition of crisis, product and remediation costs for poor quality exemplifies the true cost savings that investing in good quality service providers can have.


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About The Author

Michael Fleischer

Director, Quality-Transport from Aug' 15 to Jul' 21
World Courier
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