Greg Page, Deloitte Consulting LLP

		In today’s highly regulated and increasingly competitive life sciences landscape, quality issues are becoming more prevalent in the US and abroad. No aspect of business remains untouched: life sciences companies with poor quality systems and controls can experience tarnished reputations, lost sales, massive fines and remediation expenses, hostile working environments, talent flight, and product shortages. And negative impacts can extend far beyond company walls to affect customers and patients.

		Between 2004 and 2010, the US Food and Drug Administration (FDA) issued an average of 550 Warning Letters a year. That number more than tripled in 2011, to 1,720, with 662 Warning Letters issued in 2013. The frequency of Warning Letters is likely to increase as the FDA continues to scrutinize life sciences companies’ operations amid the proliferation of quality concerns.

		In Deloitte’s experience across the life sciences supply chain, we have found that the impacts of quality issues depend greatly upon a company’s “quality context.” We define this context as a series of stages:

Stage 1: Well-functioning quality department

		A company has no quality issues and its quality department is a valued part of the enterprise. It incorporates quality constraints and considerations throughout the supply chain, from controlling inputs to providing input to manufacturing production limits.

		A company has a higher-than-normal number of manufacturing issues and an internal or external audit identifies preliminary areas of concern. For example, a medical device company might design a product to meet customer needs but not include quality constraints in its product design process.

		The FDA (or other regulatory body) hands down a Warning Letter (or equivalent) and additional audits reveal significant quality issues. A pharmaceutical company, for example, might not have appropriate controls and monitoring in place to determine the quality of manufacturing inputs. This lack of control could result in poor-quality outputs and FDA regulatory action.

		A company receives multiple Warning Letters which go unaddressed, resulting in a Consent Decree or other major regulatory action. For instance, a pharma company might set overly ambitious sales targets that outpace manufacturing’s ability to reliably produce quality products, resulting in a Consent Decree. This represents a failure to incorporate quality inputs into supply and production planning.

		Oftentimes, a company fails to abide by the dictates of a Consent Decree because it underestimates the impact on its operations, the implications across the supply chain, and the level of effort required to build and execute a remediation program. As a result, the company or its product(s) may be excluded from the market.

		Each time a company encounters a new quality issue, whether from an internal audit, or an FDA Warning Letter, it moves higher up the scale toward increasing severity and remediation costs. Indeed, several of the above-mentioned supply chain quality issues were actual events that went unaddressed, exacerbating the issues and increasing costs.

		When considering drivers of poor quality, we have identified several attributes to avoid, as they tend to propel companies toward increasingly severe quality issues. These include process, people and technology factors such as: redundant or non-value-added quality processes; cumbersome processes that lack clarity or require considerable effort to execute; finger-pointing and lack of accountability for results; lack of strong talent in leadership positions; under-developed training programs; and lack of technology integration across various data sources.

		To reduce the potential for quality issues and the resulting ramifications of a Consent Decree, we suggest several remediating actions:

			Incorporate quality into product design and development — Companies should implement a product lifecycle management (PLM) approach in which manufacturing and quality parameters are incorporated into product design and development, leading to a higher-quality, lower-risk manufacturing environment.

			Design a sustainable quality system — As companies revise their quality standards, procedures, processes, and documentation they should design a system that is both compliant and sustainable for the business.

			Create a culture of quality — Organizations should move beyond compliance to create a culture of quality and cross-functional buy-in to prevent future quality issues.

		By adopting a proactive, sustainable process to identify and remediate potential or existing supply chain quality issues, life sciences companies can emerge as stronger, more compliant organizations that are well-positioned for long-term success.

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see 

 for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

		Member of Deloitte Touche Tohmatsu Limited

	Joe Slota (joeslota@deloitte.com) is director, life sciences industry strategy & operations; Marcos Buelvas (mbuelvas@deloitte.com) is senior manager, supply chain & manufacturing; and Greg Page is specialist leader, supply chain & manufacturing. All are employed at Deloitte Consulting LLP.

Articles

Well designed quality systems follow the product life cycle and foster a culture of quality