Pharmaceutical's Lean Prescription

Pharmaceutical's Lean Prescription

Facing increasing cost pressures, many pharmaceutical firms are finding a healthy dose of lean the perfect tonic.

Lean's impact is being felt across the board in the pharmaceutical industry -- on the factory floor, in the supply chain and in R&D. But if it seems that the pharmaceutical industry is a little late in jumping on the lean bandwagon, there is a sound economic reason. "In our industry, the cost of goods is relatively small compared to the overall cost structure, so lean hasn't been the burning platform that it has for the automotive and consumer products industries," explains Tim Tyson, a 30-year veteran in the pharma industry and the CEO of Aptuit, a firm providing drug development solutions.

However that platform does seem to be heating up as the industry faces pressure from a number of places. "The industry's need to increase productivity, combined with pressure from the government, is driving companies to turn to lean," says Robert Blaha, president, Human Capital Associates. And lean can be easily applied. "The lean process is perfectly suited to pharma as it is essentially the same as the scientific method," says Tyson. As the scientific method observes a phenomenon, formulates an explanation, predicts results and tests the theory, lean methodology subscribes to these same processes.

Lean processes are helping drive efficiency into pharmaceutical activities ranging from research to the supply chain. Photo: Lundbeck
That might explain why at Pfizer lean found a home in R&D as the company honed in on improvements in the areas of innovation, capabilities and research. "Unlike generic drugs, which are driven by the cost of manufacturing, patented drug costs reside in R&D, clinical trials and sales," says Terence M. Barnhart, senior director, Pfizer Inc. The myriad pathways of getting to market with new compounds, combined with the many people involved and the clinical trials, makes for a complicated process.

"While most of the lean tools have been applied to increasing the speed of repetitive tasks by removing waste, in the area of knowledge the application takes a different track," explains Barnhart. His challenge was how to design the most efficient experiment in order to discover the fastest way to create knowledge. In essence he created a "one-piece flow for the thought process."

The flow of ideas is a direct result of what Barnhart describes as the democratization of innovation. All employees, regardless of job title, become scientists seeking answers. And the tool they employ was formed by adapting value stream mapping to the particular needs of the pharma industry. Barnhart created a process he named critical question mapping. By mapping questions he can supply the knowledge needed to create a project. "Elegant thinking is worth its weight in gold," says Barnhart.

The results were significant. Pfizer cut early development through Phase 1 clinical trials by half in some projects. Additionally, redesigning the work and reducing steps led to improved quality. "High quality work is faster and lower cost," adds Barnhart.

Driving Lean from the Shop Floor

Lowering costs on the plant floor was the impetus for GlaxoSmithKline's lean journey that began 12 years ago. Today 6,500 employees holding green belts are located across the company's 77 plants. "Until you get the tools to the shop floor in a manner that is sustainable, you won't get any traction in your lean journey," explains David Pulman, president, Global Manufacturing and Supply, GSK. "Once employees could see that standard work was making life easier and tasks more productive, they reported a higher level of job satisfaction.

"Interestingly our lean efforts were driven from the shop floor to the management level. The management cycle was moved from a weekly basis to a daily basis, and issues were addressed within 24 hours. This was a major change since some levels of management were on weekly cycles and others on monthly. But management needed to keep up with the pace of the shop floor. It has been a very successful change to our way of working," Pulman adds.

As barriers broke down between management, technicians and operating staff, communication increased. "Open communication is essential. Everyone needs to understand the challenges that our industry is facing from a competitive viewpoint and realize that lean is an essential tool to enable success," Pulman says. Discussions now include global pricing, government regulation and economic frameworks.

Success on the floor has spurred other parts of the company to take a closer look at lean. For example, one of the company's older products was redesigned, and 25% of the costs were removed, a significant reduction especially in view of cost pressures due to generic drugs.

The end user, the patient, has a stake in lean as well. "In order to drive the business needs of the company and keep the focus squarely on the customer, combining lean and Six Sigma is the most efficient and proven route to take," says Blaha. Technical capability improves, as do patient outcomes.

Culture Change from Within

Lundbeck Inc. brought lean to both its shop floor and supply chain. The pharmaceutical company, which specializes in central nervous system disorders, believes there is no substitute for hands-on learning. "The motivation to learn and master the lean tools came from doing kaizens and understanding how the tools will affect future success. Culture change needs to come from inside the company and specific to the individual. The only way to do that is by learning on a gradual basis. You will make mistakes, but that's fine," says Christian Houborg, divisional director of service and technical operations at Lundbeck.

While consultants can get the ball rolling, Houborg believes that the processes must be internalized. Extensive training and many kaizen events led to significant lead time reductions across Lundbeck's supply chain; some areas saw a 90% reduction.

Three years after lean was introduced, finished goods production turned out twice the volume without an increase of staff or machinery. "Lean is at its best when you have a growing business, as the essence of lean is getting people to engage in their jobs," Houborg said.

Lean also shortened the quality approval process by 90% from 10 days to one day.

Furthermore, productivity increased to the point where Lundbeck was able to bring work back inside its four walls. In 2004 70% of all volume in finished goods was outsourced. By the end of 2011, it will be 5%. And the current workforce is picking up the work.

Lean allows Lundbeck to become a stronger competitor. Its production and supply chain costs as a percentage of revenue have been reduced from 19% to 13%, well below the industry average of 23%.

Lean's Role in Pharma's Future

Leadership within a particular organization is the first step to widespread industry adoption. "The key to our success has been an ambitious leadership program," explains Houborg.

"There must be an absolute commitment on the part of leadership in terms of the time and energy spent learning, implementing and training on these techniques. Frankly, a four-hour briefing just doesn't do it," says Blaha. "The culture has to evolve to the point where lean isn't an initiative, but it's just the way we do business. It becomes part of the company's DNA."

While the company DNA is changing, the government DNA must transform as well. "Lean should be universal. The government should be using the same tool set as the industry. These are proven techniques," says Blaha.

And the government will need to work more closely with industry as time to trial decreases. "Less time doesn't mean that corners are being cut. A company can be both technologically and operationally excellent," says Mark Graban, a lean guru.

"Using a better process increases quality. And it will have to be a combined effort on the part of industry and government to educate consumers that an improved process will lead to improved outcomes," says Tyson.

As economic pressures increase in pharma's world, Tyson believes lean will become firmly rooted in his industry. "In the past five to 10 years there has been a significant movement toward the use of tools such as lean and Six Sigma, and I believe in the next three to five years, there will be an even more rapid change in both acceptance and utilization of the tools," Tyson explains.

See Also
IndustryWeek Hall of Famer, George Koenigsaecker, On Pharma's Lean Journey

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