Study finds quality risk gap between U.S., Puerto Rico plants

Location apparently does matter to drug quality risk after all. Even though pharma companies may be able to produce their meds more cheaply offshore than on, "substantial evidence" shows the quality risks are higher, according to recent research.

"It's a powerful result that is surprising to many people," says John Gray of Ohio State University's Fisher College of Business. Most pharma execs are well aware of the cost benefits of offshoring but some--especially those lacking ops experience--are unaware of the potential quality risk.

The research, which appears in the Journal of Operations Management, examines "big U.S.-based multinationals and established plants owned and managed by them. These are not CMOs," he says in a phone interview.

"We believe the quality differences were driven by challenges in transferring knowledge from headquarters to the plant due to cultural differences, primarily language," he says.

Gray and researchers Aleda Roth of Clemson University and Michael Leiblein, also of Ohio State's Fisher College, focused on comparing quality risk in similar drug-producing plants in Puerto Rico and the continental U.S. They matched 30 Puerto Rican plants of 16 U.S.-based companies with similar plants owned and operated by the same pharma companies on the mainland.

The team culled an FDA database of plant inspections from 1994 to 2007. They looked first at whether a Form 483 report was issued to the company. Next came inspection outcomes: no action, voluntary action (minor problems found) or official action (more serious problems that must be corrected under threat of government sanctions).

They convened an expert panel to create a scoring system based on the possible inspection outcomes. The system allowed the researchers to create a quantitative measure of quality risk for each plant in the study, according to Gray. Plant scoring showed the higher quality risk in the Puerto Rican plants versus their matched mainland facilities.

"There is a very low probability that you will get a bad drug manufactured in a mainland U.S. plant and, based on these results, we assert that there is a slightly greater, but still very low probability that you will get a bad drug manufactured in Puerto Rico," Gray says.

Although the study was restricted to a U.S./Puerto Rico comparison, Gray says he considers it fair to extend the general results to offshoring elsewhere.  Puerto Rico is geographically close to the U.S. and has been a popular location for pharma manufacturing for some time. He expects that the results of a study like his would be similar, or possibly worse, if conducted in China, India or other distant offshore locations.

- see the release
- here's a link to the paper (sub. req.)    

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