April 16, 2014

How One Pharmaceutical Manufacturer Cut Costs while Enhancing Quality, Simplifying Processes and Streamlining Inventories

In part two of our series on cost control strategies for pharmaceuticals,  CECON consultant 1569, specializing in the formulation, manufacturing,  packaging, and dosage development of pharmaceuticals, walks us through a personal experience where he was able to lead a pharmaceutical company to realize significant cost savings.


It has been my experience that reticence to change is one of the primary reasons that pharmaceutical companies do not actively pursue cost savings as a means of improving their profitability. It is presumed that little or nothing can be changed, so why bother looking?  Other common deterrents to pursuing cost controls:

1.      “We have a Purchasing department that is responsible for obtaining the best pricing on all goods and services.”

2.      “R&D and Operations, and Facilities know what they want, so who are we (Purchasing) to question their judgment?”

3.      “Cost control is not really a viable means of positively impacting the bottom line over the long haul.”   

For pharmaceutical manufacturers, it is true that approved raw materials and components, validated processes and methods, and qualified equipment and facilities cannot be changed without significant cost and effort. Yet it is frequently (and mistakenly) assumed that these constitute all of a company’s expenses or that they cannot be modified in some way that can result in significant savings. Let me share an experience to demonstrate the fallacy that little can be changed in a regulated industry that might positively impact a company’s profitability.

A few years ago, I was retained to assess a stem cell manufacturer’s warehousing operations to see what steps could be taken to consolidate and manage their on-hand inventories to accommodate relocation to a new facility.  The new facility’s warehouse was only 3,000 ft2—about one tenth the size of the current warehouse—a challenging proposition to support expanded operations.

The first order of business was to evaluate all of the items inventoried in the warehouse and to understand why they were maintained at their current levels. Surprisingly, the company routinely kept on-hand unique inventory items. To name just a few:

1.      15-20 pallets of sterile, disposable coveralls, in 8 unique sizes (Small to 5XL). These consisted of cases of 25 coveralls per case. Provided with Certificates of Conformance.
2.      Several pallets of 3% hydrogen peroxide, USP. These were cases of 16 ounce bottles. Provided with Certificates of Analysis.

3.      Several pallets of 70% isopropyl alcohol, USP.  These were cases of 1 litre (=33.8 ounce) bottles.  Provided with Certificates of Analysis.

4.      Several pallets of dry ice delivered on a once/week basis.

The R&D group and Operations provided Purchasing with specifications and consumption rates on each of these materials and Purchasing took this information and negotiated supplier contracts to obtain the supplies at volume discounts.

In my assessment of on-hand inventories, I was not concerned about the suitability of these items for their intended use or their estimated rates of usage; but I was very concerned with minimum inventory levels, turn rates, expiry dating, etc. This exercise led me to ask: Are there better supply configurations for each of these materials that would require less space?  I was surprised to learn:

1.      The average cost of one sterile, disposable coverall was approximately $20.00. Personnel routinely wore two sets of coveralls per day.

2.      The cost of a case of six (6) x 16 ounce bottles of 3% hydrogen peroxide, USP was about $240.00 (three (3) x 32 ounce bottles of 3% hydrogen peroxide, USP at Target has a total cost of $2.67). That was one expensive Certificate of Analysis!

3.      The cost of a 1 liter (=33.8 ounce) bottle of 70% isopropyl alcohol, USP was about $90.00 (a 32 ounce bottle of 70% isopropyl alcohol at Target is $1.97).

4.      The company ordered over 5,000 lbs of dry ice pellets / week for storage, pack-out and shipping of their products. The reason they needed so much was because over 50% of it evaporated prior to its use.

Based upon this preliminary analysis, it became obvious to me that in addition to “right sizing” the company’s on-hand inventory for the new site, there were real opportunities for significant cost savings too. In assessing other supply configurations, it was learned that:

1.      With respect to sterile gowning, a local supplier of sterile surgical gowning was contacted and could provide two sets of washable, re-usable sterile gowns on a daily-basis at a cost of about $10.00 / per operator. This was a savings of almost 75%. The vendor’s quality systems were audited and found to be compliant and the vendor provided a certificate of cleanliness and sterility for all of its gowns.

2.      The supplier of hydrogen peroxide could provide cases of 4 x 1 gallon bottles of 3% hydrogen peroxide, USP (with a Certificate of Analysis) for about $600 / case. The cost for this same quantity (= 512 ounces total) of hydrogen peroxide provided in cases of 6 x 16 ounce bottles per case was $1,280. A savings of $680 per 4 x 1 gallon case configuration.

3.      The supplier could provide larger quantities of 70% Isopropyl alcohol, USP. A 4 liter bottle was available at about $200 (a savings of $160 vs. 4 x 1 liter bottles), or a 20 liter bottle at about $550 / bottle (a savings of $1,250 vs. 20 x 1 liter bottles), or a 200 liter drum at $2,500 (a savings of $15,500 vs. 200 x 1 liter bottles).

4.      As a large consumer of dry ice, the company investigated installing a dry ice on-demand manufacturing system within its new facility. A calculated Return on Investment of less than two years, made this an attractive undertaking.

These and other similar cost savings valued at a total of approximately $700,000 per year were identified during transfer of the company’s warehousing operations into the new facility. Although finding savings was not the primary objective of the assignment, it turned out to be an important benefit. The company’s Chief Financial Officer was ecstatic as these savings went right to the bottom line. While I was not aware of the company’s profit margin, I estimated it was between 20 and 30%. If true, these savings would equate to an increase in sales of $2.33 to $3.5 million dollars per year, each and every year.

Most noteworthy was the fact that in not one instance was it necessary to change a quality specification, re-validate a process or method, or re-qualify a piece of processing equipment. On the contrary, quality was enhanced, processes were simplified, and inventories were streamlined and optimized.

While this is but one example of a pharmaceutical company where significant savings were found, this is not the lone instance where I have found similar situations within pharmaceutical companies or other FDA-regulated organizations. It has been my experience that NOT finding comparable opportunities is more the exception than the rule. Yet these savings often go unrecognized.

Since 1985, The CECON Group has been placing experts in over 200 scientific disciplines. CECON consultants include pharmaceutical consultants, clinical trials experts, and chemistry experts.

April 10, 2014

Eight Agricultural Technology Solutions to World Hunger

The UN estimates that there are 86 food deficit nations, 35 nations currently in a food crisis, and 26 water deficient countries. About 39% of our world’s population is not served by any electric grid and 25% are without basic emergency power. Christianity Today reported 25,000 people were estimated to starve to death daily in a November 2008 article on world hunger.

One root cause, according to CECON Consultant # 1959, a power plant and infrastructure development expert, is that the agriculture that once produced food for direct human consumption has been industrialized and monopolized globally to now produce animal feed, luxury export crops, and global investment commodities out of both reach and benefit to the poor consumer and the small organic farmer alike. Even record yields don’t feed those who can’t afford their price. And the UN reports 41.5% of the world’s people have $2/day or less in spendable income, who are then squeezed out of the market to buy a subsistence plot of land for their survival.

CECON Consultant # 1959 is currently working on technologies in low-cost systems for greenhouse farming and community electric power plants. He proposes eight solutions for dealing with food and energy crises.

1. Build integrated electric power and greenhouse farming systems for serving communities and their surrounding small land holders, a specialty of CECON Consultant # 1959.

2. Construct single community electric power plants based on the site’s capabilities, free and waste fuels, and the project objectives and budget.   

3. Establish community-supported agriculture (CSA) in which the people of a community or village pay farmers (usually organic growers using native seed) in advance or by contract for food they pick up from them weekly during the entire growing season.

4. Enable the community or village to purchase local land for a greenhouse farm with additional plots if desired for lease or rental of equal shares to local consumers and growers.

5. Get prospective local small growers together to jointly purchase an agricultural tract, splitting its ownership at closing and possibly retaining equal shares ownership on some common ground for a greenhouse farm.

6. Pressure politicians to stop any cash subsidies to all farms over 20 acres in size, and focus on subsidizing say a 10-acre plot/family for down-payments and/or producing strategic crops for local direct human consumption. Class action law suits might speed up this particular solution as well as others.

7. Pass a family homesteading law to distribute a percentage (say 25%) of all federal and state owned conservation lands (such as Forest Service & BLM land in the US) to be completed in say a 2 year time maximum.

8. Require mandatory redistribution of all corporate farm holdings of 100 acres or larger in 10-acre parcels/family within 1 year. Similarly, Franklin D. Roosevelt required that insurance companies dispose of their acquired agricultural lands quickly in the period just following the great depression of the 1930s.

Experts report that producing the world’s human food requirements will use an amazingly small amount of land if greenhouse farming methods like theirs are applied. Based on their one-acre planned food & energy demonstration model, a 9,486 square mile area irrigated in greenhouse farming under moderately intensive organic farm management will provide adequate fish, fruit, & vegetable protein and nutrition for 6.5 billion people. That area would occupy a square plot 97.4 miles on a side, being 16.86% of the state of Iowa’s size, or 1.4% of the United State’s cropland area of 420 million acres. This area would equal seven global square plots measuring 36.81 miles on a side.

Consultant # 1959 also says that the free fuels of hydroelectric power, solar thermal, and waste utilization can provide the world’s grid-less areas with very affordable electric power without the requiring high tech solutions and equipment.  2,366.4 square miles of land (a square 48.65 miles on a side) could produce 3.029 billion gallons of ethanol transportation fuel per year for 302.9 billion transportation miles using a modern steam car version of the Stanley Steamer automobile (1897-1924). Allard Research & Development is working on a 100 gal/hour community ethanol plant that could pay for itself in less than two years at a capital investment of $150,000 (US).

 The challenge is to implement these solutions and safeguards to our freedoms from underneath the special interest alliances already in place. Dr. Vallianatos, in his book This Land is Their Land, reports these hidden self-serving corrupt alliances of land grant agricultural universities, federal governmental agencies, and their big corporate (sometimes multinational) supporters. If the present trend continues unchecked, it is possible that two dozen companies could control most of the planet’s food and energy resources very soon. 

Some individuals are undoubtedly already thinking about how to legally implement technology and equipment exchanges discreetly to secure their families and communities or villages.

 Note: The opinions contained in this article are those of the author, 
CECON Consultant # 1959, and do not reflect an official position of The CECON Group.

The ingenuity, hands-on experience, and technical expertise of its consultants is what keeps CECON thriving. Since 1985, The CECON Group has been placing experts in over 200 scientific disciplines. CECON consultants include Agricultural technology consultants, energy experts, bio-technology consultants, food science  consultants, and engineering experts. 

April 8, 2014

5 Reasons Pharmaceutical Companies are Missing out on Significant Cost Savings—Cost Control Strategies for Pharma Part 1

Many pharmaceutical companies look at cost controls as a means of bolstering their bottom line in the face of increasing competition and external pressures to reduce the price of medications. Yet many struggle to identify and implement significant savings. CECON consultant 1569, specializing in the formulation, manufacturing,  packaging, and dosage development of pharmaceuticals , lays out the top five reasons why.  Next week, in Part 2 of this series, we’ll provide a personal example of leading a pharma company to significant cost savings.

1.      Reluctance to make changes that might create risk

Pharmaceuticals is a highly regulated industry that requires companies to use approved grades of raw materials and components in processes which must be validated and employ qualified equipment systems and facilities. Additionally, raw materials, components, intermediates, and finished products must be analyzed and released using sophisticated, qualified instrumentation and validated methods. It takes years and millions of dollars to conduct the studies necessary to establish these levels of control before a company is authorized to sell a product. Consequently, companies are reluctant to make changes that might risk the quality and commercial availability of their products.

2.      Executive management does not appreciate the potential cost savings within their organizations, and as a consequence, has not made cost control a major business objective of the entire organization.

From the board room to the mail room, commitment to a comprehensive cost control program has to be communicated to and embraced by all employees. Management has to make cost control not only a business objective, but also every employee’s personal performance objective. Each employee should have a job performance objective of actively participating in the company’s cost control program. Companies should seriously consider rewarding employees with a portion of the savings they identify and implement.

3.      Companies do not have the proper structure in place to identify and implement significant cost savings.
Because of the vast number of regulations governing pharmaceutical products as well as the inherent complexity in these products’ development and production, it is not realistic to assume that one department (let alone one person as is the case in many companies) can effectively evaluate and implement significant cost savings. An effective cost control program must be a team effort and the team must minimally consist of personnel from R&D, Engineering (Process and Facilities), Operations, Quality, Purchasing, and Regulatory Affairs. These individuals should be cross-trained in basic skills such as Current Good Manufacturing Practices (21 CFR Parts 210 & 211), ICH Quality Risk Management, basic accounting principles, and Return On Investment (ROI) principles. Management needs to empower the team in its work and stand-up for the team when it questions and evaluates a company’s “sacred cows” for potential slaughter.

4.      Comprehensive data needs to be collected, maintained, and analyzed with respect to a company’s costs.
To perform an effective evaluation of the best opportunities for cost savings and their potential impact; comprehensive data needs to collected, maintained, and analyzed. In many organizations where I see great opportunities for cost savings, I also see poor documentation and accounting practices. Frequently, expenditures are mis-categorized and as a result, the spending habits and patterns of the organization are not truly known.  

5.      Like quality, cost, needs to be a characteristic designed into a product

Because of regulatory constraints, and the inherent expense in both time and money, to make changes to approved products; cost must be a design consideration in the development of new products. Companies should evaluate the potential benefit to added product features relative to their cost and ultimately the impact to the profitability of the organization.

There’s no question that there are inherent challenges to identify and implement significant cost savings in pharmaceuticals companies. However, these challenges are not insurmountable. Companies that make a commitment to cost control, set-up the cross-functional teams needed to identify, assess, and implement them, and consider cost in the design of their products can realize significant savings. In my next article, I will offer an example of a pharmaceutical company who cut costs while improving quality.

Since 1985, The CECON Group has been placing experts in over 200 scientific disciplines. CECON consultants include pharmaceutical consultants, clinical trials experts, and chemistry experts.

April 3, 2014

Nanotechnology Innovation Offers Hope that Diabetics can Skip Injections

Patients diagnosed with Diabetes 1 and advanced cases of Diabetes 2 often have to give themselves painful insulin injections – sometimes as many as several per day.  Researchers at UNC-Chapel Hill and NC State have developed a nanotechnology platform that may enable diabetics to have their insulin delivered painlessly via a handheld ultrasound device that would release nanoparticles infused with the essential hormone.

The nanoparticles used in the study are made of poly(lactic-co-glycolic) acid (PLGA). They were coated with alginate and chitosan which have negative and positive charges so that they would form a “nano-network” through which the insulin’s release could be controlled. In studies done on mice, the nanotechnology networks were administered subcutaneously and then activated through focused ultrasound, providing insulin for up to ten days and eliminating the need for days’ worth of injections.

Nanotechnology innovations have been found to be effective in the treatment of a number of difficult diseases and recently received a lot of attention when UCLA’s Jonsson Comprehensive Cancer Center used them in the treatment of pancreatic cancer.  In the UCLA application, two different nanotechnology particles were used: one created a path to the cancer while the other followed and delivered a reservoir of chemotherapeutic medication. The treatment was devised by Andre Nel, a UCLA nanomedicine professor and Huan Meng, an adjunct assistant professor.

The Food and Drug Administration, as well as many of their European equivalents, have approved a variety of drug delivery approaches using PLGA.  The use of the copolymer is particularly attractive because it degrades so easily. When it breaks down it produces lactic acid and glycolic acid, two monomers that the body is accustomed to processing and which have minimal toxicity.  Other studies into the use of nanotechnology are focused on the delivery of vaccines and even for non-invasive imaging techniques.

Since 1985, The CECON Group has been placing experts in over 200 scientific disciplines. CECON Consultants include Nanotechnology Experts,  FDA ConsultantsPharmaceutical Consultants, Experts in biotechnology and  medical devices,, and Polymers & Coatings Experts