The Real Cost Of Poor Quality — And What You Should Do About It

By Samantha Atkinson, executive vice president and principal consultant, NSF

As human beings in a fast-moving world and professionals in an industry marked by continuous change and evolution, it is natural that we can sometimes be shortsighted in our vision and local in our thinking. While it is instinctive to care about what is happening around us, the value of understanding the wider implications of our actions often surpasses the learnings we can glean from a local or narrow view.

Quality, or perhaps poor quality, has long been a topic for the pharmaceutical sector and the impact it has on an organization’s compliance level, business performance, and supply disruption and resilience. We are all aware that there is an obvious price to pay for poor quality: both the financial cost and the likely increase in regulatory oversight. However, there we should also consider the implications for the sector and the deeper clinical and social issues that result from the domino effect created by poor quality — namely, patient health.

It is well recognized that poor quality can lead to supply disruption, and medicine supply disruptions lead to challenges for patients, who ultimately need to seek alternative medicines when their normal treatment option is unavailable. While supply chain disruptions are a frustrating challenge for companies, the impact they have on patients is personal and significant.

Clear clinical impact includes compromised or delayed treatment, treatment failure, the concerning potential decision to forgo treatment until the preferred brand is available, or the patient seeking treatment online. Each of these scenarios poses different health risks, whether the risk of unauthorized or non-compliant supplies when purchased online, an adverse drug reaction due to change of treatment, or the potential for additional financial burdens for individuals and the health service in securing alternative treatments. Furthermore, we cannot ignore the global economic impact of supply disruptions, which, compounded with rising costs, global regulatory interventions, shipping challenges, and the U.K.’s departure from the EU, have resulted in higher costs to procure medicines and materials and additional social and economic turbulence.

With the real cost of poor quality — human health and well-being — in mind, it is only right that the sector seeks to positively drive enhanced quality maturity.

Supply Challenges Cause Global Concern And Drug Shortages

The medicines supply chain is global, and its supply challenges can be seen and felt around the world.

In the U.S., the American Society of Health System Pharmacists (ASHP)¹ suggests healthcare professionals are concerned “due to the tremendous resources required to address shortages, estimated at $209 million,” stating that shortages occur due to “manufacturing and quality problems, production delays and lack of manufacturing capacity, manufacturer business decisions, shortages of active pharmaceutical ingredients (APIs) or raw materials, restricted distribution and allocation of drug products, and inventory practices.”

In 2023, ASHP² reported that “there were 309 active, ongoing drug shortages [in the U.S.] — the highest number in nearly a decade and close to the all-time high of 320 shortages.”

Furthermore, ASHP identified² the cost of shortages for companies was felt as an increase in workforce and product costs. The Association of the British Pharmaceutical Industry (ABPI)³ explains that “supply shortages can happen for a variety of reasons including manufacturing issues, disrupted access to raw materials, bottlenecks in distribution or transport networks, regulatory intervention, or a ‘batch failure,’ which is where products fail to meet the high quality control standards expected in medicine manufacture.”

In the U.K., the responsibility of managing supply continuity falls to the Department of Health & Social Care (DHSC) and manufacturers are legally bound to inform the DHSC of any supply disruptions. The management of supply and shortages across the U.K. is a complex and expensive job, involving many stakeholders.⁴

The number of products in the U.K. impacted by supply disruption or shortage continues to increase. The British Generic Manufacturers Association (BGMA) reported the worrying state of the challenge seen at a national level in its April 2024 Monthly Supply Issues Dashboard.⁵ Its report shows the ongoing numbers of medicines, particularly generics, with supply issues.

The DHSC’s Process for Managing Management Supply & Shortages is extensive and shines a spotlight on the effort needed to manage supply in the U.K.

Cost Of Poor Quality (COPQ)

At an organizational level, the COPQ can result in business and financial difficulties. Much research has been undertaken on the underlying causes and financial impact of quality issues.

Meyer⁶ provides a very simple and understandable definition of the COPQ as “any cost that would not be incurred if quality were perfect.”

NSF’s 2015 study⁷ suggested, when referring to COPQ, that in the “pharmaceutical industry, it is not uncommon for such costs to range between 25% and 40% of total sales revenue.”

In 2019, the American Society for Quality⁸ reported that “many organizations will have true quality-related costs as high as 15%–20% of sales revenue, some going as high as 40% of total operations. A general rule of thumb is that costs of poor quality in a thriving company will be about 10%–15% of operations. Effective quality improvement programs can reduce this substantially, making a direct contribution to profits.”

Improvements come with investment, maturity comes as the changes are embedded, and costs reduce as an organization climbs the maturity ladder. Importantly, when an organization believes it has reached the pinnacle, it must not rest. Sustained maturity is the target, and sustained savings are achieved from ongoing effort, unwavering dedication, and continuous improvement.

So, how do organizations climb the maturity ladder for success?

U.S. FDA And NSF Lead The Charge

The U.S. FDA is leading the charge to enhance quality maturity and minimize supply disruptions from the regulator landscape. The FDA’s Quality Management Maturity (QMM) initiative was formally proposed in 2020 and has gained traction over the last few years, culminating in an announcement⁹ in January 2024 detailing the opportunity for a limited number of drug manufacturers to participate in this QMM Prototype Assessment Protocol Evaluation Program. The aim of the program is to promote quality maturity, the opportunities and benefits of the initiative, and to “encourage drug manufacturers to implement quality management practices that go beyond current good manufacturing practice (cGMP) requirements” (ibid).

NSF continues to follow in the footsteps of the FDA, providing its QMM Assessment Tool, which can be tailored to the situation or organization at hand. It aligns with the U.S. FDA model and includes areas of assessment across strategic, operational, and tactical areas of practice.

A holistic view of an organization and its culture provides insight into how people interact with the quality management system and where misalignments create operational inefficiencies and cultural fractures.

Data Integrity Supports Quality Maturity

Data integrity is often identified as a key challenge when deploying QMM. To this end, a data integrity maturity assessment is often a critical first step for companies seeking to understand this essential part of the data governance framework. Once a baseline is established, the assessment should be repeated to continually check the data integrity “temperature.” NSF recommends high-quality assessment tools for data integrity that closely align with the ISPE GAMP DI Maturity Model (RDI Guide Appendix M2) and that have been reviewed by regulatory bodies such as the MHRA and FDA to its clients.

Data integrity will remain a hot topic across the industry as regulatory oversight advances to focus on data integrity governance system maturity, rather than program setup and implementation. There is now an expectation that governance systems are embedded and in use.

An Imperative To Mature Quality

The right focus and a clear vision create a natural desire to change. A firm commitment to quality is critical to ensuring our collective impact on the global supply chain, on our sector, on our respective organizations, and, indeed, on our patients.

However, the desire to fix quality procedures and activities without considering organizational culture is shortsighted and results in limited value and return on investment.

Quality organizations mature via a combination of quality management maturity and quality culture optimization. An eagle eye view of an organization enables opportunities for rapid change and long-term transformation activities. Deep dives into behaviors causing compliance challenges, such as data integrity, can be readily undertaken as part of the overarching process to keep on track for the desired maturity state.

This is the third in Samantha Atkinson’s series of three articles about quality management maturity. The first article covers the history and context of QMM, setting the stage for an in-depth discussion; and the second article delves into how QMM bridges cultures and breaks down barriers.

About The Author:

Samantha Atkinson, Ph.D., is executive vice president and principal consultant, NSF. She has 16 years of experience at the U.K. Medicines and Healthcare products Regulatory Agency (MHRA), where she had accountability for regulatory activities across the U.K. supply chain, including inspectorate, enforcement, licensing, clinical trials, pharmacopoeia, and premarket medical devices. Atkinson is an expert in organization or system transformation and reform, and at crisis management. She has overseen national and international incident management, and was the executive lead for the MHRA’s task force in response to the COVID-19 pandemic. Previously, she served as co-chair of the International Coalition of Medicines Regulatory Authorities (ICMRA) COVID-19 Working Group. Atkinson earned her BSc, MSc, and Ph.D. from University of Reading, UK; her MBA from University of Warwick, UK; and achieved the Major Projects Leadership Academy with the Saïd Business School at the University of Oxford, UK.