How to Reduce Unnecessary Compliance Costs - By identifying and eliminating non-value-added activities, drug manufacturers can avoid falling into the same cost-traps in the future. - BioPharm


How to Reduce Unnecessary Compliance Costs
By identifying and eliminating non-value-added activities, drug manufacturers can avoid falling into the same cost-traps in the future.

BioPharm International
Volume 23, Issue 7


Figure 1.
Quantifying the financial impact of the response to failures is relatively straightforward. We recognize this as what Philip B. Crosby called "cost of poor quality" (COPQ).1 Many organizations understand the application of a COPQ analysis in operations. But COPQ also can be applied to compliance activities. Any activity or cost related to investigating, reporting, or correcting any failure (deviation) can be seen as a COPQ. These include not only manufacturing-related failures, but also errors in development and dossier submission as well. All of these activities would then fall into the NVA bucket in Figure 1, instead of lying hidden in the BVA category.

Putting these costs in the NVA category sometimes feels counterintuitive for those directly involved. Categorizing deviation investigation activities, for example, as NVA doesn't mean that they aren't important or that the business can get by without them. It simply identifies deviation investigation as an activity that would not have been needed had a failure not occurred.

It's important for those involved in this exercise to understand that the idea isn't to assign blame. The entire focus is on shifting perspective, digging deeply, and clearly understanding the events and issues driving compliance costs.

Some NVA activities and costs are obvious. Others are more subtle, but they must be captured to obtain a complete picture.

Some of the most frequently obscured NVA activities are those associated with process improvement. This, too, may seem counterintuitive. After all, how could improving something not be a value-added activity? The need for process improvement often indicates shortcomings in product development, technology transfer, validation, submission, or training. It actually is process correction.

Improvements that must be made to correct incapable processes and eliminate deviations or compliance failures certainly benefit the business, but categorizing them as BVA essentially means you've accepted failure and subsequent correction as something you can't run the business without. You can. By using operational excellence, Quality by Design, and quality risk management (QRM) methodologies from development through commercialization, you can get it right the first time and obviate the need and the cost of subsequent improvement. For compliance functions, the cost of process correction activities masquerading as process improvement can be considerable.

The first step in controlling these costs is to create an effective measurement process for COPQ. However, many organizations fail to track it accurately.


Costs associated with the expectation of failure are more difficult to see and quantify. They arise when excess staff and equipment capacity are maintained because the organization is unable to predict when the next failure will occur but feels it needs to be ready. Such excesses are the hidden, indirect affects of COPQ.

It's important to be clear that NVA costs incurred in anticipation of failure differ greatly from the BVA activity of QRM to identify and mitigate potential failure modes. QRM is proactive. The anticipation of failure described here is passive. The organization doesn't know which process is going to fail or when it's going to fail but is staffed up, just in case. What's insidious is that this condition evolves over time to become the status quo, with the result that it looks and feels like something that has to be done to run the business.

The causes of failure anticipation and the hidden costs of the activities it leads to typically fall into three major categories:

  • over-reaction to past failures
  • low inherent process capability
  • over-estimation of risk.

In other words, these costly activities can result from a faulty response to the past, poor processes in the present, and an inaccurate view of the future.

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