'I often say that when you can measure what you are speaking about, and express it in numbers, you know something about it.'
These words of the famous Glasgow physicist Lord Kelvin remain as true now as when they were first expressed in a lecture to the Institution of Civil Engineers in 1883. With a professional interest in both areas, Kelvin would understand that without the insight afforded by measurement those of us engaged in industrial activity are more likely to generate substantial amounts of heat than required amounts of light.
It is likely that over the next ten to fifteen years the effectiveness of the development processes in the pharmaceutical sector will become the primary competitive differentiator in the industry. As discovery becomes more fecund (genomics, proteomics) and the manufacturing processes are better understood, controlled and managed, the speed with which companies are able to pull safe and efficacious products through the development pipeline will be key to their success.
Pharmaceutical companies devote incredible amounts of funding to bringing new drug products successfully to market. The overwhelming majority is committed in the development phases. This is typically accepted as a cost, something that has to be endured in the serendipitous process of turning up that one in every five thousand or so screened compounds that are eventually packaged, labelled and sold as a drug product. But how much do we really know of the development processes in pharma? Why is it viewed as a cost rather than an investment? Is the focus more on the activities that go on in development at the expense of the outcomes these activities generate? To extend the sentiments of Kelvin: can the outcomes of our development activities be expressed satisfactorily in numbers? Can we really say that we know enough about this crucial area of business?
If the resources committed in product development by pharmaceutical companies are to represent an investment, then some fundamental questions must be asked. Not least the most basic - what return are we getting on this investment? To be able to answer this requires a process-based performance measurement framework that builds our knowledge of the capability of the operation to deliver good quality outcomes, efficiently and effectively.
Effective performance measurement, conferring the ability to achieve real performance management, ensures both line-of-sight from underlying processes and vertical linkages from top to bottom. It is described pictorially in Figure 1.
Translated from business goals, the first level of metrics driving behaviour is developed, the key performance measures (KPMs). From these, process-based key performance indicators (KPIs), the next level of metrics, are established. These are crucial. They drive behaviour at the appropriate points of the process (in pharmaceuticals, these will be processes such as chemical development, analytical development, formulation development). These enable the management of process outputs, and they determine the next tranche of activity-level process metrics.
The pharmaceutical product development chain is a hybrid that combines significant aspects of both R&D and operations. At a high level the relationships are described as in Figure 2. At a practical level, development encompasses both early-stage activities such as chemical development and execution-based activities such as clinical manufacturing and clinical packaging. This makes management and measurement of the process challenging. At a management level it requires simultaneous competency in the spheres of research/innovation/early development and in supply chain and manufacturing execution. Experience shows that these qualities are often mutually exclusive. From a measurement perspective, the framework has to recognise that the measures that drive diverse parts of the process are fundamentally different. In early development the metrics reflect event- or project management-based activity (such as defining objectives, identifying resources, developing plans). In full development, traditional manufacturing and supply-chain metrics the right product, place, time, quantity and price are important.
The investment in drug development is huge. The management challenge in drug product development is significant. To optimise the return on investment (RoI) in development the outcomes of the development process must be managed. To manage the activities in development, they must first be understood. To understand them they must be measured. How can this be achieved?
The purpose of development operations in the pharmaceuticals sector is to bring as many safe and efficacious new drugs as they can to the market as quickly and cost-effectively as possible - to the benefit of the patient. The only variables in this scenario are volumes, efficiencies and cost-effectiveness. This suggests three KPMs: productivity; cost of failure, and return on capital employed. In turn, these determine the next level of KPIs that are aligned to the process and begin to enable specificity on the performance of the operation. Figure 3 describes the relationship between these.
The KPIs begin to take us into those processes that comprise the product development operation in the pharmaceuticals sector. As we saw in Figure 1, each first level KPI has a related set of next-level Process Metrics that drive behaviour in each of the major development processes. These processes are identified in Figure 4:
Each of the first level KPIs in Figure 3 can be mapped against the individual processes specified in Figure 4 to systematically identify a measurement matrix for development. For example, at the intersection of the minimise development time KPI with the chemical development process an appropriate process metric might be average cycle time for synthesis. The same KPI mapped against the clinical manufacturing process suggests manufacturing cycle time or schedule adherence as appropriate process metrics. Similarly, mapping the minimise resources for drug development KPI against the formulation development process suggests variance on cost per formulation developed as a process metric, whilst the same KPI applied to the clinical manufacturing process would lead to yield and utilisation process metrics. This approach recognises the differences that exist between those processes that are substantially R&D-centric and those that are execution-centric.
Systematically deployed, this enables management of the important levers of the drug development operation. It provides both the line-of-sight and the 'vertical' linkages required for effective performance management and process improvement. Most importantly of all, it fulfils the basic purpose of the drug development operation: to get safe and effective drugs to patients who will benefit from their use, and to do this as quickly and cost-effectively as possible.
If this can be achieved, it will be possible to measure it and express it in numbers. It will be understood and it will improve capabilities to produce high quality products.
Harry Clark is managing director of SI Associates Limited
Mike Holz is a consultant with SI Associates Inc.