Full Cost Recovery in Less than One Year
Improved blend uniformity testing offers tangible cost savings to pharmaceutical companies and generic producers. The components of potential economic benefit include:
- Savings from lost production batches
- Increased production from faster validation
- Reduced routine testing costs
- Liability mitigation
- Speed to market for generics
Estimates show an annual improvement to the bottom line of at least $500,000 US per facility (exclusive of the reduction in product liability risk), and full cost recovery of less than one year.
The estimates of financial benefits are based on the following assumptions:
- each fully converted facility is equipped with four (4) ESP™ systems – one per primary blender
- a capital cost factor of $60,000 US per ESP™ system with $80,000 US allocated to internal considerations of installation, implementation and training – amounting to $560,000 US per converted facility
Opportunities for Savings
Fewer Lost Production Batches - $115,000 US/facility
Lost batches typically occur from 1 to 12 times per year per facility, depending on the formulations being produced. The lost revenue for a batch is estimated at $600,000 US, with raw materials losses accounting for approximately $30,000 US per batch. The administrative costs of tracing, investigating and documenting the cause represents a further $25,000 US. Based on improved yield of 3 batches per year, the annual cost savings are $115,000 US.
Increased Production from Faster Validation - $120,000 US/facility
Validation occurs every time production is modified (e.g. blender type/volume, facility/location). Blend uniformity has to be re-established, a process that requires extensive sampling and assaying. Two weeks of validation time could be reduced to one day with a ESP™ system. It eliminates sampling, sampling error, and permits real time results obtained during the actual blending.
If production capacity is increased due to faster validation, incremental revenue is generated from the extra batches. If only one additional batch was generated and sold at its market rate of $600,000, the additional contribution margin (conservatively estimated at 20%) would be $120,000 US per facility.
Reduced Testing Costs - $300,000 US/facility
A minimum of 4 hours of technician time is saved for each production batch that is evaluated with the ESP™ versus traditional thieving. Under the assumption of 2 production batches/day/blender, and 4 blenders/facility, 32 technician hours per day are eliminated per facility. This translates to an annual cost reduction of 4 technicians at approximately $75,000/year, or $300,000 US. A further spin off benefit is improved inventory control due to reduced queue time waiting for assay results.
Liability Mitigation – unlimited
The largest and prevailing factor in the minds of the industry is the reduced risk of financial loss through improved protection from litigation. Understandably, beyond reviewing recent settlements, this component cannot be quantified with precision (e.g. the Schering-Plough litigation and recall of Sorbitol® is estimated to have cost $100-200 million US).
The value of the ESP™ is immediately realized on the basis of:
- removal of human contact with toxic active ingredients by improved containment
- added traceability in batch records during production
- reduction of recall risk due to poor product reaching the public
- elimination of sampling bias which contributes to false results
Speed to Market for Generics - $4,800,000 US/year
Historically, upon expiry of a patent, the first generic version to be released typically sells for 60% of the ethical version. The next generic to market – even if they lag by only a matter of days – suffers a major price decrease to 40% of the ethical version.
If production is only at one batch per day, and the price is reduced from $360,000 US (60% of $600,000 US) per batch to $240,000 US per batch at the assumed 20% contribution margin, then $24,000 per day – or $4.8 milllion US is lost by being second to market.
Contact Stantec BioPharmaceutical Engineering Consultants about integrating cost cutting process solutions into your manufacturing facility.