Drugs produced in U.S.-owned and operated pharmaceutical manufacturing plants in Puerto Rico are more likely to have quality problems than those produced by the same firm in a matched plant on the mainland, a study released Tuesday by Ohio State University’s Fisher College of Business.
The findings shared by John Gray, lead author of the study and assistant professor of operations at the Ohio college, show how difficult it is to transfer world-class quality control to an offshore plant, even under the best of conditions.
“Many people, including some pharmaceutical executives, think offshore plants can produce drugs at significantly less cost but with the same quality risk as plants in the U.S. But we found that may not always be the case,” Gray said.
“We believe the quality differences we found in Puerto Rican plants were driven by challenges in transferring knowledge from headquarters to the plant, due to cultural differences, primarily differences in language and values,” he said.
The study findings accounted for many of the alternative explanations about why offshore plants may have lower quality than those on the U.S. mainland. Researchers matched 30 unspecified plants in Puerto Rico with plants owned and operated by the same pharmaceutical companies on the U.S. mainland, to compare circumstances under which drugs were produced.
The researchers found that quality was not related to the distance between the plant and the company headquarters, the education of the local population near the plant, or the number of similar drug manufacturing plants in the area. That left knowledge transfer challenges due to cultural differences as the most likely explanation for the results, said Gray, who prior to getting his PhD, worked as an operations manager for eight years for Proctor & Gamble.
Gray conducted the study with Aleda Roth of Clemson University and Michael Leiblein, associate professor of business and corporate strategy at Ohio State’s Fisher College.
FDA inspections cited
For the study, the researchers used inspection data that the U.S. Food and Drug Administration compiled pharmaceutical manufacturing plants that produced over-the-counter and prescription drugs on the island and the U.S. mainland. The results stemmed from FDA reports from 1994 to 2007, which listed any incidents in which the plants strayed from so-called “good manufacturing practices.”
The researchers used those findings to ask four independent experts to create a scoring system based on possible inspection outcomes; the system allowed the researchers to create a quantitative measure of quality risk for each plant in the study.
After the experts scored all the plants, the results “clearly showed that the quality risk was higher in the Puerto Rico plants when compared to their matched mainland facilities,” Gray said.
Drugs are safe
From a consumer standpoint, the results don’t mean that drugs manufactured in Puerto Rico are unsafe, as not all the quality risk problems that the FDA found would necessarily lead to unsafe drugs, he said.
“There is a very low probability that you will get a bad drug manufactured in a mainland U.S. plant and, based on these results, we assert that there is a slightly greater, but still very low probability that you will get a bad drug manufactured in Puerto Rico,” Gray said.
“It is a small practical difference for consumers. But for companies, even a slightly higher probability of a quality error can be a substantial problem. Just one quality error that hurts consumers or leads to a recall can be extremely costly to the company responsible,” he said
Results suggest that knowledge transfer challenges created by differences in language and culture are the best explanation why the offshore plants in the study had a higher quality risk, Gray said, noting researchers cannot rule out the possibility that there is something unique about Puerto Rico that would explain the results.
If – as the researchers suspect –cultural differences were the primary reasons for the differences in quality risk found on the island, the risks may actually be lower in Puerto Rico than they would be elsewhere, the professor said.
More commonalities than differences
Gray noted that Puerto Rico is a U.S. territory and the manufacturing plants there share much in common with similar mainland facilities.
“Facilities in more distant, less developed countries may face even greater obstacles to quality control than what we found in Puerto Rico,” he said.
The most effective way to improve quality standards in offshore plants may be to rotate managers and line employees from mainland plants with well-established quality programs.
“One of the managers I spoke to currently in a Puerto Rican plant said it best: No one here knows what it looks like to run a world-class operation in terms of quality control,” Gray said.
This kind of knowledge can’t just come from books and manuals, he said, especially when you’re dealing with workers who speak another language and come from another culture.