Benchmarking best practices and performance as a potential tool for increasing mutual trust Dr. Navjot Singh, Partner, McKinsey & Company, New York Office ICDRA – Singapore 29 November 2010 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
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Benchmarking best practices and performance as a potential tool for increasing mutual trust
Dr. Navjot Singh, Partner, McKinsey & Company, New York OfficeICDRA – Singapore29 November 2010
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
McKinsey & Company | 1
Introduction to McKinsey
▪ For over 75 years, McKinsey & Company’s primary mission has been to help clients achieve substantial, lasting improvements in their performance. We aspire to help leading institutions, private and public, improve their strategies, organizations and operations.
▪ McKinsey’s Healthcare Group serves clients around the world in the public, private and philanthropy arena. Through our work we have built global expertise in multiple healthcare systems and local market situations. We have also worked with healthcare regulators across the world.
▪ We also often pursue research in critical areas where this research can have lasting impact on overall performance of our clients.
McKinsey & Company | 2
Overview of presentation
▪ Increasing complexity and globalization calls for increased collaboration among regulators
▪ Prioritizing potential areas of collaboration
▪ Introducing Project RegEx
McKinsey & Company | 3
The last decade has brought about tremendous change…
Boom, bust and ? – DAX 30 example Rise of many economies – China example
Increased connectivity Record budget deficits and national debt
China GDP$ trillion
+16% p.a.
2009
4.9
1999
1.1
India cell phone penetration(per 100 people)
8,0006,0004,000
12,00010,000
001-Jan-201001-Jan-200501-Jan-2000
2009
45.04
1999
0.16
UK budget deficit
1999: $13.8 billion surplus
2009: $244.4 billion deficit
McKinsey & Company | 4
…including fundamental changes to the healthcare landscape
▪ SARS▪ Avian flu▪ Swine flu
15
20
25
30
20091999
US obesity ratePercent
New diseases and epidemics Increasing burden of chronic diseases
Breakthroughs in research (somewhat…) High tech meets healthcare
McKinsey & Company | 5
…and to the pharma environment
Probability of success
10.3
2002-2007
1997-2002
14.8-30%
Consolidation Commercial arms race – the end
Declining R&D productivity Enhanced focus on drug safety
McKinsey & Company | 6
Industry is responding with many initiatives – R&D Example
Improve R&D productivity
Optimize R&D total
spend
Improve Decision-Making
Fully leverage IT spend
Increase variabilization of costs and
manage spend
Closer scrutiny of cost and
speed
Increase risk sharing
and minority stakes
Focus on clinical
differentiationCER and
Risk Benefit tools
Meta-Analysis of real world
data
Rethinking Performance
MetricsR&D
leadership development
Prediction Markets
Globalization
Cross-disciplinary asset deep
dives
Enhance focus on
compliance and quality
Reduce trial
complexity
McKinsey & Company | 7
Contract research industry revenue$ billions
Globalization of clinical trials – US examplePercent of subjects enrolled in clinical trials – FY08 marketing applications for drugs and biologics received by FDA
Clinical trials are increasingly outsourced to CROs and global
6.0
2010
24.0
+15% p.a.
2000
78
22
Foreignsubjects
Domesticsubjects
SOURCE: CRO market outlook; Challenges to FDA’s ability to monitor and inspect foreign clinical trials”, OIG report, June 2010
McKinsey & Company | 8
Companies are seeking to build skills to enter the global biosimilars market
6
1510
16
130
5
10
15
20
25
30
35
+29% p.a.
2020
31
2016
16
2012
4
Other biologics
Monoclonalantibodies
21
51
CAGR2012-20Percent
Global biosimilar market is expected to grow rapidly over the next decade
SOURCE: Nature Biotechnology; McKinsey analysis
Revenue forecast of biosimilarsIn $ billion
McKinsey & Company | 9
Pharmaceutical imports have increased substantiallyUS pharmaceutical imports, $ billions
Significant shift in manufacturing location to India and ChinaCountry of origin of FDA DMFs
Supply chain has globalized with India and China as major exporters of pharmaceuticals to established markets
3.5 5.6APIs and intermediates
Finishedproducts
2007
44.9
2000
10.6 31
91
61
6
8
IndiaChina
Rest of world
20092000
3
SOURCE: Espicom; McKinsey analysis of Drug Master Files on FDA website
McKinsey & Company | 10
Global sales, CAGR, 1999-2008Percent
Contract manufacturing industry revenue$ billions
Generic manufacturers and contract manufacturers have seen rapid growth in volumes over the past decade
▪ Increasing complexity and globalization calls for increased collaboration among regulators
▪ Prioritizing potential areas of collaboration
▪ Introducing Project RegEx
McKinsey & Company | 12
Key Questions
How best to work together?
In the context of ongoing initiatives, what should be the additional areas of focus?
What should be the priorities and how to drive rapidly in the short-term?
1
2
3
McKinsey & Company | 13
Several lessons can be drawn from private sector collaborations1
McKinsey & Company | 14
Frequent reasons for failure
SOURCE: McKinsey
Percent1
Failurefor all
Mixed
Successfor all
33
16
51
▪ Overambitious – took on too many goals at once
▪ Unclear definition of and lack of agreement upfront on level of partner commitment needed for success
▪ Unwieldy governance structure due to high degree of complexity among stakeholder relationships
▪ Underestimation of technical development requirements (e.g., time, skills)
100% = 149 alliances
McKinsey & Company | 15
Options for enhancing regulatory cooperation in the globalized environment
PerspectiveHarmonization and mutual recognition
▪ Existing bodies are making progress toward an effective, long term solution
▪ Fully coordinated and streamlined standards and activities
Third parties ▪ Concerns over integrity and competency must be addressed
▪ Extra capacity and flexibility to foreign operations
Foreign offices ▪ Only the largest regulators will have the resources and capabilities to build foreign infrastructure
▪ Feet on the ground – rapid access to local intelligence
Partnerships and collaborations
▪ Partnerships and collaborations are invaluable and should be increasingly pursued – however not always easy
▪ More coordinated and efficient use of resource and sharing of information
Benchmarks and best practices
▪ Significant opportunity to complement ongoing efforts
▪ Immediate impact on perfor-mance by sharing bench-marks and best practices
Expected impact
2
McKinsey & Company | 16
Options for enhancing regulatory cooperation in the globalized environment
High
Medium
Low
Degree of collaboration among regulators
Immediate
Time to impact
3-5 years Long-Term
Harmoni-zation/Mutual Recognition
Benchmarks and best prac-tice sharing
Partnerships and collaborations
Third parties
Foreign offices
2
McKinsey & Company | 17
There are several collaborations underway2
Existing benchmarking initiatives, e.g.,
Assessment of the performance of pre-market evaluation process
Existing regulatory partnerships, e.g.,
Largest inter-national collabo-ration to share experience, best practices and training for drug inspections
Assessments of Medicines Regulatory systems in Africa
Collaboration between EMA, FDA and TGA on international GCP and GMP inspection activities launched in September 2009
TGA
McKinsey & Company | 18
What could be additional areas of focus?3
Public Health Impact
▪ Prevention
▪ Improved outcomes
▪ Public confidence
▪ Innovation
▪ Pre-Market Approvals
▪ Post-Market Surveillance
Main ActivitiesManagement System
▪ Overarching strategy
▪ Operating system
▪ Organization and culture
McKinsey & Company | 19
Prioritizing additional areas of collaboration
Management System
▪ Overarching strategy
▪ Operating system
▪ Organization and culture
▪ Processes▪ Quality management system▪ Resource management system▪ Crisis management system▪ Knowledge management system▪ Information technology▪ Infrastructure and footprint
▪ Organization structure▪ Governance and decision-making▪ Accountability▪ Performance management▪ Culture▪ Training and professional development
▪ Vision and mission▪ Policies and standards▪ Risk management▪ Regulatory science▪ International cooperation
3
McKinsey & Company | 20
Inspections are a major focus of operational activities and budget for regulators
72
28
Others
Inspections and other field operations
US FDA FY11 budget request – budget authority and user fees100% = $3,252 million
SOURCE: FDA FY11 budget request
3
Inspections are a major area where additional insights are needed ▪ Large budget and head
dedicated to inspections, e.g., for US FDA– Over $900 million
spent annually on field operations
– Over 4,000 FTEs on field activities
▪ Increasing managerial complexity to meet the needs of the globalized supply chain
Inspections are a major area where additional insights are needed ▪ Large budget and head
dedicated to inspections, e.g., for US FDA– Over $900 million
spent annually on field operations
– Over 4,000 FTEs on field activities
▪ Increasing managerial complexity to meet the needs of the globalized supply chain
US FDA EXAMPLE
McKinsey & Company | 21
Overview of presentation
▪ Increasing complexity and globalization calls for increased collaboration among regulators
▪ Prioritizing potential areas of collaboration
▪ Introducing Project RegEx
McKinsey & Company | 22
Overview of objectives and approach for Project RegEx
▪ Identify key differences and best practices in management systems across food and medical products regulators around the world that impact the effectiveness and efficiency of regulatory activities and health outcomes
Objective
▪ Participants will complete a survey, a brief data request, participate in interviews and share relevant data
▪ McKinsey will confidentially store the data, conduct analyses and share disguised findings with participants
Approach
▪ Assurance by McKinsey of the safety and integrity of the data at all times
▪ Findings will be de-identified and will only be shared with participants
▪ In some cases, with approval from participants some high level findings may be published
Our commit-ment to you
McKinsey & Company | 23
Initial focus of Project RegEx will be on Inspections
Module 1▪ Initial focus on
– Inspections: GMP, GCP and GLP
– Products: Drugs, Devices and Food
– Qualitative and quantitative benchmarks
– Management best practices
Module 2Module 3
Module 4 and beyond
McKinsey & Company | 24
Pilot module – What is entailed if you join?
• If you have an interest in joining please reach out
• Initial discussion with McKinsey
• Interest in joining• Sign a confiden-
tiality agreement (to protect you, and us)
• Nominate point of contact
• Nominate individuals to be interviewed for 1 hr
Sign up Input to design(optional - pilot participants only)
Data collection& analysis
Output
• Review bench-marking design in detail
• Share your input for additional questions & data points to collect
• Complete an online survey
• Respond to a simple data request
• McKinsey conducts 1-hr Interviews with nominated individuals (in person when possible)
• McKinsey analyzes data collected
• Receive a confiden-tial, customized final report (your perfor-mance relative to de-identified perfor-mance of others)
• Meeting to discuss results with McKinsey
• Some sanitized excerpts will be published with approval from participants
• Provide input to Module 2 (optional)
McKinsey & Company | 25
Survey will be organized by elements of a distinctive management system for regulators – example questions (1/4)