Saturday, June 6, 2009

SDM ’07 grad reflects on program’s value to pharma - SDM Pulse, Summer 2009

By Ragu Bharadwaj, SDM ’07

Editor’s note: This is the fourth and last article in a series following Ragu Bharadwaj’s progress through the System Design and Management Program. Previous articles can be accessed through the news archive at (summer 2007, fall 2007, summer 2008 issues of the SDM Pulse

Ragu Bharadwaj
SDM ’07
While systems theory has made good progress in such domains as defense and manufacturing, it has barely entered the realm of pharmaceutical development. As a research scientist at a small but fast-growing pharmaceutical company in the Boston area, I was therefore exploring new territory when I entered MIT’s System Design and Management Program (SDM).

Now that I have completed my degree, I can say with confidence that SDM provided me with the skills and tools needed to address many of the tough problems facing pharma. In particular, I spent my time at SDM exploring the value of systems thinking to the complex and enormously expensive problems of new drug discovery and development.

Historically, gut instinct, knowledge, and intuition have driven the research, development, manufacture, and
commercialization of pharmaceuticals. And yet the three core areas explored in SDM (systems engineering, system architecture, and systems dynamics), along with risk benefit analysis, are yet to be employed to great advantage. Here are some examples.

Organizational innovation
After research yields a preclinical drug candidate, development works to make the candidate into a formulation that can be delivered to a patient for clinical trials. This process is not without hurdles. While those in development work to ensure a new drug moves quickly into manufacturing, those responsible for quality assurance constantly verify that necessary safeguards are being taken. In most pharmaceutical companies, these two groups bicker constantly, and reasonable risk assessments rarely triumph over the louder voice.

Professor Thomas J. Allen’s course on organizational innovation helped me to understand why these two
groups so rarely find common ground—they literally don’t share any. While the development team needs lab space, the quality group only needs office space. So in addition to being functionally organized in separate departments, these groups are often housed in separate buildings. As Allen explains, this leads to lowered chance of any interaction and an “us versus them” mentality. This attitude reduces the chance that the two groups will be able to develop a common framework for risk evaluation. As a result, a stringent risk framework more suitable for mature commercial drugs is often applied to materials still under development, causing trial delays and slowing the release of new drugs.

To show how big this problem can be, consider that a blockbuster drug brings in at least $1 billion a year. This translates into $3 million per day of delay, as the limited duration of patents constricts the time available for the company to recoup costs through charges to the consumer. Each delay therefore not only loses the company money, it also makes the drug a little more expensive for patients, excludes more patients from access to the drug, and reduces time and money that could be spent by the pharma company on furthering other drugs in its pipeline.

There is a huge opportunity to apply such SDM tools as risk benefit analysis and failure mode element analysis to optimize this area. Developing a common framework of risk that could be both pragmatically used in development and accepted by the quality team would be a boon to the industry.

Quality by design
Major opportunities also exist for improving development through systems engineering and system architecture. Ideas such as quality by design (ensuring quality at every step in the life cycle, from inception to final product) offer potential gains to both the pharma companies and to regulatory authorities such as the US Food and Drug Administration, which is now encouraging its use. While the company provides more information to the FDA about its drug, it also gains a better understanding of drug properties and minimizes its risk of manufacturing errors, while in many cases increasing operational freedom.

Portfolio management and marketing groups within pharma companies are also beginning to adopt system
dynamics tools such as agent-based programming (a computational way to assess the impact of individuals on the whole system) to lower financial risk and allocate resources better. As these tools gain acceptance, layering real options onto funding decisions in research, clinical trials, and manufacturing cannot be far behind. Currently very few companies (Genentech is one) are known to apply this well. But within the next few years, I expect to see far more rational decisions and a better use of scarce financial resources in the pharmaceutical industry.

Applying SDM skills
Pharmaceutical research, development, and commercialization could also benefit from the application of systems principles—as I have seen in my own work. For example, using ideas from system dynamics, we have been able to highlight problems where delays in the flow of information can affect both supply and demand. We have been able to mitigate these problems by developing and using a variant of the Beer Game (a simulation developed at MIT to introduce students to the value of integrated supply chain management). In our game, by losing customers due to the lack of product, fictitious patients suffer from the lack of medicines. The game has definitely had its intended effect as participants with different functions across the company have now vowed to collaborate more intensely.

In addition, there are multiple opportunities for operations streamlining at almost every point in the pharma chain. At SDM, these opportunities were highlighted for me by elective courses in lean principles, system dynamics, and operations strategy. For example, at work I have been able to apply some very simple lean principles—with the help of my team—to reduce a 16-day cycle-time process in drug discovery to just over four days, using fewer resources and increasing employee satisfaction. As the process is iterative, this has led to faster design-build-test cycles, along with a greater overall success rate per design cycle.

I am also involved in a similar effort in development: we are hoping to take a 60-day process, involving multiple departments, down to under a week. Given the functional organization of pharma, this project involves breaking silos, challenging belief systems, and getting people to change their way of thinking about problems. Fortunately, the elective I took at MIT on power and negotiation has greatly helped me with this work.

Today, the pharmaceutical domain still has some of the most complex and inefficient operations seen in any
industry. I believe SDM’s emphasis on reducing complexity in large systems makes the program an excellent fit for anyone interested in improving health care by leading pharma to a more efficient future.

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