A Rating System for Drug Manufacturing Facilities to Mitigate Shortages is Viable: New Study

COLLEGE PARK, Md., June 23, 2022 /PRNewswire/ -- The longstanding 'safe and effective' regulatory approach to assure Americans their drug products meet a high standard of quality remains effective. However, the pharmaceutical industry needs an additional apparatus – a quality rating system – to address recent supply shortages that are attributable to deficiencies in manufacturing practices, says risk management expert Clifford Rossi, a professor of the practice and executive-in-residence at the University of Maryland's Robert H. Smith School of Business.

"Think CMNS nursing home ratings and CARFAX® car history reports," he adds.

The FDA has concurred and is developing a framework that assesses and rates the "quality management maturity" (QMM) of manufacturing facilities. It's designed to improve supply chain transparency, inform purchasing decisions, reduce drug shortages, and increase medicine availability. The agency further has funded Rossi to help assess such a rating system.

"Despite a market characterized by price inelasticity, a 'quality ratings' [system] should incent manufacturers to invest in quality processes with an aim toward reducing drug shortages," writes Rossi in "Economics and Risks Associated with FDA's QMM Rating Program" — his resulting white paper. He also presented the work as part of a recent FDA-hosted QMM workshop that drew more than 2,000 agency stakeholders as virtual attendees.

The pharma industry – as it is critical to the welfare and health of society — has been well-regulated by the FDA's Current Good Manufacturing Practice (CGMP) standards), Rossi says. But "the proliferation of drug products over the years, the globalization of the pharmaceutical market, increasing complexity of drug products, manufacturing processes, and supply chains have led to drug shortages in this country are startling and concerning both to policymakers and also consumers and patients dependent on uninterrupted access to high quality drug products."

Furthermore, the market is unable to differentiate drug products based on manufacturing quality, he adds, and costs imposed on pharmacies and healthcare providers during a drug shortage are not built into price negotiations directly.

"Differences among manufacturers exist in terms of their adoption of best practices in quality management," Rossi says. "This has significant implications for the likelihood of a drug shortage over time for companies unwilling or unable to go beyond CGMP standards."

A quality rating system can address this. Evidence, he adds, appears in another FDA initiative — the Center for Devices and Radiological Health, which "has experienced solid success and momentum in their implementation of voluntary assessments of medical manufacturers."

Elsewhere, the Centers for Medicare and Medicaid Services' nursing home rating system has "facilitated significant price differentials between high and low-rated nursing homes," he says.  And "the introduction of car history reports by CARFAX® has revolutionized the used car market by arming consumers with detailed information on potential damage and defects for a used auto."

Making QMM ratings mandatory for API (active pharmaceutical ingredient) and FDF (fixed dose formulation) manufacturers, Rossi says, "would certainly achieve full industry participation, comparable to what bank regulatory agencies require of depository institutions with regard to their CAMELS (Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk) ratings."

However, following this path has obvious tradeoffs for the FDA, industry and consumers, he says. "The costs to implement this would clearly need to be weighed against the benefits.

A more pragmatic solution is to continue to evolve current QMM voluntary pilot programs into a broader program of voluntary adoption, Rossi says. "There is evidence from other markets that with sufficient time and resources, what starts as a limited voluntary program can blossom into a widely adopted program."

Read "Economics and Risks Associated with FDA's QMM Rating Program," via UMD's Center of Excellence in Regulatory Science and Innovation (M-CERSI).

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Contact: Greg Muraski at [email protected]

SOURCE University of Maryland's Robert H. Smith School of Business