The Cost of Manufacturing Inefficiencies in the Healthcare Industry

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How much money is lost due to bad manufacturing (i.e. yield loss) in the pharmaceutical/biotech manufacturing industry?

Hello, and thanks for your question asking how much money is lost due to bad manufacturing (i.e. yield loss) in the pharmaceutical/biotech manufacturing industry. I have found that 15% of the US's healthcare costs are due to inefficient drug manufacturing. I also found that 80% of all product quality issues in the pharmaceutical/biotech manufacturing industry are due to human error. Further to this, 77% of production downtime can be attributed to failures of equipment and environmental problems. Finally, I found that temperature excursions in material shipping (logistics) can be attributed to $35 billion in annual losses in the entire pharma industry. Below you will find a deep dive into my research, along with all the details as to how I came to this conclusion.

OVERVIEW
In order to answer your question I searched through industry publications and articles, like on Contract Pharma for example, to look for the required information. Following this I searched for information in market research reports looking at this industry, however, after a thorough search through these sources the necessary information still alluded me. Next, I searched through various media articles and reports, as well as through sites providing pharma industry related news. I can conclude that not all information you required was available, I believe that either it has not been collected or it is only available in reports that must be purchased. However, below I have gone into detail on each of the segments that you requested information on, and have explained where information was and wasn't available.

The most important sources that i found to answer your question were those from pharmaguideline, the Wall Street Journal and the Boston College Law Review.

FINDINGS
- MANUFACTURING YIELD LOSS
While there are no sources which mention money lost due to yield loss, however I found information on the cost of inefficient drug manufacturing. One source tells us that 15% of the US's healthcare costs are due to inefficient drug manufacturing. This equates to $50 billion in annual costs.

- HUMAN ERROR
Next I found information about human error and its impact life sciences manufacturing (lifescience industry consists of pharma & biotech industries).

We know that around 80% of all product quality issues are due to human error. This human error equates to around $30.7 billion in losses. Human error in this industry is a major problem, while companies are attempting to address it through retraining, a survey tells us that 47% of errors are reoccurring.

- MACHINE FAILURES
Information about the percentage or amount lost due to machine failure or equipment failure in pharma industry is not available. However, in order to provide you with some useful information I have found sources about equipment failure that explain that "77% of production downtime can be attributed to failures of equipment and environmental problems." In addition to this, I have found that these unplanned downtime costs total to $50 billion wasted annually. 42% of unplanned downtime is attributed to equipment failure, so that's a $21 billion loss because of unplaned downtime.

- INCORRECT STORAGE OR HANDLING OF MATERIALS
Again, the specific percentage or amount of loss beacause of inefficient material handling in pharma manufacturing is not available. However, I did find information on losses from logistics and storage for the whole pharma industry. For example, $35 billion in annual losses are attributed to losses associated with temperature excursions. This is broken down as follows: $15.2 billion in lost product cost, $8.6 billion in root cause analysis, $5.65 billion in clinical trial loss, $3.65 billion in replacement costs and $1 billion in wasted logistics costs.

While logistics is not the same as incorrect storage or handling of materials, it can be considered as being part of material handling, which is why I provided the above information. This source claims that "material handling is the movement, protection, storage and control of materials and products throughout manufacturing, warehousing, distribution, consumption and disposal."

CONCLUSION
Overall, I have found that 15% of the US's healthcare costs are due to inefficient drug manufacturing. I also found that 80% of all product quality issues in the pharmaceutical/biotech manufacturing industry are due to human error. Further to this, 77% of production downtime can be attributed to failures of equipment and environmental problems. Finally, I found that temperature excursions in material shipping (logistics) can be attributed to $35 billion in annual losses in the entire pharma industry.

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