Steven Roan; Maria Jernelid , pp. 58. MAM/Sektionen för Management, 2009.
The pharmaceutical industry is extremely large, dynamic and a highly profitable industry. Pattison and Warren ( 2003, p 1 ) suggest that in 2002 the pharmaceutical industry pulled in profits that far exceed other industries and accounted for profits “ five-and-a-half times greater than the median for all industries represented in the Fortune 500”. Drug discovery and development is however very expensive and the industry is plagued with drug failures during the development stage. Including the costs of failures, developing and taking a new drug to market, the estimated cost for drug development is in the region of US$1.5 Billion and continues to grow year on year (Gassmann et al. 2008).The industry is now faced with finding ways to improve productivity while meeting product and customer, regulatory and efficiency demands.
A couple of issues differentiate the pharmaceutical industry from most other industries. Firstly, consumers of pharmaceutical products often have very little say in the products that they use. Secondly, the pharmaceutical industry is one of only a couple of industries in which the patent protection essentially equals the product.
Six Sigma can be defined as many things, and to different people it may have different meanings. Some will define Six Sigma as a methodology that aims to produce near perfect production process. In numerical term, the vast amount of literature on the subject is supported by Pande et al. (2000) who suggests that Six Sigma aims for a performance target of only 3.4 defects for every million activities. Some will define Six Sigma is as change in organizational culture with the outcome to enhance the position a company, with the goal to achieve greater customer satisfaction, profitability, and competitiveness While Six Sigma is not statistical system, it does use statistics as a major tool for the use and interpretation of the data.
Six Sigma has been used by some of the world’s most successful companies in a variety of different industries as a means to increase their operational efficiency and improve quality while still facilitating compliance, and providing significant benefits to the customer. The focus of Six Sigma is to enhance customer satisfaction and reduce cost by using facts and statistical analysis to minimize the non-desirable variation in the business processes.
A number of different companies who have already implemented Six Sigma within the pharmaceutical industry have been contacted as a means to investigate if or how the customers benefit from Six Sigma. Six hypotheses were created to investigate if Six Sigma is indeed a suitable strategic method for the industry and if the industry can utilise the vast experience from other companies as a bench mark to apply Six Sigma.
Companies will invariable differ, regardless if they are involved in the same industry and this they will have different competencies. Hypothesis were therefore created to investigate if companies should embrace Six Sigma in the entire organisation rather than not just departments if they realise the full potential, and if different companies have different application of the six Sigma Strategy. Leadership and commitment was also investigated to find out how critical this is to the success of Six Sigma in the pharmaceutical industry. As a means to answer the hypothesis, a number of Key Performance Indicators were used to measure customer benefits that consisted of; improved quality of product, price reduction, shorter delivery times to market and increased financial support for new development projects.
The results showed that fundamental to the success of Six Sigma are the support and leadership by management at every level. Companies who have senior management failing to drive and evaluate Six Sigma will not realise the full potential of the strategy. Companies have started to use another business strategy called Lean to compliment Six Sigma. Lean is a methodology to eliminate delays between process steps lining up these processes so that there is virtually no interruption.
It is also clear that little or no interest in passing on operational cost savings to the customers is the focus when implementing Six Sigma. This could be related to the nature of the industry, which is totally reliant on patent protection to maximise their profits. Customers may however potentially benefit from operational efficiency which leads to decreased R&D timelines which could result in drugs being available sooner on the market. Six Sigma is mainly thought of as a tool to seek operational cost savings which can be used to further strengthen or widen R&D. Customers may also receive some benefit as further R&D leads to new and innovative advances that enhance or offer improvement to current treatment.
The conclusion from this thesis work is that overall the customer benefits from the implementation of Six Sigma in the pharmaceutical industry because of higher quality, better control of quality and faster R&D processes.