Benchmarking best practices and performance as a …

1 Benchmarking best practices and performance as a potential tool for increasing mutual trustDr. 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 prohibitedMcKinsey & Company|1 Introduction to McKinsey For over 75years, McKinsey & Company s primary missionhas 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.

2 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 researchin critical areas where this research can have lasting impact on overall performance of our & Company|2 Overview of presentation Increasing complexity and globalization calls for increased collaboration among regulators Prioritizing potential areas of collaboration Introducing Project RegExMcKinsey & Company|3 The last decade has brought about tremendous , bust and ?

3 DAX 30 exampleRise of many economies China exampleIncreased connectivityRecord budget deficits and national debtChina GDP$ trillion+16% cell phone penetration(per 100 people)8,0006,0004,00012,00010, budget deficit1999: $ billion surplus2009: $ billion deficitMcKinsey & Company| fundamental changes to the healthcare landscape SARS Avian flu Swine flu1520253020091999US obesity ratePercentNew diseases and epidemicsIncreasing burden of chronic diseasesBreakthroughs in research ( )High tech meets healthcareMcKinsey & Company| to the pharma environmentProbability of arms race the endDeclining R&D productivityEnhanced focus on drug safetyMcKinsey & Company|6 Industry is responding with many initiatives R&D ExampleImprove R&D productivityOptimize R&D total spendImprove Decision-MakingFully leverage IT spendIncrease variabilization of costs and manage spendCloser scrutiny of cost and speedIncrease risk sharing and minority stakesFocus on clinicaldifferentiationCER and Risk Benefit toolsMeta-Analysis of real world dataRethinking performance MetricsR&D leadership

4 DevelopmentPrediction MarketsGlobalizationCross-disciplinary asset deep divesEnhance focus on compliance and qualityReduce trial complexityMcKinsey & Company|7 Contract research industry revenue$ billionsGlobalization of clinical trials US examplePercent of subjects enrolled in clinical trials FY08 marketing applications for drugs and biologics received by FDAC linical trials are increasingly outsourced to CROs and +15% : 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 market61510161305101520253035+29% biologicsMonoclonalantibodies2151 CAGR2012-20 PercentGlobal biosimilar market is expected to grow rapidly over the next decadeSOURCE: Nature Biotechnology.

5 McKinsey analysisRevenue forecast of biosimilarsIn $ billionMcKinsey & Company|9 Pharmaceutical imports have increased substantiallyUS pharmaceutical imports, $ billionsSignificant shift in manufacturing location to India and ChinaCountry of origin of FDA DMFsSupply chain has globalized with India and China as major exporters of pharmaceuticals to established and of world200920003 SOURCE: Espicom; McKinsey analysis of Drug Master Files on FDA websiteMcKinsey & Company|10 Global sales, CAGR, 1999-2008 PercentContract manufacturing industry revenue$ billionsGeneric manufacturers and contract manufacturers have seen rapid growth in volumes over the past decadeSOURCE: Espicom; Evaluate; Datamonitor; Gx Bulletin.

6 McKinsey drugs186 GenericsBiologicsSmall molecules13 Factor 2 McKinsey & Company|11 Overview of presentation Increasing complexity and globalization calls for increased collaboration among regulators Prioritizing potential areas of collaboration Introducing Project RegExMcKinsey & Company|12 Key QuestionsHow 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?123 McKinsey & Company|13 Several lessons can be drawn from private sector collaborations1 McKinsey & Company|14 Frequent reasons for failureSOURCE.

7 McKinseyPercent1 Failurefor allMixedSuccessfor all331651 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 ( , time, skills)100% = 149 alliancesMcKinsey & Company|15 Options for enhancing regulatory cooperation in the globalized environmentPerspectiveHarmonization and mutual recognition Existing bodies are making progress toward an effective, long term solution Fully coordinated and streamlined standards and activitiesThird parties Concerns over integrity and competency must be addressed Extra capacity and flexibility to foreign operationsForeign offices Only the largest regulators will have the resources and capabilities to build foreign infrastructure Feet on the ground rapid access to local intelligencePartnerships 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

8 InformationBenchmarks and best practices Significant opportunity to complement ongoing efforts Immediate impact on perfor-mance by sharing bench-marks and best practices Expected impact2 McKinsey & Company|16 Options for enhancing regulatory cooperation in the globalized environmentHighMediumLowDegree of collaboration among regulatorsImmediateTime to impact3-5 yearsLong-TermHarmoni-zation/Mutual RecognitionBenchmarks and best prac-tice sharingPartnerships and collaborationsThird partiesForeign offices2 McKinsey & Company|17 There are several collaborations underway2 Existing Benchmarking initiatives, ,Assessment of the performance of pre-market evaluation processExisting regulatory partnerships, ,Largest inter-national collabo-ration to share experience, best practices and training for drug inspectionsAssessments of Medicines Regulatory systems in AfricaCollaboration between EMA, FDA and TGA on international GCP and GMP inspection activities launched in September 2009 TGAMcKinsey & Company|18 What could be additional areas of focus?

9 3 Public Health Impact Prevention Improved outcomes Public confidence Innovation Pre-Market Approvals Post-Market SurveillanceMain ActivitiesManagement System Overarching strategy Operating system Organization and cultureMcKinsey & Company|19 Prioritizing additional areas of collaborationManagement 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 cooperation3 McKinsey & Company|20 Inspections are a major focus of operational activities and budget for regulators7228 OthersInspections and other field operationsUS FDA FY11 budget request budget authority and user fees100% = $3,252 million SOURCE.

10 FDA FY11 budget request3 Inspections are a major area where additional insights are needed Large budget and head dedicated to inspections, , 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 chainInspections are a major area where additional insights are needed Large budget and head dedicated to inspections, , 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 chainUS FDA EXAMPLEMcKinsey & Company|21 Overview of presentation Increasing complexity and globalization calls for increased collaboration among regulators Prioritizing potential areas of collaboration Introducing Project RegExMcKinsey & 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