Video
Every year, healthcare companies are spending more time, resources and money on compliance issues. As compliance becomes increasingly rigorous, the complexity within healthcare organizations grows. Jason Evers, a partner in the Healthcare practice, shares several methods for mitigating business complexity and the resulting compliance issues.
Read the Bain Brief: Reducing the Risk of Noncompliance in Healthcare
Read the transcript below.
JASON EVERS: One of the issues facing many health care companies today is they're spending more and more time and resources and costs on compliance. At the same time, the number of compliance issues continue to increase. One of the examples of which is that the number of warning letters in both pharma and medtech has almost doubled over the course of the past five years.
And we think that there's a variety of reasons for this. But one of which that is not necessarily apparent all the time is the link between complexity and compliance. And so over time as compliance requirements have gotten more rigorous, the actual complexity of the companies themselves has increased.
This complexity has several sources. It can be geographic complexity from new markets. It can be product complexity with SKU proliferation. Or it can be organizational complexity.
This complexity has a direct trace to maintaining compliance. And this takes several different forms, one of which is, the complexity can overwhelm the systems associated with maintaining documentation and filings. So filing product with individual markets with the tracking and keeping up-to-date licenses, so on and so forth.
It also impacts the manufacturing process itself, so the complexity dramatically increases the amount of testing and lab work required, the amount of inspections on the line, and just creates unnecessary costs and slowdowns throughout the process. And then finally, it overwhelms the surveillance. So how do you actually monitor the product in field? The complexity dramatically increases, the amount of noise, as well as the complaints, and actually responding to what are real signals of safety in the field as opposed to unnecessary noise.
The cost of this can be very real. There's the direct cost as it ties to the compliance itself. Addressing a complaint can be several hundred dollars. Addressing a warning letter—several million dollars. Or ultimately, a consent decree, which can be several hundred million dollars.
And outside the direct cost, there's also the other costs associated with it. There's drug shortages. There is having late filings and not being able to sell product in markets. And then there's obviously the manufacturing process itself, of slowing it down and creating unnecessary costs in terms of the manufacturing and the overall process.
So what can you do about it? One of the things that we think people can do is, first, understand this link between complexity and compliance. What that starts with is bringing together representatives of quality, supply chain, commercial, manufacturing, and regulatory to actually understand what choices are leading to value-add complexity and what choices are leading to unnecessary complexity in the system.
Once you've done that, you need to take action. That's a matter of taking out the unnecessary complexity in a systematic way and driving these costs and really repositioning the system to be as lean and as efficient as possible. Once you've done that, you then need to build for the future, creating the right incentives and processes and understandings, so that as choices are made, you understand how it impacts complexity and compliance and you're making the right choices. And you're building a compliance system that actually serves the right level of complexity for the organization. If you do this, you not only reduce costs, you improve speed dramatically and, ultimately, improve patient safety.
Read the Bain Brief: Reducing the Risk of Noncompliance in Healthcare
Published in October 2016