Case Study - Commercial

Product Recall

The Facts
PharmX is a global company that manufactures and sells a variety of injectible pharmaceutical products. It has several manufacturing facilities around the world and also employs toll manufacturers. It sells its products in certain countries through distributors, who by law hold the regulatory certifications within the countries in which they distribute.

PharmX is organized into three operating business units. It also has a worldwide manufacturing operations team, a global R&D unit, and a shared service administrative/corporate team. The company has also designated "regional heads" (usually one of the business unit leaders from a specific geographic region) to coordinate efforts and communication flow within geographic areas, such as Asia, Eastern Europe, North America, etc.

Thus, PharmX is a matrix organization where many employees report directly or indirectly to more than one person within the company.
PharmX has undertaken a global Enterprise-Wide Risk Management program.

Identification
During the initial phase of the project, people from different areas of the organization and from various regions note that a material vulnerability may exist in the area of Product Recall.

Assessment
Product Recall is further scrutinized. Participants in a cross-functional workshop rate the inherent risk of a Product Recall as "high" in both Impact and Likelihood, and determine that the company's present processes and procedures are not sufficient to effectively mitigate the risk. The following are key findings:

a) Lines of responsibility for decision-making are unclear because of multiple reporting relationships in PharmX's matrix organization.

b) There's no standard terminology surrounding a potential recall.

c) Processes and procedures are unclear. When should a product be recalled? Who makes the decision? How is the decision made and who is involved?

d) There are gaps in coordination among different company entities - local, regional, global, headquarters.

e) No communications strategy exists for a Product Recall. Who needs to be notified? When? How? Who is responsible for managing communications with different stakeholders?

f) What are the various parties' contractual rights and obligations should a recall be necessary in a country where product registration is in the name of a distributor?

g) There's an urgent need for crisis management and contingency planning among all the constituencies involved - employees, the local community, distributors, government, the healthcare community and, most important, patients and their families.

Response
A variety of strategies are developed and implemented:

• Task forces are established to develop mitigation recommendations - globally, regionally and locally. Recommendations are presented to Risk Council. The Risk Council consolidates the recommendations with the work product produced by other teams to create an Annual Risk Report and Recommendations, which is used in the annual Budget and Strategic Planning cycle.
• Once Mitigation Plans are accepted and budgets are approved, a Risk Owner is designated to address each challenge and execute an approved Mitigation Plan:
• Revamped Product Recall processes and procedures are developed and rolled out with standardized terminology, as well as clear roles and responsibilities - global, regional and local.
• Training is provided to everyone who could be involved in a potential recall situation.
• Infrastructure is put into place to expedite and facilitate the Product Recall decision-making process.
• Crisis Management and Communications Plans are put into place and appropriate training is provided to members of the Leadership Teams (global, regional and local) who would be involved in such a crisis. Responsibility for communicating with various stakeholders, including regulatory authorities, is clearly defined.

Opportunity benefit
Business Continuity Planning identifies strategies to minimize product supply disruption. As part of this process, it's recognized that changes in global marketing conditions now allow for greater standardization of dosage forms and packaging. Leveraging this opportunity permits significant global manufacturing synergies, and provides a backup supply to protect against local disruptions.

Management & Monitoring
The Risk Council facilitates self-assessments within the organization and manages periodic audits of Product Recall processes and procedures to make sure they are clear and relevant, especially when there are organizational changes.

• Continuous training programs - including cross-functional mock training exercises - ensure that a state of readiness is constantly maintained. Every business unit and manufacturing facility receives refresher training and updates their plans at least once every two years.
• An outside expert provides an objective assessment of PharmX's response to actual recalls.
• Objective standards for measuring improvement are established.
• Product dosage forms and packaging are streamlined, savings are captured, and opportunity benefits are realized.

All progress and continuing challenges are reported at least annually to the Risk Council.