Life sciences companies find an ERP solution with something extra
By Philipp Harper
The life sciences companies that develop and bring to market pharmaceuticals, biotechnology, and medical devices have the same need for good enterprise resource planning (ERP) that all manufacturers have.
An effective ERP solution can result in better resource management and more efficient operations. And that can mean a healthier bottom line.
But for members of the life sciences sector, an additional hurdle must be cleared before profitability can be achieved: regulatory approval. Companies that can't pass muster with the U.S. Food and Drug Administration (FDA) will find themselves paying huge lost-opportunity costs for non-compliance. But solutions based on Microsoft Dynamics AX could help improve compliance and reduce costs.
The FDA's manufacturing mandates
Success in the life sciences often requires an enormous up-front investment. In the pharmaceutical sector, for instance, estimates (in calendar year 2000) of what it costs to bring a new drug to the U.S. market range from $110 million to $802 million, depending on who's doing the estimating.
Much of that expense is tied up in complying with the elaborate—some would say exhaustive—requirements imposed by the FDA on the drug research and development (R&D) process, including multiple levels of clinical trials. But FDA oversight doesn't stop there.
Once the drug has been developed and the marketplace entered, the manufacturing process becomes subject to federal scrutiny. And compliance doesn't come cheap.
One of the principal requirements is 21 CFR (Code of Federal Regulations) Part 11, which governs electronic record-keeping in the life sciences industry.
The annual cost for Part 11 compliance can range from $5 million to $400 million, depending on a company's size. The industry-wide compliance cost will total $2 billion in 2006.
The regulation was put into place as life sciences companies adopted automated production processes, dropping the paper audit trail along the way. Part 11 calls for electronic audit trails and digital signatures in documenting the manufacture of any and all products subject to FDA approval.
Companies that continue to track what they do the old-fashioned way—with paper—aren't affected. Of course, they're probably not as competitive either.
Another set of requirements, Good Manufacturing Practices (GMPs), applies to everyone in the industry regardless of manufacturing method. GMPs, introduced more than 40 years ago, describe the methods, equipment, facilities, and controls required for producing life sciences products. They are contained in several sections of CFR 21.
The ideal life sciences ERP solution is one that embraces GMPs while also leaving the electronic audit trail required by Part 11.
An ERP solution that covers the regulatory base
German pharmaceutical giant Boehringer Ingelheim, which has annual sales of nearly $9 billion, is an example of a life sciences company that was able to extend the functionality of its ERP system to meet the FDA's GMPs and Part 11 requirements.
In 1999 the company found itself in the market for a new ERP solution for its Nordic subsidiaries (Denmark, Sweden, Norway, and Finland). The multiple systems then in place lacked support for forecast planning and purchasing and, in the case of Denmark, for the manufacturing process.
Whatever solution was selected needed to offer shared service potential, be fully integrated (not just among the subsidiaries but with the SAP system at headquarters and with distributor and third-party systems), and operate with real-time planning and decision-making. Boehringer Ingelheim considered systems from SAP, Siebel, and Microsoft.
Pharmaceutical giant chooses Microsoft Dynamics AX
Based on its broad functionality, flexibility, ease of use, and low total cost of ownership, the company selected Microsoft Dynamics AX as its solution.
Using a single Microsoft SQL Server database for all four installations, Microsoft Dynamics AX handles processing needs in sales, purchasing, marketing, and finance while providing full integration with the SAP solution operating at the home office in Germany. (In fact, Microsoft Dynamics AX was designed to function in enterprises of Boehringer Ingelheim's size in just such a spoke-and-hub configuration, while offering a standalone ERP solution for small and mid-sized enterprises.)
The solution also was successfully integrated with wholesalers' and distributors' systems. This makes possible links to tables and records in external databases and manipulation of imported and exported data.
Boehringer Ingelheim was able to customize the solution to meet the FDA's GMPs and Part 11 requirements. However, with installation of the solution's latest version—both at the four original sites and in four new countries—that capability will come out of the box.
Introduced in 2005, Microsoft Dynamics AX for Life Sciences is a "validated" ERP solution, meaning it has been certified by a third party as complying with FDA mandates, including GMPs and Part 11. This saves life sciences manufacturers from having to pay a significant amount of money to have consultants create the necessary documentation from scratch.
A multidimensional solution
In the life sciences sector, where the costs of entry and of failure are unusually high, any solution that speeds the regulatory approval process confers a real competitive advantage.
Microsoft Dynamics AX for Life Sciences achieves that by delivering out-of-the-box compliance with FDA manufacturing standards. That the solution combines validation documentation with best-of-breed ERP functionality represents a true step forward in life sciences manufacturing.
It's a safe bet that in the near future any ERP solution designed for the sector will take into account and effectively navigate the regulatory landscape. To do less will be to fail.
