1. Six Sigma adds up for pharma
Companies look to the popular process to combat costs,
reduce time-to-market for drugs, and address inefficiencies
in manufacturing, sales, and R&D.
by Nick D'Amore
In the face of rising costs, longer waits for getting a drug to market, and increased competition,
pharmaceutical companies are starting to join other industries in subscribing to the tenets of Six
Sigma. Experts say using the tools of Six Sigma will allow companies to reduce the time needed to get
their drugs on store shelves and cut costs by eliminating variations in many processes and trimming
waste. These benefits come at a price, in cost and commitment. For pharmaceutical
companies to be truly successful within the Six Sigma model, the executives at the top of
the chain of command must take the lead and incorporate Six Sigma throughout all aspects
of their companies, in essence making a culture shift. Without the commitment and the
change in culture, experts say the training and the strategies will never reach their full
potential.
The tools of Six Sigma, Lean, and other continuous improvement methods work to streamline processes
and eliminate defects in those processes. In conjunction with those ideals, executives and managers work
to find areas throughout the company where continuous improvement can have an impact. Although
companies in other industries have sworn by such principles for decades, the pharmaceutical industry has
only recently embraced these concepts. Experts believe that the many varied challenges the industry faces
— pricing pressures, the time needed to get drugs on the market, individualized medicines — will force
many executives to implement Six Sigma in at least some aspects of their companies. The industry will no
longer be able to make up for inefficient and wasteful business practices with the same booming success
the industry had come to expect in the past.
The Medicare Modernization Act, which went into effect in January, may drive pharmaceutical companies to
the ideas of Six Sigma as generic drugs are expected to gain a stronger hold in the pharmaceutical market,
according to Sander Flaum, managing partner, Flaum Partners Inc. (flaumpartners.com). "People,
including myself, think that 60% to 80% of all drugs prescribed under the Medicare Modernization Act will
be generic," he says. "There will be more pressure on big and medium pharma to find a way to enhance
their bottom line. The easiest way to enhance the bottom line — at least in the short term, if the pipeline is
thin, and a lot of major drugs are going off-patent — is to bring Six Sigma in, in every department and
section of your firm."
In recent years, many major pharmaceutical companies have discovered the benefits of using the Six
Sigma principles to eliminate variables, defects, and inefficiencies in their business models. Most
companies using Six Sigma have done so only in the manufacturing capacity. Fewer companies are
applying the Six Sigma process to research and development, and even less are boldly applying the
concept in all areas. The companies who embrace the philosophy wholeheartedly will reap the most
rewards and achieve the most success, experts say.
Six Sigma seeks to eliminate process variance by relying on the analysis of data and the use of statistics.
For a process to be classified as Six Sigma, the process can only produce 3.4 defects per million
opportunities. The strategy took shape at Motorola in the 1980s and achieved popularity when
implemented by Jack Welch at General Electric while he was CEO. His book, The Way We Work, was cited
by many Six Sigma experts as the catalyst for the concept’s widespread use in many industries,
particularly manufacturing where the concept had first been implemented. Since that time, companies
have added and molded Six Sigma to suit their needs, incorporating Lean as well, which serves to
streamline business processes. Six Sigma is made up of two processes: DMAIC — define, measure,
analyze, improve, control — and DMADV — define, measure, analyze, design, verify.

2. Six Sigma ultimately allows executives to make the right decision for their individual companies, based on
data they can analyze. "You have the data to make the right decision, and the right decision might be, let’s
be inefficient," according to David Dilts, Ph.D., professor of operations management, Vanderbilt Owen
Graduate School of Management, and professor and director, management technology program, Vanderbilt
University School of Engineering.
Lean originated at Toyota and was detailed in the book, The Machine That Changed the World, by James P.
Womack, Daniel T. Jones, and Daniel Roos. Many companies combine the principles of Lean and Six Sigma
into a process called Lean Six Sigma or Lean Sigma. Lean is focused on streamlining processes and
eliminating the steps that add no value to the end result. Six Sigma provides companies with a philosophy
and a set of tools to implement the changes deemed necessary.
For Six Sigma to achieve its fullest potential, experts agree that there must be a commitment from the
highest levels of the organization on down. Implementing Six Sigma requires a change of culture within an
organization, as well as an intense focus on processes. Elliot Liu, Ph.D., professor, University of Phoenix
online campus, believes that Six Sigma is executive training education, and therefore, requires leadership
and commitment. "In absence of that, it will be just another quality initiative," he says.
According to Tom Connellan, former program director at Michigan Business School’s executive education
program, the leadership component of Six Sigma is its greatest asset. Companies that focus only on the
statistical analysis aspect will miss the primary benefits of the process. "A company that uses Six Sigma as
a strategic leadership tool is capitalizing on the full benefit of Six Sigma and they’ll reduce costs at the
same time," he says.
Without first addressing the culture of an organization before implementing Six Sigma, executives will not
get the high level of success they had hoped for, according to Eric Labe, senior VP, Thomas Group Inc.
Thomas Group (thomasgroup.com) helps businesses process improvements. Though company executives
know the issues facing their organizations, those issues often are not the root of the problem.
"The problem is that they cannot fix those problems because a good majority of them deal with culture,"
Mr. Labe told Med Ad News. "There are very few people that can go into their boss’ office and tell them
they’re doing their job wrong."
Executives must have a clear understanding of their business, their position in the industry, the challenges
the company faces, and strategies for the future, according to Blanton Godfrey, Ph.D., dean and Joseph D.
Moore professor, College of Textiles, North Carolina State University. In addition, executives need to
honestly define the company’s strengths and weaknesses, opportunities, and threats, and then have a
clear understanding of what issues need to be addressed first. "They need to have a clear map of what
they’re trying to accomplish," Dr. Godfrey says.
Having high-ranking executives lead the way in implementing Six Sigma will create an environment where
all areas and all employees are operating from a common ground. Bonnie Smith, managing director of
Lean Six Sigma, TBM Consulting Group, says many times continuous improvement falls into the hands of
a VP of manufacturing or operations, leaving other areas without leadership in implementing Six Sigma-
type processes. TBM Consulting helps companies use Lean Sigma to achieve efficiency and productivity. "In
companies that it’s being pushed down by the CEO, it’s being pushed down throughout the entire
organization," Ms. Smith says.
A cultural shift toward Six Sigma allows a company to tap into its most important asset: its employees. "A
question every senior executive should be asking themselves is, ‘How can I get people more engaged,’" Mr.
Connellan says. "Six Sigma, done properly, is an absolutely awesome way to get people engaged."
Having employees involved in the system will translate into a successful change of mind-set for the
company. "If people are rewarded appropriately for this kind of behavior, if they demonstrate business
results that are meaningful, those things will help with the culture," according to Tom Hodson, principal,
Deloitte.
Industry experts believe that although Six Sigma is extremely effective when used appropriately,
companies should not assume the process will fix every problem or correct every defect. Mr. Labe says Six
Sigma is merely one of many tools companies should use when looking at the way they do business. "You
must be very careful saying Six Sigma is the cure-all answer to all evils," he says. "If Six Sigma is the only
tool in our box, and that’s the hammer, then everything you come across sort of looks like a nail."

3. Although companies such as General Electric (ge.com) have been able to achieve results where their Black
Belts — people trained in Six Sigma who can train others — are saving the company about $500,000 per
person, many companies have not seen and may not see those results, and could get discouraged. "You
typically take your best people and make them your Black Belts, so you start questioning, ‘Am I getting the
returns that I thought I’d get by taking one of my best people out of their position and turning them into a
Black Belt agent Six Sigma?’" Mr. Labe says.
Mr. Labe believes that some pharmaceutical company executives are resistant about the investment
required in terms of training personnel in Six Sigma. "It’s a huge investment," he says. "It’s not
uncommon for [employees trained in Six Sigma] to then change their roles, and some companies are
apprehensive about doing that. Status quo is great."
Pharmaceutical companies have been slow to embrace Six Sigma for a variety of reasons, including the
fact that cost-cutting and eliminating process variance are only starting to be discussed within many
companies.
Some pharmaceutical companies struggle with the senior-level management commitment that is necessary
for Six Sigma to be effective, according to Gary Tyson, VP, clinical development practice, Campbell
Alliance (campbellalliance.com), a management-consulting company specializing in the pharmaceutical
and biotechnology industries.
"People at pharmaceutical companies did not grow up in a cost-containment mind-set," Mr. Tyson told Med
Ad News. "In other industries, manufacturers like Motorola have been dedicated for years to reducing the
cost of manufacturing an electronic component. Since that has not been the driver in pharma, finding
senior managers who feel strongly about Six Sigma can be difficult."
Every pharmaceutical company may not have the same opportunities in which to apply Six Sigma,
according to John Rhodes, global managing partner, life sciences, Deloitte (deloitte.com), a professional
services company providing audit, tax, consulting, and advisory services. "If you are more a specialty
company, like Roche, you do not have the same opportunities in sales force that you might in
manufacturing, which is what they’ve been focus on," Mr. Rhodes says.
The dynamics of the pharmaceutical industry in the past have not created an environment where there is
intense focus on trimming waste and reducing costs. Such concerns were often secondary to creating the
next big thing. According to Mr. Hodson, cost pressures and troublesome pipelines are changing priorities.
"The cost side of the equation is driving this," Mr. Hodson told Med Ad News. "When your livelihood and
your business model are based on innovation and new products, it’s not surprising that the cost side of the
equation is a little behind."
In addition, the pharmaceutical industry is only starting to experience the problems that have already
plagued other industries, such as the automotive industry, says Robert Blaha, president, Human Capital
Associates. Human Capital Associates (hca-leadership.com) uses Lean Six Sigma to improve
organizations.
"The need to get the waste out, improve the bottom line, and use state-of-the-art business acumen was a
little slower coming to pharma because pharma was from a curve ahead — from profits, from position,
from respectability — of general industry," Mr. Blaha says. "What has happened is pharma’s just now come
to the reality that you’ve got to run your businesses efficiently and effectively."
Mr. Connellan believes that when companies begin to see their competitors implementing Six Sigma and
succeeding, they will be more willing to incorporate the tools in their own organizations. He cites Valeant
Pharmaceuticals (valeant.com) as an example of a company taking the lead, implementing Six Sigma
intensely throughout the company. "When they start to see companies like Valeant improving their bottom
line, decreasing time-to-market, reducing contracting costs, reducing manufacturing costs, increasing
customer loyalty and support, and getting more OKs from formularies, these are the kinds of things that
will make people sit up and notice," Mr. Connellan says.
Pharmaceutical companies will not have blockbusters to fall back on as they have in the past, Dr. Dilts
says. He believes that the pharmaceutical industry is changing in ways that will not allow for one major
drug to mask fundamental problems in the business process. "As we go down the road of proteomics,
genomics, and individualized medicine, there’s going to be less chance of a blockbuster drug," he says.
"It’s going to now be more tailored to specific individuals. You better know how to be more efficient at
what you do."

4. companies are using Six Sigma to eliminate variances from routines as basic as processing invoices to
cutting out waste during research and development. A few of these companies are instituting the concepts
and principles in every aspect of the company. There are major opportunities in research and development
and clinical trials, but the number of companies engaging Six Sigma in those areas is not as widespread as
in manufacturing. "I generally see R&D as a tougher nut to crack," Ms. Smith says. "That group is far more
resistant to change than operations. Operations has been used to doing various types of programs."
Ms. Smith believes that Six Sigma should be initiated in manufacturing first because the changes in the
processes there will permeate the rest of the organization. She says research and development personnel
may be less open to change, especially if the implementation is not coming from the highest levels of
corporate governance. "They already have a process in place, and the perception is that process is already
working," Ms. Smith says. "In a lot of organizations where it’s driven by the VP of manufacturing, they are
not responsible for the R&D piece."
Ajit Gill, president and CEO of Nektar Therapeutics, believes that reducing error and variation from the
manufacturing process is vital for companies as FDA begins pushing companies to do just that. Nektar has
been using Six Sigma in many areas of the company. "What Six Sigma is trying to do is reduce the
variability in a process," Mr. Gill says. "If you think about it, what does the FDA ultimately want companies
to do? Reduce variability in the product. In that sense, isn’t this a fabulous tool for this industry and for us
to be adopting?"
Mr. Gill says Nektar is applying Six Sigma as the company develops the diabetes drug Exubera, which is
not only Nektar’s first product, but could be their biggest, in terms of volume. "We thought we had better
pay real attention to manufacturing, having far more robust manufacturing processes that one would
typically get in this business," he says.
Aside from manufacturing, Six Sigma can play a role in making the sales and marketing side more
efficient. Mr. Flaum says Six Sigma can be used to effectively assign and distribute sales representatives.
"Under Six Sigma, the name of the game is improving the bottom line by becoming more efficient and
getting errors out," he says. "Having too many sales reps certainly could be an error."
To that end, Six Sigma can be applied to educating sales representatives, seeing how they address
requests for information, execute contracts, and visit with customers, according to Mr. Hodson. He cites
Merck & Co. as an example of a major pharmaceutical company putting Six Sigma to work in an area
outside manufacturing or even research and development. Merck, he says, is looking to reduce by 50% the
amount of sales representatives promoting the same drug in the company. "[Merck has] taken these
principles and have applied them to sales rep space, and is looking at their mix of reps and what they’re
spending their time doing to drive efficiency in that area," Mr. Hodson says.
According to Mr. Hodson, many of the top pharmaceutical companies have taken the lead in implementing
Six Sigma ideals into their organization. "Eli Lilly, for example, had something like 160 projects," he says.
"They estimate $250 million in benefit."
Among the major companies using these processes in all or part of their organization are Abbott
Laboratories (abbott.com), Amgen Inc. (amgen.com), Bristol-Myers Squibb Co. (bms.com), Johnson &
Johnson (jnj.com), Eli Lilly and Co. (lilly.com), Merck (merck.com), Pfizer Inc. (pfizer.com), Schering-
Plough Corp. (schering-plough.com), and Wyeth (wyeth.com). "The larger firms where you have major
production output, you need to use it," Mr. Flaum says. "Any company that has not taken a look at how the
process works is behind the times because it is an incredible way to focus on heightening your efficiency."
pharmaceutical companies are hesitant about implementing Six Sigma because they do not want to
mechanize an industry where the drugs are unique and the patients are unique. Although he agrees with
this assumption, Dr. Dilts says there are still areas, particularly in R&D, where Six Sigma can be
successfully applied.
"If you are opening a Phase III clinical trial, you basically have to do the same steps that you have to do
for the opening of a Phase II clinical trial," he told Med Ad News. "There is a philosophical difference that,
particularly in the development area, people consider that an art form, and art forms do not lend
themselves to systemization."
According to Mr. Connellan, Six Sigma can be applied in a variety of areas of R&D, such as reducing the
time needed to recruit participants for clinical trials. "If you can shorten your time-to-market by 90 days,
that is a huge revenue impact," he says.

5. Dr. Dilts believes that implementing Six Sigma in R&D will allow researchers to discover more quickly
whether a drug will succeed, but Six Sigma does not have to hamper creativity. "You want the R&D people
to have the opportunity to try things," he says. "If you do Six Sigma right, one of the nice things you can
do is try little experiments."
Many experts believe that Six Sigma should be applied to all facets of a organization, as long as there is
data to be measured and analyzed. "Six Sigma was built around the idea that you’re going to have
thousands of instances, so you can catch the outliers over time," Mr. Tyson says. "There are areas of
pharma where it would make sense, and there are areas where other process-improvement approaches
are more applicable.
"Six Sigma works well — and all continuous-improvement methodologies work well — when there’s a lot of
something to measure. They work poorly when there are only a few instances of something to measure,
because you can’t see trends over time if you’re only doing something a few times a year, or even a dozen
times a year."
The pharmaceutical industry still has some catching up to do though, Mr. Blaha says. "There’s been a much
bigger appetite for it the last two or three years," he says. "But I don’t think that pharma is where general
industry is yet. There’s a lot of people who are doing projects, there’s a lot of people who have trained
some Black Belts, but not a lot of organizations that have taken a systemic approach to run their business
this way."
Increased innovation will be a by-product of more widespread use of Six Sigma, as companies seek to
stave off competition by addressing customer needs and creating products that serve unmet needs,
according to Leonard Hepp, Ph.D., director, process improvement/Six Sigma, Nektar (nektar.com). "It’s
going to force you to listen to customers and recognize that all products aren’t all things to all people," Dr.
Hepp says. "As you’re pushed more competitively, other values come that you have never thought about,
and that starts to transform an industry. It’s amazing how quickly you’ll see the companies change."
Six Sigma will spread to more areas within the companies that have already embraced the process, Dr.
Godfrey told Med Ad News. "It will continue to evolve, it will get re-translated," he says. "People will
rename some of the tools and modify them more to fit their type of business. Six Sigma is very hard to pin
down because what it is today is very different than what it was five years ago. It’s continuously evolving
as people copy the best practices from other companies."
According to Mr. Labe, the popularity of Six Sigma has already crested and he believes that companies will
start using the tools of Six Sigma more appropriately, and therefore, more effectively. Company managers
will begin exploring other avenues of continuous improvement, as well, he says. "When used appropriately,
it’s as good as it gets, but when used inappropriately, it doesn’t get the results that people were looking
for," Mr. Labe says.