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Explaining the behavioral economics context of culture of quality

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Thank you for the many comments on Pharmaceutical Culture of Quality presentation. Some of you asked for more information to understand why I based the discussion in the context of behavioral economics (as opposed to, for example, ethics). This slide-deck provides an explanation for my decision to link culture of quality to the dimension of econometric and behavioral economics.

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Explaining the behavioral economics context of culture of quality

  1. 1. Culture of Quality: Explaining the Behavioral Economics & Econometric Context Ajaz@ajazhussain.com 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 1 http://www.psychologytoday.com/blog/markets-in-mind/201401/dilbert-does-behavioral- economics WWW.dilbert.com
  2. 2. Some viewers of my presentations on Slideshare asked for additional information to understand the context of Behavioral Economics & Econometrics in Pharmaceutical Culture of Quality ….. http://www.slideshare.net/a2zpharmsci/pharmaceutical-culture-of-quality-38207722 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 2
  3. 3. Key Features of this Course • Focused differently; complement mainstream GXP training already conducted • Framework to integrate CoQ, QMS and GXP; connected to regulatory requirements • Easy to understand and remember; ‘Connect the Dots’ • Rational discussion on deviant behaviors; No negative cultural overtones • Opportunity to reflect and seed the idea of life-long learning. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 3
  4. 4. Based on the wisdom and evidence on what it takes to build and sustain Culture of Quality (CoQ) W. Edwards Deming - Out of the Crisis, MIT Press (2000). James T. Reason - Concepts such error models/management and safety culture. Daniel Kahneman - Decision making under risk and concepts from behavioral economics. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 4
  5. 5. Other important concepts and sources of information • Creating a Culture of Quality: Financial Incentives Don’t Reduce Errors. Employees must be passionate about eliminating mistakes. Ashwin Srinivasan and Bryan Kurey. Harvard Business Review, April 2014. • Distinguishing Control from Learning in Total Quality Management: A contingency perspective. S. B. Sitkin, K. M. Sutcliffe, and R. G. Schroeder. Academy of Management Review: 19, 537-564 (1994). • Putting Errors to Good Use: Error management culture in organizations. C. van Dyck. (2000). Doctoral Dissertation. Faculty of Social and Behavioural Sciences. The University of Amsterdam. • The theory of planned behavior. Ajen, I. Organizational Behavior and Human Decision Processes. 50, 179-211 (1991) 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 5
  6. 6. Other important concepts and sources of information • Predictably Irrational: The Hidden Forces That Shape Our Decisions. Dan Ariely, (2010). HarperCollins Publishers. • The Honest Truth about Dishonesty: How We Lie to Everyone--Especially Ourselves. Dan Ariely, (2012). HarperCollins Publishers. • The Power of Habit: Why We Do What We Do in Life and Business. Charles Duhigg, (2012). Random House Publishing Group. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 6
  7. 7. One can be judged irrational ......... • The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways. • Reversals of preference are demonstrated in choices regarding monetary outcomes, both hypothetical and real, and in questions pertaining to the loss of human lives. • … A man [or woman] could be judged irrational either because his [her] preferences are contradictory or because his desires and aversions do not reflect his/her pleasures and pains. • Amos Tversky and Daniel Kahneman (1981) • Insanity: doing the same thing over and over again and expecting different results. Albert Einstein, (attributed). 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 7
  8. 8. “The End of Rational Economics.”Dan Ariely. Harvard Business Review, July 2009. • “[Allen Greenspan] made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders.” • Dan Ariely. Harvard Business Review, July 2009. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 8
  9. 9. “We’re painfully blinking awake to the falsity of standard economic theory….” • ….that human beings are capable of always making rational decisions and that markets and institutions, in the aggregate, are healthily self-regulating. • Unlike the FDA, for example, which forces medical practitioners and pharmaceutical companies to test their assumptions before sending treatments into the marketplace, no entity requires business (and also the public sector) to get at the truth of things. • Dan Ariely Harvard Business Review July 2009 • But what does this have to do with pharmaceutical sector – which (as Dan Ariely wrote, above) is regulated by FDA? • Dan was primarily referring to the pre-approval process; post-approval the system is under a episodic inspectional domain – which can be plagued with ‘heterogeneity and information asymmetry gaps’ 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 9
  10. 10. Chemometric, Pharmacometrics & Econometrics: Three Dimensions of QbD 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 10 Chemometrics Econometrics Review & Approval Business Decisions: Commercial operations, profitability & availability. Periodic Regulatory Inspections Three Econometric Papers on Quality Decay, Shock, and Renewal: Operational Routines and Process Entropy in the Pharmaceutical Industry. Regulator Heterogeneity and Endogenous Efforts to Close the Information Asymmetry Gap: Evidence from FDA regulation. Quality Risk in Offshore Manufacturing: Evidence from the Pharmaceutical Industry How do people really make decisions? Prospect Theory: An Analysis of Decision under Risk. Daniel Kahneman and Amos Tversky Econometrica. 47: 263-291 (1979) The Framing of Decisions and the Psychology of Choice. Amos Tversky and Daniel Kahneman Science. 211, pp. 453-458 (1981) The End of Rational Economics. Dan Ariely. Harvard Business Review, July 2009. Ajaz S. Hussain. SWISS PHARMA 34 (2012) Nr. 6.
  11. 11. CoQ: Pre-approval, Approval & Post-approval 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 11 Development & Application Commercial Operations Pharmacovigilance Inspections – 483, WL,… Marketing,…. Manufacturing Marketing Authorization Pre-Approval Inspection Review Application Development Prone to ‘process entropy’ without FDA Inspections! http://www.nike.com/us/en_us/c/justdoit “Throw-over the wall” “Satisfy Reviewer Requirements”
  12. 12. Decay, Shock, and Renewal: Operational Routines and Process Entropy in the Pharmaceutical Industry ……the tendency of operational routines to decay is widespread. Our results also illustrate that FDA inspections act as external renewals that halt decay in adherence to routines….. Gopesh Anand, John Gray, and Enno Siemsen. Organization Science. 23:1700-1716 (2012) 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 12
  13. 13. Regulator Heterogeneity and Endogenous Efforts to Close the Information Asymmetry Gap: Evidence from FDA regulation ….considerable evidence that regulators are actively aware of information asymmetries ….. Our results also reveal marked heterogeneity among individual regulators Jeffrey T. Macher, John W. Mayo and Jack A. Nickerson. Journal of Law and Economics. 54: 25 – 54 (2011) 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 13
  14. 14. Quality Risk in Offshore Manufacturing: Evidence from the Pharmaceutical Industry ...transfer and maintenance of the knowledge required to operate with a low quality risk across non-geographic distance are left as the most plausible explanatory factors. John Gray, Aleda Roth, and Michael Leiblein. Journal of Operations Management. 29: 737–752 (2011) 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 14
  15. 15. Behaviors: Rational & Irrational The Framing of Decisions and the Psychology of Choice. Amos Tversky and Daniel Kahneman. Science. 211, pp. 453-458 (1981) 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 15
  16. 16. “How Honest People Cheat” Harvard Business Review, February 2008 Most individuals, operating on their own and given the opportunity, will cheat—but just a little bit, all the while indulging in rationalization that allows them to live with themselves. Human fallibility अविश्िसनीय • Error गलती • Malicious दुर्भािपूर्ा • Beyond ‘cheating’ - Many biases – leading to wrong decision 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 16 The Honest Truth about Dishonesty: How We Lie to Everyone--Especially Ourselves. Dan Ariely, (2012). HarperCollins Publishers.
  17. 17. “Four years after the scandals of the financial crisis prompted deans and faculty to re-examine how they teach ethics..” • Does an 'A' in Ethics Have Any Value? B-Schools Step Up Efforts to Tie Moral Principles to Their Business Programs, but Quantifying Those Virtues Is Tough. By MELISSA KORN. THE WALL STREET JOURNAL. Feb. 6, 2013 • "Business schools have been giving students some education in ethics for at least the past 25 or 30 years, and we still have these problems," such as irresponsibly risky bets or manipulation of the London interbank offered rate, says John Delaney, dean of University of Pittsburgh's College of Business Administration and Katz Graduate School of Business. • Stand-alone ethics courses are a start, but they "compartmentalize" the issue for students, as if ethical questions aren't applicable to all business disciplines, says David Ikenberry, dean of University of Colorado's Leeds School. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 17
  18. 18. The Behavioral Economics Context An Alternate Approach to a Discussion Based in Ethics/Morality A means to discuss behaviors in the context of human (rational and irrational) decision-making • A majority of people in the pharma sector have the right intentions – duty of care; yet some of their decisions fall under the irrational category • Certain cognitive biases hinder them to test certain assumptions when making decisions; and/or • Their frame of reference & understanding is not aligned with the legal and regulatory requirements in the USA • There will always be a segment which will bend or break the rules – when no one is looking; • Their frame of reference (prevailing norms in an environment) provides them with a basis to rationalize that their bending/braking of rules does ‘no harm’ Then there are the habitual criminals – who have no place in the legitimate world of health care • It should be recognized that the line separating Cheating by Design and Quality by Design is very thin 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 18
  19. 19. Why Culture of Quality? FDA inspections are periodic, of limited duration, face information asymmetry, are heterogeneous,.. • CoQ shapes the environment - ideally to facilitates human behavior to do the right thing when no one is looking • Effective QMS • Compliance to GXP CoQ is a Safeguard to Pre-conditions for Malice or Disregard when the Regulator is Not Inspecting or Reviewing • Attitude/Rationalization • Pressure/Incentive • Opportunity – “holes” in QMS, supervision, policies,… 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 19
  20. 20. Preconditions to malice or disregard Rationalization & Attitude Pressure & Incentive Opportunity – ‘holes in the QMS” 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 20
  21. 21. Challenge of a ‘cluster’ of poor data integrity practices Many pharma companies in India have state-of-art quality systems However, a ‘cluster’ of poor data integrity practices have been noted.. There is a serious and lingering concern that there may be a set of common factors and that such practices may be more widespread The size of this cluster is increasing as rigor and frequency of US FDA inspections have increased Suspects are cultural attitudes, human hardships in an emerging economy, and/or growth ambition beyond what current systems can support Effective intervention needs a deeper understanding of root cause(s); to strengthen Culture of Quality. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 21
  22. 22. Clustering Illusion – this is not. The Gold Sheet. 28 March 2014. Bowman Cox Four Viewpoints 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 22
  23. 23. At the individual level, in QC function– how often does this occur? attitude toward performing the behavior Process validation is done so quality is good; test prone to error “Batch failure means I made a mistake” subjective norm documentation not critical; Compendial testing sufficient Indian regulators collect & test samples – no issue there! 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 23 “Testing into compliance” In general – low empowerment is a significant challenge (low perceived behavioral control); plus reasons to rationalize….
  24. 24. Systems Approach for Error/Deviation Management 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 24 Organization (Policies & Sr. Mgmt.) Technology (Constraints & Controls) Individual (Training & Certification) Team & Supervisor (Soft Defenses) Defenses (Quality Management System) Error Latent अप्रकट conditions Goal conflicts & mixed messages Design flaws Production pressures Fear of error Human error: models and management. J. Reason. BMJ. 320: 768–770 (2000).
  25. 25. Quality is everyone's responsibility Lack of knowledge... that is the problem. If you do not know how to ask the right question, you discover nothing. If you can't describe what you are doing as a process, you don't know what you're doing. Rational behavior requires theory. Reactive behavior requires only reflex action. Whenever there is fear, you will get wrong figures. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 25 Learning is not compulsory... neither is survival. Selected quotes, W. Edwards Deming
  26. 26. Intentions and Behaviors: Pre-approval, Approval & Post-approval • Process Entropy, decisions here at risk of only focused on economic factors (as opposed to consciously balancing interest of patients)Post-Approval • Process validation – the old way “three batches and done for life” • Controls and Specifications – sources of variability adequately understood and controlled in the interest of patients? Approval • Time to file – is the only goal in mind. The quality of review at FDA matters a lot – it often is in need for improvement (currently – for example, Question based Review for CMC) Pre-Approval 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 26
  27. 27. Framework which connects • CoQ: Environment that facilitates individuals to guide their behavior to work in the interest of patients and to continually improve this ability • An organization is a complex system which makes many thousands of decisions each day – writing a SOP for each decision is not always practical. • A systems approach to quality is essential! • It should recognize that the weakest link in the system is often human fallibility – variable capacity to act consciously – when no one is looking. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 27
  28. 28. Connecting- the- Dots GXPs – rational behaviors How proactive compliance is achieved? X, Y, Z Quality Management System What makes a QMS reliable? A, B, C, D Culture of Quality Why people change their behavior: 1, 2, 3 Human Behaviors Beyond GXPs Predictors of Culture of Quality 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 28
  29. 29. Predictors of CoQ: Act consciously in the interest of patients – when no one is looking. Only four attributes actually predict a culture of quality: Leadership Emphasis Message Credibility Peer Involvement Employee Empowerment People will change their behavior if they see the new behavior as Normal (1) Rewarding (2) Easy (3) 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 29
  30. 30. Dots and Connections CoQ 1 2 3 QMS A B C D GXP Behaviors X Y X 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 30
  31. 31. Integrated Framework Culture of Quality Normal Rewarding Easy QMS System Knowledge Variation Behavior Behavior - GXPs Fear Removed Mastery Awareness 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 31 Environment Leadership Emphasis Message Credibility Peer Involvement Employee Empowerment Connect to CoQConnect to GXPs
  32. 32. CoQ Manifests in the Organization's Environment by Design Different functions connected directly or indirectly to the two products (medicine and evidence) – their outputs impacts quality of these products •Each function within its environment should be working to ensure the two products are consistently linked [directly or via the chain of evidence to the clinical trial product that established the pivotal evidence of benefit and risk that allows the product to be sold] •Multitude of individuals from various disciplines of science, engineering, management .. Each expected to be disciplined within their disciplinary methodologies; a proportion of staff may not have formal training in any disciplinary methodology The phrase by design in Quality by Design – is therefore, a foundation of CoQ. • In this course CoQ – QMS- GXP and QbD – are viewed and discussed in the most basic elements – intention and behavior • “Features of Quality by Design: Doing things consciously” 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 32
  33. 33. Quality by Design – What is it? Doing things consciously – stuck in my mind! FDA’s ACPS Meeting October 2005 Topic - Achieving and demonstrating “Quality by Design” with respect to drug release/dissolution performance for conventional or immediate release solid oral dosage forms A PhRMA Perspective – presented by C. Sinko and R. Reed. “Features of Quality by Design: Doing things consciously” 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 33
  34. 34. Culture of Quality Summary We do our best to develop our medicine and the evidence that meets the needs of patients – we develop these products consciously recognizing quality cannot be tested into our products. We recognize that nothing is perfect and there will be some errors in our design, systems and procedures, or we may make mistakes in following set procedures. It is normal, easy and rewarding to work within our quality management system, without fear, to detect, correct and to learn from our mistakes. In doing so we act consciously in the interest of patients – specially when no one is looking, and continually improve our quality by design and aim for right first time. 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 34
  35. 35. The Behavioral Economics Context An Alternate Approach to a Discussion Based in Ethics/Morality A means to discuss behaviors in the context of human (rational and irrational) decision-making • A majority of people in the pharma sector have the right intentions – duty of care; yet some of their decisions fall under the irrational category • Certain cognitive biases hinder them to test certain assumptions when making decisions; and/or • Their frame of reference & understanding is not aligned with the legal and regulatory requirements in the USA • There will always be a segment which will bend or break the rules – when no one is looking; • Their frame of reference (prevailing norms in an environment) provides them with a basis to rationalize that their bending/braking of rules does ‘no harm’ Then there are the habitual criminals – who have no place in the legitimate world of health care • It should be recognized that the line separating Cheating by Design and Quality by Design is very thin 8/23/2014 © AJAZ S. HUSSAIN | INSIGHT ADVICE & SOLUTIONS LLC 35

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