The research compared inspection reports for 30 plants in Puerto Rico and their equivalents on the US mainland, matched by both parent firm and product standard industrial code (SIC), and found that, on average, the 'quality risk' was higher for plants on the Island.
The difference in quality risk was consistent even when distance from a parent company or differences in the local population’s industry specific skill sets were taken into account, both of which have been cited as potential causes of quality problems.
Instead, the authors suggest that challenges related to the transfer and maintenance of knowledge required to operate a manufacturing plant from the US to Puerto Rico are the most plausible explanation for the increased quality risk.
Language and cultural differences
Lead researcher John Gray, from Ohio State University's Fisher College of Business said: “We believe the quality differences we found in Puerto Rican plants were driven by challenges in transferring knowledge from headquarters to the plant, due to cultural differences, primarily differences in language and values."
Gray suggests that US pharmaceutical manufacturing firms need to more carefully consider the increased quality risk associated with the offshoring of production, particularly with regard to process-sensitive products like drugs.
"It is difficult for many executives to fully appreciate the day-to-day discipline required to operate with low quality risk. And that is something harder to monitor and ensure when plants are offshore.”
Offshoring the only problem?
Gray also speculates that the 'quality risk' may increase the further ‘offshore’ that drug manufacturing is done and that standards on Puerto Rico - a US territory - may actually be higher than those elsewhere.
“Facilities in more distant, less developed countries may face even greater obstacles to quality control than what we found in Puerto Rico,” he said, adding that the team is currently conducting quality risk comparisons for other countries.
However, while the authors may attribute most of the blame for higher quality risk to the practice of offshoring, their findings and conclusions also suggest that US pharmaceutical companies could do a better job of knowledge transfer when they choose to offshore production.