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28 Pharmaceutical Technology ® Trends in Formulation 2023 eBook PharmTech.com Qualit y excellence saves lives and saves money. Making qual- ity-driven purchasing decisions contributes to low- ering non-compliance and shortage risk for patients, while effectively reducing adverse quality events. Costs for medicines account for only a small share of overall healthcare costs—in the United States in 2019, hospital spending was more than triple that for prescription drugs (1). However, drug costs are an easy target to generate immediate savings. There is a tre- mendous pressure on the pharmaceutical industry to continuously lower drug prices at all costs. Such an uninhibited approach leads fatally to shortcuts and to decisions that seldomly benefit patients. Assum- ing that lower drug costs are a patient's most valuable benefit is inaccurate—the patient benefits most from the right cost-to-quality medicine, not the cheapest. Balancing cost and quality One way to reduce drug costs has been to outsource the production of APIs. This strategy is now the standard across the industry from small and emerging pharma companies, to branded manufacturers, generic-drug companies, or Big Pharma. Downward pricing pressure on APIs is most acute in the generic sector, and many generic-drug formu- lators rely heavily on API suppliers, often located in emerging markets, which offer lower-cost products. However, recent quality and safety issues, such as the contamination of APIs with nitrosamine compounds, has led FDA, the European Medicines Agency (EMA), and other regulator y authorities to increase their oversight of such facilities. Indeed, inspections have resulted in the issuance of warning letters and in some cases facility closures. An unintended consequence of this continual down- ward pricing pressure and aggressive cost-cutting measures on APIs often end up costing manufacturers more. Selecting the lowest commonly acceptable qual- ity API manufacturer(s) comes at the expense of sup- ply chain reliability and most importantly against the judgement of the manufacturer's own quality teams. In a downward spiral, API manufacturers push their costs down simply by lowering their quality standards and their redundancies and thus put more dependable suppliers out of business. This triggers an amplified risk of failure for this API by wiping out high-quality supply sources. When such API manufacturers ulti- mately fail, the entire supply chain is affected, creat- ing a significantly higher likelihood of drug shortages. Looking at total cost of ownership with an API supplier Quality compliance with good manufacturing prac- tice (GMP) in all areas of API production and manage- ment of all aspects of API manufacturing is necessary to ensure that API suppliers produce safe, reliable, and high-quality APIs that achieve a balanced total cost of ownership. Time and money must be invested upstream in API development and the ongoing de- velopment of scientific and technical expertise, ad- vanced and robust qualit y management systems, continuous improvement initiatives, and extensive operator training programs. Effective quality management programs need to in- clude strong and continuous quality oversight in-house, and even more so when working with partners. Quali- fication of suppliers, the signing of quality agreements, and the performance of audits once every two or three years is not sufficient. All aspects of the manufacturing process must be monitored on a regular basis, including the review of operational procedures, batch documentation, change management controls and documentation, overall quality practices, risk assessments, and so on. Regular review of stability and other important quality-control (QC) data, monthly meetings to discuss deviations, and frequent onsite audits enable confirmation of contin- ued and consistent quality performance. API suppliers must remember that they own the drug master files (DMFs) for the products they bring to the marketplace. The buck stops with them: they are responsible for the quality and safety of the APIs they sell to drug formulators. Using a risk-based approach to supplier selection Drug formulators should seek API suppliers with technical ability and excellent safety, quality, and compliance track records at all stages from raw ma- terial sourcing practices to testing, manufacturing, and product release. These high-quality suppliers can be identified using a risk-based approach that takes into consideration the total cost of ownership for out- sourced APIs, which includes: The recall of contaminated drug products may result in both drug shortages impacting patients and have significant reputation and financial damage on manufacturers.