The following information is about pharmaceutical manufacturing. The Food and Drug Administration (FDA) has concluded that the pharmaceutical industry needs to adopt manufacturing innovations, partly to raise quality standards. In other industries, manufacturers constantly change their production lines to find improvements. But FDA regulations leave drug-manufacturing processes virtually frozen in time. As part of the drug-approval process, a company's detailed manufacturing plan—and even the factory itself—must obtain FDA approval. After approval, even a tiny change in how a drug is produced requires another round of FDA review and authorization that involves time and paperwork.
Quality testing is done by hand. Computerized equipment and robots are not used as commonly as in other high-tech industries. Most pharmaceuticals are made according to recipes that involve many separate steps. Each step produces an intermediate batch of chemicals that must be stored, sometimes for long periods. Only then can the process move on to the next step. Gauging the dryness of a batch requires a technician to stop a dryer, break a vacuum seal, and pluck a sample by hand for testing in a specialized laboratory. Before the concoction can move on, a worker might have to wait hours for test results. Under the old system for testing for bacterial contamination, a scientist looked for contamination by peering through a microscope to count colonies of organisms in a petri dish.
a. Describe how diminishing returns are likely to set in for the pharmaceutical production process.
b. Why do you think the FDA allowed firms to maintain these types of production processes?