program overview & value proposition

© Performance Review Institute

Program Overview & Value Proposition

Revision Date: 20 February 2014

1

© Performance Review Institute2

Content

• Objective• Background• Chronology• Benefits

• Medical Device Industry• Medical Device Industry OEMs• Medical Device Industry Suppliers

• Scope of Project• Critical Process Areas of Interest• Existing PRI Processes and Products

• Process Map• Timeline – High Level Summary• 2013 Meetings & Details

• Program Development Activity (Outside of Roundtable Meetings)

• Requests to Medical Device Industry Stakeholders

• Program Risk Analysis• Confidentiality of Information• Case Studies

• Aerospace (Airline Passenger Safety Trends)

• Aerospace (Nadcap Subscriber Critical Process Escapes)

• Transportation & Power Generation (OEM)

• Medical Device (Electronic Circuits Hypothetical)

• Financials • Cost Structure• Template for Cost/Benefit Calculation


Objective

To demonstrate to the medical device industry the value of creating an industry managed supply chain oversight program (MedAccred) that will reduce risk to patient safety, assure quality products and compliance with requirements as they apply to critical processes


Background

• Increased number of recalls attributed to supplier quality issues

• Overall increased interest in outsourcing and globalization of the supply chain, thereby increasing the challenge of oversight

• Purchasing controls is one of the top ten cited FDA 483 observations for medical device quality system violations

• Purchasing controls has been the target of several enforcement actions (warning letters, consent decrees)


Date ActivityDecember 2012 Industry roundtable #1 (5Dec12):

• 19 industry stakeholders from 15 different OEMs and suppliers present• Strong interest in a process-focused IMP expressed

February 2013 eAuditNet demonstration conducted (5Feb13) Industry roundtable #2/Observation of Dallas Nadcap meeting (20-22Feb13)

March 2013 Value Proposition document created and released to industry

April 2013 Proof of concept audit (welding) conducted

May 2013 Industry roundtable #3 (15May13)Management Council sub-teams formed

June 2013 MedAccred Management Council (MMC) established with bi-weekly conference calls5 Task Groups createdLOI signed by Philips

August 2013 Industry roundtable #4 (28Aug13)Program branding: MedAccred agreed by MMC

September 2013 Proof of concept audit (PCBA) conductedMedAccred website developed

October 2013 Proof of concept audit (Heat Treating) conducted

December 2013 Industry roundtable #5 (05Dec13)Program presented to FDA CDRH Dept. (03Dec13)

January 2014 Program presented to FDA Commissioners Level (27Jan14)

February 2014 Industry roundtable #6 (12Feb14)

Chronology


Next Steps

• Increase participation and commitment from the Medical Device Manufacturers

• Increase participation from Suppliers who provide a Critical Manufacturing Process

• Conduct proof of concept (PoC) audits in four technology areas (Electronic Circuits, Electronics – Cable & Harnesses, Welding, Heat Treatment) – 3 completed YTD

• Task Groups to continue audit checklist development, auditor recruitment, etc.

• Continue to conduct regular Management Council face to face meetings and bi-weekly conference calls to provide status updates on sub-team and Task Group activity and continue program development momentum

• Continue dialogue with CDRH and FDA – Commissioners Level

• Signature of Subscriber Agreements


Benefits to Medical Device Industry

• Promotes a philosophy of continuous improvement and a culture of patient safety and quality for all participants

• Enhances compliance and quality management system effectiveness throughout the industry

• Promotes best practices to assure patient safety and quality

• Promotes application of industry and technical standards/practices

• Provides an opportunity for collaboration between suppliers and OEMs

• Improves visibility of industry requirements to sub-tier suppliers

Similar program in aerospace industry has 20 year history of successful performance and regulatory acceptance


Benefits to Medical Device Industry (cont.)

• Promotes least burdensome approach by reducing redundant process audits by multiple customers

• Enables reallocation of resources to other areas requiring attention

• Provides real-time and consistent visibility of supply chain quality

• Aligns with FDA’s “Case for Quality” strategic initiative


Benefits to Medical Device Industry OEMs

• Establish stringent industry consensus audit criteria based on industry and specific OEM requirements that ensure compliance and quality of devices, reduce the risk to patient safety and will satisfy the requirements of all participants

• Conduct in-depth special process audits that are compliant and consistent to accepted industry/technical standards and conducted by industry recognized and approved Subject Matter Experts. • Covers 3 areas:

1. Assess effectiveness of suppliers’ QMS at the special process level; 2. Audits based on robust core and OEM-specific checklists; 3. Process-focused Product Audits


Benefits to Medical Device Industry OEMs (cont.)

• Provides greater visibility of the supply chain to all levels and sub-tiers that provide critical processes, consistent with regulatory requirements (e.g. FDA, ISO 13485, MDD, etc.)

• Identify and reduce risk of exposure to lower-quality suppliers and reduction of costly recalls

• Provides early warning notification to OEMs of supply chain quality issues

• Provides complete visibility of audit results and corrective actions taken in a secure and retrievable format

• Program reduces cost of non-quality• Program reduces cost of compliance


Benefits to Medical Device Industry OEMs (cont.)

• Program frees up OEM resources to focus on supplier development opportunities and/or problem area resolution

• Improves flow down of OEM requirements to sub-tier suppliers

• Makes the supplier selection process more efficient

• Global supply chain visibility through a web based system to support and improve efficiency in industry managed auditing and accreditation system (eAuditNet).

• Supports procurement to identify accredited suppliers (Qualified Supplier List)

• Supports supplier risk management activity

• Shared pool of trained, recognized and approved subject matter experts among OEMs


• Provides consistent/standardized critical process audits accepted by the medical device industry resulting in fewer redundant onsite audits by multiple OEMs

• Can use accreditation to increase client-base and opportunities across the medical device industry

• Enhances the supplier’s compliance status

• Medical device industry-accepted and consistent technical requirements leading to process discipline, greater operational efficiency and continuous improvement resulting in higher quality and lower overall cost.

Benefits to Medical Device Industry Suppliers


Benefits to Medical Device Industry Suppliers (cont.)

• Helps suppliers develop a structured approach to special process and product

• Opportunity to participate in development of audit criteria and the accreditation program

• 85% of suppliers report quality improvements after accreditation, including reducing scrap rates, reworks, escapes and defective products (from aerospace survey data)

© Performance Review Institute

Critical Process Areas of Interest

• Casting/Forging• Chemical Processing• Cleaning • Coatings• Electronics

• Displays• Electronic Circuits - PCBAs****• Power sources/supplies**• Cable & Harnesses***

• Fluidics• Heat Treatment**• Machining

• Laser Etch• Material Testing Laboratories• Measurement/Inspection

• Non-Destructive Testing

• Optics• Packaging

• Sterile• Raw Materials• Re-agent• Resins

• Composites• Injection Molding

• Sterilization****• Software*

• Hosted Services• Welding*

KEY:BOLD PRI currently has

checklists addressing these Critical Process/Product areas

BLUE Active Task Groups as of February 2014

* Number of votes received by 22Mar13 Dallas Roundtable participants for conducting Proof of Concept audits

© Performance Review Institute15The Medical Device Industry has expressed interest in these Critical Processes and Products

Special Processes Systems & Products

Non-Destructive Testing

Welding

Chemical Processing

Heat Treating

Materials Testing Laboratories

Coatings

Non-Conventional Machining

Conventional Machining as a Special Process

Surface Enhancement

Non Metallic Materials Testing

Electronics

Fluid Distribution Systems

Sealants

Aerospace Quality Systems

Composites

Elastomer Seals

Castings & ForgingsRaw Materials

Future Processes

Measurement & Inspection

Non Metallic Materials

Manufacturing

Existing Nadcap Processes and Products


StartWed 8/28/13

FinishFri 12/19/14

4th Quarter 2nd Quarter 3rd Quarter 4th QuarterInternal OEM Buy-inWed 8/28/13 - Fri 1/3/14

Draft Program DocumentsWed 8/28/13 - Fri 1/3/14

Conduct PoC AuditsWed 8/28/13 - Fri 3/28/14

Review PoC Audit Results for ValueWed 8/28/13 - Fri 3/28/14

Validate SoftwareWed 8/28/13 - Fri 6/27/14

Configure eAuditNet to support MedAccredWed 8/28/13 - Fri 6/27/14

(ASK) Assemble List of SuppliersWed 8/28/13 - Fri 1/31/14

Approach and gain buy-in from Regulatory Agencies Mon 9/30/13 - Fri 6/27/14

(ASK) OEMs sign Subscriber Agreements (Tue 10/1/13 - Fri 1/31/14)

Define Auditor Requirements/HiringMon 11/4/13 - Fri 6/27/14

Approach Industry AssociationsMon 11/4/13 - Fri 12/19/14

Approach broader Supply baseMon 1/6/14 - Fri 12/19/14

Rally external stakeholders for Program buy-inMon 2/3/14 - Thu 10/23/14

European and Asian OEM engagementTue 4/1/14 - Fri 12/19/14

(ASK) OEMs issue supplier mandates as applicableTue 4/1/14 - Fri 12/19/14

MMC Meeting (Pittsburgh, PA)

Wed 8/28/13

MMC Meeting (Minneapolis, MN)

Thu 10/31/13

FDA Meetings (CDRH and OGROP)

Mon 12/2/13 - Mon 3/31/14


Thu 12/5/13

Release MedAccred Program Document

(PD1300)Wed 1/1/14 - Mon 3/31/14

MMC Meeting (Anaheim, CA)

Wed 2/12/14

Seek FDA follow-up meeting/progress report

Tue 4/1/14 - Thu 5/1/14

Launch Supplier Support Committee

Tue 4/1/14

MMC Meeting (Cincinnati, OH)

Mon 5/5/14


Wed 9/17/14


Wed 12/3/14

6JAN14

Key

OEM Responsibility

PRI Responsibility

Joint Responsibility

MedAccred Development Plan (Dec 2013 – Q4 2014)


StartWed 8/21/13

FinishFri 2/27/15

4th Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter(STL) Checklist development

Wed 8/21/13 - Fri 3/28/14

(WLD) Ongoing checklist reviewWed 8/21/13 - Fri 1/31/14

(WLD) Define auditor requirements/hiringWed 8/21/13 - Fri 1/31/14

PoC (EC) Checklist reviewMon 9/30/13 - Fri 2/14/14

(EC) Define auditor requirements/hiring

Mon 9/30/13 - Fri 2/14/14PoC

Develop Task Group Operating Procedures as applicableTue 10/1/13 - Mon 9/15/14

(HT) Ongoing checklist reviewMon 10/21/13 - Tue 3/4/14

(HT) Define auditor requirements/hiring

Mon 10/21/13 - Tue 3/4/14

(WLD) Pilot audit of revised checklists

Mon 2/3/14 - Fri 6/20/14

PoC

(EC) Pilot audit of revised checklistsMon 2/17/14 - Mon 7/7/14

(CH) Ongoing checklist reviewMon 3/3/14 - Wed 7/9/14

(CH) Define auditor requirements/hiring

(HT) Pilot audit of revised checklistsWed 3/5/14 - Mon 8/4/14

Pilot Audit

(STL) Checklist refinementFri 5/2/14 - Tue 9/30/14

(STL) Define auditor requirements/hiringFri 5/2/14 - Tue 9/30/14

(WLD) Release checklists for supplier preparation

Mon 6/23/14 - Fri 11/7/14

(EC) Release checklists for supplier preparation

Tue 7/8/14 - Mon 11/24/14

(CH) Pilot audit of revised checklistsThu 7/10/14 - Wed 11/26/14

(HT) Release checklists for supplier preparation

Wed 8/6/14 - Fri 12/19/14

(STL) Pilot audit of revised checklists

Wed 10/1/14 - Fri 12/19/14

(CH) Release checklists for supplier preparation

Thu 11/27/14 - Fri 2/27/15

MMC Meeting (Minneapolis, MN)

Thu 10/31/13

FDA Meetings (CDRH and OGROP)

Mon 12/2/13 - Mon 3/31/14


Thu 12/5/13

(ASK) OEMs sign Subscriber Agreements

Mon 1/6/14 - Fri 1/31/14

MMC Meeting (Anaheim, CA)

Wed 2/12/14

(ASK) OEMs issue supplier mandates as applicable

Tue 4/1/14

Launch Supplier Support Committee

Tue 4/1/14

MMC Meeting (Cincinnati, OH)

Mon 5/5/14


Wed 9/17/14


Wed 12/3/14

6JAN14

Task Group Development Plan (Dec 2013 – Q4 2014)

Key Electronic Circuits - PCBA

Electronics – C & H

Heat Treating

Sterilization

Welding


Program Risk Analysis

• Risks of developing a program/not doing it right• Not timely

• No critical mass

• Proof of Concept audits not showing much

• Cost could go up without critical mass

• Risks to implementing a program• Will find suppliers that aren’t capable – increased exposure

• Could mean more work for OEM – short term stretch on resources

• Finding enough/the right SMEs to conduct audits

• Agency acknowledgement

• OEM may still have to conduct special process audits


Confidentiality of Information

Addressed in Nadcap Operating Procedures (NOP):

• NOP-001 describes the Nadcap program“These Operating Procedures shall govern the operations of the Nadcap Program. This document establishes the policies for how Nadcap shall meet the requirements defined in SAE AS7003. Nadcap Management Council (NMC) and all Nadcap Task Groups and committees shall operate in accordance with these procedures and all referenced documents.”

• NOP-002 describes the roles and functions around Task Groups.


• eAuditNet implements operating procedures:

• Each Company has one (or more) administrator(s) who are verified by PRI before any other users can be associated with that Company

• Each user has unique credentials, and is only associated with a Company by that Company's administrator(s)

• Each user can only access audits/functions relevant to their company and roles

• eAuditNet uses standard IT security best practices:

• All eAuditNet/program data is delivered over Secure Socket Layer (‘https’)

• All system activity is logged

• Audit data is stored behind multiple firewalls, and physical safeguards are in place

• PRI and SAE have regular information security audits:• PCI compliance• External penetration testing, etc

Confidentiality of Information (cont.)eAuditNet security features:


Case Studies

• Aerospace (Airline Passenger Safety Trends)

• Aerospace (Nadcap OEM – Critical Process Escapes)

• Transportation & Power Generation (OEM)

• Medical Device (Electronic Circuits Hypothetical)

22 *Data from Aviation Safety Network and NTSB

Aerospace (Airline Passenger Safety Trends)

1990-1994 1995-1999 2000-2004 2005-2009 2010-20120

200

400

600

800

1000

1200

1400

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

138

45 31 30 30

11911226

813 807

615

0 0 2 21 4.3138

773

1800

3850

4705Accidents/Year

Casualties/year

PRI - Products Removed, Suspended, Recalled or Stopped

Number of Nadcap Audits/year

23

1990-1994 1995-1999 2000-2004 2005-2009 2010-20110

1

2

3

4

5

6

7

0

5000

10000

15000

20000

25000

30000

1.38

0.90.77

0.48

0.028

0.820.69

0.40.58

0

4.34

6.25

5.14

2.9

0.93

2.67

6.49

6.11

4.38

0.73

62.12 77.46 89.75 95.39130.89690

3865

9000

19250

28447

0 0 2 21 4.3

Major accidents/million hrs flown

Serious accidents/million hrs flown

Injury accidents/million hrs flown

Damage accidents/million hrs flown

Aircraft hours shown in Millions

Number of Nadcap Audits (cumu-lative)

PRI - Products Removed, Suspended, Recalled or Stopped

Since March 20, 1997, aircraft -10 or more seats scheduled passenger service have been operated under 14 CFR 121.

Definitions of NTSB Classifications:Major - an accident in which any of three conditions is met: 1. a Part 121 aircraft was

destroyed, or 2. there were multiple

fatalities, or 3. there was one fatality

and a Part 121 aircraft was substantially damaged.

Serious - an accident in which at least one of two conditions is met: 4. there was one fatality

without substantial damage to a Part 121 aircraft, or

5. there was at least one serious injury and a Part 121 aircraft was substantially damaged.

Injury - a nonfatal accident with at least one serious injury and without substantial damage to a Part 121 aircraft.Damage - an accident in which no person was killed or seriously injured, but in which any aircraft was substantially damaged.*Data from Aviation Safety Network and NTSB

Aerospace OEM - Critical Process Escapes

2001 2002 2003 2004 2005 2006 2007 2008 2009 as of

(6/09)

Internal Data Provided by Nadcap SubscriberSupplier SP ProcessInternal SP Process

No.

of E

scap

es

24

78% decrease

* An escape is where defective product has been shipped to the customer prior to being identified as faulty


Transportation & Power Generation (TPG) Program – Fastener Example

• Event: OEM experienced a product escape due to a faulty fastener and were forced to make an expensive repair

• Included in OEM Recourse: Requested a PRI NDT audit for their fastener supplier

• TPG Audit Results: NDT audit uncovered cracks not found during initial inspection and process control violations that would have prevented the cracks

• Pre-TPG Program: Focus was on certifying the component (product-centric)


Medical Device Quality-Related Product Recall (Hypothetical)2010: FDA issues a Class II recall on an Automated External Defibrillator ¹.Root cause: Printed Circuit Board Assembly (Electronic Circuits)

(1) Trautman, K. (2010). Purchasing Controls – Background & Examples. Retrieved November 02, 2012, from FDANews.com

• Supplier has incorrectly applied solder flux

• Ineffective cleaningSpecific root-causes

• 20,525 devices were recalled• Contamination could have

lead to inoperabilityProduct failure/recall

• Although individual supplier could resolve issue, the industry remains exposed

• Customers remain exposed to potential consequences

• Highly likely industry will face similar issues from other suppliers

Threat to life & profits


How would Nadcap address this issue?

Medical Device Quality Related Product Recall (Hypothetical) (cont.)

Root cause: Printed Circuit Board Assembly (Electronic Circuits)

Supplier has incorrectly applied solder flux Ineffective cleaning

Nadcap process compliance is used as a preventative measure:AC7120 Revision B – audit criteria for circuit card assembly

17.1 Reflow Soldering17.1.14.C Are soldering defects including solder joint touchup identified, recorded and addressed in a continuous

improvement plan?

17.1.15.C Is the cleaning method being used as per the procedure and is the maximum time permitted between reflow and cleaning being observed?

Audit Note: Maximum allowed time of 8 hours unless otherwise specified by customer or manufacturer’s recommendation.

20 Coatings and Encapsulation20.1.C Is there objective evidence of cleanliness verification?

Cost Structure

• Supplier Audit Pricing (per-audit fee including travel costs) Based on current auditor daily fee of $420 per day. Will be increased as Auditor fees and travel costs increase in subsequent years.

* A travel surcharge will be added (expected to be between USD 1000 and 2000) for Asia-Pacific and South American audits, and for ITAR/EAR audits outside of North America

Stand Alone Audits (includes travel costs) Americas & Asia UK (Pound) Europe (Euro)1 Day $4,450 £2975 €44502 Day $5,700 £3800 €57003 Day $6,950 £4625 €69504 Day $8,200 £5450 €82005 Day $9,450 £6275 €9450Application Fee included

Follow-up Audits For Verification Of Corrective Action1 Day $4,450 £2975 €4450Each Added Auditor Day $1,250 £825 €1250

1st Subscribing Year 2nd Subscribing Year Onwards

New Subscribers 1-5 Active Subscribers

6-10 Active Subscribers

>11 Active Subscribers

Program Subscription Fee $60,000 $55,000 $50,000

Program Development Fee $90,000

Total Annual Subscriber Fees $90,000 $60,000 $55,000 $50,000

• Subscription Fees


OEM Cost/Benefit Template

• What number of Critical Process Audits currently performing?

• How many can be eliminated?

• What is the cost to conduct these audits?

• Travel/Time savings?

• Can the QMS audits currently being conducted by OEMs be reduced?

• cGMP compliance

• Intangibles• Draw from entire med-tech industry expertise

• OEM experts could observe audits conducted by Subject Matter Experts


Upcoming MMC Meetings - 2014

Next Teleconference

• 7 March 2014, 11:00 EST

Face to Face

• 5 May 2014, Cincinnati, OH

program overview & value proposition

Documents

5feb13 industry roundtable

roundtable meetingsrequests

proof of concept audit

audit checklist development

face meetings

quality products

fda cdrh

cited fda