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Revision Date: 30 August 2013

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Advancing Medical Device Quality Through Supply Chain Process Accreditation

Program Overview & Value Proposition

© 2013 Performance Review Institute

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

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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

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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)

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Chronology • 2011-2012

– PRI was approached by several medical device industry OEMs to determine applicability of a Nadcap-like program (Aerospace) for their industry

– PRI gathered information, presented at industry events, and met individually with multiple OEM supply chain quality executives

• 5 December 2012 – Initial Medical Device Industry Roundtable meeting held in Chicago, Il

(5Dec12) • Attendees included 19 medical device industry stakeholders representing 15

different OEMs and suppliers • Interest expressed in further exploring an industry managed program for the

medical device industry • Value proposition sub-team established (GE Healthcare, Stryker Corp, Baxter

Healthcare Corp and Philips Healthcare)

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Chronology (cont.) • 2013 Status

– eAuditNet (web-based audit management software) demonstration conducted (5Feb13) • 10 medical device industry stakeholders represented

– Value Proposition Sub-Team Meeting (13Feb13) • Draft Value Proposition document created

– 5Dec12 Roundtable follow-up meeting/Observation of Dallas Nadcap meeting (20-22Feb13) • Discussed Value Proposition document • Identified how and who should be involved in promoting the value and importance of concept

– Recap Telecom (13Mar13) • Reviewed progress and actions from 5Dec12 and 22Feb13 meetings • Discussed Letters of Intent • Proposed initial 4 special process areas for proof of concept audits (Electronic Circuits - PCBAs, Electronics – Cable &

Harnesses, Heat Treat and Welding) – April 2013

• Proof of Concept audit (welding) conducted – Roundtable Meeting (15May13)

• Discussed: Internal OEM Buy-in, engaging the supply chain, PoC audit results, forming special process task groups, reviewed DRAFT program documents, and next steps

– June 2013 • Program established as MedAccred and Management Council began regular teleconferences • 5 Task Groups formed (Electronic Circuits – PCBAs, Electronics – Cable & Harnesses, Heat Treating, Sterilization, Welding) • 3 Management Council Sub-Teams formed (Proof of Concept Audits, Program Documents and External Communications

& Strategy) – MedAccred Management Council Meeting (28Aug13)

• Year to date progress reviewed • 12 month program development strategy agreed

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Next Steps • Ongoing signature of Letters of Intent • Continue to develop critical mass of industry stakeholders (OEMs and suppliers)

– Current active participants in program development to contact less active participants – OEMs to identify suppliers and suggest representatives for participating in the program

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

• Task Groups to begin 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

• Introduce MedAccred concept to FDA • Signature of Program Development Agreements

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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

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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

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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

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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

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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

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• 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.

13 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)

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Critical Process Areas of Interest • Casting/Forging • Chemical Processing • Cleaning • Coatings • Electronics

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

• Fluidics (serum samples through instruments via micro pumps)

• Heat Treatment** • Machining

• Laser Etch • Material Testing Laboratories • Measurement/Inspection

• Non-Destructive Testing • Optics (sample color changes using

spectrophotometers) • Packaging

• Sterile • Raw Materials • Re-agent (hospital lab consumable

products) • Resins

• Composites • Injection Molding

• Sterilization**** • Software*

• Hosted Services • Welding*

KEY: BOLD - PRI currently has checklists addressing these Critical Process/Product areas * - Number of votes received by 22Mar13 Dallas Roundtable participants for conducting Proof of Concept audits RED - Active Task Groups as of June 2013 Revision Date: 30 August 2013

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The Medical Device Industry has expressed interest in these Critical Processes and Products

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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 & Forgings Raw Materials

Future Processes

Measurement & Inspection

Non Metallic Materials

Manufacturing

Existing Nadcap Processes and Products



Proposed MedAccred Development Plan (28Aug13 – 29Aug14)

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Key

OEM Responsibility

PRI Responsibility

Joint Responsibility

Start 8/28/13

Finish Fri 8/29/14

September November January March May July Internal OEM Buy-in

8/28/13 - 1/3/14

Draft Program Documents 8/28/13 - 12/5/13

Conduct PoC Audits 8/28/13 - 3/28/14

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

Validate Software 8/28/13 - 6/27/14

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

(ASK) Identify # of Suppliers in Supply Base

8/28/13 - 10/31/13

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

(ASK) OEMs sign Program Development/Subscriber Agreements 10/1/13 – 3/28/14

Define Auditor Requirements/Hiring 11/4/13 - 6/27/14

Approach Industry Associations 11/4/13 - 8/29/14

Approach broader Supply base 1/6/14 - 8/29/14

Rally external stakeholders for Program buy-in 4/1/14 - 8/29/14

European and Asian OEM engagement 4/1/14 - 8/29/14

(ASK) OEMs issue supplier mandates as applicable 4/1/14 - 8/29/14

MMC Meeting (Pittsburgh, PA)

8/28/13

FDA Meetings (CDRH and OGROP)

10/1/13 - 10/29/13

MMC Meeting (Minneapolis, MN)

10/31/13

Release MedAccred Program Document

(PD1300) 12/5/13

(PRI) Present strategy for supplier engagement

12/5/13


12/5/13

MMC Meeting (Location TBD)

3/19/14

Seek FDA follow-up meeting/progress report

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

Launch Supplier Support Committee

4/1/14


6/18/14



Task Group Development Timeline (28 August 2013 – Q4 2014)

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Start 8/21/13

Finish Fri 12/19/14

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

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

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

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

PoC 9/9/13

- 9/27/1

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(EC) Checklist review 9/30/13 - 2/14/14

(EC) Define auditor requirements/hiring

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

10/18/13

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

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

(HT) Define auditor requirements/hiring

PoC 12/2/13 -

12/20/13

(CH) Ongoing checklist review 12/23/13 - Wed 4/30/14

(CH) Define auditor requirements/hiring

(WLD) Pilot audit of revised checklists 2/3/14 - 6/20/14

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

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

PoC 4/1/14 - 5/1/14

(CH) Pilot audit of revised checklists 5/1/14 - 9/17/14

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

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

(WLD) Release checklists for supplier preparation

6/23/14 - 11/7/14

(EC) Release checklists for supplier preparation

7/8/14 - 11/24/14

(HT) Release checklists for supplier preparation

8/6/14 - 12/19/14

(CH) Release checklists for supplier preparation

9/18/14 - 12/19/14

(STL) Pilot audit of revised checklists

10/1/14 - 12/19/14

(ASK) Identify # of Suppliers in Supply Base

8/28/13 - 10/31/13


8/28/13

FDA Meetings (CDRH and OGROP)

10/1/13 - 10/29/13

(ASK) OEMs sign Prog. Dev. Agreements

10/1/13

MMC Meeting (Minneapolis, MN)

10/31/13

Release MedAccred Program Document

(PD1300) 12/5/13


12/5/13

(ASK) OEMs sign Subscriber Agreements

1/6/14


3/19/14

(ASK) OEMs issue supplier mandates as applicable

4/1/14

Launch Supplier Support Committee

4/1/14


6/18/14


9/17/14


12/3/14

Today

Key Electronic Circuits - PCBA

Electronics – C & H

Heat Treating

Sterilization

Welding Revision Date: 30 August 2013


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

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20 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

21 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)

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*Data from Aviation Safety Network and NTSB

Aerospace (Airline Passenger Safety Trends)

138

45 31 30 30

1191 1226

813 807

615

0 0 2 21 4.3 138

773

1800

3850

4705

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

0

200

400

600

800

1000

1200

1400

1990-1994 1995-1999 2000-2004 2005-2009 2010-2012

Accidents/Year

Casualties/year

PRI - Products Removed,Suspended, Recalled or Stopped

Number of Nadcap Audits/year



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1.38

0.9 0.77

0.48

0.028

0.82 0.69

0.4 0.58

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 95.39 130.89 690

3865

9000

19250

28447

0 0 2 21 4.3 0

5000

10000

15000

20000

25000

30000

0

1

2

3

4

5

6

7

1990-1994 1995-1999 2000-2004 2005-2009 2010-2011

Major accidents/million hrsflownSerious accidents/million hrsflownInjury accidents/million hrsflownDamage accidents/million hrsflownAircraft hours shown in Millions

Number of Nadcap Audits(cumulative)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: 1. there was one fatality

without substantial damage to a Part 121 aircraft, or

2. 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 asof (6/09)

No.

of E

scap

es

Internal Data Provided by Nadcap Subscriber

Supplier SP ProcessInternal SP Process

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78% decrease



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)


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27 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 cleaning

Specific root-causes

•20,525 devices were recalled • Contamination could have lead to inoperability Product

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


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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 Soldering 17.1.14.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 Encapsulation 20.1.C Is there objective evidence of cleanliness verification?


Cost Structure • Program Development and Setup fee (one-time per-Subscriber fee):

• 1-14 Large OEMs: USD 90000

• > 15 Large OEMs: USD 60000 (at initial program launch)

• Small OEMs – A lower fee to be determined

• Program Operations fee (annual per-Subscriber fee):

• USD 30000

• Small OEMs – USD 5000

• Shared Program Administration fee (annual per-Subscriber fee):

• USD 30000 for all new Subscribers. Fees in subsequent years based on total number of Subscribers

• Small OEMs: USD 20000

• Smaller OEMs will not be able to participate in Management Council activities and will only be given access to their own suppliers’ data

• 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

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Number of Subscribers New 1-5 6-10 >11

Administration Fee $30,000 $30,000 $25,000 $20,000

Stand Alone Audits (includes travel costs) Americas & Asia UK (Pound) Europe (Euro) 1 Day $4,450 £2975 €4450 2 Day $5,700 £3800 €5700 3 Day $6,950 £4625 €6950 4 Day $8,200 £5450 €8200 5 Day $9,450 £6275 €9450 Application Fee included

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



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

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Upcoming MMC Meetings - 2013

Next Teleconference

– 11 September, 11:00 EST

Face to Face

– 31 October, Minnesota MN • To follow the MD&M conference

– 17 December, Pittsburgh PA

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