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Unique Device Identification System Practical perspectives on implementation and compliance readiness

May 2014

Contents

Executive summary .................................................. 2

Core compliance requirements ................................. 4

The manufacturer’s perspective: Challenges ahead ..................................................... 6

The provider’s perspective: Expected benefits ...................................................... 7

PwC’s perspective: Requirements for successful programs ..................... 8

Outlook .................................................................. 10

2 Practical perspectives in implementation and compliance readiness | Unique Device Identification System

“By making it possible to rapidly and definitively identify a device and key attributes that affect its safe and effective use, the rule will reduce medical errors that result from misidentification of a device or confusion concerning its appropriate use. The identification system established under this rule will lead to more accurate reporting of adverse events by making it easier to identify the device prior to submitting a report.”

—FDA, Final Rule, Unique Device Identification System

Executive summary

States to bear a unique device identifier (UDI). Over the course of the legislative process, the FDA has been consistent and clear regarding its objectives for promulgating the UDI law. The agency says it is focused on improving patient safety and care by the unique identification of devices throughout their distribution and at their point of use. The FDA intends the UDI to support improved product selection and overall patient care management, transparency of device use and performance, more responsive surveillance and adverse event reporting, and more complete and timely recall management.

While the FDA realizes the industry will incur costs to implement UDI and associated data management capabilities, the agency believes the benefits will outweigh the costs. In addition to expected improvements in adverse event and recall management, the FDA also believes the UDI will help increase the use of automated systems in healthcare. This is where the connection between device use, electronic health records (EHRs) or personal health records (PHRs), and clinical outcomes may yield the biggest patient benefits.

Source: HRI analysis and Centers for Medicare and Medicaid Services National Health Expenditures (2012)

On September 24, 2013, the FDA published its Final Rule for Unique Device Identification (UDI). The UDI Final Rule requires medical device manufacturers to label medical devices with a unique identifier in both machine and human readable formats. This regulation also requires device manufacturers to populate a database—known as the Global Unique Device Identification Database or GUDID—with attribute data regarding each device that is assigned a UDI. In addition to these labeling and database requirements, the FDA also expects manufacturers, distributors, and providers to reference the UDI in processes such as adverse event reporting or recalls. Compliance deadlines will be phased in over time by device classification, with Class III timing set for one year from Final Rule publication, or September 24, 2014.

Background

In compliance with 2012 Food and Drug Administration Safety and Innovation Act (FDASIA), the FDA published a Final Rule on September 24, 2013 that requires most medical devices distributed in the United

“By linking clinical detail and information regarding device use, more effective device safety surveillance and evaluation studies could be conducted, contributing to a more complete safety and effectiveness profile for devices and enabling more appropriate and timely remedies when potential safety concerns are identified.”

—FDA, Final Rule, Unique

Device Identification System

In other words, UDI may spur development of a platform for device comparative effectiveness. This comparative effectiveness platform could be the impetus for widespread changes to how devices are designed and launched by manufacturers, selected and used in patient care by providers, and reimbursed by payers. Beyond patient safety and care, we should not overlook the potential operational and transactional benefits of implementing UDI. Healthcare providers and manufacturers may experience improvements in order and invoice accuracy, inventory management, and in a range of transactions among manufacturers, payers, and providers.

Unique Device Identification System | Practical perspectives in implementation and compliance readiness 3

Summary of key compliance dates and exceptions:Implementation compliance dates are as follows:

• 2014: Class III and devices licensed under PHS act

• 2015: Class II/I implants and life supporting/sustaining

• 2016: Remainder of Class II

• 2018: Class I

For direct marking:

• 2015: FDASIA devices

• 2016: Rest of Class III

• 2018: Rest of Class II

• 2020: Rest of Class I

Exception to compliance dates:

• The FDA may grant a one-year extension of the compliance date for for Class III devices or devices licensed under the PHS act when it is in the best interest of public health

• Finished devices that are manufactured and labeled prior to their compliance date (This exception expires three years after the compliance date.)


Core compliance requirements

According to the Final Rule, manufacturers must uniquely identify medical devices using defined data standards such as GS1, HIBCC, or others approved by the FDA. Manufacturers must label devices with a unique identifier in both machine- and human-readable formats. Compliance timelines range from one year following the publication of the Final Rule for Class III devices, two years following publication for Implantable and Life Sustaining devices, three years following publication for Class II devices, and five years following publication for Class I devices. For certain types of devices, manufacturers will also be required to directly mark the UDI on the device.

To uniquely label a device for identification and use, a UDI may consist of two parts:

1) A device identifier (DI) that identifies the specific device version or model and the device labeler

2) A production identifier (PI) that identifies one or more of the following when present on the label: lot or batch within which the device was manufactured, serial number, donor identification number, expiration date, and/or date of manufacture

The FDA does not specify the data standard used to create and convey the UDI, nor does it define the machine-readable data carrier. So manufacturers can select from

data standards such as HIBC or GS1 and may choose to convey the UDI in a bar code or on a RFID tag.

So where is all of the information that providers may need regarding the identification and use of a device? The UDI on a device label will be the key that unlocks this information in the Global Unique Device Identification Database (GUDID). Manufacturers must report product attributes to the GUDID along the same compliance timelines referenced above. Distributors, payers, and, most important, providers, will have access to the GUDID to aid in the identification, selection, and proper usage of the device.

In addition to labeling devices with a UDI and reporting key attribute data to the GUDID, manufacturers must update a range of FDA-regulated processes to incorporate and make consistent use of the UDI. The regulations encompassing the final UDI rule and “conforming amendments” include the following:

• Part 830 (New part 830 UDI Requirements)

• Part 801 (Changes and Addition to Labeling)

• Part 803 (Medical Device Reporting)

• Part 806 (Medical Devices; Reports of Corrections and Removals)

• Part 814 (Premarket Approval of Medical Devices)

• Part 820 (Quality System Regulation)

• Part 821 (Medical Device Tracking Requirements)

• Part 822 (Post-market Surveillance)

To comply with the proposed regulation and conforming amendments, manufacturers will have to update policies and procedures, adapt associated business processes and IT systems, and ensure that future reporting and documentation clearly demonstrates their incorporation of the UDI. In our experience to date, manufacturers have been more focused on device labeling and GUDID reporting than on conforming amendments. This may represent a blind spot for some manufacturers, as they may underestimate the impact of effectively incorporating the UDI into the associated business processes and ensuring consistent incorporation in multiple divisions or business units.


In our experience to date, manufacturers have been more focused on device labeling and GUDID reporting than on conforming amendments. This may represent a blind spot for some manufacturers.


In 2013, while the industry awaited the Final Rule, more than 300 individuals representing device manufacturers and related industry executives attended a webcast hosted by PwC. The webcast focused on the anticipated effect of the FDA’s UDI law. This event featured speakers Jay Crowley, a senior advisor at the FDA, and Jeffrey Secunda, the vice president of technology and regulatory affairs at AdvaMed. They shared their perspectives on the future of UDI in the device industry. PwC also provided a brief overview of its perspective on the challenges this new requirement represents for both manufacturers and providers.

During the webcast, attendees were asked to respond to online polling questions designed to gauge industry readiness for UDI, understand implementation challenges, and identify possible business benefits from UDI investments. The results of those questions provide valuable insights into the industry’s preparation and readiness for UDI.

• Industry readiness: When asked to describe their organizations’ readiness to meet the UDI

requirements, only 10% of respondents said their UDI implementation was underway or complete. Another 42% of respondents indicated that they had an implementation plan or were in the requirements-gathering phase.

These responses suggest that only a small percentage of manufacturers are currently ready to meet anticipated UDI requirements.

• Implementation challenges: Respondents were asked to identify challenges with implementing the UDI requirements. Twenty percent said that integrating applications and technology platforms was their biggest challenge, and another 15% percent said collecting, managing, and reporting GUDID

The manufacturer’s perspective: Challenges ahead

data was the most difficult. Nine percent of respondents said that updating internal processes and training users posed the biggest challenge. While the IT and data governance aspects appear to be the biggest challenges to UDI readiness, manufacturers should not underestimate the potential business process impacts associated with addressing conforming amendments.

• Expected business benefits: When asked if they plan to leverage UDI capabilities to add value, 26% of respondents said they would either improve internal productivity and customer service, or leverage UDI for comparative effectiveness programs. However, 11% indicated that they will do only what is required to comply with the law. Twenty-four percent said they were undecided. These are not surprising results. Many of our discussions to date with manufacturers have led to the same conclusions on UDI business benefits. Most manufacturers consider UDI simply a regulatory requirement. They most likely will not realize the full potential of UDI until they have had the opportunity to use their new capabilities in a variety of internal processes and transactions with providers.

What’s the key lesson many medical device manufacturers have learned from their work on UDI compliance thus far? They tell us that preparing for the compliance timelines is a complex task. There are multiple processes, systems, functions, and policies that are affected. Combine the number of changes required with a diverse product portfolio supplied from an array of divisions and sites, and the complexity increases at a seemingly exponential rate. Now that the Final Rule is published, it’s time for manufacturers to develop

Only a small percentage of manufacturers are currently ready to meet anticipated UDI requirements.

A surprising

19%

said they had not yet started their strategy or planning phase.


a UDI strategy and get started on implementation. The stark reality for patients is that medical errors can be as deadly as the diseases and injuries their treatments are intended to remedy. Because the improper identification and selection of a device could have life threatening consequences for patients, providers are warmly welcoming the UDI. Many providers had urged the FDA to accelerate the law’s implementation timelines, and some are encouraging their medical device suppliers to implement UDI as soon as possible. Some are even suggesting the use of GS1 data standards on future labels to drive data consistency and harmonization among their operational and patient-facing systems. In these cases, suggestions often come in the form of contract and pricing terms in the agreements providers write or renew with manufacturers.

The impact on patients of medical treatment errors in the US is

substantial. A number of published studies have documented the toll of treatment errors, some estimating that they lead to thousands of patient deaths in US annually. Then there is the economic impact. Some studies estimate that medical treatment errors cost the industry millions of dollars each year.

The reality is that providers often find it difficult to identify and distinguish one device from another. A wide and complex array of nomenclature and numbering schemes, label content and formats, and date formats all challenge a provider’s ability to properly identify a device and select it for proper use. In some cases, the same device has multiple names or identification numbers. But while providers may eagerly await the day that devices arrive on their dock with a UDI, they too must prepare to incorporate the UDI into their clinical, operational, and transactional systems.

The provider’s perspective: Expected benefits

The stark reality for providers is that medical errors can be as deadly as the diseases and injuries their treatments are intended to remedy.


Most manufacturers start their UDI assessments with a bottom-up accounting of all devices sold in the US by device classification. In our experience, manufacturers are often surprised by the number of products per class that still remain in their portfolio, despite past life cycle management initiatives. Furthermore, with disparate and disconnected data management and reporting systems, it takes manufacturers a good deal of time to identify and quantify the configurations or kits in which their devices are sold in the US. So a critical first step is for manufacturers to identify all of their devices by class and review their product configurations and convenience kits to ensure that they characterize their entire device portfolio. As they go through this process, manufacturers will develop a clear understanding of their product shelf-life and inventory on hand in order to manage their existing inventory of products with non-UDI compliant labeling.

Meeting the requirements of the UDI Final Rule will require involvement from multiple functions, including product development, operations, quality, regulatory, order management, and inventory management. Manufacturers will need to implement many processes and solutions to collect and report attribute data and incorporate UDIs into quality and regulatory procedures. The number of IT and reporting systems affected will be surprisingly large. However, some manufacturers may initially consider UDI to be just a labeling or bar coding challenge. PwC’s Unique Device Identification team has significant experience working with organizations at various stages of UDI readiness. Such experience has helped our UDI team compile a view of what’s required for successful UDI programs:

PwC’s perspective: Requirements for successful programs

When they first read the UDI Final Rule, some manufacturers may think that compliance timelines are far on the horizon. However, when they determine the time required to update labels, create attribute data collection and reporting capabilities, and update quality and regulatory procedures, they realize that three years is not much time to prepare for, say, Class II compliance. This is why assessing the impact of the regulation on your product portfolio is so critical.

Let’s take a hypothetical example. A manufacturer may have a product portfolio that resembles a typical bell curve: a few Class III devices, many Class II devices, and some Class I devices. This manufacturer may drive the development of GUDID data management and device labeling capabilities toward the Class III compliance timeline as a means of piloting the required solutions. With its Class III devices labeled with a UDI and its GUDID data management solution in place, this manufacturer should have sufficient time to update its relatively large number of Class II devices. Hence the value of starting as soon as possible.

Assess the effect on your product portfolio. Start as soon as possible.1 2


We believe that manufacturers’ early assessment of their foundational readiness for UDI compliance is critical to the success of their subsequent implementation of the program. Leading practices suggest that large and complex programs can benefit from an objective assessment and validation exercise to help ensure that organizations adopt a holistic approach, keep the scope of their programs realistic and manageable, and identify issues early on. The key is to recognize potential program risks before they occur and be ready to take action should they materialize. Good, old-fashioned project management is necessary to identify issues before they have a significant impact on schedule, cost, quality, or compliance. Organizations should define up front their key criteria for success and identify how they will verify stakeholder satisfaction during the course of implementation.

A robust UDI program is built from a solid strategy and implementation plan. The strategy should define approaches for label updates, date formats, data collection and reporting capabilities, communication with customers, and change management. The implementation plan must account for the time required for estimated net resources to do everything from revise labels to update standard operating procedures. These time and resource budgets inform a multi-phase, multi-year schedule of expense and capital costs for the program.

A comprehensive implementation plan requires the sponsorship of a senior, executive leader and the oversight of a cross-functional steering committee. The project’s core team should represent all functions and divisions that will be significantly affected during the implementation timeline. Leadership should solicit cross-functional support early and maintain it over the life of the project with an informative communications plan.

Conduct an initial risk assessment and validation.

Plan in phases, and manage cross-functionally.3 4

©2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. ST-14-0045

www.pwc.com

To have a deeper conversation about how this subject may affect your business, please contact:

Jennifer Parkhurst, Principal (415) 498 5272 [email protected]

Paul Arhanic, Director (973) 236 5373 [email protected]

Wayne McDonnell, Director (949) 437 5451 [email protected]

Gaurav Satpute, Director (646) 471 4337 [email protected]

Outlook

Whether manufacturers share that outcome data or not, providers may be able to track product use and results more accurately by leveraging the link UDI can provide between products and patients. This would help providers make more informed clinical decisions and help patients achieve better outcomes. To help make their bottom lines healthier, payers and providers could use this data to drive pricing and gain leverage in pay-for-performance negotiations with manufacturers.

In the long term, UDI has the potential to change the development, selection, use, and management of medical devices. The degree of that change during the next few years will depend on the extent to which the healthcare value chain—manufacturers, payers, and providers—makes use of the device, and the outcomes data that will result from the UDI regulation.

Some device companies may go beyond compliance with the law and leverage the UDI mandate to better understand how their products affect patient outcomes.

About PwC’s Pharmaceutical and Life Sciences Industry group

As a global leader serving the medical device industry, PwC provides clients with assurance, tax and advisory services. Our medtech capabilities are part of the firm’s larger initiative for the health-related industries that brings together expertise and allows collaboration on a wide range of issues impacting the needs of medtech, pharmaceutical and health services organizations. More than 184,000 people in 157 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. For more information, visit: http://www.pwc.com/us/medtech

http://www.pwc.com/us/medtech

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