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How FDA's Rule on Medical-Device Tracking Can Cure a Sick Supply Chain

Regulation is usually viewed by the private sector as a burden. But sometimes it makes good business sense.

That's especially true in the case of the medical device industry, which is crying out for better visibility and management of high-priced products throughout the supply chain. The Food and Drug Administration's new rules on the identification and tracking of medical devices should have that precise outcome.

Up to now, industry has lacked a simple, automated way for hospitals to keep track of lost, wasted and expired supplies. The result: far more inventory on hand than is needed, with items socked away in multiple locations, and healthcare professionals hoarding materials out of a fear that they won't be immediately available when needed.

Now comes FDA’s regulations on unique device identification (UDI), issued in September of 2013 and being phased in over the following seven years. The first three phases are already in place, mandating UDIs on labels and packages for Class II and Class III devices, as well as for implantable, life-supporting and life-sustaining devices. In addition, affected Class III devices — entailing the highest level of risk — must include a UDI as a permanent marking on the device itself, if it’s intended for reprocessing and reuse.

In September, 2018, the regulations ramp up to require a UDI as a permanent marking on Class II devices. And by September of 2020, all classes of medical devices must bear a permanent UDI, if they’re intended for reprocessing prior to each use.

FDA views the rules as a way to establish “a consistent and standard way to identify medical devices throughout their distribution and use,” according to Jeffrey Shuren, director of the Center for Devices and Radiological Health. In addition, the information will serve as the basis for a National Evaluation System for medical devices, aiding in the reporting of adverse events, product defects and recalls. By the time the rules are fully in effect, items in the database will number in the millions, according to Guillermo Ramas, chief executive officer of Genesis Automation USA.

Such a system makes eminent sense for the industry, allowing healthcare professionals to keep track of devices that are implanted in patients, and maintain a searchable database that can be consulted in the event of a recall. But some parts of the organization, especially operations and supply chain, are lagging in adjusting to the new UDI rules, says Ramas. There’s still a degree of confusion as to who within the organization is responsible for shepherding the initiative.

Certain providers, especially smaller ones, are in danger of not meeting the timetable for implementation of the rules. Others will comply but “probably won’t be optimized,” says Ramas. Their ability to quickly search the database for past implants, for example, will vary from company to company.

Why is the supply-chain side of the house lagging? Historically, says Ramas, its mission has been to get supplies to clinical staff, with an emphasis on speed and price. Now that mission is beginning to broaden. Manufacturers and hospitals are placing a renewed emphasis on risk and patient safety, necessitating tighter control over devices.

Given the criticality of so many medical procedures, you might think that healthcare would be in the lead when it comes to applying unique identifiers to its products. On the contrary; the retail and automotive sectors are much further ahead in tracking parts and products throughout the supply chain. Hospitals, meanwhile, can’t give a precise answer when asked how much a given procedure will cost.

“There’s been plenty of time to be made aware of this,” says Ramas, “but historically, clinical and supply chain in the hospital have not always worked as closely together as you would have hoped.”

The big hospitals and group purchasing organizations are making strides in that direction — motivated, of course, by FDA’s UDI mandate. To make it happen, they need to embed the complete workflow, including the picking of supplies and prepping for surgeries, within the hospital’s processes. It’s more than a question of slapping a label on every item. “The fact that all devices have a UDI doesn’t mean anything, unless you adapt all of your processes,” says Ramas.

FDA’s purpose in issuing the UDI rules — and that of healthcare providers as well — is to promote patient safety. But there are business benefits to be realized as well. Up to now, hospitals have been plagued by “terrible inventory management,” says Ramas. Surgeons have been granted complete discretion in dictating the types and quantities of devices they need. Often they end up ordering too many of a particular item, resulting in the disposal of unused or expired product. “A ton of stuff gets thrown away,” Ramas says, citing a study by the University of California at San Francisco that found discards accounting for 13 percent of total supply costs.

With UDIs in place, accompanied by the proper business-process change, hospitals can analyze surgeons’ preference cards and determine what’s really needed. They can identify items that never get used, and cut down on ordering without jeopardizing the availability of crucial devices.

“There would be no second-guessing,” says Ramas. “Hoarding comes because inefficient inventory-management systems have been put into place in the past, with little information and a lack of visibility.” With the proper application of UDIs, hospitals and doctors alike can see the light — and eliminate a costly side effect of poor supply-chain visibility.

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