Medical Device Link.

Originally Published MX May/June 2004

INFORMATION TECHNOLOGIES

Under the European Union's new environmental directives, IT compliance is about to take on a whole new dimension.

Chris Wong

Medical device manufacturers are no strangers to the necessity of meeting compliance requirements set by FDA. Managing the constraints and accountability related to such regulations is part and parcel of the medical technology business. However, regulation is set to take on a whole new dimension with emerging environmental directives from the European Union (EU), which will require medical device companies to change the way they develop and bring their products to market.

The EU's new environmental directives are not up for debate, and their reach is widespread. They will affect many of the devices found in hospitals and clinics around the world—from simple electronic thermometers to such complex systems as radiotherapy equipment, dialysis machines, and ventilators. The only notable exemption is for medical devices that are considered "implanted or infected," such as pacemakers.

While the legislation has moved quickly, most companies have not responded with the same speed. According to a study conducted last year by AMR Research (Boston), an overwhelming majority of multinational companies underestimate the scope and extent of the impact of environmental regulation on major business processes.¹ Moreover, few companies interviewed by AMR had developed a strategy or assigned a budget to address the required system changes. Following is an explanation of these requirements, how they will affect medical device manufacturers, and what can be done to cost-effectively manage their compliance.

The Regulations

Two environmental directives will have a significant impact on the medical device industry. Both became law in the European Union in February 2003 and will become effective within the next two years. Because many medical device manufacturers launch new products by bringing them to market first in Europe, laws stemming from the EU are of top concern to these companies.

The first of the new directives is titled "Restrictions on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment" (RoHS).² As of July 1, 2006, it will prohibit the sale of electronics-based products that contain more than 0.01% of specific hazardous materials, including cadmium, mercury, lead, hexavalent chromium, polybrominated biphenyls (PBB), and polybrominated diphenyl ether (PBDE). Since traces of these elements are found in many medical devices, this law will fundamentally change the way such products are created, from initial design to sourcing of core components.

The second directive is on "Waste Electrical and Electronic Equipment" (WEEE), and is intended to ensure that electronic products are recycled or disposed of properly.³ In the past, EU regulations typically made the management of hazardous medical wastes the responsibility of hospitals. By contrast, this directive makes it the responsibility of medical device manufacturers to manage the electronics waste from the products they deliver. Starting August 13, 2005, manufacturers are required to finance the collection, treatment, recycling, and recovery of all electronics waste. The directive does not affect other hospital disposal policies or regulations.

Although required compliance is one to two years away, the impact of the EU's directives is already being felt in countries that have chosen to adopt all or some of the environmental policies earlier. The medical device industry does not yet seem to have been affected, but companies can take a lesson from the experience of Sony. In late 2002, Dutch authorities temporarily halted the delivery of more than 1.3 million Sony PlayStation consoles, because the devices' cables contained too much cadmium. Replacing the cables and validating their safety cost Sony $110 million.

What the Regulations Mean

The core difference between FDA regulations and the EU's new environmental directives is that the latter incorporate clear and very specific requirements with little room for flexibility. One of the toughest aspects of dealing with FDA regulations is the notion of interpretation. In its quality systems regulation, for instance, FDA indicates that systems used to design or manufacture medical products must be validated, without much more guidance than that. By contrast, the RoHS legislation establishes clear thresholds that a product will have to meet in order to be deemed "allowable" for the EU market.

One impact of the new directives is certain. Medical device manufacturers will be required to increase the scrutiny and review already present in their product development process, and to extend them from inception and design all the way through end-of-life and disposal. Additionally, because many medical devices are brought to market first in the EU in order to take advantage of the faster and less-restrictive process of CE marking, it is possible that such products may soon encounter delays related to the new directives. The need for manufacturers to demonstrate compliance with the new directives certainly raises the potential for incurring additional delays in an already extended process of bringing a new product to market.

As described below, the four key areas that will be affected by these regulations are reporting, product design, service and repair, and sourcing and procurement.

Reporting. WEEE requires new compliance reporting that will track certifications at every step of the product's life cycle, including trade documents; labeling; disassembly and recovery processing instructions; and the tracking of disposal, reclamation, and reuse compliance. Additionally, RoHS regulations will require documented proof that medical devices do not exceed the maximum allowable amount of hazardous substances. Compliance will demand huge stores of data for audit purposes and will require the ability to summarize this information into higher-level reports.

Product Design. Design guidelines will be required to ensure that products do not contain hazardous substances and are also prepared for disassembly, reuse, and recycling. Compliance will also require system-level test data that will support the manufacturer's claim of product conformance.

At the design level, companies can minimize the costs of development by applying compliance efforts while a product is still in the concept stage. Making adjustments further along in the process will be more expensive. At an engineering level, the requirement for proof of compliance in the design cycle will likely mean that less time will be spent on the creative development of the device—and more will be spent on administrative tasks.

Service and Repair. For devices with long life cycles, companies will need to track repair and upgrade histories in order to meet regulatory guidelines for end-of-life processing. This means that if changes are made during the life of the product—such as swapping out the battery shipped with the product for a new battery—this too will need to be tracked to ensure that any substitutions meet RoHS requirements, so that at the end of the product's life it will be accepted by recyclers.

Sourcing and Procurement. This can be the most complicated part of the process requiring change. Companies will need to incorporate additional qualification criteria for supplier selection and parts qualification, and to track that information through the life cycle of the product. This requirement is especially important in cases where contract manufacturers are responsible for sourcing. Not only will the parts of a device need to meet the requirements, so too will their suppliers. The entire process of sourcing and procurement is thus about to become more complicated, as qualified parts must not only be cost-effective and available but must also comply with the environmental legislation.

Costs

Some analysts estimate that IT costs for supporting compliance with the EU's new directives may be up to 10% of a company's IT budget over the next two to three years. Analysts also agree that the primary sources of increased cost will be in the purchase of new materials, regulation of outsourcing, and changes to operations and R&D.

Although these projected increases are high, the business risk of noncompliance is even higher. Failure to comply could result in the removal of the manufacturers' products from the marketplace.

How to Get Started

Following are recommendations for how medical device manufacturers can prepare their companies for the pending regulation.

Changing Perception. Device manufacturers need to change their current perception of a product's life cycle. The product development process is now longer than before and includes regulatory requirements at both the beginning and end of the process. Addressing the need to change requires a commitment across a company's various organizations, including R&D, marketing, quality assurance, regulatory affairs, corporate management, information technology, and even sales. Companies can no longer look at the process piecemeal.

Today, most companies implement a product data management (PDM) solution for product design and transition to manufacturing, along with customer relationship management (CRM), order management (OM), and service life cycle management (SLM) solutions to address various aspects of service and repair. Going forward, information distributed across these areas will need to be much more integrated.

Implementing Solutions. Device manufacturers should consider the adoption of new technologies that address the need to manage the entire product life cycle. When reviewing such solutions, look for the capability to perform the following tasks.

• Collaborate with suppliers to collect material data for supplier material declarations.
• Generate an environmental view of the product to analyze it for environmental risk and make "what if" changes to bring the product into compliance.
• Manage regulatory documentation and specifications.
• Track recovery manifests and disposal certificates of destruction.
• Manage compliance of outsourced recovery partners through audits and closed-loop corrective actions.

Providing Input. There are still unanswered questions regarding the implementation of WEEE and RoHS. With few established guidelines, there is still an opportunity for companies to have a voice in definitions and accepted practices for complying with these two regulations (see sidebar). Specifically, there is still a need for creating a standardized method of testing. There are also questions related to the definitions and terminology of the directives.

Medical industry groups such as AdvaMed and the Medical Device Manufacturers Association are not currently focused on these environmental compliance requirements. However, it will be important for such organizations to engage in the environmental regulation dialog to ensure that the medical device industry's requirements are taken into consideration. Such involvement will be especially important if, as is expected, the U.S. Congress considers the adoption of similar legislation.

Going Retail. Device manufacturers should adopt best practices from the retail industry. According to AMR Research, companies can learn from the reverse logistic best practices of retailers.1 Under the WEEE regulation, medical device companies will face similar challenges in the collection, disposal, and return of components and products. Retailers have been successful in managing this process by imposing tightly integrated logistics systems. These same systems can be applied by medical device manufacturers to help reduce costs related to collection, logistics, sorting, storing, recycling, and disposing of the product through collection centers and recycling plants.

Conclusion

The EU's new environmental regulations are coming fast, but there is time to put into place both the best practices and technology to manage them. Device companies should get involved with organizations now, to both learn about and influence the guidelines for meeting these directives. And they should also take tips from the experience of those in other industries.

By making such initial inroads now, device companies will be able to continue driving their product innovation processes and meet competitive time-to-market demands, while also complying with global guidelines for ensuring the health of individuals and the environment alike.

References

1. Electronic Waste Processing: Manufacturers Running Out of Time (Boston: AMR Research, 2003).

2. "Directive 2002/95/EC of the European Parliament and of the Council of 27 January 2003 on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment," Official Journal of the European Union L37 (February 13, 2003): 19–23.

3. "Directive 2002/96/EC of the European Parliament and of the Council of 27 January 2003 on Waste Electrical and Electronic Equipment (WEEE)," Official Journal of the European Union L37 (February 13, 2003): 24–38.

Chris Wong is chief products officer and executive vice president of Agile Software (San Jose), leading the company's global product strategy, mergers and acquisitions, and technology partnership initiatives.

Photo by DIGITALVISION

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