To gain an insightful description of what is happening in the 21st Century to the world economy where the global supply chain now includes China, India, and other emerging countries, read Thomas L. Friedman's recent book, “The World is Flat.” He hypothesizes that this is due to a convergence of technology, advancement in communication, and world events that has created a horizontal playing field for multiple forms of collaboration. This collaboration is utilized in the medical device industry and is known by several terms:
OEM—Original Equipment Manufacturer
Contract manufacturing
Supplier of components or subassemblies
Vendors of components or services
Contract developers or engineering services
Consultant services
What is Outsourcing?
All of this collaboration comes under the umbrella term “outsourcing” and if conducted by a foreign entity is called “off-shoring.” The impetus for outsourcing in the device industry is the desire for an improvement in productivity associated with technological advancements. The medical device industry is characterized as a divergent innovative industry where the majority of companies are small to medium size.
Device companies are outsourcing more manufacturing each year driven by the need to focus on their core competencies in order to continue to have a robust pipeline of new products. Manufacturing strategies have always included suppliers and/or vendors for components of medical devices; this is the decision to “make” the components yourself or “buy” components from a supplier or vendor. The decision to purchase components falls within the company's' quality system under purchasing controls in the FDA Quality System Regulation for Medical Devices, 21CFR820 and ISO 13485 Medical Device—Quality Management System standard. Purchasing controls also apply to outsourcing research and development activities for specific technologies that are not the finished device manufacturer's core competency; examples are software development or wireless connectivity for patient monitoring products.
When entering an outsourcing contract agreement, participants should keep in mind the following:
✓ A contract agreement between the finished device manufacturer and contractor or supplier should clearly describe product specification and requirements.
✓ Responsibilities of each entity to meet the requirements should be defined in the contract.
Contract manufacturing and procurement cover a wide range of specialties in the medical device industry. Table 1 contains examples of categories of outsourcing activities.
Quality System Implication
To the finished device manufacturer: The Quality System Regulation defines the term “manufacturer” as any person who designs, manufactures, fabricates, assembles, or processes a finished device and includes contract sterilization, installation, relabeling, remanufacturing, repackaging, or specification developer.
If the contactors or outsourcers listed above process a finished device, then they are considered a manufacturer and must comply with the Quality System Regulation 21CFR820.
To the component supplier/vendor: If the contractor, supplier, and/or vendor only manufactures or processes a component or subassembly, then they are covered by the requirements for purchasing controls, which the finished device manufacture implements. These specific requirements for purchasing controls are stated in 21CFR 820.50 and ISO 13485, 7.4. It is the responsibility of the finished device manufacturer (the one whose name appears on the label and who represents it to the user) to ensure that the purchased product, component, or service conforms to the specified purchasing requirements and to perform evaluations of the potential contractors, suppliers, and/or vendors.
Purchasing Controls
The finished device manufacturer must evaluate and select suppliers and/or vendors and contractors based on the contractor's or supplier's ability to provide product, services, or components that meet specifications. To assess their capability several methods are commonly employed:
Conduct audits
Survey capability and quality system
Determine certification to ISO 13485 or ISO 9001
Review historical data
Conduct testing of product
After the initial qualification, other methods for control of contractors, suppliers, or vendors are implemented. These may include:
Monitoring data for conformance to specifications
Trending performance data
Conducting receiving inspection
Periodically or routinely testing product
Reviewing certificates of analysis
Conducting periodic audits
There is a range of control that may be established by the device manufacturer depending on the risk and importance of the product, component, or service. The extent of control over the contractor or supplier is based on a risk assessment, which answers the question “What is the impact of this component or service to the quality of the finished device?” For the high risk component or service, more stringent purchasing controls are exerted.
Contract Agreements
A contract between the finished device manufacturer and the contractor or supplier should clearly describe the product specifications or requirements, and the applicable quality attributes of the product. Responsibilities of each entity to meet the requirements should be defined in the contract. Another key requirement in a contract is for the contractor or supplier to notify the finished device manufacturer of any proposed changes and their planned implementation. This enables the finished device manufacturer to perform an assessment of the impact of the change and its effect on the quality of the finished device.
During contract development, all elements of the quality system should be considered to determine which facets are the responsibility of the finished device manufacturer and which are the responsibility of the contractor or supplier.
For a new product, an important point to consider in the contract is risk assessment. If the contractor is developing specifications, will they perform a risk assessment or will the finished device manufacturer conduct risk assessment? Consideration must also be given to risk management for the lifecycle of the product.
These contract agreements have expanded in some instances into a partnership, joint venture, or an alliance. New product development is more commonly using outsourcing to contractors and creating strategic alliances to bring new products to market faster and more efficiently.
Conclusion
Outsourcing is a valuable strategy for both manufacturing and product development. If a finished device manufacturer utilizes outsourcing as a strategy, then they must implement the requirements for purchasing controls in their quality system relevant to these activities.
Author notes
Vera Buffaloe is president of Buffaloe Consulting, Inc.and is a regulatory and quality professional with more than 30 years experience in the medical device industry. She has been a consultant since 1993 assisting both large and small device firms achieve compliance. She is a lead instructor for AAMI QSR courses on the Quality System Regulation, Process Validation, CAPA, Design Controls, and Risk Management. She can be reached at verabuff@pipeline.com
