BEST PRACTICES,®LLCBest Practices, LLC Strategic Benchmarking ResearchBenchmarking Quality:How Medical Device & Diagnostic...
BEST PRACTICES,®LLCTable of Contents - 1 Executive Summary…………………………………………………………………. Research Overview Participating Co...
BEST PRACTICES,®LLCTable of Contents - 2 Compliance: Quality Plays Leading Role in Compliance Activities withHelp from Co...
BEST PRACTICES,®LLCTable of Contents - 3 Non-Conforming: Quality Governs Non-Conforming Activities with Helpof Company Si...
BEST PRACTICES,®LLCKey Topics AddressedStudy Overview Quality Spend Levels andInclusions/Exclusions Future Quality Spend...
BEST PRACTICES,®LLCBenchmark Class:6Copyright © Best Practices, LLC• Corporate Vice President, Quality and Regulatory• Se...
BEST PRACTICES,®LLCKey Findings & Insights: Quality Spend Trends & DriversThe following key findings and insights emerged ...
BEST PRACTICES,®LLC(n=11)Q12. How has the total spend of your companys medical device Quality function changed over the pa...
BEST PRACTICES,®LLC0246810120.0% 1.0% 2.0% 3.0% 4.0% 5.0%Quality Cost / RevenueFinding Your Zone of Optimal Competitivenes...
BEST PRACTICES,®LLCComplexity Drives Quality Support Spend IncreasesComplexity – in three distinct forms – is identified a...
BEST PRACTICES,®LLCLess Than Half of Quality Systems at Acquired Companies AreFully Integrated into Existing StandardsThe ...
BEST PRACTICES,®LLC12StructurePeopleProductsCustom-ersSalesForcesFacilitiesSuppliersQualitySystemsTechnol-ogyIntegrationCe...
BEST PRACTICES,®LLCQuality Staffing over Med Device Employees – Shown as %13Copyright © Best Practices, LLCMedical Device...
BEST PRACTICES,®LLCMajority Changed Less than 50% of Released & Effective DocsForty percent of the total benchmark class i...
BEST PRACTICES,®LLCQ26d. Please estimate the percentage of Quality Assurance activities that are done in low-wage markets ...
BEST PRACTICES,®LLC(n=11)Q19e. Indicate what role in the following processes within your Quality system does your Quality ...
BEST PRACTICES,®LLCQ7. In which regions does your company sell medical devices/diagnostics directly and/or through a distr...
BEST PRACTICES,®LLC18Copyright © Best Practices, LLCBest Practices, LLC is a research and consulting firm that conducts w...
Upcoming SlideShare
Loading in …5
×

Benchmarking Quality: How Medical Device and Diagnostics Companies Manage Cost Effectiveness while Ensuring Quality and Safety

3,796 views

Published on

Medical device and diagnostics companies spend millions to ensure their products meet quality standards at every stage of the product lifecycle, from R&D to post-market activity. Facing tight budgets and escalating regulations, quality leaders are preparing to shift resources, automate and outsource activities, develop and retain key talent, and build business plans that justify their budgets.

This Best Practices, LLC, report delivers comprehensive survey benchmarks on how medical device companies are defining and allocating Quality spend, identifying factors that impact spending levels, and investing in future mission-critical Quality activities.

Quality leaders can use the evidence-based metrics and insights for Quality spending, staffing, change request levels, outsourcing, software quality, inspections, lab testing, complaint management, trend insights and more.

0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
3,796
On SlideShare
0
From Embeds
0
Number of Embeds
31
Actions
Shares
0
Downloads
38
Comments
0
Likes
3
Embeds 0
No embeds

No notes for slide

Benchmarking Quality: How Medical Device and Diagnostics Companies Manage Cost Effectiveness while Ensuring Quality and Safety

  1. 1. BEST PRACTICES,®LLCBest Practices, LLC Strategic Benchmarking ResearchBenchmarking Quality:How Medical Device & DiagnosticsCompanies Manage Cost Effectivenesswhile Ensuring Quality & Safety
  2. 2. BEST PRACTICES,®LLCTable of Contents - 1 Executive Summary…………………………………………………………………. Research Overview Participating Companies Key Findings & Insights……………………………………………………………. Inclusions & Exclusions Impact Quality Spend Levels………….......….….. Future Quality Spend Drivers: Complexity, High Change Rates &Increased Regulatory Scrutiny……………………………………………………. Future Quality Spend Normalizers: Simplification, Standardization,Divestitures & Automation………………………………………………………… Fully Integrating Independent Quality Systems & Acquisitions SupportsStandardization & Simplification…………………………………………………. Regulatory Scrutiny & Internal Complexity, Efficiencies & Cost PressuresChallenge Quality Leaders for Next Two Years………………………………… Quality Staffing Steadies After Three Years of Influx…………………………. Quality Budget Allocations for Key Activities Favor Product Support &Compliance Activities……………………………………………………………….2Copyright © Best Practices, LLC5715273542525664
  3. 3. BEST PRACTICES,®LLCTable of Contents - 2 Compliance: Quality Plays Leading Role in Compliance Activities withHelp from Company Sites in Low-Wage Labor Markets……………………… Compliance: Up to Half of Released Documents Changed or Updated in2012…………………………………………………………………………………….. Inspection/Production: Quality Takes the Lead in Majority ofInspection/Production Activities with Help of Outsourcers in Low-WageLabor Markets………………………………………………………………………… Inspection/Production: Varied Size of Supplier Networks – Still RequiresDetailed Inspection 60%+ of Incoming Batches for Most ……………………. Inspection/Production: Software Validation Activities Span SeveralFunctions with Many Landing Under Qualitys Purview……………………… Inspection/Production: Centralized Labs & Outsourced Vendors PerformMajority of Sterilization, Toxicology, & Biocompatibility QualificationTests…………………………………………………………………………………….3Copyright © Best Practices, LLC697478838690
  4. 4. BEST PRACTICES,®LLCTable of Contents - 3 Non-Conforming: Quality Governs Non-Conforming Activities with Helpof Company Sites in Low-Wage Labor Markets………………………………... Non-Conforming: Cycle Times for Processing CAPAs Can Take Up to AYear or More………………………………………………………………………….. Non-Conforming: Virtual Reviews & Automation Help Manage Thousandsof Annual Complaints ………………………………………………………………. Product Support: Pre-Clinical & Clinical Quality Assurance Activities NotOften Led by Quality………………………………………………………………… Product Support: Quality Is Involved in Many Aspects of Design Control& Cross-Charge Related Expenses…………………………………………… Additional Quality Activities: Quality Supports Many Additional Activitieswith Use of Company Sites & Outsourced Vendors in Low-Wage LaborMarkets………………………………………………………………………………… Universe of Learning: Key Demographics of Participating Companies ….. Appendix……………………………………………………………………………....4Copyright © Best Practices, LLC9297101106111115120128
  5. 5. BEST PRACTICES,®LLCKey Topics AddressedStudy Overview Quality Spend Levels andInclusions/Exclusions Future Quality Spend Drivers & Normalizers Acquisition & Integration Levels Future Pitfalls & Challenges for the QualityFunction Quality Staffing Levels Volume of Change Requests, Complaints,CAPAs, and NCEs Budget Allocations for Key Quality Activitiesincluding: Compliance; Inspection/Production; Non-conforming; ProductSupport; Other Quality Activities Degree of Quality Responsibility Across KeyActivity Areas Use of Offshoring and Outsourcing in Low-wage Labor Markets for Quality ActivitiesResearch Objective: This comprehensive surveybenchmarks how medical device companies aredefining and allocating Quality spend, identifyingfactors that impact spending levels, and investing infuture mission-critical Quality activities.The results of this study provide evidence-basedbenchmarks for Quality spending, staffing, changerequest levels, outsourcing, software quality,inspections, lab testing, complaint management,trend insights and more.Methodology: Best Practices, LLC engaged 12Quality leaders at 12 companies through abenchmarking survey instrument. In addition,research analysts conducted several brief interviewsto verify quantitative and qualitative data.Research Project Objectives, Methodology & Results5Copyright © Best Practices, LLCMedical device and diagnostics companies spend millions to ensure their products meet qualitystandards at every stage of the product lifecycle, from R&D to post-market activity. Facing tight budgetsand escalating regulations, quality leaders preparing to shift resources, automate and outsourceactivities, develop and retain key talent, and build business plans that justify their budgets.
  6. 6. BEST PRACTICES,®LLCBenchmark Class:6Copyright © Best Practices, LLC• Corporate Vice President, Quality and Regulatory• Senior Vice President, Quality and Regulatory• Vice President, Global Quality Systems• Vice President, Quality Assurance Operations• Vice President, Quality and Regulatory• Vice President, Quality and Regulatory Affairs• Senior Director, Global Quality Systems• Senior Director, Global Quality and Regulatory• Senior Director, Quality• Director, Quality Systems• Senior Manager, Quality and Quality Assurance• Manager, Quality Assurance andRegulatory AffairsJob Titles of Respondents:Universe of Learning: 12 Med Dev Orgs, 6 in Large Co. SegmentTwelve benchmark survey respondents participated in this research, nearly half of whom serve as vicepresidents in Quality. Eleven of 12 benchmark companies represented are based in the United States.Two participants represent large business units instead of the entire company. The six circled companiesmake up the large company segment (LCS), with an average of $3.9 billion in 2012 revenue from medicaldevice operations.
  7. 7. BEST PRACTICES,®LLCKey Findings & Insights: Quality Spend Trends & DriversThe following key findings and insights emerged from this study. Quality Spending Trends: Nearly half of participating companies saw spending increase for the Qualityfunction over the past three years with an average amount of increase in spending of 6% for the fullbenchmark class and for the large companies within it. Regulatory requirements, business expansion/newproducts, and economic conditions are commonly cited forces for increased Quality spend. Factors Increasing Quality Support Spend: Complexity in product mix, product family, andmanufacturing network received the highest impact ratings when it comes to prompting investmentincreases in Quality spend. The total benchmark class also spotlights high change rates for design andmanufacturing processes – along with standardization initiatives – as other sources of increasing QualitySupport spending in the next two years. The large company segment indicated that the impact ofRegulatory infractions on Quality Support spend increases is much higher than did the overall benchmarkclass. Half of large companies ranked consent decrees as having high impact on costs compared to only25% of the overall benchmark class. Future Quality Spend Normalizers: The overall benchmark class spotlights product simplification,network optimization, standardization initiatives, and divestitures as key drivers expected to decreaseQuality Support spending requirements in the next 24 months. Large companies rank divestitures as beingtwice as likely to lower costs compared to the overall benchmark class. Locating plants in low-costmarkets, automation, and decreasing change rates for product design and manufacturing all have at leastsome positive impact on reducing support spending needs. A minority of companies did suggest thatRegulatory factors will help reduce costs – possibly because Regulatory actions have promptedimprovements that lead to lower support cost requirements.7Copyright © Best Practices, LLC
  8. 8. BEST PRACTICES,®LLC(n=11)Q12. How has the total spend of your companys medical device Quality function changed over the past threeyears (2010-2012)?8Copyright © Best Practices, LLCSpend Change Trend: Cost Changes Over Past 3 Years inMedical Devices Quality Function(n=6)45% 50%36% 33%18% 17%Total BenchmarkClassLarge CompanySegmentIncreased Remained the same DecreasedTotal %Change inQuality spendin past 3 yearsMax 30%75th Percentile 10%Mean 6%Median 0%25th Percentile 0%Min -8%(n=5)Large Company Segment:Total %Change inQuality spendin past 3 yearsMax 30%75th Percentile 8%Mean 6%Median 0%25th Percentile 0%Min -10%(n=10)Total Benchmark Class:45% of Participants Increased Quality Spending in Past 3 YearsNearly half of participating companies saw spending increase for the Quality function over the past threeyears. The average amount of increase in spending for the Quality function was 6% for both the fullbenchmark class and the large companies within it.
  9. 9. BEST PRACTICES,®LLC0246810120.0% 1.0% 2.0% 3.0% 4.0% 5.0%Quality Cost / RevenueFinding Your Zone of Optimal Competitiveness(Core Quality Costs Excluding Various Support Services)Company ACompany BCompany CCompany DCompany ECompany FCompany GCompany HCompany ICompany JCompany KEntering Zone of Competitiveness for Quality “Core Costs”On average, companies spend about 1.8% of revenue on the Quality function. For large companies, theaverage was lower at 1.7%. However, with Quality spend increasing by an average of 6-10% overall,companies are moving toward an optimal zone of competition where spend lands between 1.5% - 3% oftotal revenue. Most companies exclude a host of Support Services & Functions in the calculation ofQuality core costs.TBCAverage=1.8%9Copyright © Best Practices, LLC
  10. 10. BEST PRACTICES,®LLCComplexity Drives Quality Support Spend IncreasesComplexity – in three distinct forms – is identified as the primary driver behind anticipated increases inQuality Support spending in the next two years. Product mix complexity, product family complexity, andmanufacturing network complexity received the highest impact ratings when it comes to promptinginvestment increases in Quality Support.(n=12)Q27a. For the following factors, indicate the likely impact each has on increasing Quality Support spend in your companythroughout the next 12 to 24 months.10Copyright © Best Practices, LLCFactors Increasing Quality Support Spend: Complexity Factors – Total Benchmark Class8%8%50%25%33%42%42%25%58%42%25%33%17%8%25%25%17%8%8%Complexity of product mixMany product familiesComplexity of manufacturing networkLarge corporate acquisitionsSmall bolt-on product acquisitions1 - No Impact 2 - Low Impact 3 - Medium Impact 4 - High Impact
  11. 11. BEST PRACTICES,®LLCLess Than Half of Quality Systems at Acquired Companies AreFully Integrated into Existing StandardsThe total benchmark class has fully integrated only 38% of acquired sites into existing Quality standards.Conversely, 29% of deals remain stand-alone and 34% pursue only partial integration with parentcompany Quality standards. All companies plan for future integration.Q35. Based on the past 3 years (2010-2012) of acquisitions, estimate the % of acquired facilities where Quality staff andsystems have been fully integrated into your corporate Quality standards.11Copyright © Best Practices, LLC(n=7)Quality Integration for Acquired Sites – Total Benchmark Class:Percentageof totalacquisitionsfullyIntegrated,38%Percentageof totalacquisitionsremainingstand-alone(nointegration),25%Percentageof totalacquisitionswith someintegrationbut not allsites/systems,34%• All companies plan for future integration.• Two companies in the total benchmark class indicate that they have alreadyfully integrated, therefore their data were omitted from the calculations.Currently% of totalacquisitionsfully inte-grated% of totalacquisitionsremainingstand-alone% of totalacquisitionswith someintegrationMax 75% 100% 100%75th Percentile 65% 50% 40%Mean 38% 29% 34%Median 50% 0% 31%25th Percentile 5% 0% 13%Min 0% 0% 0%Average Degree CurrentAcquisition Integration:
  12. 12. BEST PRACTICES,®LLC12StructurePeopleProductsCustom-ersSalesForcesFacilitiesSuppliersQualitySystemsTechnol-ogyIntegrationCenter ofExcellenceIntegration Centers of Excellence Help Achieve M&AProductivity TargetsMany acquisitions and decentralized culture have permitted many quality systems not to be fullyintegrated. Fully integrating quality systems across acquired companies and assets offer greaterefficiencies. Some companies employ Integration Centers of Excellence to accomplish this.Benefits Of IntegrationSpecialists Specialists can organize quickly Have experience with pastintegrations Employ “due diligence” mindset tointegration Drive early synergy actions Avoid common mistakes Remain focused on integration forfull cycle Don’t have line operationresponsibilities that distract Get to back-end opportunities:Quality, Technology, et al.
  13. 13. BEST PRACTICES,®LLCQuality Staffing over Med Device Employees – Shown as %13Copyright © Best Practices, LLCMedical Device Quality Staffing:Quality FTEs/ MedicalDevice FTEsMax10.2%75th Percentile7.7%Mean5.9%Median5.8%25th Percentile3.3%Min2.6%Quality FTEs/ MedicalDevice FTEsMax10.2%75th Percentile7.7%Mean5.4%Median4.7%25th Percentile3.3%Min1.6%(n=10) (n=6)Total Benchmark Class: Large Company Segment:Nearly 5.5% of Medical Device FTEs Work in Quality FunctionWhen normalized by Medical Device FTEs, Quality function staff makes up an average of 5.4% of theMedical Device FTEs among benchmark class companies. Among large companies, the average is higherat 5.9%.
  14. 14. BEST PRACTICES,®LLCMajority Changed Less than 50% of Released & Effective DocsForty percent of the total benchmark class indicated that their Quality functions changed or updatedbetween 31-50% of released and effective documents in 2012. One large-company representativeachieved the lowest change/update rate of 11-15% in the benchmark class.(n=10)Q37. What percentage of your companys released and effective documents were changed or updated in 2012?14Copyright © Best Practices, LLCDocument Change Levels:Total Benchmark Class: Large Company Segment:(n=5)11-15%,10%16-20%,10%21-30%,30%31-50%,40%Morethan50%,10%11-15%,20%31-50%,60%21-20%,20%
  15. 15. BEST PRACTICES,®LLCQ26d. Please estimate the percentage of Quality Assurance activities that are done in low-wage markets at company sites vs.via third-party outsourcers.15Copyright © Best Practices, LLCManaging QA Labor Costs across Global Markets(n=4-5)Large Companies Use Low-Wage Markets for QualityEngineering & Design Assurance for Commercial ProductsAll participants in the large company segment perform at least some Quality Engineering and DesignAssurance for Commercial Products support activities at company sites in low-wage markets. Up to 40%also use third-party vendors in these markets for some Quality Engineering activities.Companies performing activities in low-wagemarkets at company sitesCompanies using 3rd-party outsourced vendors toconduct activities in low-wage marketsQualityEngineeringPre-ClinicalQualityAssuranceClinicalQualityAssuranceDesignAssurancefor NewProducts &CommercialProductsQualityEngineeringPre-ClinicalQualityAssuranceClinicalQualityAssuranceDesignAssurancefor NewProducts &CommercialProducts0%0% 25% 75% 20% 0% 60% 75% 100% 80% 80%1-15%0% 75% 25% 60% 0% 40% 0% 0% 20% 20%16-30%40% 0% 0% 0% 40% 0% 0% 0% 0% 0%31-50%40% 0% 0% 0% 20% 0% 0% 0% 0% 0%51-100%20% 0% 0% 20% 40% 0% 25% 0% 0% 0%Large Company Segment – Product Support Activities:%ActivitiesPerformed
  16. 16. BEST PRACTICES,®LLC(n=11)Q19e. Indicate what role in the following processes within your Quality system does your Quality unit play.16Copyright © Best Practices, LLCScope of Responsibility for the Quality Organization – Other:Total Benchmark ClassQuality Supports – or Leads – Additional Process AreasAdditional process areas where Quality often leads (82% of companies) include Quality Project Timeand Corporate Quality Administration. The Quality function most often plays a support role inContinuous Improvement, Six Sigma, and M&A Due Diligence.Other Processes9%9%9%9%18%18%64%82%73%91%91%82%82%27%18%18%Quality project TimeCorporate Quality AdministrationManagement TimeContinuous Improvement ProjectsM&A Due Diligence and IntegrationSix Sigma ProjectsNon-quality Project timeNo role Supports Leads
  17. 17. BEST PRACTICES,®LLCQ7. In which regions does your company sell medical devices/diagnostics directly and/or through a distributor?(Check all that apply)17Copyright © Best Practices, LLC% of Companies who Sell Directly in Each Region(n=12) (n=6)92%75% 75% 67% 67%25%100% 100%83%100%83%33%USA Europe Other AsiaPacific CountriesSouth andCentral AmericaJapan OtherTotal Benchmark Class Large Company Segment92% 83% 75% 67%50%67%100% 100%83%67% 67%50%South andCentral AmericaOther AsiaPacific CountriesEurope Japan USA Other% of Companies that Sell Through a Distributor in Each RegionAll Benchmark Partners Sell Medical Devices GloballyAll benchmark partners sell medical devices in the US and globally. One company that does not selldirectly in the US, sells through a distributor. Nearly all, or 92%, sell medical devices through adistributor in South and Central America, where 67% of companies in the total benchmark class also selldirectly. A third of companies in the benchmark class sell both directly and through distributors in allregions benchmarked.
  18. 18. BEST PRACTICES,®LLC18Copyright © Best Practices, LLCBest Practices, LLC is a research and consulting firm that conducts workbased on the simple yet profound principle that organizations can chart acourse to superior economic performance by studying the best businesspractices, operating tactics and winning strategies of world-classcompanies.Best Practices, LLC6350 Quadrangle Drive, Suite 200, Chapel Hill, NC 27517919-403-0251best@best-in-class.comwww.best-in-class.comAbout Best Practices, LLC

×