Medical Device Link.

The compatibility of a manufacturer's PDM system with its regulatory compliance system is an issue of some importance, because the vast majority of PDM packages available today have their roots in other industries. Medtech firms can easily waste large amounts of money troubleshooting problems with systems that are fundamentally incompatible or that do not comply with applicable regulations. Fortunately, a number of well-established PDM suppliers have now had enough experience with medtech clients to develop relatively sophisticated expertise in the field. Agile Software (San Jose), for instance, now has a business unit dedicated to medtech markets.

Although regulatory compliance is essential for companies in the medtech community, manufacturers are extremely sensitive to the enormous sums of money that must be devoted to regulatory activities. "Today, about 50% of the cost of a Class III device can be attributed to the management of regulatory information," says Michael Prudhomme, chief technology officer for netRegulus (Minneapolis). According to industry estimates, 12–20% of smaller companies' operating budgets is now devoted to regulatory compliance. Companies that hope to reduce such costs by implementing IT solutions should therefore first ensure that their systems are compatible with one another and that the combined whole is sufficient to address all the issues that commonly arise for device firms.

"One of the biggest issues for medical device companies is the enormous diversity of sites where their data come from," says Prudhomme. "These can include sites where clinical trials are being conducted as well as the company's own facilities." Many companies deal regularly with sites located in several different countries, each with their own market requirements and regulations.

In addition, the sheer complexity of the information can often produce unnecessary waste, Prudhomme says. He cites the example of a company that needed to recall some lots of its product, but was unable to provide critical product information to its representatives in several countries. As a result, those reps were forced to recall more product than necessary. A regulatory compliance application that was designed to interface with the rest of the company's product information could have prevented such waste. "The good packages," says Prudhomme, "are designed to do this."

The manufacturer's PDM system should also be integrated with its supply-chain management (SCM) systems and customer-relationship management packages, says Vince Barletta, director of industry development for Agile's medtech group. When any changes are made to these databases, the PDM package should automatically update all related documents, such as instructions for bills of materials used by the ERP system. Adapters that enable PDM systems to communicate with virtually any major ERP system are commercially available.

Regulatory Compliance Systems. A wide variety of IT systems are available to help medtech companies manage data and documents related specifically to regulatory requirements (see Table II). The capabilities of such software systems are illustrated by the experience of Zimmer Inc. (Warsaw, IN), an orthopedic implant manufacturer, which selected a system by CDC Solutions (Philadelphia) to assist in meeting its regulatory compliance needs. Zimmer wanted IT help in regulatory compliance for both paper and electronic premarket submissions. Like many systems, the IT solution provided by CDC offered an "out-of-the-box" system for handling such regulatory compliance documents. Zimmer completed the initial phase of implementation in only three months.

The Zimmer project had two primary objectives: to streamline the paper production process, and to complete the move toward electronic submission of regulatory approval documents. Zimmer needed the capability to generate both premarket notification (510(k)) documents and premarket approval (PMA) applications, and to make use of such features as electronic signatures, cross-referencing, bookmarking, and watermarking capabilities. Zimmer also needed the scalability that would enable it to manage documents ranging from hundreds of pages to hundreds of thousands of pages in the required formats. The CDC system generates such documents in a portable document file (.pdf) format, which is an electronic file format that is commonly used by compliance systems and is acceptable to FDA.

Although some companies offer a range of modules that can help medtech manufacturers comply with FDA requirements in a variety of areas—such as clinical trials, quality systems, and postmarket surveillance—not all such modules have to be part of the manufacturer's integrated, seamless system. In the case of clinical trials systems, for instance, Tasker advises that "only the analysis and summary documents of the clinical trials data files" need to be linked to the manufacturer's regulatory compliance and PDM systems.

On the other hand, he notes, all of the modules of a clinical trials system should be linked to the manufacturer's ERP system, because investigational devices involved in clinical trials are often delivered to study sites on a just-in-time basis. In addition, investigators participating in a clinical trial are often paid only when they reach certain milestones in the study protocol. By linking the clinical trials system to the corporate ERP system, the manufacturer can use a milestone-related study report to trigger the ERP's finance modules and issue the investigator's payment.

ERP Systems. The integrated assemblies of software modules collectively known as ERP systems offer medtech manufacturers considerable advantages for handling ever-increasing amounts of corporate data. Designed originally to meet the needs of other, larger industries, however, such systems have tended to be too complex and too expensive for the needs of most medical device companies. The cost of implementing an ERP system can often run into the tens of millions of dollars.

In recent years, however, the makers of ERP systems have begun to offer products that are better suited for smaller companies, making them scalable so that they can match the increasing level of complexity and sophistication required by a growing company. Vendors are also extending the scope of their products by adding customer service tools as well as modules for customer-interaction management, supply-chain management, and sales force automation (see Table III).

In the past, the needs of core business functions have been served by independent software systems offering essentially the same functionality as ERP systems. However, the new ERP systems tightly integrate these varied functions into a single system. Such integration is immediately apparent to the user, because each of the system's functions uses the same operating characteristics and interface layout. Moreover, when the user enters data into one application of the ERP system, it is automatically reflected everywhere else. For example, salary changes or new hires entered into the human resources module are automatically reflected in the system's payroll and accounting modules. Similarly, order-entry information is automatically shared with accounting, scheduling, inventory, and any other affected functions in real time.

Such integration is designed to ensure that company executives and managers receive consistent, accurate, and timely data. Because ERP systems typically cover the complete gamut of activities within any business enterprise, their implementation presents an opportunity to streamline and improve business processes, taking advantage of the integration to increase efficiency and thus boost productivity.

Because ERP systems are expensive and can take several years to implement fully, scalability is important. "We saw a real need to address the ERP needs of medical device and batch pharmaceutical manufacturers with less than $100 million in annual sales," says Expandable Software's Hardy. "These are companies that typically cannot spend lots of money on IT systems. Then, when they reach the IPO stage, they bring in a chief information officer who will want to build a system his or her way."

Avoiding the Pitfalls

For companies looking to upgrade their IT systems, there are several important issues to keep in mind. First—and probably most important, say the experts—is the problem of unrealistic expectations. "PDM and ERP systems don't come cheap. You can spend quite a bit of money on them and, by definition, companies must depend on them to automate core business processes," says Chris Blanchard, business development manager for Intergraph PDM Solutions (Cincinnati). "Yet ironically, many companies do not devote enough time or resources to seeing that the systems are implemented properly. Part of the reason for this is that implementation usually involves some disruption of workflow. Also, it can be as long as nine months before an organization sees any return on investment from the initial phases of implementation. For many companies, that's tough to take."

Chris Williams, chief technology officer at Ingenuus (San Francisco), agrees. "In general, ERP projects can take from two to five years to fully implement and in some cases can cost as much as $12 million per module. These systems are very big investments, even when they make use of Web-enabled ASP technologies."

To address this problem, Blanchard recommends that companies break up ERP and PDM projects into smaller bites, and implement them one or two at a time in a series of successive releases. That way, companies can adjust to the new systems and work out any problems before they are compounded throughout the organization.

"Any company that is reputable offers a lot of technical support during the implementation phase. The only real way to evaluate how good a company is is to check references—and not just three or four," adds Hardy of Expandable. "If a company is good, it ought to be able to offer references from at least a hundred clients, not just a handful. Check them all."

Another problem often encountered by device manufacturers is back-end integration—that is, how to establish interfaces between the new ERP system and legacy computer systems, or even among the ERP systems of allied companies. "The reality today is that manufacturing is dispersed geographically across many sites, often in different countries," says Ingenuus's Williams. "Operations are increasingly outsourced to entirely different companies. So the notion of enterprise planning is a bit anachronistic in this new environment.

"In today's environment, it's not uncommon to find two organizations that are trying to do business with one another, each employing an ERP system that is not compatible with the other," Williams adds. "That problem is compounded exponentially as you add more and more business partners."

The difficulty of such back-end integration demonstrates the need for what Williams calls 'intelligent collaborative commerce.' "The real future of this technology lies in involving all the stakeholders in each critical business process and integrating their needs to optimize the bottom-line results for each company,"he says. "Companies need to focus on the critical business processes, not the technologies. So far, none of the PDM, ERP, or SCM systems has really addressed this problem."

A final problem resides with the managers usually charged with overseeing the use of ERP systems. According to a report by IDC (Framingham, MA), such IT managers often regard ERP systems simply as integrated core business systems that combine forecasting, logistics, manufacturing operations, and financial applications in some way. They do not recognize how the users of various modules might like to use others' data—often because they simply do not ask. In addition, says the report, even leading ERP packages make it difficult to incorporate customized programming that would extend the functionality of the systems to meet a particular manufacturer's needs. This drawback can make further integration with outside organizations difficult, if not impossible.

Conclusion

If there is any consensus among those involved in developing and implementing IT systems for medtech manufacturers, it is that top management must be committed to the project. Such a commitment must account for the time, expense, and disruption in workflow that are often encountered long before ROI from these initiatives is realized.

It's not difficult to see why it's so important to get executive sign-off on such large-scale IT projects. According to Brett Williams, a former top executive with Medibuy.com (San Diego) and now an e-business strategy consultant, half of all e-business ventures fail. And the number one reason for failure, he says, is that "CEOs don't get involved. It's the kiss of death."

Does this mean that all such IT systems and electronic manufacturing projects implemented in the medical device industry are doomed? On the contrary, says Williams, electronic business is here to stay. In fact, he says, "In five years, the e in e-business, e-manufacturing, and e-commerce will be a dim memory. It will just become business—everyone's business."

One reason that such systems are likely to become even more important in medtech manufacturing is that company executives are beginning to see the connections between high-quality IT systems, time to market, improved liability exposure, and other bottom-line advantages. "Of course, R&D, sales, and marketing concerns always take a higher priority," observes Mark Schaub, president and CEO of netRegulus. "But increasingly, executives are beginning to see the connection between IT issues and the bottom line."

How such IT systems can improve overall competitive advantage and corporate performance, as well as create previously unforeseen ways to do business and exploit new market opportunities, will be the subject of the final installment in this series.

Cliff Henke is a freelance writer based in Southern California.

Copyright ©2001 MX