FDA Audits: The True Cost of Quality Problems

Introduction

FDA inspections are an unavoidable and often unwelcome reality for medical device manufacturers, and knowing how to prepare for them effectively and confidently is vital to success. Not having a proper plan in place can have dire consequences for organizations. Quality failures can result in everything from warning letters to major compliance actions requiring facility shutdowns, and, since medical device recalls have been on the rise, the threat of regulatory action is very real.

Inspections that lead to recommended actions, warning letters, or recalls have a significant negative impact on revenue for organizations, and can truly make or break a smaller manufacturer’s ability to keep the doors open. A product-centric quality management system software takes the guesswork and uncertainty out of responding to audits and helps prevent many quality issues from surfacing or evolving into costly mistakes that haunt organizations for months or even years. How? Product-centric QMS solutions link quality records and processes directly to the product design record. Using a single system for managing product development and related quality issues provides optimal visibility to all stakeholders and gives quality teams a traceable historical record to respond to auditors.

Based on FDA inspection data, quality issues impact organizations in two main ways.

1. Quality Gaps Exacerbate Audit Concerns

In 2017, the FDA conducted 2,235 total domestic and foreign FDA medical device quality system inspections, which was significantly more than any total inspection number in any of the previous five years. As devices get more complex and manufacturer supply chains become more distributed, it becomes more challenging to comply with domestic and international regulations. These ever-changing dynamics increase the chances of standard audits turning into citations or warnings if the necessary controls are not in place.

Forty-nine percent of these medical device inspections came to the conclusion that the device manufacturer needed to take “voluntary” or “official” quality actions in order to remain in compliance with regulatory standards. According to the FDA, the regulatory body has “increased the annual number of medical device inspections it conducts, and through the implementation of a risk-based inspection approach that focuses on ‘high-risk’ firms and/or products.” ¹ These actions have varying levels of complexity and can lead to further warning letters or citations if not addressed appropriately.

The FDA issued 500 recalls in 2017; 52 of these product recalls were identified as Class I, a class reserved for situations where there is a reasonable chance a product will cause serious health problems or death. Recalls can seriously damage a company’s reputation and lead to significant revenue loss.

Which leads to the next point about the increase in FDA inspections and regulatory actions.

2. Quality Gaps Boast a Hefty Price Tag

When quality issues are uncovered during FDA inspections, manufacturers feel the pain in their bottom line. McKinsey & Company reported that annual direct costs related to quality problems totaled $26 billion to $36 billion for medical device manufacturers. Of these direct costs, remediation, routine internal and external quality failures, and nonroutine external quality failures comprised an estimated $18 billion to $26 billion.

Manufacturers see significant losses associated with regulatory actions that aren’t necessarily linked directly to the costs of complying with regulatory requirements. McKinsey & Company also estimated that medium-to-large medical device companies might see as much as a $1 billion to $3 billion potential indirect cost of nonroutine quality failures. These costs could come from revenue loss from pulling products off-market or delaying their launch, market-cap declines, and/or significant reputational damage that affects the company’s market share and profitability.

Conclusion

Regardless of a medical device manufacturer’s size, the inability to respond to inspections or audits with controlled and accurate information can have a significant detrimental effect on a manufacturer’s ability to get innovative products to market or to mitigate issues for products that have already been delivered to market. Today’s innovators must have the ability to address internal or external audits from identification through resolution. To do this effectively and cost-efficiently, product-centric QMS solutions provide a complete traceable audit trail from product design to quality issues.

With complex products comprised of software, electronics, and hardware, it is critical to reevaluate traditional QMS approaches to make sure everyone involved with product quality can access and trace issues throughout the product life cycle. If manufacturers rely on disconnected quality and product systems, then the opportunity to find and address gaps or issues is magnified with these siloed systems. Product-centric QMS solutions like Arena QMS make it easier to respond to audits and reduce quality issues by providing a single, product-centric solution to decrease audit issues and resulting costs, and to simplify compliance. Want to learn more? Read our 5 Tips to Pass Your FDA Medical Device Audit with Confidence.

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