Originally Published MDDI August 2005
Guide To Outsourcing
When taking a product to the global market, outsourcing can help get through regulatory, cultural, and other differences.
To remain competitive, medical device companies must eventually design products to serve the global market. Even small firms that lack a huge marketing arm can go global early on, if they have the right strategies in place. The problem for many companies, however, is how to address product design and development for a targeted market. Regulatory differences, cultural hurdles, and communication issues can seem daunting. However, companies can partner with outsourcers to address these issues early on in the development process. This article looks at how to use outsourcing to help maneuver through different regulatory frameworks. It also addresses other key differences that must be considered when deciding to take products to the global market and how outsourcing can help.
The device development process is rigorous, and seemingly minor details can have a huge effect on a company's operations and profitability. Detailed below are some basic principles for preparing for the global market. These principles apply whether a manufacturer has the benefit of a large corporate partner or opts for outsourcing on a small scale or with multiple outsource partners.
In designing devices that address different regulatory frameworks, it is best to harness the rules for a targeted market from the beginning. Rules can be incorporated into the company's guide to good engineering practices that address design and validation. Planning for a clear regulatory strategy for devices destined for foreign markets is essential. Moreover, this must be done at the outset of a new development project. Retrofitting a product after the design is complete can be cost-prohibitive, and it can cause delays in getting the product into the new market.
A key strategic decision is whether it is better to first introduce an advanced product in Europe where regulatory barriers may be easier to overcome, or in the United States where market acceptance may be more rapid. Regulatory approval tends to be region specific. The European Union, United States, and Japan certainly have distinct regulatory requirements, but it is possible, for example, to leverage clinical studies done in different geographic locations as long as they are done according to rigorous protocols applicable to the country in which the device will be marketed. It is important, too, to understand that regulatory approval and clinical trials are separate from reimbursement requirements, which are country specific.
One advantage to working globally is that innovations can be leveraged and tested among different markets. In general, many device companies find that they can achieve CE marking more quickly and efficiently than FDA approval. Provided the product meets design standards, a company can often use clinical data attained from use of the real device in Europe to bolster submission to FDA.
Selecting a Partner
When selecting partners for a design team, look for track records. To get a sense of their capabilities, ask about the research backgrounds of their staff as well as publications and presentations at industry conferences. Find out what products they have done that are commercially successful, in addition to those that were technically successful. Work with people who have brought products to market quickly, efficiently, and successfully in the past.
Finding a competent manufacturing partner is tricky. Count on having somebody from the company's design team on-site or visiting frequently during the course of the manufacturing process.
An outsourcing partner should be able to help evaluate the merits of manufacturing in different countries. It's important to assess a partner's experience in the logistics associated with global distribution. A partner should understand how products must be customized for each market, advise on keeping costs in check, and be able to source material locally if appropriate.
With today's competitive landscape, device manufacturers must make good use of the Internet to improve communications, information gathering, and logistics, especially if they are outsourcing overseas. Even for large medical device companies, product development is necessarily a collaborative venture, channeling expertise from multiple vendors. Independent small companies can extensively use the Internet in their partnering strategies. By outsourcing specific projects, they can tap expertise, local knowledge, and guidance that a larger company might have
Conducting market, business, and technical research is an important step because significant structural differences exist between U.S. and global markets. Market needs and marketing requirements vary from country to country. Because much of the new-product development process is conducted by technical and regulatory affairs professionals, market details are often at risk of being overlooked. The most perfectly engineered product can fail if it doesn't meet the needs of the local market. For example, different medical systems have different purchasing influencers depending on the process and path to market.
In the United States, medical devices are sold directly to hospitals. But the European health system is governmentally supported, and suppliers may need to go through a governmental tendering process before a device can be placed on the market. The reimbursement issue is even more complex because each European country has its own specific reimbursement process. Researching market attributes at a detailed level can ensure that product development and regulatory decisions are sound from the start.
If a manufacturer does not have a large development partner with local staff, a practical alternative to such research is to outsource the due diligence to a firm that can demonstrate a track record of projects in a particular geographic area. To compare data reliably and precisely, work with the firm to devise a succinct brief, so that each respective market is assessed in a similar way.
Thorough technical research should be done as well. Manufacturers needs to understand the fundamental principles by which their devices operate and interact with other systems. It is particularly important to understand how a device will function with other devices available in a particular region. In some cases, it may be necessary to outsource some fundamental research to gather field data to fully understand all of the possible compatibility issues.
Alternatively, seemingly insignificant product attributes that are unrelated to the core medical function can make a huge difference to the level of market acceptance. For example, in Germany, batteries must be removable from all products for replacement or recycling, whereas in the United States, it is acceptable to sell a completely disposable battery-powered product.
Product development decisions should be predicated within the context of how medical care is commonly delivered in a country or particular market. And, while ergonomic factors may be universal, the way a device is used and common medical procedures may vary widely by country. For example, hospitals and clinics increasingly incorporate wireless transmission into their computer systems to enable them to monitor patients remotely. Such systems mean that patient data can be uploaded and interpreted in different hospital departments. But to accomplish this, wireless devices not only have to work with existing software systems, but also within the medical bandwidth, which varies by region. A company wishing to sell in multiple markets must make an early-stage design decision either to build a device or system platform capable of syncing with multiple standards or to build different versions of devices specific to different countries.
Emerging Trends. Emerging trends in the global medical device industry also vary by country. Such trends range from miniaturization to increasingly complex communications platforms. They might also include advances in drug-delivery techniques, approval of new classes of materials, or improved sensor technology.
Such developments mean improved quality of care for the patient, but also mean that medical device companies must constantly climb the innovation curve to keep up with rival technologies emerging around the globe. It is critical to stay on top of how different emerging trends and technologies are advancing in targeted markets by conducting thorough market research, attending conferences, and reading the literature.
Borrowed Technologies. To speed development time, consider borrowing technologies already developed for other industries when appropriate. Incorporating advances in wireless technologies is a good example. Currently the frequencies available for implantable wireless medical devices are limited and are not robust enough for the powerful applications that are emerging. But technologies gleaned from seemingly unrelated areas are overcoming this issue. For example, Philips Medical System's (Andover, MA) developed a wireless patient-monitoring system for the U.S. market. The system draws heavily on a cordless telephony originally developed solely for the European market (digital enhanced cordless telecommunications).
International product development requires medical, marketing, engineering, and production teams in multiple sites around the globe to define important strategic choices early. Choices in the early stages directly affect rapid globalization. Many of these functions can be outsourced. These outsourcing partners can function as an integral part of the product development team. With a team of project leaders in different geographic markets, they must clearly understand their roles and talk to each other regularly to review progress. To make it work, target markets must be specified up front.
There are excellent software and communications tools available that can ensure a smooth working relationship with vendors and other partners. Setting up a project management framework to handle logistics will make the development path much smoother. For example, set up a project document database that all can access, so that there is no divide between internally generated and externally generated information. Invest in document templates in a standard form so that all partners involved can modify and add to them as the project develops.
A company intranet can provide a flexible communications framework. Project teams, including vendors and other partners, should meet at first physically so that people establish the basis of personal trust and communications. In some countries, a face-to-face meeting is essential for establishing trust. Videoconferencing is a useful tool as well. Meetings, even if mostly virtual, should take place on a regular basis. Outside consultants can be given password access for a project's duration, as well as access to the internal e-mail system. Everybody should be able to see the ongoing project on the Internet.
While differences in time zones can impede communications, certain development tasks, such as software creation, can be generated around the clock, speeding up the development cycle. One caveat: while it is now easier than ever to enact projects virtually, it is important to meet physically at agreed-upon milestones to ensure that all processes and plans are proceeding smoothly. When using partners in other countries, it is important to follow up e-mails with both regular phone calls and personal meetings. The language of commerce is generally English, but in some countries, additional translation and interpreters may be needed.
The bottom line is that different countries have vastly different marketing requirements. Everything from utilities, environmental regulations, and the cost of disposables are important aspects of the new-product development process. And, with much of the new-product development process conducted by engineers and regulatory affairs professionals, it is easy to forget something as basic as marketing
Scaling Up Production
Until you have made hundreds of your devices, you won't see the problems that occur in production. There will be scaling up issues, so plan for them in advance and work with manufacturing partners to ensure that they are prepared as well. Many device companies outsource part or all of their manufacturing. The partner company must be prepared to minimize technical risk and meet regulatory requirements, and the facilities must deliver effective proof of principle and process development capabilities.
Production problems are ubiquitous, but they can be minimized by understanding the manufacturing constraints that may be encountered. For example, will your manufacturer have the capacity to meet heightened production if you have a spike in demand for your product? A flowchart is an integral part of planning, including locations and providers of manufacturing processes, ownership of material, transportation, and temperature sensitivities of materials. It is critical to have a recovery plan for risks or problems that occur.
International product development requires medical, marketing, engineering, and production teams in multiple sites around the globe. It is important to define strategic choices early in the effort--choices that will directly affect rapid globalization. Attention to detail throughout your process is critical to global success.
Andrew Diston is senior vice president and managing director of the U.S. headquarters for Cambridge Consultants, a research and development firm based in Boston with headquarters in Cambridge, UK.
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