ID Standards Have Moved Beyond a “Nice to Have”

FDA has indicated that, later this year, it will issue its proposed rule for a unique device identification (UDI) system for medical devices. The goal is to facilitate adverse event reporting and recall management. Under the UDI system, medical device makers will be required to assign unique identifiers to their devices, apply UDIs to all levels of packaging down to the lowest unit of use, and publish UDIs to a database.

Karen Conway

February 27, 2012

18 Min Read
ID Standards Have Moved Beyond a “Nice to Have”

Global data standards This is a defining moment in the global medical-device industry, a time when manufacturers are facing increased pressure in the United States as well as abroad to fundamentally change how they identify their products and their customers. Regulatory agencies, group purchasing organizations (GPOs), and healthcare providers are driving manufacturers toward global data standards to identify material product numbers and their account numbers to improve patient safety while increasing efficiencies. While some markets have required manufacturers to use such standards in electronic business transactions for quite some time, two initiatives in the U.S. are currently spurring increased market activity around standards adoption.

FDA has indicated that, later this year, it will issue its proposed rule for a unique device identification (UDI) system for medical devices. The goal is to facilitate adverse event reporting and recall management. Under the UDI system, medical device makers will be required to assign unique identifiers to their devices, apply UDIs to all levels of packaging down to the lowest unit of use, and publish UDIs to a database. This database will be owned and maintained by FDA. Establishing a UDI system has implications both domestically and abroad because FDA is working with regulatory authorities in Europe, North America, Asia, and other locations across the globe to establish a globally harmonized approach to UDI through the Global Harmonization Task Force (GHTF) and the Asian Harmonization Working Party (AHWP).

At the same time, leading U.S. GPOs and some healthcare providers are calling on trading partners to use GS1 Global Location Numbers (GLNs) to identify organizations and their locations and GS1 Global Trade Item Numbers (GTINs) to identify manufacturers’ products in the business transactions that they perform with one another. Although the responsibility to enumerate organizations and locations with GLNs rests in the hands of both providers and manufacturers, manufacturers alone must take the lead in product identification. By the U.S. industry established sunrise date of December 31, 2012, manufacturers are expected to use GTINs in business transactions with their U.S. customers, mark them on packaging levels so that they can be scanned at the point of use, and register them in a GS1 Global Data Synchronization Network (GDSN) certified data pool to facilitate synchronization with trading partners.

GHX is an organization that connects more than 80% of licensed beds at hospitals and their key suppliers in the U.S., as well as Canada and nine European countries. The company works closely with its membership, regulatory agencies, and organizations that administer global data standards to assist medical device makers to help satisfy market and regulatory demands for standards adoption. Over time, it’s become clear that manufacturers range broadly in their knowledge of standards and their state of enablement, with the majority of the suppliers currently behind on the adoption curve.

Why should I care about global data standards?

Most medical device manufacturers are trying to put out multiple fires in today’s challenging healthcare environment, from customer price pressure to stricter regulatory approval requirements. We hear time and time again that there are too few resources to go around and manufacturers must focus their efforts on the hottest burning issues of the moment. As a result, many are not proactively implementing global data standards unless they are forced to standardize product or account identification to satisfy a specific regulatory or customer requirement.

Manufacturers need to realize is that change is coming, and that it is coming faster than ever. While there’s a perception among some manufacturers that proposed requirements for global data standards have been around for a long time, the difference today is that customers are now beginning to demand them. The industry-established sunrise dates for GLN and GTIN adoption in the U.S. is one indication of this increased demand, with leading GPOs and health systems drawing a line in the sand on when they expect manufacturers to enumerate their products and transact with standardized location and product data.

Some manufacturers have asked whether they risk losing business by ignoring this emerging trend. Conversely, manufacturers must consider whether the use of standardized data presents the opportunity to increase sales by positioning itself as a company with which its customers can easily transact business.

A prime example of how customer demand for product data standardization will impact manufacturers moving forward can be seen at Sisters of Mercy Health System, a U.S.-integrated delivery network (IDN) that’s based in the Midwest. The network contains more than 400 clinic and hospital locations, including 28 acute care hospitals, providing care to 2.7 million patients in four states. Three years ago, Sisters of Mercy rewrote its supplier contracts to include a clause whereby manufacturers that don’t label products with GTINs in both a machine-readable and human-readable format by the December 31, 2012 sunrise date will pay a financial penalty. Vance B. Moore, senior vice president of operations for Sisters of Mercy, provides his perspective on why device makers should care about global data standards.

“The healthcare supply chain is becoming more sophisticated,” says Moore. “On the provider side, we are moving from a cottage industry where each individual institution is managed independently to a unified force where supply chain principles from other industries are being applied across organizations to operate in a smarter and more cost-effective manner. Manufacturers should not underestimate the significant growth of this new supply chain that is emerging in healthcare.”

Sisters of Mercy is one of a growing number of healthcare providers that are preparing systems and processes to transact with global data standards. Resource Optimization & Innovation (ROi), Mercy’s supply chain division, has enumerated its own private label brand of medical supplies, Regard, with GTINs and the healthcare system is using this data standard to uniquely identify products throughout the procure-to-pay process. The healthcare system is also transacting business with a handful of outside medical suppliers that have enumerated their products with GTINs.

To satisfy customer and regulatory demands, drive down the cost of doing business, and improve patient care, global healthcare manufacturer Abbott is working to enumerate its product lines with GTINs. Michael Wallace, director of global standards and serialization for Abbott and tri-chair of the GS1 Global Healthcare Leadership Team, comments on how the healthcare industry’s view of product identification is changing and how manufacturers must adapt to keep pace with this change.

“For most manufacturers, standards are becoming a new way of looking at their businesses,” says Wallace. “In the past, there was little pressure to adopt standards, so manufacturers looked at product identification from the perspective of their own four walls. Today, we are being asked by customers to standardize product identification to make supply chain costs go down and regulators are saying that we need to adopt standards so that they can better monitor products for patient safety. I believe manufacturers that standardize their data will gain a competitive advantage moving forward.”

There are basically two reasons why customers are asking for this standard: to cut costs and to improve patient care. Healthcare providers currently spend countless hours and dollars addressing issues related to inaccurate supply chain data. For organization and location ID, providers struggle with managing the thousands of proprietary account numbers that manufacturers assign to their customers and to each location to which they ship their products. For example, a healthcare system that has 100 ship-to locations and 3000 suppliers could potentially have to manage 300,000 different account numbers. With a single location having hundreds or even thousands of account numbers associated with it, products are frequently billed and shipped to the wrong locations, increasing costs and ultimately jeopardizing patient care.

The problem is equal or even more challenging on the product ID side of the equation for which manufacturers, their customers, and other trading partners (distributors, GPOs), identify healthcare products in different ways to meet their own individual needs. This makes it difficult for providers to order the right products, ensure they are purchasing products at the correct prices, and track products throughout the supply chain. As a result, provider organizations collectively lose billions of dollars each year due to supply chain errors and inefficiencies.

“At the end of the day, if we can operate the supply chain function more efficiently and pay for products more effectively, we’ll be able to drive a lot of non-value added costs out of healthcare,” says Sisters of Mercy’s Moore. “Not only will this enable us to deliver more cost-effective care to patients, it will improve profitability and contribute to our long-term sustainability.”
Siemens Healthcare Diagnostics is part of Siemens, one of the world’s largest suppliers to the healthcare industry. The company is taking a customer-centric approach to global data standards to streamline business transactions and impact patient safety. Siemens has enumerated a significant portion of its products worldwide with GTINs and has published data for its entire U.S. product line into GS1’s Global Data Synchronization Network (GDSN) to share its standardized product data with customers and trading partners. Dr. Dietmar Hein, head of Global e-commerce for Siemens Healthcare Diagnostics, explains why his organization has been on the front end of the curve for standards adoption.

“By enumerating our products with GTINs and sharing product data through the GDSN, we are providing our customers with a single point of truth that they can use to support order accuracy from the very beginning of the order-to-cash process,” says Hein. “This is what our customers have been asking for and it is in everyone’s best interest to improve the accuracy and efficiency of the healthcare supply chain.”

Siemens has also been addressing issues related to organization and location identification through the use of GS1 GLNs. The company has enumerated itself with GLNs to prepare for GLN transactions with trading partners in the U.S. In addition, Siemens is using customer GLNs in its GPO administrative fee reporting to support compliance with the sunrise date.
Compounding these operational issues, providers will increasingly need to report on the cost and quality of the healthcare they deliver, which will make them want to better understand the role that supplies play in patient outcomes. Providers will also want to understand how the cost of a product impacts the cost of a procedure, especially in relation to high-cost orthopedic and cardiovascular implants. For a healthcare provider to determine if one product provides better outcomes over another, the provider must be able to track specific products to the point of use and beyond. This presents a significant challenge when providers have no way to uniquely identify products.

At Sisters of Mercy, Moore and his team conducted an analysis to determine how many of its suppliers’ products shared the same supplier-assigned identification numbers. According to Moore, there were thousands of products in its systems with duplicate numbers. In one case, a cardiac stent and gauze shared the same identifier so that when a clinician scanned the barcode on the cardiac stent, the gauze information populated the patient medical record.

To address such issues, Sisters of Mercy develops and generates its own bar coded labels to uniquely identify products used throughout its facilities. This kind of effort increases non-value-added costs to the supply chain in what is already a challenging economic and regulatory climate for providers.

“For the first time, the government is shining a spotlight on the healthcare industry and telling us that we need to address the quality and cost-structure of our organizations or reimbursements will be negatively impacted,” says Moore. “Vendors need to understand what we as providers are facing and align with the issues that are important to us to make it easier and less costly for us to conduct business with them.”

What’s the expected investment return if I implement standards?

In addition to complying with customer and regulatory demands, global data standards can provide manufacturers with a variety of business benefits, from increased operational efficiency to lower supply chain costs. But Abbott’s Wallace notes that simply enumerating products with GTINs or another industry standard doesn’t necessarily provide a direct business benefit.

“Benefits don’t come just because we adopt standards. Rather, they come because of how we modify our processes to leverage them,” Wallace says. “For example, standards enable us to use auto-identification technologies to avoid transcription errors and gain greater visibility into shipments and receipts. In the end, we will use these standards as keys to ensure that we can supply our customers and get paid for our products in the most effective and efficient manner.”

Steve Capel, director of eBusiness EMEA at Covidien and a GS1 Healthcare Leadership Team representative, points to some of the logistical benefits that can be derived from global data standards adoption. Covidien, a $10 billion global healthcare products leader, is currently enumerating its products with GTINs to meet the December 31, 2012 sunrise date.
“If every regulatory agency and customer has a different demand for manufacturers to identify and label their products, then packaging for products sold globally would significantly increase in size, which would increase manufacturing and logistics costs as well as packaging waste ” says Capel. “One driver to standards adoption is that we only have to mark products once, we don’t have to touch them again, and nobody else is marking our products. We are able to unambiguously identify a product so that we can trace it throughout its complete life cycle anywhere that it travels in the world.”

One area in which both manufacturers and their customers can derive significant business value from standards enablement is e-commerce. According to HIMSS Analytics, 95% of acute care hospitals with more than 150 beds purchase at least some of their medical-surgical supplies electronically. For manufacturers to take advantage of the benefits that come from e-commerce—more accurate transactions, increased process efficiency, and reduced days sales outstanding (DSOs)—they need to transact with standardized data that can be understood by the information technology systems employed by customers and other business partners.

Furthermore, conducting e-commerce with disparate data negates many of the intended benefits. The ordering, shipping, and invoicing discrepancies that arise from trading partners using their own identifiers in electronic transactions require manual rework, which adds time, labor, and cost to the supply chain for all parties involved.

“Imagine a future where the use of auto-identification technology enables machine-to-machine communication, so an order goes through successfully with no human intervention,” says Wallace. “Now compare that to the manual processes when there’s an issue with the order and the customer has to get on the phone with one or more people to fix the problem. While many are implementing standards today for compliance reasons, companies are starting to understand that there are additional business benefits that can be derived from this approach, both within their four walls and throughout the healthcare supply chain.”

David Leedam, senior manager of e-commerce for Siemens Healthcare Diagnostics, points to the important role that standards will play in e-commerce in the future.

“In five years, customers who pick up the phone to place an order will be in the minority in healthcare,” Leedam says. “The move toward e-commerce is accelerating rapidly, and the pressure for trading partners to adopt e-commerce will force the standardization issue. Global data standards will become the cost of entry into e-commerce. If you aren’t standardized, you won’t easily play with those parties that are.”

Will my customers stop purchasing my products if I don’t use standards?

In today’s economic climate, healthcare providers are searching for new ways to cut costs without negatively impacting patient care. Supplies represent the second largest area of expense for providers behind labor costs, so hospitals and other facilities are increasingly turning their sights on the supply chain as a way to increase revenue and reduce waste.
Negotiating lower prices for products is one tactic. In a recent Novation survey of U.S. healthcare providers, 45% of the respondents stated that they foresee a decrease in supply spending over the next year at their facilities.1 Another tactic is to reduce the operating expenses associated with supply chain processes, including the manual labor required to order the correct products and ensure they are available when needed.

In many cases, manufacturers can only go so far to reduce the cost of their products while still delivering an acceptable margin. But they can take steps to make it easier and more cost-efficient for customers to conduct business with them. The use of standards in supply-chain transactions is one way to do this, according to Moore from Sisters of Mercy.

“As the purchasers of goods, we look first and foremost for superior products and then we drop down to the next tier of the decision-making process, which is cost,” says Moore. “If a manufacturer is offering a higher-priced product that is clinically equivalent to another product on the market, then it needs to come up with a distinct value so that providers can evaluate the total delivered cost for that particular product. Standardized product data is one way that manufacturers can provide added-value enabling providers to take costs out of the process and make higher-priced products more appealing and affordable.”

Wallace from Abbott believes that this approach will help his company compete. “There are clear signs that hospitals are moving in a direction where they will require a standardized way of looking at products and will seek out manufacturers that have adopted standards and can utilize them in transactions,” he says. “If a hospital is searching an electronic catalog of standardized product data that doesn’t contain your company’s products, then you may not get the sale.”

What if I don’t use standards?

Although each market currently has its own requirements for product identification, there’s a growing trend across the globe to standardize how manufacturers identify and label their products. In the U.S., FDA’s impending UDI rule will require the manufacturer to include a unique identifier on the label of its device so that participants in the healthcare supply chain can accurately identify that product from the point of manufacturer through the point of use.

FDA has indicated that both the GS1 GTIN and the Health Industry Business Communications Council (HIBCC) HIBC-Labeler Identification Codes (LICs) will qualify as unique device identifiers. UDI implementation in the U.S. will be based on premarket risk class. Class III devices (e.g., some implants) will be required to bear a unique device identifier 12 months following issuance of FDA’s final UDI rule. Class II devices (e.g., hospital based equipment) get 36 months following the final rule and Class I devices (e.g., many disposables) have 60 months following the final rule.

FDA’s UDI rule will have many implications for manufacturers that sell products in the U.S.—both those based in the United States and those based abroad—since they will be required to identify their products using one of these two standards. It could also have implications for manufacturers selling abroad because FDA is collaborating with regulators in other markets on a UDI solution that can be implemented on a more global scale.

“A manufacturer will have two choices for product identification, HIBC LICs or GS1 GTINs. If they don’t comply, they won’t be able to sell their products in the U.S. market,” says Wallace. “At Abbott, we’ve looked at both standards and since GS1 GTINs are being adopted by multiple countries and customers, we’ve opted to identify our products with GTINs and harmonize our approach globally on this single standard.”

If customers of my Class I devices haven’t asked that I use standardized data, why should I put the time and efforts into standardizing my product data now?

Implementing global data standards, either in place of or in conjunction with proprietary account numbers, has enterprise-wide implications for a manufacturer. When a manufacturer changes how it identifies its products, this change touches multiple functions, from marketing and labeling to purchasing and inventory tracking.

Furthermore, standardization isn’t just about enumerating products. If a manufacturer wants to use global data standards in its business transactions, it needs to adapt systems and processes to facilitate this usage. This involves finding ways to share synchronized product data with customers and other trading partners, preparing enterprise resource planning (ERP) systems to transact with standards in place of proprietary numbers, and determining which encoding to use (linear barcode, 2-D barcode, RFID tag) to ensure that customers can leverage standards via auto identification technology.

“Global data standards adoption is something that isn’t easy to do,” says Wallace. “We are working our standards implementation into many of our standardized business processes so that we can roll it out in a rational, reasonable manner and that takes time, resources and planning.”

The e-Commerce group at Siemens Healthcare Diagnostics took an “investigative approach” to initiate its global data standards adoption project. This enabled the team to determine exactly what was needed and gain buy-in from management. Their goal was to leverage global data standards to establish a single point-of-truth for its products, which involves not only enumerating its products with GTINs, but also finding ways to share them with trading partners and use them in supply chain transactions.

“Standardizing product identification with GTINs touches every part of our company, so we had to carefully evaluate the impact it would have and the work that would need to be done to make it happen,” says Leedam from Siemens Healthcare Diagnostics.

Manufacturers may not be feeling the pressure right now to implement global data standards. But with customer, regulatory, and industry drivers looming on the horizon, and the fact that standards implementation isn’t a “flip of a switch” process, it would be wise to, at the very least, explore what will be required to adopt standards in the future. This will allow manufacturers to allocate the necessary resources both from staffing and technology perspectives.

“It takes a long time to get it right,” said Covidien’s Capel. “Manufacturers must also consider shelf life. Even though the GTIN sunrise date is more than a year away, companies are manufacturing products right now that will be sitting on hospital shelves in five years. Manufacturers should bring together multiple functions within their organizations when planning their global data standards strategy to understand the impact of this change enterprise-wide.”


1. Novation National Economic Impact Survey, June 2011; Available from Internet:

Karen Conway is industry relations director for GHX.

About the Author(s)

Karen Conway

Karen Conway is vice president of industry relations at GHX, where she works with standards bodies, government agencies, academic researchers, and trade associations. She is a recognized expert and speaker on the topic of Unique Device Identification and the benefits that can be delivered across healthcare with data on real-world performance of medical-surgical products.

Sign up for the QMED & MD+DI Daily newsletter.

You May Also Like