navigating the complexity of life sciences dave medina vice president – life sciences qad, inc....

Navigating the Complexity of Life Sciences

Dave MedinaVice President – Life SciencesQAD, Inc.

West Coast User Group Meeting

This presentation includes forward-looking statements about QAD and its business. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in QAD’s SEC filings, including its Form 10-K for the fiscal year ended January 31, 2013.

The company undertakes no obligation to update forward-looking statements.

Safe Harbor

Navigating the Complexity of Life Sciences

• The Complex Life Sciences Environment• U.S. Healthcare Reform and Life Sciences

Manufacturers• Serialization - The Regulations

- UDI and ePedigree –

• The Business Impact of Serialization, Track and Trace

Agenda

• Globalization - From sourcing to new markets in emerging

countries - Global price regulation and reduced reimbursement

• Complex global regulatory environment- Innovation while managing current offerings.

• Global collaboration - Changing business models - Controlling quality, compliance, governance and

risk

Life Sciences Industry Trends

The Complex Life Sciences Environment

• Increased focus on patient safety - Anti-counterfeiting (e-Pedigree / UDI)

• QbD and PAT initiatives- Automate QMS into manufacturing processes

• Reimbursement and price pressures - Better contract and revenue management- Accurate trade activity management

• Demand- Supply chain visibility

Life Sciences Industry Trends


The U.S. Healthcare Supply Chain


Sample size = 1120; Source: 2009, Nachtmann and Pohl

1 – Ad Hoc• SCM unstructured and loosely defined• Process measures not in place

2 - Defined• Basic SCM defined and documented• Process changes thru formal process

3 - Linked• Managers employ SCM with strategic

intent and results• SCM measures horizontal

4 - Integrated• SCM ecosystem cooperation to the

process level• SCM deeply embedded in organization

5 - Extended• Routine Supply Chain collaboration

between legal entities


Leveraging Technology – Manufacturer Plans

*Excerpted from IDC Report: “Best Practices: 2012 Life Science Manufacturing and Supply Chain IT Benchmark Guide”

RankTechnology ERP

Vendor

1 Data mining / analytics 42.3%

2 Business intelligence / dash boarding 44.1%

3 Quality control 40.6%

4 Track & trace / serialization / ePedigree 42.4%

5 Strategic sourcing 37.5%

6 Process Analytical Technology (PAT) 20.3%

7 Warehouse management 37.3%

8 Data warehousing 18.6%

9 Demand forecasting 35.5%

10 Supply chain visibility / monitoring 35.5%

Top 10 Planned SCM Technology Purchases 2012*In order of preference from ERP Vendor

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U.S. Healthcare Reform and Life Sciences Manufacturers

• Effective Jan 1, 2013 – 2.3%- Final / Interim rule issued Dec 5, 1012

• Complex rules challenge internal processes- Convenience kits- Rebate management- Constructive sales price- Reporting compliance- Exemptions

• Challenges internal processes

Medical Device Excise Tax

U.S. Health Care Reform and Life Sciences Manufacturers

• How healthcare makes money- Today – by filling hospital beds and doing more

things to/for patients- Tomorrow –by keeping people out of hospital

beds and doing less things to/for patients

• Accountable Care Organizations (ACOs)- Move delivery systems from silo to multi-provider- From “fee for service” to shared payments- Understanding and managing costs critical

Your Customers


• Providers- Large IDNs leveraging GPO contracts- IDNs consolidating - Regional Purchasing Co-ops- ACO’s acting as GPO’s

• Manufacturers- Supply chain efficiency, visibility- Partnerships with customers

• Better contract management- Understanding impact on financials- Better visibility downstream to customer

behavior

Near-term impact


U.S. Health Care Reform and Life Sciences ManufacturersFuture QAD Functions: Trade Activity Management

Manufacturerw/TPM Life Science

GPO(Buying Group)

Indirect Customer

DistributorInvoices at List Price – Std disc

Invoices at Contract

Price

Customers Order from Distributor

Admin Fee ($)

$$ Chargeback (List – Contract Price)

Contract Price

Definition

Indirect Customer

Distributor Orders from Manufacturer

• The supply chain:- Expenditures are 20 – 50% of cost of care- Tie up capital – restricting investment- Influences choice of patient care technologies

• Engagement in customer supply chain- Know every treatment-essential product used

for care of patient?- Study the impact of products on outcomes?- Identify cost/quality trade-offs

• Focus on demand planning

Long-term impact


• Regulatory mandates

• Reimbursement• Group purchase

(GPO, IDN, ACO)• Cost pressures• Seasonality (e.g.,

flu season, etc.)• Patient

demographics• Visibility to LS

enterprise• Shelf life (e.g.,

consignment)

Global Distributio

n

• National regulatory issues• Regional reimbursement issues• No LS enterprise visibility

into…• …Inventory levels• …Shelf life• …Provider demand

Wholesale/ Distribution Partners

• No LS enterprise visibility into…

• …Inventory levels• …Shelf life• GPO Contract

Management

Raw Materials Suppliers

• Quality control• Regulatory governance• Global dispersion• Long lead times

Contract Manufacturing

• Lack of visibility to manufacturing schedules

• Multiple supply chain partners

• Lack of forecast collaboration

• Increased regulations• Quality system

management• Regulatory

governance

APIPayer

s

Demand Planning Challenges - Life Sciences


The Life Sciences

Enterprise

U.S. Healthcare Providers

Demand Planning Challenges - Life Sciences


Patient

Life Sciences Enterpris

e

Healthcare Provider

External Sources

•Social Media

Payer

Economics

Employer Incentive

s

• Patient engagement in healthcare will drive decisions on alternatives

• Influences on patient decisions are varied

• Understanding a patient’s demand drivers will be critical to success

• Reliable forecasts- Mathematical modeling - Collaborative input- Responsive to change

• Inventory-efficient supply chain- Reduce inventory- Improve customer service- Increase promotional effectiveness

Demand Planning 7.0


Enabling the Effective Enterprise!

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Serialization, Track and Trace

• Food & Drug Administration Amendments Act (FDAAA) – Sep 2007

• Reduce medical errors- Rapid and accurate device ID

• Improve accuracy of data in IT systems- Streamline supply chain processes - Useful EMR application in clinical environments

• Adverse events and recalls• Anti-counterfeiting

Unique Device Identifier (UDI)


• Unique code - Unambiguous ID of a specific product

• Consists of two parts:- Device Identifier (DI) – • Specific model

- Production identifier (PI) – • Lot or batch no., • serial number, • expiration date, • or date of manufacturer

What’s a UDI?


• Must be presented in 2 forms on label:- Plain-text, and- Automatic Identification and Data Capture

(AIDC) tech

• Plus - direct device marking on…- Long-term implantable devices- Reusable devices – sterilized routinely- Devices that may get separated from label

• Convenience kits & devices in kits• Exemptions (retail, class I devices)

What’s Required in a UDI?


Example of a UDI on a device labelSource: http://www.fda.gov/medicaldevices/deviceregulationandguidance/uniquedeviceidentification/default.htm

Unique Device Identifier (UDI)


• Who must comply?- Manufacturers, reprocessors, specification

developers, repackagers, relabelers and kit assemblers

• Standards-based – ISO15459• Manufacturers create their own code• Format - 2 standards organizations

- GS1 & HIBCC (Healthcare Industry Business Communication Council)

How will UDI system work?


• Global Unique Device Identification Database (GUDID)- Quickly identify devices to reduce errors- Track devices in event of a shortage- Integrate data with electronic health records

• Final FDA rule before May 7, 2013

How will UDI system work?


What are the implications?


FDA UDI ComplianceERP System

Quality Management

System

Production & Process

Design

Supply Chain Partners

• ERP serialization functionality with easy track and trace essential to compliance with UDI requirements

• Why?- Anti-counterfeiting- Brand security and protection- Supply chain optimization - Trade activity management

• Contract manufacturers- Level of technical infrastructure varies- Some may see as a value-added

differentiator

Drug ePedigree


• California ePedigree – The Basics

Drug ePedigree


Date Player Requirement

Jan 1, 2015 Pharmaceutical Manufacturers

• Serialize and ePedigree 50% of their prescription drug packages

Jan 1, 2016 Pharmaceutical Manufacturers

• Serialize and ePedigree remaining prescription drug packages

July 1, 2016 Distributors and Repackagers

• Receive ePedigrees and serialized drug packages

• Update ePedigrees• Repackagers must link incoming and

outgoing serial numbers• Ship serialized drug packages• Pass on the updated ePedigrees

July 1, 2017 Pharmacies • Receive ePedigrees and serialized drug packages

• Update ePedigrees• Ship serialized drug packages (returns)• Pass on the updated ePedigrees (returns)

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The Business Impact of Serialization and Item Attributes


Business Process Impact

Manufacturer

Indirect Customer

Distributor

Invoices at List Price – Std disc

Invoices at Contract Price

Customers Order from Distributor

Indirect Customer

Distributor Orders from

Manufacturer

Serialization Integration• Trade management• Product safety• Supply chain integrity• Recall• Non-conformance/CAPA

Serialized products

$$ Chargeback (List – Contract Price)

Manufacturer checks serialization against invoice to detect counterfeit, gray market, double

counting and accurate discount

Allows for easier recall by tracking to

end user

Visibility in case of CAPA investigation due to non-

conformance

CAPA Investigati

on

• Item level serialization• Track and trace

- Lot trace workbench- Serial data history- Lot and sub-lot data

• Item attributes for quality control

Sample Use Case


Recall – QAD Serialization


FDA First Alert• Company discovers

problem - contacts FDA• FDA inspection• FDA receives report

(AER)• CDC contacts FDA

Distributors• Reviews stock for

affected product• Returns undistributed,

affected stock• Advises affected

clients

Pharmacy• Identifies affected product• Returns affected product

Patient• Takes suspected recall

product to pharmacy• Pharmacy reviews

ePedigree with item level serialization

• Pharmacy determines part of affected lot

• Pharmacy recalls product and returns to distributor / manufacturer

Class I Recall

FDA Alerts Public

ePedigree ePedigree

ePedigree

Manufacturer• Recall initiated• Identify affected shipments• Contacts distributors with

appropriate serialization• CAPA investigation initiated

Recall Effectiveness

Send data to CAPA

Data

Lot Trace Workbench


Manufacturer• Problem confirmed• Affected lots ID’d• FDA notified (prior slide)• Recall (prior slide) Original

Complaint• Originator of complaint

to company (AER)• ePedigree ID‘s item • Manufacturer notified

ePedigree

Supplier• Impact analysis• Other product lots

(finished goods shipped)?

• Inventory?• Review QC history of

supplier, etc.

Lot Trace – Back• Raw materials and component

history• Associated QC data (testing, etc.)

• Suspect raw materials batch(s)

• Supplier identified

Other Distributors and Supply Chain Partners• Advised of recall

Lot Trace – Forward• Other product from suspect raw

materials?• Where shipped? (Extend recall)• Any inventory or WIP?• Remove/quarantine/destroy

Extend recall

CAPA Support and Item Attributes


FDA Effectiveness Check• Review entire recall process

• Reasonable removal/correction effort?• Product destroyed/recondition?• Investigate cause of defect

CAPA Process• Root cause analysis• Take Action• Document

Investigation• Product history• Material/Supplier

• Analysis• Supplier

Action• Disqualify supplier• Destroy remaining product• Destroy quarantined

materials• Replace with new supplier

Data

Documentation

Data from various sources• Supplier history (QAD Item Attributes)• Quality attribute history (QAD Item Attributes)• Statistical analysis• Additional testing, etc.

CEBOS

• Trade Management Functionality• Demand Planning 7.0• Item level serialization• Lot trace Work Bench• Item Attributes for Quality

Control• CEBOS – QMS Software

QAD Functionality

Meeting the Complex Needs of the Life Sciences Industry

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navigating the complexity of life sciences dave medina vice president – life sciences qad, inc....

Documents

life science manufacturing

healthcare supply chain

erp vendor slide

process level scm

trace agenda slide

complex rules

scm unstructured

basic scm