Requirements from all sides of the outsourcing relationship in order to make sure that biochemical sourcing is optimized to the benefit of all parties.
Figure 1. Liquid media manufacturing on an automated packaging line in SAFC's facility in Irvine, Scotland.
IVD manufacturers usually employ one of two different types of biochemical outsourcing: purchasing raw materials for internal kit manufacture, and OEM/contract manufacturing by an outside source for external kit manufacture. This article will discuss global quality and supply-chain issues relevant to both sides of the outsourcing relationship. It will also review the implications of the European Union's Registration, Evaluation, and Authorization of Chemicals (REACH) legislation for IVD manufacturers.
Regulatory and Quality Framework
In order to maintain quality levels and minimize the risk of substandard products getting into the supply chain, the highly regulated IVD market requires manufacturers to acquire quality assurance expertise and comply with ongoing regulatory standards. Manufacturers of diagnostics kits must therefore obtain and maintain a facility license from FDA, adhere to all CGMP requirements per 21 CFR 820, and meet all the legal and regulatory filing requirements to receive 510(k) premarket approval and the European Union's CE mark. Although not mandatory by law, ISO 13485:2003 certification is also an important market requirement.
Considering the nature of IVDs and the importance of their correct application to patient health, the quality and traceability of supplies in the IVD market are paramount. However, supplier companies are currently not required to manufacture raw materials for IVD companies under CGMP conditions. Suppliers are expected to be ISO-certified or equivalent, have traceable existing quality system/quality assurance programs that support change control notifications for key raw materials, and have an effective process for receiving and handling complaints. A sustainable corrective and preventive action (CAPA) program should ensure the ability to determine rapidly the cause of every complaint and should enact changes to prevent a reoccurrence of the problem.
In addition, all supplier products should have assigned quality or analytical testing specifications in place. A common practice is to test and validate products in advance to ensure customer specifications are met, or to conduct customized analytical testing on behalf of an IVD manufacturer and provide documented testing and certification results
Quality assurance customization is therefore an important requirement. Such customization entails developing intermediate quality levels that comply with or surpass ISO standards but do not necessarily require full CGMP certification, in order to meet the varying and individual demands of customers. The documentation required to support quality procedures includes material safety data sheets (MSDS), product specifications, certificates of analysis, and certificates of origin, when needed.
REACH's Impact on IVD Manufacturers
IVD manufacturers now require suppliers to be prepared for the REACH regulation, which has been in effect since last June. The regulation requires companies to register all substances they produce in or import into the EU in amounts greater than one metric ton per year by providing full toxicological data on them and a risk assessment of their uses. For the existing 30,000 substances that are listed in the European Inventory of Existing Commercial Chemical Substances (EINECS), a phase-in period has been established that allows registration to be spread over 10 years, provided the substances were preregistered by December 1, 2008.
According to REACH's “no data, no market” message, manufacturers or importers that have not preregistered their substances or not registered them on time will have to stop their production in or importation into the EU market. For IVD manufacturers, supplier assessment regarding their readiness for complying with REACH is critical to identify any potential risk of interruption of supply in the future. The assessment should be carried out on key substances that are bought from or in Europe, based on volumes, but also taking into account that some substances are exempt from REACH registration.
For example, according to Annex IV of REACH, the following substances that may be used in the IVD industry are exempt from registration: fatty acids, glycerides, dextrine, glucose, and D-manitol. In addition, according to Annex V, substances occurring in nature that are physically extracted but not chemically modified may be exempt from registration, provided they are not classified as dangerous.
Figure 2. Cell culture manufacturing on an automated media packaging line in SAFC's facility in Irvine, Scotland.
European IVD manufacturers need to assess their own imports and make sure that the substances they import in quantities of more than one ton per year per legal entity have been preregistered. Preregistration was a simple procedure with a minimum amount of information required, and was done using the International Uniform Chemical Information Database (IUCLID5), a Web-based preregistration submission tool available on the European Chemicals Agency (ECHA) Web site. IVD manufacturers should have completed this process before the December 1, 2008, deadline in order to benefit from the advantages of the phase-in period that provides a longer time for formal registration, data sharing, and cost sharing via the Substances Information Exchange Forum (SIEF).
IVD manufacturers that export test kits to Europe have to make sure that each substance used in their kits complies with REACH. Under REACH, an IVD kit is usually considered an article, so if the total volume per year of the individual substances making up the kits reaches the one ton limit, the substances need to be registered.
IVD manufacturers will also be affected by the authorization procedure under REACH. By June 2009, up to seven substances are likely to be added to the authorization list. Once it is published, the production and use of these seven substances will be prevented in Europe. Companies using those substances that are subject to authorization will be encouraged to substitute them in their manufacturing processes. If they can prove and document that the substitution is not possible in the short-term and if the benefit provided by the use of that substance is greater than its risk, ECHA may grant an authorization that will be valid only for one company and for a limited period of time.
REACH is the biggest regulatory change that the EU chemical industry has faced to date. It will significantly affect the chemical and related industries in numerous ways, which are difficult to predict today. However, the first short-term impact will be the withdrawal of the substances that have not been preregistered by some suppliers for strategic reasons. If the critical authorization and registration processes are not considered in time and supply-chain assessments are not completed, many IVD companies could face serious shortages in materials that are vital to their development and commercialization programs.
Security of Supply
IVD manufacturers typically outsource multiple components for their diagnostics systems, including biochemicals. As mentioned before, such outsourcing can consist of acquiring the raw materials required for internal kit manufacture by IVD companies, or OEM/contract manufacturing by an outside source for external kit manufacture. In both cases, the manufacturing requires six to seven basic raw chemical materials for each diagnostics kit. The main materials categories include enzymes, carbohydrates, buffers, substrates, proteins, metal ions, and dyes, as well as oligonucleotides for molecular diagnostics and antibodies for immunoassays.
To IVD manufacturers, the security of the supply of such chemical materials is a primary concern. Having the raw materials available at the required time for manufacturing and packaging is essential. And having clear communication about such matters between the manufacturer and the supplier is critical.
Since significant costs are incurred from qualifying, maintaining, and auditing suppliers, as well as issuing purchase orders to each supplier for purchases, some IVD firms prefer to deal with strategic global supply chains and maintain as few suppliers as possible. From a manufacturing perspective, such preference has led to a consolidation among raw materials suppliers with the aim of offering a broader product range with complete ancillary services to secure the supply chain.
The consolidation of suppliers can lead to finding a balance between the financial incentives of consolidating vendors and suppliers, and the security of the existing supply chain that had previously been in place. Besides a broad range of products, a raw materials supplier should also be able to offer OEM production, and should meet all of the regulatory and customization requirements to assure compliance with such requirements as a supplier to an FDA-regulated or CE-marked IVD manufacturer.
Figure 3. Powder, media, and sera manufacturing at a serum processing center in SAFC's facility in Lenexa, KS.
Today, it is common practice for IVD companies to outsource the manufacturing or packaging of some or all of their diagnostics kits. This practice is a key growth, product rationalization, and lean enterprise strategy that is done in part to free up the company's manufacturing or packaging capacity. Doing so allows an IVD company to pursue new market segments or product lines without the capital expenses that are required to construct a new facility or improve the existing plant. The capital outlay is typically zero, unless specialized equipment is required for the manufacturing or packaging, for which IVD manufacturers are expected to pay. Such costs can sometimes be reduced through economies of scale if the specialty equipment can be shared with the packaging of several product lines or with the manufacturing or packaging of another product line or OEM customer.
Supplier flexibility and minimizing global delivery and lead times (less than two weeks after receipt of order) remain important determining factors for outsourcing. While some IVD manufacturers will outsource OEM production, they may specify where some or all of the raw materials should be purchased, such as oligonucleotides produced by a specific company. Other IVD companies will allow OEM manufacturers to handle the outsourcing requirements by either using their own raw materials or tapping into their expertise to source other products from external suppliers. In all cases, the security of the supply is the overarching requirement.
In today's IVD market, global supply-chain management, initiatives, and expertise are of paramount importance. With stringent market demands in terms of quality, compliance, and security of supply, along with the expansion of the supply chain to a global level, doing business in the IVD industry has become more complex, particularly with the number of different elements that make up diagnostics kits. The suppliers that have a documented and sustained history of results in meeting their customers' requirements, and possess comprehensive and complimentary product lines offering depth and breadth will have a competitive advantage in dealing with IVD firms that demand multiple products.
Most diagnostics suppliers are currently investing large amounts of resources to ensure their supply-chain management systems meet the IVD industry's needs. A key expectation of suppliers is to provide the correct quantity of high-quality raw materials on time. Since outsourcing has become a global business, the need for transparency in the supply chain has become even more important, especially bearing in mind the supply problems that the IVD industry has recently experienced in certain regions. Such problems lead to extensive product recalls that can compromise reputations, patient safety concerns that can become significant financial and customer confidence issues, and a realignment of the supply chain in some cases.
Depending on the diagnostic products being manufactured, it is imperative that IVD companies work with a reliable partner that brings experience along with existing and documented quality and supplier audit processes for shipping hazardous raw materials. The supplier should already comply with all the safety and regulatory requirements, a particularly important factor for dispatching internationally. Suppliers must also have flexible packaging options due to the wide variety of possible requests from IVD manufacturers, such as the following: large volumes of raw materials to be supplied in bulk form, usually as liquids when and if possible, and in packaging specific to manufacturing requirements, capabilities, and equipment.
Additional packaging customization is often required, such as level indicators or a bar code. For example, customers may require multiple amounts or small amounts of liquids to be provided in a box. For larger amounts, typical packaging sizes can range from 100 ml to 2 liters. In addition, many reagents need to be kept refrigerated or frozen, particularly products such as proteins, cell culture materials, serum, and other media.
In the case of OEM manufacturing, the manufacturing, analytical testing protocols, quality assurance testing, labeling, documentation, test and qualification protocols, and final packaging must be carried out under CGMP conditions, and in an FDA-approved and licensed facility. European bound materials carrying a CE mark need to be certified as meeting IVD Directive requirements.
Since many IVD companies have manufacturing locations around the world, they may want to standardize sales, service, and outsourcing processes on a global basis. Based on larger raw material quantities or standardization, they may also want to ensure global capabilities to manufacture similar products of similar quality at multiple locations.
Accelerating the Manufacturing Process
Incomplete product specifications are a common problem, particularly from many smaller IVD manufacturers. The lack of specifications or incomplete specifications may lead to delays, difficulties in issuing quotes, and loss of time or customer dissatisfaction, especially if the final product delivered was not exactly what was required for manufacturing. For example, the product grade or particle size of buffers can be important to the manufacturer of a specific product. Failing to clarify or state such facts in the product specifications could result in a delivered buffer that does not meet customer manufacturing requirements, or in product delivery delays while specifications are being clarified.
Effective communication throughout the supply chain is required to clarify product specifications, and to determine a realistic lead time that meets all manufacturing cycles and deadlines. For the timely flow of products, suppliers need to consider product manufacturing and packaging times into facility schedules. Both the IVD manufacturer and the supplier need to understand clearly the expected customer delivery date at the time the quote is issued. Products required in very large quantities, such as fetal bovine sera or a HEPES buffer, typically need to be forecasted and built into a supplier's manufacturing and packaging cycles to assure product availability. Even a conservative forecast is beneficial to most suppliers. Providing 50 kg of a buffer for next-day delivery is not always possible.
For the most part, diagnostics suppliers are contributing large volumes of products in large-scale form for IVD manufacturing purposes. But unlike prepackaged research products, such types of products are not necessarily kept in stock or inventory.
Pricing is an important aspect of doing business in any industry, and the IVD industry is no exception. While suppliers are cognizant of the importance of raw materials pricing to the IVD manufacturers, they also know that there is much more in a quote than just the raw material costs. There is the quality assurance backing that goes along with every product, the supply-chain expertise, and all of the other custom capabilities required to service the IVD market properly.
George Crowell is the diagnostics market segment manager at SAFC Supply Solutions (St. Louis). He can be reached at george.crowell
While security of the supply is the prime requirement in the IVD supply chain, the keys to meeting this objective include appropriate information exchange and the added value offered throughout the entire supply chain. That is, knowledge of the IVD industry and its regulations, paired with product expertise, helps to build reliable partnerships. Supplier sales representatives can be a valuable source of information to IVD manufacturers. The sales representatives are typically well trained on a company's products and are knowledgeable about FDA and CE mark regulatory requirements, trends in the IVD industry, technological developments, and members of professional life sciences associations and networks.
In addition, consultation with supplier experts is an important part of raw material procurement in the IVD industry. Whether it is technical counsel, regulatory advice, product or product-grade recommendation or customization advice, information obtained through consultations with knowledgeable partners can be a bonus to an IVD manufacturer, often saving them time and money. By addressing each of the points outlined above, open relationships between IVD firms and their suppliers and strategic partners can maximize profits and minimize costs, lost time, and quality and confidence issues.
Copyright ©2009 IVD Technology