Driving Performance Excellence in the Regulatory Affairs Function at Medical Device Companies: Budget, Staffing & Responsibilities

Benchmarking Regulatory Affairs

Staffing & Performance Excellence

in Medical Devices

Best Practices, LLC Strategic Benchmarking Research & Analysis

February 2015 Page | 1

Page | 2

Executive Summary 3-10

Research Overview 3-6

Regulatory Landscape: Executive Summary 7-10

Detailed Research Findings 11-87

Regulatory Structure & Management 11-33

Regulatory Submissions & Functional Trends Benchmark Analysis 34-50

Investment & Staffing Efficiency Benchmarks 51-62

Roles & Responsibility Benchmarks 63--74

Regulatory Outsourcing & Offshoring Benchmarks 75-87

Benchmark Profile 88-94

About Best Practices, LLC 95

Table of Contents

Page | 3

Field Research & Insight Development:

Best Practices, LLC recruited Regulatory Vice

Presidents and Executives at 32 leading medical

device companies to share quality data

and regulatory insights regarding current and future

trends influencing Regulatory Affairs.

Medical Device Companies wish to

inform and deepen their understanding of

the critical drivers of Regulatory

performance excellence including:

• Staffing & structure

• Submissions & functional trends

• Roles & responsibilities

• Regulatory offshoring & outsourcing trends

Research Objectives:

Business Objective:

This study:

Maps regulatory performance benchmarks to deepen understanding of high performance boundaries

Identifies key performance indicators for regulatory budget, staffing, submissions trends,

management factors, critical regulatory roles, responsibilities and offshoring / outsourcing trends, and

Spotlights current and future trends shaping the Medical Device Regulatory Affairs function.

Regulatory Affairs leaders in the Medical Device industry seek to understand optimal resourcing and staffing levels to balance

corporate efficiency with effectiveness of regulatory systems. Best Practices, LLC conducted this study to establish evidence-

based benchmarks describing performance levels, approaches and boundaries -- as well as to capture forward-looking insights

about high-performance in the Regulatory Affairs function at medical device companies.

Research Objectives & Methodology

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Benchmark Class & Segments

Complex Portfolio Class

Less Complex or Mixed Portfolio Class

Other Benchmark Companies

Universe of Learning: Thirty Two Regulatory Leaders Contributed to This Research

Primary analysis concentrates on larger companies, often segmenting them by product portfolio complexity. Portfolio

complexity was assessed by Ratio of Class III products, which emerges as a key driver of regulatory resources employed.

Participating companies range in size from +$25 billion to $300 million. Response data from some smaller companies (less than

$300 million in revenue) were considered to analyze general regulatory trends and emerging issues.

Page | 5

Segments For Analysis:

TBC (Total Benchmark Class) – responses from all

companies

Large Companies – responses from companies with

revenues greater than $1B in 2014

Complex Portfolio Companies – responses from

companies that have relatively more class III products

(+25%) measured as less than four class II unique device

identifications (UDIs) per each class III UDI

Less Complex or Mixed Portfolio Companies – responses

from companies that have relatively less class III products

(<25%) measured as more than four class II UDIs per each

class III UDI in their portfolio

Key Terms & Acronyms:

UDI – unique device identification

GUDID – global UDI database

TBC – total benchmark class

RA Staffing Ratio – Ratio of RA

FTEs to Total FTEs in company

Data Segmentation, Definitions & Acronyms Used in Analysis

Definitions

Submissions Filed: Filings submitted to FDA or other equivalent organizations outside of U.S. for

registration, request for clinical studies or commercialization of a product

Submissions Maintained: Once filed, a submission is maintain by tracking, updating, and reporting any

accidents occurred from the use of a device to FDA

Pre-submissions: A submission to the Agency that occurs prior to the actual submission of a full

application, e.g., rolling review, reviewable unit, clinical information that the sponsor requests comment

on prior to submitting their application, etc..

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Summary of Key Findings: Structure & Management Factors

Size Drives RA Structure: Company size significantly impacts RA operational structure in a predictable

evolutionary way. Smaller companies have centralized structures with only a few RA FTEs, hence they

don’t have separate corporate groups. Middle-sized companies typically have centralized structure as well,

but they also have a strong regulatory group to form a separate corporate group that would oversee the

function. Global giants have corporate groups setting standards with decentralized or distributed RA

functions to better support respective business units or divisions.

Centralization Is The Favored Structural Form: Across most size and evolutionary stages, Regulatory

Affairs – as a compliance function that engages regulators – favors centralization in some form or

expression. Fully 65% of benchmark companies report they employ centralized structures.

Leadership Reporting: Among all sized-companies, more than two-thirds report directly to the CEO. As

companies get very large, a leadership reporting level is often inserted between RA and the C-level.

Among the very largest companies, only 50% report that RA still reports directly to the C-level.

Soft Influence of Portfolio Complexity: Portfolio complexity is a soft influence – like gravity – but is not

the only driver of RA staffing efficiency. As companies grow in size and complexity, they begin to focus on

optimizing staffing within their portfolio. Efficient and inefficient approaches were identified in both complex

and less complex portfolios.

Impact of Corporate Regulatory Affairs Groups: The presence of a corporate regulatory group seems to

drive greater staffing efficiency by enforcing standards of excellence and efficiency. Sixty-two percent of

respondents report they have corporate regulatory groups that vary greatly in size. Companies with

separate corporate RA oversight groups have on average 1% of total staff working in RA compared to

companies without separate corporate RA groups that average at 1.2%. Corporate groups also seem to

streamline the total number of FTEs: the range between top and bottom quartiles is smaller for companies

with corporate RA oversight groups.

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Q. How is Regulatory Affairs structured in your company?

n=31

Structure (Total Benchmark Class)

Centralized 65%

Decentralized or Distributed

26%

Dotted Line 3%

Solid Line 3%

Matrixed 3%

Other 9%

Solid line: Solid line to regulatory dotted line to business;

Matrixed: Regulatory is distributed, but senior Regulatory Leadership reports into a business (or Regional) leader AND to a Divisional

Regulatory Leader.

Regulatory Is Primarily Centralized as a Separate Function

Two thirds of companies employ centralized structures to organize their Regulatory Affairs Functions. About one quarter use

decentralized or distributed Regulatory structures. A minority of companies have evolved hybrid regulatory structures.

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# manufacturing sites /

$1B Revenue

# of manufacturing sites

that are also design

centers / $1B Revenue

# OEMs and Contract

Manufacturers / $1B

Revenue

Max 10.5 10.5 139.1

75 Percentile 6.7 6.7 8.9

Mean 4.6 3.9 30.2

Median 2.5 1.8 2.0

25 Percentile 2.1 0.4 0.7

Min 1.0 0.3 0.0

Manufacturing System Profiles (Complex Portfolio Companies)

(Plants, Design Centers & Contract Manufacturers Supported per $1B Revenue)

Companies Support Roughly 2 Manufacturing Sites, Design Centers

& OEMs per $1B Revenue

On median, benchmark companies with complex portfolios require and support 2.5 manufacturing sites, 1.8 manufacturing sites

with design centers and 2 OEM & contract manufacturers for each $1B in revenue.

n=5

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$175,000

$225,000

$275,000

2011 2012 2013 2014 2015 2016

Premarket Application Panel-Track Supplement

$10,000

$20,000

$30,000

$40,000

2011 2012 2013 2014 2015 2016

180-Day Supplement Real-Time Supplement

$3,500

$4,000

$4,500

$5,000

$5,500

2011 2012 2013 2014 2015 2016

510(K) Premarket Notification Submission 30-Day Notice

Over the past five years, the FDA has increased the processing fees for medical devices by a total of 11%. Most of the regulatory

filing fees have increased every year at about 2.0% CAGR, which doesn’t look high, but inflates the filing costs over a 5-10 years

period.

FDA Med Device User Processing Fees Increased by 11% Over Five Years

Submission Fee Increases between 2011-2016

Source: FDA website

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Q. Approximately how many of each of the following submissions types did your company file in 2014?

n=16

EU, Canada & Japan

Submissions Filed (Total Benchmark Class)

The Japanese Market Has Drawn Many More Submissions On Average Than the EU and Canada Markets Combined

On average, 61 and 59 todokede and Shonin submissions were filed by companies in the last year. Companies filed on average

17 design dossiers, and 12 technical files in the EU region - while the Canadian market averaged 4-6 submissions.

Design dossiers Technical files Class II device

Licenses Class III and Class IV

device Licenses Todokede Shonin

Max 75.0 40.0 15.0 22.0 371.0 445.0

75 Percentile 17.0 15.0 5.5 6.5 35.3 20.0

Mean 16.8 11.9 4.2 5.8 61.8 59.4

Median 10.5 8.0 2.5 4.5 7.0 9.0

25 Percentile 1.0 3.5 1.0 1.0 0.3 2.0

Min 0.0 0.0 0.0 0.0 0.0 0.0

EU Submissions Canadian Submissions Japanese Submissions

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Q. Estimate the Regulatory staff time allocated to reviewing change notices and documenting the assessment.

n=22

Staff Time Invested in Change Management (Total Benchmark Class)

Change Notices Consume Significant Amount of Regulatory Time

Nearly 80% of companies report that regulatory staff spend more than 20% of their time managing change notices and

documentation.

9% of Companies

9% of Companies

32% of Companies

9% of Companies

23% of Companies

4% of Companies

14% of Companies

1% - 10% of time

11% - 20% of time

21% – 30% of time

31% – 40% of time

41% – 50% of time

51% – 60% of time

>61% of time

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benchmarking®. We are a research, consulting, benchmark database, publishing and advisory firm that

conducts work based on the simple yet profound principle that organizations can chart a course to superior

economic performance by leveraging the best business practices, operating tactics and winning strategies of

world-class companies.

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