Stericycle Recall Index Q3 2014

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1 Stericycle Recall Index Q MEDICAL DEVICE RECALL 1 TREND

2 OUTLOOK

3 Class II Consistency The FDA defines a Class II recall as a situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote. 2 Since the third quarter of 2010 these events have remained relatively consistent within the medical device sector at approximately 89 percent. While Class II events pose no risk of fatality, they contribute significantly to the industry s complexity. Depending upon the manufacturer s supply chain, a Class II event could be either a patient level or a hospital level recall. This means that manufacturers must devise comprehensive recall plans for both audience segments, and ensure that they are prepared to address their unique requirements as the recall progresses. With patient safety at stake, even the smallest recall requires that manufacturers take steps to address the challenges of recall execution, including: Product retrieval: Identifying the affected product and efficiently removing it from the marketplace Notification: Ensuring that all affected parties, including patients, regulators and distributors, are apprised of the recall, and are kept up to date as it evolves Data Collection: Information systems to capture all data points related to product retrieval and consumer notification Q1 Q2 Q CLASS II AND TOTAL MEDICAL DEVICE RECALLS Total Class II recalls Total Class II recalls Total Class II recalls Scaling response based on the amount of affected units is another recall execution challenge, as evidenced by Class II medical device recalls in Throughout the year, events in this category have varied significantly in size and scope. While there were some large-scale events, the majority of Class II recalls were smaller in volume. For example, the industry has a quarterly average of 24 Class II recalls of 10 units or less for all of 2014 to date Stericycle ExpertSOLUTIONS TM All rights reserved. 3

4 The Global Element The above challenges are made more complex by the global economy. Fifty-seven percent of Q3 s medical device recalls affected the U.S. and at least one other country, a trend that has remained consistent with earlier quarters in the year. In fact, when looking specifically at overall FDA global recalls, the medical device sector has the highest percentage of global events. Remote regions were impacted by nearly half of the international medical device recalls issued in Q3, with the British Virgin Islands, Haiti, Cyprus and Malta among areas affected. In addition to the broader trend of globalization, medical device recalls are increasingly affecting island countries. These remote regions were impacted by nearly half of the international medical device recalls issued in Q3, with the British Virgin Islands, Haiti, Cyprus and Malta among the areas affected. Further underscoring the distributed nature of recalls, the world s smallest recognized state the Vatican was affected by a recall in Q3. This speaks to the challenges of managing recall execution and logistics in remote regions. Most manufacturers lack any sort of ground presence in these markets, which can make it difficult for companies to assess the variables of global response. For example: Understanding country-specific regulatory requirements Localizing and/or translating all notification materials Logistics of removing and transporting affected product for disposal 4

5 The Tech Factor The top drivers for medical device recalls in Q3 were labeling and/or packaging errors and software issues, which combined to contribute to more than 40 percent of the quarter s activity. Among the software glitches were anomalies with calendar settings, discrepancies with digital images, and spontaneous rebooting resulting in unintended downtime. It is likely that software errors will continue to factor prominently in medical device recalls in future quarters, as technology grows more pervasive throughout the industry. In fact, a recent report from Transparency Market Research values global medical device connectivity at $33.5 billion by More than 40% of Q3 recalls were due to labeling/ packaging errors and software issues According to the report among the factors contributing to this growth are: Greater need for workflow automation Demand for increased patient safety Enforcement of government regulations governing electronic medical records (EMRs) adoption As manufacturers invest in new technical innovations and integrate technology into existing product lines, it s critical that they adapt recall planning accordingly in order to ensure patient safety Stericycle ExpertSOLUTIONS TM All rights reserved. 5

6 New Regulatory Challenges In an effort to further improve patient safety, the FDA has introduced a new policy to provide a consistent way to identify and track medical devices. The Unique Device Identification System (UDI) consists of two components. The first is assigning a unique number to each device, including critical information such as the lot or batch number, expiration date and manufacturing date, where applicable. The second element is a publicly searchable database housing each device and its identifier. 4 Though the rule was finalized in September 2013, the FDA is phasing it in over several key compliance dates the first of which occurred in Q3 of this year. As of September 24, 2014, the labels and packages on all Class III regulated devices must bear a UDI. By 2015, all implantable, life-supporting and life-sustaining devices will require a UDI and, in the following September, the labels and packages of Class II regulated devices must bear a UDI. 5 The time-table progresses over several ASSIGNING A UNIQUE NUMBER TO EACH DEVICE INCREASES TRACEABILITY IN THE SUPPLY CHAIN AND WILL HELP MORE EFFICIENTLY DEFINE THE SCOPE OF A RECALL. years until 2020, at which point all required devices and their components must be properly labeled and submitted to the UDI database. This has numerous implications for the recall industry. Assigning a unique number to each device increases traceability in the supply chain and will help more efficiently define the scope of a recall. This will make it easier to target affected stakeholders and could increase response rates. It is evident that the initial responsibility for meeting UDI mandates lies with device manufacturers. However, in order for the system to truly be effective, all stakeholders, including healthcare providers and patients themselves, will ultimately be forced to modify behavior and processes. Future Index analyses will examine how this ruling impacts medical device recall activity throughout the rollout

7 The Recall Scorecard NHTSA Overview Q3 saw 200 NHTSA related recalls which includes cars, child seats, equipment and tires an increase of three percent from Q2. Not surprisingly, autos were the primary driver of this activity contributing 96 percent to Q3 s total recalled unit volume. In fact, the Index analysis reveals that there has been an average of two auto recalls per day so far in Despite this steady activity, the amount of total NHTSA units which includes Auto, Tire, Childseats & Equipment decreased by nearly 50 percent from Q2 s record-setting 30 million plus. However, Q3 s unit volume is the second highest of all quarters since In fact, there have almost been more autos recalled in the first three quarters of 2014 than in 2011, 2012, and 2013 combined! NHTSA Recalls 200 NHTSA RECALLS in Q Recalled units down 50% from Q Autos contributed 96% to Q3 s total recalled unit volume 2014 Auto Recalls to date Avg Recalls: Q per Day Q Q Auto Units Recalled Q Q Q Q Q ,893,945 4,975,109 9,638,065 14,874,594 26,683, Stericycle ExpertSOLUTIONS TM All rights reserved. 7

8 The Recall Scorecard Pharmaceutical Overview FDA Enforcement Reports documented 84 pharmaceutical recalls in Q3, down eight percent from the prior quarter. The Index analysis reveals that the number of events is not the only decrease the industry experienced in the quarter. The number of affected units decreased by nearly 50 percent to be the lowest number of impacted units tracked in all of The amount of companies involved in a recall also dropped from Q2 for a total of 61. While fewer manufacturers experienced a recall in Q3 compared to the previous quarter, more companies had multiple events. Twenty-one percent of organizations had two or more recalls in Q3 versus 17 percent in Q2, and the percentage of companies with five or more events was also up in Q3. Additional Index findings include: Geographic complexity: The trend of geographically distributed and global events remains consistent with prior quarters Dramatic fluctuation in affected units: There were two recalls of more than a million units and three events with 10 units or less Pharmaceutical Recalls 84 PHARMA RECALLS in Q This is down 8% from Q Number of affected units decreased by nearly 50% 17% Q % Q Percentage of companies or manufacturers with 2+ recalls 84% of pharmaceutical recalls were nationwide since Q

9 The Recall Scorecard FDA Food Overview The FDA food industry experienced record highs in a number of areas in Q3, including the amount of nationwide and global events. According to FDA Enforcement Reports, 19 percent of food recalls affected the entire U.S. and four percent were international the highest percentage both categories have experienced in all of In addition, the quarter saw the highest number of Class I recalls tracked since Q While these events contributed to 45 percent of the quarter s recall activity, Class I recalls accounted for only 12 percent of the total volume recalled. USDA Food Overview According to USDA reports, there were 21 recalls of meat, poultry or processed egg products in Q3, the majority of which were Class I events. However, both the overall number of recalls and the amount of recalled units was down compared to Q2. Food Recalls 19% of FDA food recalls affected the entire U.S. 4% were international 21 USDA recalls of meat, poultry or processed egg products in Q Class I causes for both FDA and USDA recalls Undeclared allergens Processing deviation Lack of inspection Elevated levels of lead Presence of Salmonella Potential Listeria contamination 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 9

10 The Recall Scorecard CPSC Overview While Q3 experienced a slight decrease in the number of CPSC events compared to Q2, the quarter saw almost a 50% increase in the volume of recalled units. There were 74 events that contributed to the 12 million plus recalled units during Q Child/juvenile products accounted for 7 of the 74 recall events. Additional Index findings include: There were a total of 12,278,838 units recalled in Q ,170 recalled units were for Child/Juvenile products The risk of Entrapment/Strangulation was the leading cause of Child/Juvenile product recalls Sporting/recreational equipment and home fixtures/furnishings continue to be the largest category contributors to CPSC recalls in 2014 CPSC Recalls 12 million+ units recalled in Q3 26,170 recalled units were for Child/ Juvenile products Top Causes of CPSC Recalls Entrapment/ Strangulation Structural collapse Machine failure 10

11 Explanation of Stericycle ExpertSOLUTIONS and the Stericycle Recall Index Stericycle ExpertSOLUTIONS helps partners minimize risk to the public and to their company brand by executing and planning for product recalls efficiently, effectively and compliantly. Each quarter, we analyze cumulative recall data across six product categories. This helps our partners navigate the regulatory environment and identify trends. How the Stericycle Recall Index is Compiled The Stericycle Recall Index gathers and tracks cumulative data from the four primary federal agencies that oversee recalls in the United States: the Consumer Product Safety Commission (CPSC), the Food and Drug Administration (FDA), the Food Safety and Inspection Service (FSIS) of the United States Department of Agriculture (USDA), and the National Highway Traffic Safety Administration (NHTSA). FDA Data To track trends in food, pharmaceutical, and medical device recalls, the Stericycle Recall Index uses information publicly available in news releases posted on the FDA website. For additional insight into recalls governed by the FDA, Stericycle collects and analyzes data from the agency s weekly enforcement reports, which provide additional details including recall class, quantity of units affected and number of reported incidents. CPSC Data For further insight into consumer product recall trends, Stericycle analyzes data from CPSC recall announcements. When compiling statistics and analyzing trends for consumer product recalls, the Stericycle Recall Index uses standard product categories and hazards recognized by the CPSC Stericycle ExpertSOLUTIONS TM All rights reserved. 11

12 USDA Data For additional insight into food recall trends involving meat, poultry, and egg products, the Stericycle Recall Index collects and analyzes data from recall announcements posted on the USDA s FSIS website. Statistics and trends are compiled using standard product categories, classifications, and reasons for recalls as recognized by the USDA. NHTSA Data To understand trends in the automotive industry, the Stericycle Recall Index analyzes data from NHTSA reports on recalls of autos, child seats, equipment and tires. Terminology Announced recalls represent those recalls documented in news releases published on agency websites. Enforced recalls refer to those recalls documented in weekly FDA enforcement reports that are summarized based on the FDA assigned Event ID. Their documentation can lag behind announced recalls by weeks or even months because the recall process may take time to complete. A Class I recall, according to the FDA, is a situation in which there is a reasonable probability that the product will cause serious adverse health consequences or death. A Class II recall is a situation in which the product could cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote. The FDA defines a Class III recall as a situation in which the product is not likely to cause adverse health consequences. 12

13 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 13