Task Order No. 24 CONTRACT NO. HHSF223200810017I FINAL REPORT UNIQUE DEVICE IDENTIFICATION (UDI) FOR MEDICAL DEVICES SUBMITTED TO: FOOD AND DRUG ADMINISTRATION OFFICE OF POLICY & PLANNING 10902 New Hampshire Avenue Building 32, Room 3254 Silver Spring, MD 20903 SUBMITTED BY: EASTERN RESEARCH GROUP, INC. 110 HARTWELL AVENUE LEXINGTON, MA 02421 WWW.ERG.COM ERG TASK NO. 0259.03.024.001 DATE: MAY 2012 TABL E OF CONTENTS TABLE OF CONTENTS ........................................................................................................... III LIST OF TABLES .......................................................................................................................VI SECTION ONE EXECUTIVE SUMMARY ........................................................................ 1-1 1.1 SUMMARY OF THE PROPOSED RULE ............................................................................................... 1-2 1.2 LABELER COSTS TO IMPLEMENT UNIQUE DEVICE IDENTIFICATION ............................................. 1-2 1.2.1 Immediate Implementation Cost Scenario .............................................................................. 1-3 1.2.2 Proposed Implementation Schedule ....................................................................................... 1-5 1.3 IMPACTS ON LABELING FIRMS AND ESTABLISHMENTS ................................................................ 1-6 SECTION TWO INTRODUCTION ..................................................................................... 2-1 2.1 BACKGROUND AND ORGANIZATION OF THE REPORT .................................................................... 2-1 2.2 SUMMARY OF THE PROPOSED UDI RULE ........................................................................................ 2-1 2.2.1 Components of the UDI .......................................................................................................... 2-2 2.2.2 Display of UDI on Label ........................................................................................................ 2-2 2.2.3 Exceptions to the Rule ............................................................................................................ 2-3 2.2.4 Issuance of UDIs and Global Unique Identification Database .............................................. 2-4 SECTION THREE PROFILE OF THE AFFECTED ENTITIES ................................... 3-1 3.1 IDENTIFYING THE AFFECTED UNIVERSE OF MEDICAL DEVICE LABELERS ................................... 3-1 3.2 PROFILE OF AFFECTED ESTABLISHMENTS ..................................................................................... 3-3 3.2.1 Manufacturers of Medical Devices ........................................................................................ 3-3 3.2.2 Reprocessors of Medical Devices ........................................................................................... 3-8 3.2.3 Specification Developers ...................................................................................................... 3-10 3.2.4 Repackagers and Relabelers of Medical Devices ................................................................. 3-13 SECTION FOUR DIRECT REGULATORY COSTS ....................................................... 4-1 4.1 INTRODUCTION .............................................................................................................................. 4-1 4.2 KEY COSTING ASSUMPTIONS .......................................................................................................... 4-1 4.2.1 Assumptions—UDI Structure ................................................................................................. 4-1 4.2.2 Assumptions—Baseline Compliance and Exceptions from the Proposed Rule ...................... 4-2 4.2.3 Assumptions—Display of UDI on Label ................................................................................. 4-3 4.2.4 Assumptions—Barcoding Used to Represent UDI ................................................................. 4-5 4.2.5 Assumptions—Incremental Costs Due to the Proposed Rule ................................................. 4-7 iii 4.3 COSTS TO AFFECTED ENTITIES ...................................................................................................... 4-8 4.3.1 Cost Estimate for Manufacturers, Reprocessors, and Specification Developers ................... 4-8 4.3.2 Costs for Repackagers and Relabelers ................................................................................. 4-58 4.3.3 Total Costs to U.S. Industry ................................................................................................. 4-66 4.3.4 Costs to the Issuing Agencies ............................................................................................... 4-67 4.3.5 All Costs of UDI to All U.S. Entities .................................................................................... 4-69 4.3.6 Costs for Foreign Entities and All Affected Entities ............................................................. 4-70 4.4 TIMING OF INVESTMENTS ............................................................................................................ 4-70 SECTION FIVE ECONOMIC IMPACTS ........................................................................... 5-1 5.1 IMPACTS ON DEVICE MANUFACTURING, REPROCESSING, AND SPECIFICATION DEVELOPMENT FIRMS 5-1 5.2 IMPACTS ON REPACKAGING AND RELABELING (R/R FIRMS ......................................................... 5-10 5.3 SUMMARY OF IMPACTS ON MEDICAL DEVICE LABELING FIRMS.................................................. 5-13 5.4 IMPACTS ON MEDICAL DEVICE LABELING ESTABLISHMENTS ....................................................... 5-13 SECTION SIX ALTERNATIVES TO THE PROPOSED RULE ..................................... 6-1 6.1 NO ACTION—VOLUNTARY ADOPTION ........................................................................................... 6-1 6.2 LABELING ONLY ............................................................................................................................. 6-4 6.3 ONLY CLASS II AND CLASS III DEVICES REQUIRE UDI ................................................................ 6-5 6.3.1 Methodology for Identifying Class II and Class III Device Labelers ..................................... 6-5 6.3.2 Costs and Impacts of an Alternative Covering Only Class II and Class III Devices ............. 6-9 6.4 ONLY CLASS III DEVICES REQUIRE UDI ....................................................................................... 6-9 6.4.1 Methodology for Identifying Class III Device Labelers ....................................................... 6-11 6.4.2 Costs of an Alternative Covering Only Class III Devices .................................................... 6-14 6.5 STATIC BARCODE UDI ................................................................................................................. 6-15 6.5.1 Manufacturers, Reprocessors, and Specification Developers .............................................. 6-17 6.5.2 Relabelers/Repackagers ....................................................................................................... 6-23 6.6 CLASS II/III WITH VARIABLE BARCODING AND CLASS I WITH STATIC BARCODING (GMP-EXEMPT DEVICES EXCLUDED) ............................................................................................................................... 6-25 6.6.1 Cost Savings for Initial Labelers .......................................................................................... 6-29 6.6.2 Cost Savings for R/Rs ........................................................................................................... 6-35 6.6.3 Cost Savings Realized by the Class I Static Alternative, Total Cost of the Alternative, and Impacts of the Alternative ............................................................................................................................... 6-35 6.6.4 Timing of Investments under the Class I Only Static Barcoding Alternative ....................... 6-41 6.7 COSTS TO FDA FOR ESTABLISHING THE GUDID UNDER FURLS ............................................... 6-41 iv 6.7.1 Initial Development and Deployment ................................................................................... 6-43 6.7.2 Operation and Maintenance ................................................................................................. 6-44 6.7.3 Annualized Costs to FDA of the GUDID System ................................................................. 6-44 SECTION SEVEN INITIAL REGULATORY FLEXIBILITY ANALYSIS ................... 7-1 7.1 NEED FOR THE PROPOSED RULE ..................................................................................................... 7-1 7.2 OBJECTIVES AND LEGAL BASIS OF THE PROPOSED RULE ............................................................... 7-1 7.3 ESTIMATE OF SMALL ENTITIES AFFECTED BY THE PROPOSED RULE .............................................. 7-2 7.4 RECORDKEEPING, REPORTING AND OTHER COMPLIANCE REQUIREMENTS OF THE PROPOSED RULE 7-2 7.4.1 Recordkeeping and Reporting Requirements ......................................................................... 7-2 7.4.2 Other Compliance Tasks ........................................................................................................ 7-5 7.5 OTHER FEDERAL RULES ................................................................................................................. 7-5 7.6 COSTS TO AND IMPACTS ON SMALL ENTITIES AS A RESULT OF THE PROPOSED