On a tip from a Technology Forecasters member, we’ve discovered a Catch 22 for some CMs that want to do certain kinds of business in medical electronics. It stems from a well-intentioned government effort to reduce paperwork. Here’s the scoop.

Medical electronics is highly regulated by the Food & Drug Administration. There are several hurdles a medical OEM must get over - and these often apply to CMs, too. As spelled out in the Code of Federal Regulations (insert “Section 807.20″ and click “search”), OEMs and CMs are required to register with the FDA and list specific devices they are bringing to market.

In June 2005, the FDA eased the rule for domestic CMs, declaring they only need to register if they ship devices directly to end customers or into commercial distribution. Domestic CMs building PCBs, sub-assemblies or even finished devices that they send to the OEM need not register. The FDA further elaborated a month later.

Clearly, this reduces paperwork for some CMs. However, the Law of Unintended Consequences got in the way on two fronts. The first is your basic chicken-and-egg problem.

As TFI concluded from research earlier this year, many CMs want to offer medical OEMs end-to-end services, including shipping completed products directly to the OEM’s customers or into commercial distribution.

But now they can’t register with the FDA until they have secured business that includes distributing completed devices. Many medical OEMs - new to outsourcing - are not up to date on the amended rule, and still expect CMs to be registered. CMs will have to educate OEMs.

The second issue is competitive advantage. CMs already registered with the FDA, even if they were not shipping products directly to end customers, remain in the registration database. If they now compete for business that involves placing devices into commercial distribution, they have an advantage over CMs who were never listed. From the OEM’s perspective, one CM is listed and one is not.

The FDA may soon address this matter. A bill before Congress (Item 4 on Page 2), would authorize the FDA to remove all CMs listed in the database that are not shipping products directly to customers or into commercial distribution.

This issue most likely impacts medium-sized and smaller CMs that are just starting to enter or expand their medical electronics business. We’d like to hear your experiences.

Posted by Bill Roberts, September 21st, 2007

Filed to Outsourcing, Supply chain management

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