At the end of the day, businesses are in business to make money. So where does regulatory compliance fit within your business model? Let's go ahead and examine the two main cost components of compliance:
- Cost of submissions. According to the law, you must obtain regulatory approval as a precondition to market your product. This is usually obtained in response to an active submission to the appropriate regulatory agency. Can't cut any corners here, the success of your submission will gate short term sales performance. Hire the best regulatory consultants you can afford.
- Quality system costs. To keep your product on the market, the law says that you must implement and maintain a quality system compliant with the regulations. This is an ongoing operational cost. Your "state of compliance" is sampled at the regulatory agency's periodic audit event, usually every 2-4 years (on average). Do we have an opportunity here?
The answer, in most cases, seems to be yes. The key word is how to "manage the enforcement risk" and this thinking is most prevalent in small firms, perhaps even with the tacit cooperation of regulatory agencies which seem to be a lot more lenient in their inspections when dealing with small entities.
So the microeconomic behavior in relation to Item 2 seems to go like this:
1. Implement a "de minimis" quality system. Hope for the best.
2. When audited, hire a smart regulatory consultant that can successfully argue with the auditor that your quality system's level of depth is commensurate with your product's level of risk
3. If and when cited in the regulatory agency's audit report, address the specific finding(s) and move on
Adopting this strategy would automatically "optimize" your regulatory compliance costs. Or would it?
Perhaps in the short term the answer could be yes. To be viable over the long term, however, you might want to consider the following additional elements:
a) Worst case scenario, what is the impact of non-compliance? Might range from massive documentation rework, consent decree, or total product recall.
b) Given the current trends in regulatory enforcement, what is the probability that your firm will be found non-compliant, even if you successfully passed all regulatory audits in the past?
c) Will your firm be acquired by a larger firm in the near future? If so, are you prepared to "raise the bar" on your quality system compliance just before or after the acquisition?
d) Do you have safety issues in the field (like patient injuries or deaths associated with your product) that might trigger unwarranted attention from the regulators?
e) Are you a supplier, OEM, or a contract service provider of a company that was involved in a recent safety recall, consent decree, or associated with adverse events related to patient injury or death?
The major hidden "hard" cost of long term non-compliance is the cost of rework. This includes the cost of reverse engineering device designs, revalidating products, fixtures, and manufacturing lines, and the cost of recalls.
The more important hidden costs, however, are the "soft" ones: losing out market share due to negative customer image, inability to respond to your competitors' newest feature offerings, and loss of revenue while your product is put "on hold" by the regulatory body until remediation is complete.
Each company, product, and market is different. To find out more, visit http://www.priusmedical.com/ and contact us for a personalized assessment.
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