The jury is still out: FDA’s Unique Device Identification (UDI) System

While other government regulations like ICD-10 and Meaningful Use get all the headlines, as well as all of the positive and negative attention, the FDA’s Unique Device Identification (UDI) System seems to be waiting in limbo like a defendant waiting for the jury to come back with it verdict. 

We decided to reach out to Spencer Nam, Senior Research Fellow, Health Care, Clayton Christensen Institute to ask him to share his thoughts about UDI and its future.

Jason Free: What are your thoughts on how the FDA’s UDI project is impacting the medical device industry? Do you believe it is on the right track? If not, what adjustments need to be made?

Spencer Nam2
Spencer Nam, Senior Research Fellow, Health Care, Clayton Christensen Institute

Spencer Nam: Although it is a bit early to tell exactly how the UDI project is impacting the medical device industry, certainly the manufacturers, particularly those manufacturing Class III devices, must be feeling some urgency to address the issue, as the date of the first set of compliances has already passed (September 24, 2014). Based on some of the surveys done by various consulting and independent research institutions, I estimate that only about 30-40 percent of all Class III device manufacturers have met the first compliance date, and the rest of the manufacturers have asked for a one-year extension. I expect a similar compliance rate will apply for the second compliance date (September 24, 2015).

Broadly speaking, I expect the UDI project to have a fairly substantial and lasting impact on the medical device industry due to the comprehensive nature of the program. UDI will likely affect how medical devices are used and evaluated, which will also impact innovations. Certainly more data will be collected and analyzed on all devices. Only time will tell on how effectively those data will be utilized to bring new technologies to use.

In terms of the early implementation of the program, as with most of the government led programs, the UDI project is probably behind schedule. I’d imagine that the current seven-year roll out plan will likely stretch into a 10-12 year implementation process. If we start talking about actively using UDI in patient treatment and management, it is likely to be a 15-20 year process for the UDI to become a core part of medical device utilization.

In terms of adjustments, clearly our expectations on what UDI can and will do in clinical settings need to be adjusted down. Just making UDI available on all devices and actually utilizing them as part of clinical activities are two independent outcomes. In order for the utilization of UDI to materialize, a number of new processes will need to be implemented. 

One thing that has not been clear to me is why the FDA decided to have Class III devices coded first. In practice, Class III devices are the most complex instruments, not only in terms of the devices themselves but also how devices are actually used in clinical environment. Class III devices are so highly monitored and followed that they probably do not have the immediate needs for UDI. On the other hand, Class I devices are the ones that are least monitored and are generally simple devices that are not tied to complex procedures or clinical processes. While Class III devices only account for 10 percent of all medical devices, making it the smallest group.If the FDA were hoping to make UDI more mainstream faster, it should’ve started the UDI process with Class I devices. Then by year seven, more than 90 percent of all medical devices would have a UDI instead of just 40-50 percent, based on the current method.

Free: Some believe adding the UDI to insurance claims poses too many technical problems. What are your thoughts?

Nam: I think the correct answer is “it depends,” as there will be a myriad of issues across different types of devices. While the actual “mapping” of UDI to categories of devices might not be too complicated, how such mapping will be interpreted as part of reimbursement is a completely new set of issues that could become extremely complex. Especially for Class III and some Class II, where the same device could be used for a number of different indications, a UDI-driven coding scheme could make the whole process much more cumbersome than it needs be, just so that we could track each device being used for procedures. The incremental benefits for the reimbursement community, for all the trouble it will have to go through, do not seem to justify the means.

For Class I devices where the usage complexity is much more limited and the indication of usage is fairly uniform, adding UDI to insurance claims should not take  much more than just adding another column of numbers. Given that the program begins the UDI process with tagging the most complex devices (Class III) first, implementing the UDI into insurance claims process will likely create serious technical issues.

Free: With scarce resources, hospitals need to focus first on where it would make the most positive impact for patients. Do you believe UDI currently adds too much administrative burden relative to its projected benefits? 

Nam: The initial UDI process is more of “tagging” each device with standardized codes, so the administrative burden at the hospital level should not be significant. However, utilizing UDI in clinical environment is a whole new level of commitment and requirements for hospitals. New reporting requirements will likely be needed. New software implementations will be required. Interoperability of the hospital’s IT system becomes more essential as the device data will need to be shared across institutions. It is clear that the UDI project will first require substantial investment of time, money, and resources of the hospital administration before seeing any meaningful benefits from the system. Over the long-term, such benefits should outweigh the initial burden, but if “long-term” means 20-30 years, that is a long time to wait to reap rewards from investments made today.

Free: Some say the implementation of UDI would have to include incentives for providers and would initially have to be conducted on a voluntary basis to allow hospital time to adopt. What are your thoughts?

Nam: I agree that incentives will be required for the UDI program to get its foothold in the clinical environment. However, I am not sure if incentives to providers will be the answer. From early industry feedback, providers are generally on-board with adopting UDI as long as it does not become a substantial cost burden on them. In fact, providers might have been the ones who really lobbied for something like UDI in the first place. But, for UDI to be utilized at the level that the architects of the program have envisioned, a lot of steps will have to be covered first.

Most manufacturers are probably not interested in complying with the program any sooner than that they absolutely have to. IT software vendors are also not going to provide adequate interoperability quickly enough to make UDI a functional program for the providers. The reimbursement community will likely avoid the issue as long as they can to avoid complicated discussions required for UDI to be integrated into reimbursement. So, incentivizing providers to adopt UDI is probably incentivizing the stakeholder with least leverage.

I think the most effective incentive program will have to be associated with device manufacturers and HCIT software companies. Both of these stakeholders can help the providers with all the tools needed for UDI to be successfully implemented and utilized to deliver tangible bottom line results. These stakeholders, if given right incentives, will educate the providers on the benefits of UDI on their own dime. On the other hand, incentivizing the providers who do not have the mandate or the means to encourage other key stakeholders to follow through with their end of the deal probably will do little to move the needle.

Free: What are your projections for the roll-out and impacts of UDI in the coming years?

Nam: I expect the UDI implementation to be a very slow process that will likely require more stringent FDA regulations for all stakeholders to come in compliance with the program. There are so many intermediate steps required for the UDI program to truly unleash its impact to the entire medical device industry that I am very cautious on the timing of when UDI will become an active part of the clinical processes involving medical devices. I see a full implementation of the program to take at least 15-20 years (maybe longer), and even then just the Class III devices and some Class II devices may be truly utilizing the UDI program.

Having said that, the long-term impact is clear on what UDI can do to device management and follow up. The program will provide us with the potential to gather extensive data on how particular devices are used in clinical situations and how certain implanted devices may be functioning over time. If these data are properly used, we should generate new medical insights that can help us to develop more effective and safe devices.

The question still remains on how much  added benefit these new data will provide or if the incremental benefits will outweigh the cost of implementation. If full implementation will take decades instead of years, it is possible that some of the expected benefits from UDI will have been achieved through other means. Other issues such as UDI’s potential impact on issues such as patient privacy have not been fully investigated at the moment. As the program picks up full steam, we expect some of these issues to be brought to the forefront of on-going discussions.


Clayton Christensen Institute, interoperability, medical devices, UDI, Unique Device Identification System


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