Program Overview & Value Proposition

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2. Program Overview & Value Proposition

3. Content • Value Proposition Objective • Current Medical Device Industry Challenges • Chronology • Next Steps • Benefits • Medical Device Industry • Medical Device Industry OEMs • Medical Device Industry Suppliers • Scope • Using MedAccred for Critical Process Supplier Oversight • Critical Process Areas of Interest • Existing PRI Processes and Products • Program Risk Analysis • Confidentiality of Information • Case Studies • Aerospace (Nadcap Subscriber Critical Process Escapes) • PRI Transportation & Power Generation Program (OEM) • Medical Device (Electronic Circuits – PCBA Hypothetical) • Financials • Subscriber Fees / Supplier Audit Pricing • Template for Cost/Benefit Calculation • Additional Information • PRI Contact & Future Meetings

4. Value Proposition Objective To demonstrate to the medical device industry the value of creating an industry managed supply chain oversight program (MedAccred) that will reduce risk to patient safety, assure quality products and compliance with requirements as they apply to critical processes.

5. Current Medical Device Industry Challenges • Increased outsourcing and globalization of the supply chain throughout the medical device industry, thereby increasing the challenge of appropriate level of oversight • Increased number of recalls attributed to supplier quality issues • Purchasing controls: • is one of the top cited FDA-483 observations for medical device quality system violations • has been included as an element of several enforcement actions (warning letters, consent decrees) • Flow down of design requirements from OEMs to first-tier and sub-tier suppliers is a critical issue affecting Quality & Safety

6. Chronology

7. Next Steps for 2015 • Increase participation and commitment from the Medical Device Manufacturers • Increase participation and commitment to suppliers who provide critical manufacturing processes • Conduct MedAccred audits of suppliers • Continue dialogue with CDRH and FDA Office of Global Operations • Complete software validation of eAuditNet and update system as required • Promote MedAccred to the wider Medical Devices industry

8. Benefits to Medical Device Industry • Promotes a philosophy of continuous improvement and a culture of patient safety and quality for all participants • Enhances compliance and quality management system effectiveness throughout the industry • Promotes best practices to assure patient safety and quality • Promotes application of industry and technical standards/practices • Provides an opportunity for collaboration between Suppliers and OEMs • Improves visibility of industry requirements to sub-tier Suppliers Similar program in aerospace industry has a 25 year history of successful performance and regulatory acceptance

9. Benefits to Medical Device Industry (cont.) • Promotes least burdensome approach by reducing redundant process audits by multiple customers • Enables reallocation of resources to other areas requiring attention • Provides real-time and consistent visibility of supply chain quality • Aligns with FDA’s “Case for Quality” strategic initiative

10. Benefits to Medical Device Industry OEMs • Establishes stringent industry consensus audit criteria based on industry and specific OEM requirements that ensure compliance and quality of devices, reduce the risk to patient safety and will satisfy the requirements of all participants • Conducts in-depth special process audits that are compliant and consistent to accepted industry/technical standards and conducted by industry recognized and approved Subject Matter Experts. • Covers 3 areas: • Assess effectiveness of Suppliers’ QMS at the special process level; • Audits based on robust core and OEM-specific checklists; • Process-focused Product Audits

11. Benefits to Medical Device Industry OEMs (cont.) • Provides greater visibility of the supply chain to all levels and sub-tiers that provide critical processes, consistent with regulatory requirements (e.g. FDA, ISO 13485, MDD, etc.) • Identify and reduce risk of exposure to lower-quality Suppliers and reduction of costly recalls • Provides early warning notification to OEMs of supply chain quality issues • Provides complete visibility of audit results and corrective actionstaken in a secure and retrievable format • Reduces cost of non-quality • Reduces cost of compliance

12. Benefits to Medical Device Industry OEMs (cont.) • Releases OEM resources to focus on Supplier development opportunities and/or problem area resolution • Improves flow down of OEM requirements to sub-tier Suppliers • Makes the Supplier selection process more efficient • Globalsupply chain visibility through a web based system to support and improve efficiency in industry managed auditing and accreditation system (eAuditNet). • Supports procurement to identify accredited Suppliers (Qualified Supplier List) • Supports Supplier risk management activity • Creates a shared pool of trained, recognized and approved subject matter expertsamong OEMs

13. Benefits to Medical Device Industry Suppliers • Providesconsistent/standardizedcritical process audits accepted by the medical device industry resulting in fewer redundant onsite audits by multiple OEMs • Can use accreditationto increase client-base and opportunities across the Medical Device Industry • Enhances the Supplier’s compliancestatus • Medical Device Industry-accepted and consistent technical requirementsleading to process discipline, greater operational efficiency and continuous improvement resulting in higher quality and loweroverall cost.

14. Benefits to Medical Device Industry Suppliers (cont.) • Helps Suppliers develop a structured approach to special process and product • Provides opportunity to participate in development of audit criteriaand the accreditation program • 85% of suppliers report quality improvements after accreditation, including reducing scrap rates, reworks, escapes and defective products (from aerospace survey data)

15. What is MedAccred and it’s Scope • An industry-managed audit program that addresses critical manufacturing process issues in the supply chain and reduces risk to patient safety by enhancing compliance to critical process manufacturing requirements • MedAccred is a tool for Medical Device OEMs to use in the oversight of their supply base while they maintain ultimate responsibility for quality and compliance • MedAccred program provides in-depth, critical process, audits that are compliant and consistent to accepted industry/technical standards and conducted by industry recognized and approved Subject Matter Experts • Scope of audit • Critical, process-focused, technical audits with sampling of product audits to ensure process capability to meet requirements • Assesses effectiveness of suppliers’ Quality Management System (QMS) at the critical process level (e.g. PCBA, Heat Treating, Welding, Sterilization, etc.) • Audits based on robust core and OEM-specific checklists

16. Using MedAccred for Critical Process Oversight MEDACCRED: - Qualified Suppliers List (QSL) - Sub-tier suppliers

17. OEMs Establish Requirements And Provide Oversight • For devices to meet the industry and FDA requirements, OEMs must: • Define design specifications for the products to be manufactured • Understand which of the manufacturing processes used in making the device or its components are Critical to Quality (CTQ) and hence safety of the device • Define industry standards and OEM specific requirements for these critical processes • Communicate (i.e. Flow-Down) these requirements to all levels of the Critical Process Supply Chain • Understand who are the Contract Manufacturers, as well as sub-tier suppliers that are providing Critical Manufacturing Processes for the devices or their components • Define requirements for periodic oversight via the MedAccred program

18. Suppliers: Critical Process Providers Must Maintain Compliance To Requirements • Critical Process Providers (Suppliers) are responsible for ensuring all requirements (Industry Standards, OEM specifications, etc.) as flowed down by the OEM are met. • This includes ensuring compliance to all critical process requirements. • Receiving and maintaining MedAccred Accreditation is a mechanism for Suppliers to demonstrate they have been verified as having the necessary processing capabilities and controls to ensure compliance. • Flow Down: A systematic approach that ensures OEMS specifications and expectations of quality are effectively communicated to critical manufacturing process providers for devices and device components at all tiers of the supply chain

19. Auditors review OEM requirements and ensure the supplier is in compliance • Subscribing OEMs can maintain oversight and ensure effective flow-down of their requirements by participating in the Critical Process Task Groups and the audit process. MedAccred: Can Provide Oversight To Verify Compliance To Requirements • The MedAccred Audit verifies the Suppliers have the process capability, necessary equipment, controls, qualified personnel, sub-tier controls, etc. and the ability to follow the process requirements as defined by the OEM and/or industry specifications. • Critical Process Task Groups, made up of Industry Representatives, create industry agreed audit criteria which drive supplier process compliance to customer requirements.

20. MedAccred: Can Provide Oversight To Verify Compliance To Requirements • For those Suppliers that outsource a critical manufacturing process, the MedAccred QSL allows them selected accredited sub-tier suppliers • The MedAccred QSL (Qualified Supplier List): • A publicly available list of accredited MedAccred Suppliers to specific Critical Process technologies • Display of all Audits/Certificates for a supplier

21. Critical Process Areas of Interest • Casting/Forging • Chemical Processing • Cleaning • Coatings • Electronics • Displays • Electronic Circuits - PCBAs • Power sources/supplies • Cable & Harnesses • Fluidics • Heat Treatment • Machining • Laser Etch • Material Testing Laboratories • Measurement/Inspection • Non-Destructive Testing • Optics • Packaging • Sterile • Raw Materials • Re-agent • Resins • Composites • Injection Molding • Sterilization • Software • Hosted Services • Welding KEY: BOLD PRI currently has checklists addressing these Critical Process/Product areas BLUE Active Task Groups as of January 2015

22. Existing Nadcap Processes and Products Special Processes Systems & Products Non-Destructive Testing Coatings Castings & Forgings Aerospace Quality Systems Electronics Composites Fluid Distribution Systems Welding Non-Conventional Machining Future Processes Elastomer Seals Sealants Chemical Processing Conventional Machining as a Special Process Raw Materials Measurement & Inspection Materials Testing Laboratories Non Metallic Materials Testing Heat Treating Surface Enhancement Non Metallic Materials Manufacturing The Medical Device Industry has expressed interest in these Critical Processes and Products

23. Program Risk Analysis • Risks of developing a program/not doing it right • Not timely • No critical mass • Proof of Concept audits not showing much • Cost could go up without critical mass • Risks to implementing a program • Will find Suppliers that aren’t capable – increased exposure • Could mean more work for OEM – short term stretch on resources • Finding enough/the right SMEs to conduct audits • Agency acknowledgement • OEMs may still have to conduct special process audits

24. Confidentiality of Information Addressed in MedAccred Program Document PD1300: • 1.1 describes the MedAccred program “This Program Document shall govern the operations of the MedAccred Program. This document establishes the policies for how MedAccred shall meet the requirements defined in PD1000. MedAccred Management Council (MMC) and all MedAccred Task Groups and committees shall operate in accordance with these procedures and all referenced documents.” • 4.4 describes the roles and functions around Task Groups.

25. Confidentiality of Information (cont.) eAuditNet security features: • eAuditNet implements operating procedures: • Each Company has one (or more) administrator(s) who are verified by PRI before any other users can be associated with that Company • Each user has unique credentials, and is only associated with a Company by that Company's administrator(s) • Each user can only access audits/functions relevant to their company and roles • eAuditNet uses standard IT security best practices: • All eAuditNet/program data is delivered over Secure Socket Layer (‘https’) • All system activity is logged • Audit data is stored behind multiple firewalls, and physical safeguards are in place • PRI and SAE have regular information security audits: • PCI compliance • External penetration testing, etc

26. Case Studies • Aerospace (Nadcap OEM – Critical Process Escapes) • Transportation & Power Generation (OEM) • Medical Device (Electronic Circuits - PCBA Hypothetical)

27. Aerospace OEM - Critical Process Escapes 78% decrease * An escape is where defective product has been shipped to the customer prior to being identified as faulty

28. PRI Transportation & Power Generation (TPG) Program – Fastener Example • Event: OEM experienced a product escape due to a faulty fastener and were forced to make an expensive repair • Included in OEM Recourse: Requested a PRI NDT audit for their fastener Supplier • TPG Audit Results: NDT audit uncovered cracks not found during initial inspection and process control violations that would have prevented the cracks • Pre-TPG Program: Focus was on certifying the component (product-centric)

29. Medical Device Quality-Related Product Recall (Hypothetical) 2010: FDA issues a Class II recall on an Automated External Defibrillator ¹. Root cause: Printed Circuit Board Assembly (Electronic Circuits) Trautman, K. (2010). Purchasing Controls – Background & Examples. Retrieved November 02, 2012, from FDANews.com

30. Medical Device Quality-Related Product Recall (Hypothetical) (cont.) • Root cause: • Printed Circuit Board Assembly (Electronic Circuits) • Supplier has incorrectly applied solder flux • Ineffective cleaning • Nadcap process compliance is used as a preventative measure: • AC7120 Revision B – audit criteria for circuit card assembly • 17.1 Reflow Soldering • 17.1.14.C Are soldering defects including solder joint touchup identified, recorded and addressed in a continuous improvement plan? • 17.1.15.C Is the cleaning method being used as per the procedure and is the maximum time permitted between reflow and cleaning being observed? • Audit Note: Maximum allowed time of 8 hours unless otherwise specified by customer or manufacturer’s • recommendation. • 20 Coatings and Encapsulation • 20.1.C Is there objective evidence of cleanliness verification?

31. Subscription Fees Revised: 29Oct14

32. Supplier Audit Pricing(Per-audit fee including travel costs. Based on current auditor daily fee of $420 per day. Will be increased as auditor fees and travel costs increase in subsequent years) *EMEA – Europe, Middle East and Africa **ITAR - International Traffic in Arms Regulations, EAR - Export Administration Regulations (Audits with Export Control restrictions require a US citizen to travel to other regions. Hence, the additional fee to cover travel costs). NOTE: The above pricing model includes travel surcharges for Asia-Pacific and South American audits, and for ITAR/EAR audits outside of the United States. These surcharges were shown as “expected to be between USD1000 and 2000” in the initial cost structure shown from the beginning of the program. Revised: 29Oct14

33. OEM Cost/Benefit Template • What number of Critical Process Audits currently performing? • How many can be eliminated? • What is the cost to conduct these audits? • Travel/Time savings? • Can the QMS audits currently being conducted by OEMs be reduced? • cGMP compliance • Intangibles • Draw from entire med-tech industry expertise • OEM experts could observe audits conducted by Subject Matter Experts

34. Additional Information • Details on upcoming MedAccred meetings, and access to supporting information on the program (including this presentation), can be found on the MedAccred website: http://www.p-r-i.org/other-programs/medaccred/

35. Justin McCabe Research & Development Specialist, PRI jmccabe@p-r-i.org +1 724 772 8693 Bob Lizewski Manager Nadcap Program Quality and NUCAP, PRI rlizewski@p-r-i.org +1 724 772 8618 Joseph Pinto Executive Vice President & Chief Operating Officer, PRI jpinto@p-r-i.org +1 724 772 7175 Contact Details & Upcoming Meetings • Upcoming MedAccred meetings: • MMC Monthly Teleconference: January 14 at 10:30am - 11:30am EST • MMC Face to Face Meeting: February 17 (all day) in Memphis, Tennessee – Memphis Hilton