BB&T Washington Editor and BB&T Staff Reports

After more than half a decade of fuss and bother, Congress finally passed a patent reform bill in September, which President Obama promptly signed, but there are those who believe that the America Invents Act of 2011 (H.R. 1249) creates as many questions as it answers.

On the one hand, Tony Shaw, counsel at the law firm of Arent Fox (Washington) and an adjunct professor of law at the Georgetown University Law Center (Washington), told BB&T in an interview that once the bulk of the law's provisions go into effect 18 months after the President signed the bill, inventors may conclude they “have to file preemptively even if [they] haven't quite perfected the invention“ because of the imposition of the first-to-file (FTF) paradigm embodied in the bill. Shaw also remarked that inventors in other nations are more savvy about the FTF approach and hence “we sort of put ourselves at a competitive disadvantage by adopting their system.“

On the other hand, JC Scott, senior executive VP for government affairs at the Advanced Medical Technology Association (AdvaMed; Washington), said in a statement e-mailed to BB&T that modernizing the patent process “is an important element of making sure that America's medical device companies continue to be the world leaders.“ Scott made note of the transition to FTF – or first-inventor-to-file, as some refer to it – which he said “will promote international harmonization and create efficiencies throughout the system.“

Not all the associations are as optimistic, however. Tom Novelli, VP for government affairs at the Medical Device Manufacturers Association (MDMA; Washington) said in a statement e-mailed to BB&T, “MDMA appreciates the progress made by Congress to improve the patent reform bill from earlier versions.“ He said the bill “while not perfect, is a positive step towards updating the current patent system,“ although Novelli expressed concern that the establishment “of a new post-grant review process may overburden PTO and provide a potential vehicle for abuse by some parties.“ He finished the statement by stating, “we look forward to working with the PTO as it seeks guidance on implementation of the new law.“

The debate over the America Invents Act covered several amendments addressing issues such as business method patents, but the most important amendment in terms of the U.S. Patent and Trademark Office's operations was offered by Sen. Tom Coburn (R-Oklahoma). Coburn's amendment would have forbade any diversion of patent fees into the general treasury, but the Senate voted 50-48 to table the vote, which quashed any further discussion.

Sen. Pat Leahy (D-Vermont), chairman of the Senate Judiciary Committee, said “acceptance of [Coburn's] amendment will effectively kill the bill. The leadership of the House has told me“ it would gain no traction in the House under such circumstances, but Coburn would hear none of it. He replied that such failures on Congress's part are “why we have a 12% approval rating,“ and he asserted further, “there are 750,000 patents pending right now, and there should be only about 100,000.“ Coburn also made the case that Congress “can change the amount of fees [PTO collects] if they're not doing a good job.“

Shaw said FTF will change minds about when and what information to file. “I think now a lot of companies take their time“ about filing, waiting “until they've perfected“ or further refined the invention. “Now you'll probably have to file pre-emptively even if you haven't quite perfected the invention,“ he said.

Shaw also echoed some of the widespread skepticism regarding Congress's ability to keep its hands out of PTO's cookie jar. “I don't think anyone thinks Congress will behave itself“ on this score, he said. “I think everyone recognizes the need to stop fee diversion and it didn't happen,“ he shrugged.

FDA's de novo tweak allows a parallel 510(k) filing

FDA published the much-anticipated guidance for the de novo device application channel recently, and as promised has opened a new regulatory door that allows a device maker to avoid the need for obtaining a determination of not substantially equivalent (NSE) for moderate- and low-risk devices. The guidance calls for a sponsor to file a pre-de novo (PDS) submission as an alternative to wrangling with the 510(k) channel first, but a firm that obtains the agency's nod to go ahead with the de novo filing can file a parallel application for the device as a 510(k) and as a de novo.

The guidance addresses a long-standing sore spot that was inadvertently laid onto the Code of Federal Regulations after passage of the the Food and Drug Administration Modernization Act of 1997, which gave rise to the de novo path. In its Sept. 30 statement, FDA acknowledges that the de novo program “has been under-utilized because of process inefficiencies.“ The agency states that the addition of a PDS submission tool may eliminate up to 90 days “from the process and [foster] more efficient, early interaction between manufacturers and the FDA,“ but also that the guidance “provides clarity for manufacturers on the suitability of a device for the de novo process.“

The guidance was officially dated Oct. 3 and FDA is taking comments for 90 days after the announcement in the Federal Register.

As many in industry know all too well, obtaining a declaration of de novo at present requires that the sponsor respond to the NSE determination within 30 days, and FDA has another 60 days thereafter to determine whether the device qualifies as a moderate- or low-risk device sans predicate. Adding the time required to obtain the NSE determination means that a sponsor can spend half a year jumping through the hoops before commencing formal work with FDA on the requirements of the device as a de novo. FDA reminds readers of the guidance that their successful de novo application can itself serve as a predicate for other applications.

In the section titled “when the de novo process may be used,“ FDA states that any devices found NSE “due to a lack of performance data would generally be ineligible . . . because lack of performance data means that a predicate device likely exists,“ which in turn is interpreted as meaning the device “has likely been classified.“

Sponsors will still have the option of starting the process with a 510(k) application, but a sponsor that successfully files a PDS can run a parallel 510(k) application in addition to the de novo application. On the other hand, FDA states that sponsors should not file a PDS “once a 510(k) has been submitted unless we specifically advise you to do so.“

For a parallel de novo/510(k) filing, FDA states that it will ask for clarification on any information found in the PDS within 60 days of receipt of a firm's “most recent response to such a request“ – suggestive of the clock reset that industry finds objectionable of the current 510(k) process – and that a sponsor's request for a meeting with reviewers should not take place until after 30 days have passed. FDA states that performance data are not sought by FDA at this stage and that it will issue a letter of suitability within 60 days of the agency's receipt of all needed information along with a list of the types of data for special controls and performance data reviewers believe they will need.

If, on the other hand, FDA indicates to the applicant that it does not see the application as suitable, it will issue “a non-binding letter“ to that effect, again within 60 days. The sponsor is advised to make note of the de novo application in the 510(k) paperwork, and has an unlimited amount of time to “collect the information necessary for the concurrent“ filing once the agency stamps the PDS in the affirmative.

Later in the guidance, FDA says that it will sort through a parallel submission within 20 days to determine whether the filing contains all the needed information. Should the agency require additional information, “the review clock will reset to 60 days upon receipt of complete information,“ the guidance states, adding that if 180 days pass without the information, the application will be deemed withdrawn.

NVCA survey says > 40% of VCs plan to pull back

The struggle over FDA's ramped-up oversight of medical devices and diagnostics continues apace with a recent report by the National Venture Capital Association (NVCA; Arlington, Virginia) indicating that the trend of decreasing venture capital (VC) investment in the U.S. will continue. According to a survey of more than 150 VC firms in the U.S., FDA's regulatory requirements are the dominant driver of this trend, which the respondents say will push more investors overseas and dry up investment in the U.S. On the other hand, one of the more prominent among venture capitalists, Jack Lasersohn of the Vertical Group (Palo Alto, California) told BB&T that industry's talks with both FDA and Congress seem to be having the desired effect, namely broadening awareness of how FDA's recent regulatory push is damaging the availability of devices that are now routinely introduced in Europe first.

According to an Oct. 6 NVCA statement, a survey conducted by the association “identified [FDA] regulatory challenges as the most significant factor driving away investment from start-up companies,“ although reimbursement issues were also cited as a factor as well as an “adverse financial environment.“ NVCA states that the survey indicated that 39% of respondents indicated that they had decreased their investments in life science start-ups over the past three years, the same percentage of respondents who indicated they intend to continue reducing such investments in the U.S., some by as much as 30%.

Med-tech and biotech seem to fare worse than pharma in the survey, with 40% and 42% of VC firms expecting to trim their investments in biotech and med-tech, respectively, but some of these investments are headed for other realms. NVCA's statement indicates that 42% of respondents indicate an interest in healthcare services that are not regulated by FDA, while 54% indicated they are looking at healthcare IT.

Device flight seems an even more established fact given the results of the survey, which indicates that 36% of firms are eyeing European markets while 44% have an active interest in one part or another of Asia. Only 13% of respondents indicate an interest in further investment in North America.

The report is the latest salvo in an ongoing war of words between FDA and industry on the impact of the agency's tightened scrutiny of med-tech, with Josh Makower, MD, of device incubator ExploraMed (Mountain View, California) arguing late last year that the higher costs associated with gaining regulatory approval in the U.S. along with the device lag is driving investors offshore. Jeff Shuren, MD, director of the Center for Devices and Radiological Health, initially took an oppositional stance with regard to delays in device approvals, arguing that those delays were “all on industry“ in an impromptu press session after a hearing in the House Energy and Commerce earlier this year, but Shuren has since stated that some of the delays in device clearances and approvals are due to problems at the Office of Device Evaluation.

When asked whether industry's message about device lag and device flight is getting through to Capitol Hill, Lasersohn, who is a member of the board of directors at NVCA, said, “I think so.“

“I met with four or five congressmen and senators“ recently, Lasersohn said, and “with very senior people in the [Obama] administration and at FDA. I would say everyone agrees this is a problem, and we don't hear anyone saying it's not a problem“ he said, adding, that he sees it as “very interesting to see very broad bipartisan, bicameral“ agreement that “the FDA hurdle has become a real obstacle for our ability to continue to finance these companies.“

There are a number of factors that have given rise to the problem with declining VC, and Lasersohn acknowledged that FDA is not the sole stimulus behind investor flight. “Obviously there's no way to give a reliable answer“ as to the exact proportion each factor represents, but he said the survey was designed to root out at least some of the uncertainty over this point. “We basically asked that question in this survey ten different ways and [the responses are] all very consistent. Among all the factors that affect our willingness to invest in life sciences in the U.S., the one consistently cited as having the highest impact . . . is FDA regulation.“ When the question was posed in the reverse, meaning when asked whether VC firms would return to American soil to do business if FDA eased off, “the answer was yes,“ he said.

Lasersohn also emphasized the reaction at FDA. “It is also important to say that FDA's senior people are also aware of this and are making real efforts to try and fix some of these problems,“ he said, with some of the more recent effort – including efforts to train staff at the Office of Device Evaluation on some key points – as of some value in the effort to reverse investor flight.

Lasersohn acknowledged that nation-of-origin rules are adding fuel to the device-flight fire. “We would all prefer to introduce products in the U.S., and there are a lot of good reasons for that,“ he said, such as clinical trial and industrial infrastructure, not to mention the fact that the U.S. is “still the largest market in the world“ for therapeutic and diagnostic devices.

Regarding the rising tide of disincentives, Lasersohn said, “I think [FDA is] taking it very seriously, but this is [comparable to] turning around a battleship, and there's a culture change at the very heart of this problem. We have to think creatively and specifically about how to do this.“

While biostatisticians on advisory committees often seem inclined to make hash of clinical considerations, purely statistical considerations are not the largest problem with device approvals, Lasersohn said, noting that he sees “two extremely important issues. The first is how the risk/benefit assessment is made. You cannot apply a rigid set of thresholds,“ such as for how much clinical benefit and for what portion of the affected population, he stated, adding there is “no reasonable way to take the position that a therapy that works for 22% of the population is reasonable and 16% is not.“ Still, many reviewers “apply that kind of rigid analysis,“ he claimed.

Lasersohn also brought up the relatively obvious case of dire need. Elderly patients with terminal cancer have a tolerance for risk that is “completely different than a healthy 40-year old. Appreciating that the elements in these equations vary enormously“ is common sense, he remarked. “Senior managers at FDA believe this, but does it always work its way down to reviewers? I think not,“ he said, adding that he sees this as “the most important problem.“

The second most important problem is the expertise issue, Lasersohn opined saying that where device reviews are concerned, “those judgments are often based on incomplete data sets,“ which is almost always the case. However, all the controversy over conflict of interest, including among members of FDA's advisory committees, has left the agency with a dearth of expertise. “Conflict-of-interest rules that have become completely draconian“ are one of the factors that have “caused FDA to just cripple itself“ in terms of the experience needed to realistically assess some applications.