BB&T Washington Editor
WASHINGTON – If predictability is the Holy Grail of industry, the search is presumed to be ongoing thanks to, among other things, the uncertainties engendered by the Patient Protection and Affordable Care Act of 2010 (PPACA). A session on reimbursement and price pressures held at AdvaMed 2010 included plenty of discussions as to how providers would be affected, but the discussions generally failed to account for two troublesome features, namely the double-counting of savings purported to stem from healthcare reform and the overhang of the sustainable growth rate (SGR) mechanism. These omissions may have left some attendees wondering what the Camelot of predictability will look like 10 years hence and asking “is there someone else up there we can talk to?“
The answer, as the French soldier told Sir Galahad in the Monty Python version of the story of the Holy Grail, may be: “No, now go away or I shall taunt you a second time.“
Karen Milgate, director of the office of policy at the center for strategic planning at the Centers for Medicare & Medicaid Services, opened her remarks by noting “there's a lot of change underway“ thanks to PPACA, but that “there are some other tools and [elements of] framework that were put in place“ prior to PPACA.
Milgate seemed wary of addressing whether the general understanding of price pressures adequately factors in all the relevant forces. Forecasts of the impact of PPACA indicate that healthcare spending in the U.S. will rise from roughly $2.5 trillion last year to about $4.7 trillion by 2019, at least according to the CMS actuarial team. However, the agency's actuaries have said twice this year that the Obama administration and supporters of reform are counting the savings from healthcare reform twice, applying them to both the Medicare Part A hospital trust fund and toward the financing of expanded enrollment under PPACA. However, no attempt has been made to account for the fact that the near-certain congressional override of SGR will cost as much as $33 billion annually, a fact even the CMS actuaries opted not to address in their annual forecast of healthcare expenditures in September.
As for price pressures, Milgate said, “I think they will be great“ in any case, but offered little more than the disclaimer that “SGR and accounting rules aside, there are some serious incentives“ for productivity. Thanks to value-based purchasing, those incentives “may be greater“ than is commonly appreciated, she said.
Joel Slackman, managing director for the Blue Cross/Blue Shield Association (BCBS; Chicago), said that from a private payer's perspective, these two factors tend to be washed out in the face of more immediate concerns. “Its hard to imagine how price pressures, when they're already astronomical, could be higher,“ he said.
“There has been such tremendous pressure on plans“ from employers “to achieve savings quickly,“ Slackman remarked. He said employers “want to see cost savings right now. The challenge is not going to be dealing with ever greater cost pressures, but how do you meet that demand“ to “cut costs right now.“
Slackman gave a private payer's perspective on healthcare reform legislation, stating that BCBS sees “two broad classes of reforms“ that will affect providers, including delivery and payment reforms, “but the other major class of reforms . . . is the restructuring of the market for insurance.“ Slackman said of the insurance markets for individuals and small group that “its widely viewed that these exchanges will alter the landscape“ and create “very tight networks of providers“ that will influence how reimbursement is administered.
“These reforms are layered on top of reforms that were underway in the private sector for several years now,“ Slackman said, adding that BCBS had published a white paper titled “Pathways to Covering America“ which notes that fee-for-service care “is a very poor way of structuring incentives. We want to move away from that.“
Slackman remarked that the medical home concept pays primary care physicians (PCPs) for coordinating care, adding that the BCBS plans “have launched about 45 pilots“ for this concept that affect about 3 million patients. “There are a lot of variations across these pilots,“ he remarked, noting that some deal with multiple payers and some offer a variety of incentives for better quality of care. Some entities are “paying up front for infrastructure,“ used by providers, such as healthcare information technology, he said.
“What they all have in common is this commitment“ to making the PCP “the hub“ of the patient's engagement with medical care, Slackman said. “Most of these pilots have been launched in the last year, so we don't have“ a lot of data yet, he acknowledged. Still, “we have some early results“ suggesting that utilization and cost are sensitive to such reorganizations. In six months for one pilot, “they've started to see among patients. . . some decreases in utilization in, for example, high-cost imaging procedures,“ he said.
Slackman said the Blues are “seeing improvements in some process measures“ and in some outcomes, such as fewer admissions to hospitals for things that can be handled in ambulatory care settings. “The direction seems to be a promising one,“ although the data are preliminary, he said.
Slackman may have been talking to med-tech executives, but had a word of hope for the inventor of the post-it note. “One thing that has been a low-tech way to improve quality is a check-list,“ Slackman remarked, noting that including some simple things on a checklist, such as whether the provider has washed his or her hands, can have an effect far disproportionate to the cost.
Slackman admitted that the Blues have several concerns about healthcare reform, including that “we're very concerned about the ultimate trajectory of accountable care organizations.“ He posed the question, “will CMS inadvertently give ACOs undue market concentration and consolidation, which would lead to higher prices?“ He also noted that health insurance exchanges “let states allow all health plans that meet standards to participate,“ but he spoke as if to convey the idea that the consumer is now king where healthcare is concerned. Consumer choice, he said, “is going to have a huge effect on the world in which we all operate.“
'It depends' the answer to IIB/statutory fix question
The pace of change at FDA is usually thought of as torpid, but the device and diagnostics industries are concerned that the changes proposed for the 510(k) program might be rapid in coming and hence destructive. A session at AdvaMed 2010, hosted by the Advanced Medical Technology Association (AdvaMed; Washington) dealing with the impending changes to the 510(k) program led to little in the way of breaking news, but lent a little clarity on the questions of how quickly FDA might roll out those changes as well as whether statutory changes would be needed to break class II devices into two sub-classes.
The answer to this latter question, unfortunately, may be “it depends.“
A standing room-only crowd filled room 202B of the Washington Convention Center to hear a panel of five take on the question of what the proposed changes to the 510(k) program would look like in practice, including two legislative staffers who appeared on the proviso that their remarks were off the record. Former FDAer Phil Phillips, president of the Phillips Consulting Group (McHenry, Maryland), was willing to speak on the record on the question regarding the class IIb issue. Phillips opined that there is no need for a statutory change if the new classification is “tied strictly to the need for clinical data“ in a way that parallels the way that FDA currently approaches such questions. If the change is to be reflected in chapter 21 of the Code of Federal Regulations, however, the statute will itself need work.The class IIb concept has attracted more attention than any other of the agency's proposed changes to the 510(k) program, with the possible exception of whether the agency should be empowered to consider potential off-label use when reviewing 510(k) applications. Regulatory attorney Howard Dorfman with the New York law firm of Ropes and Gray told BB&T recently that it is not clear whether a statutory change is essential, but Dorfman also made the case that any argument by industry that seems to go against the popular perception of patient safety would present a public relations hazard and that consequently, industry might not be willing to force a showdown either in a court of law or in the halls of Congress, given that either route might lead to a thrashing in the court of public opinion. On the other hand, there is reason to believe that the next iteration of Congress would not provide fertile grounds for such legislation.
Christy Foreman, acting director of the Office of Device Evaluation at the Center for Devices and Radiological Health, assured industry that the proposed changes to the 510(k) program are still just recommendations. “At this point, that is what they are, recommendations. No decision has been made,“ she said.
Foreman noted that FDA has about 700 pages of comments on hand, which will take time to sort out. “Don't panic,“ she urged attendees, remarking further that FDA is “looking at the cost of implementation and the bang for the buck for that implementation“ in deciding on its priorities. She stated further regarding the more controversial proposals that “we also have the IOM to consider“ in reference to the report expected next summer from the Institute of Medicine. “Before we make any [controversial] changes, we'll want to see what the IOM has to say,“ she said.
Foreman addressed FDA's motivation for considering a revamp of the clearance process. “We have a concern that the general public has lost confidence in 510(k) decisions,“ she said, including imputations that it is “a short-cut process“ and “a rubber-stamp process.“ The agency's leadership, she said, feels it has to deal with these kinds of characterizations in order to restore public confidence in the agency's ability to appropriately regulate the device industry.
Managers at CDRH also want to “revise the de novo process to make it a more efficient process,“ Foreman reminded attendees, adding that “we want to improve the guidance process“ as well, which has been a sore spot for industry for some time.
“We received a lot of comments on predicates,“ including comments indicating hostility toward the idea of restrictions imposed on the use of split predicates, Foreman said. Of course, industry expressed no support for the proposal to post data on cleared devices at the FDA web site, which Foreman reminded would be presented as a “general schematic but not a detailed schematic.“ She urged attendees not to be concerned that the agency is interested in anything that would compromise a firm's intellectual property.
“The recommendation on rescissions is not intended to add any authorities,“ Foreman said, but is intended to “provide transparency and predictability by assuring the holder due process rights.“ The current process leaves the holder of the device in limbo, she said.
As for the class IIb issue, Foreman said, “the final comments that came in were not so supportive“ as the initial comments were. Hence, the proposal qualifies as a controversial one that will not likely find traction anytime in the next few months. Foreman said, “we want to provide predictability“ to the existing device clearance process, noting that at present, about 10% of cleared device applications have to present some sort of clinical data. The formalization of the process is “so you know up front that there will probably be a clinical data need,“ although device types can be moved off the list as well as onto the list, she said.
Foreman also noted that the class IIb proposal “would provide a level of harmonization . . . with the rest of the world, which is on a four-class system.“
Foreman indicated that the proposal to limit the number of predicates in an application has lost traction at FDA. “The agency has no intent to make changes with regard to multiple predicates,“ Foreman said, “but where we have concern is some split predicates.“ She gave the example of an application for a low-energy wound cleaner used with wound flush that relies on a predicate using a different energy source. “This is probably not the best way to go to market,“ she commented, suggesting that such an application is perhaps a better fit for a de novo application.
Ubl: 510(k) process 'needs tune-up, not a new engine'
The third day of AdvaMed 2010 included the traditional annual policy briefing, conducted for the first time by Jim Mazzo, president of Abbott Medical Optics (Santa Ana, California), who is in his first year as board chairman of AdvaMed. Accompanying Mazzo was Steve Ubl, president/CEO of AdvaMed, who noted that this year's attendance was an all-time high of more than 1,700 attendees.
Much of the discussion in this policy briefing revolved around the impending changes to the 510(k) program, which many in industry feel constitutes a case of regulatory overkill. In his opening remarks, Ubl offered the most concise criticism of the overall 510(k) revamp, stating, “we believe the process needs a tune-up not a new engine.“ He remarked further that the proposals “should be highly targeted“ and “should have a corresponding public health benefit.“
Mazzo led off the discussion, making note first of what he described as “a very difficult business environment“ for med-tech and for the private sector as a whole, but he added that the device tax, scheduled to commence in 2013, “could necessitate companies to reduce both people and R&D investment.“
“We don't like uncertainty,“ Mazzo observed, but he added that other “troubling trends“ bode poorly for the U.S. leadership in med-tech as well. “Companies are increasingly introducing innovations abroad [rather] than here,“ he asserted, adding that venture capital investment in medtech increased by less than 40% in the U.S. between 2000 and 2009, but grew by roughly 60% in Europe over that same span of time.
“We need an efficient and predictable regulatory system,“ Mazzo argued, assuring all present that “we as an industry are committed to patient safety and have long supported a well-resourced FDA.“ He also raised the issue of healthcare reforms dealing with payment methodologies, stating that medtech can fare well in such an environment. “If properly designed, the new payment systems“ might do better in terms of rewarding smartly applied devices and diagnostics.
Global harmonization is also a priority at AdvaMed, Mazzo said. “Emerging markets such as in Asia are very appealing“ and are drawing the interest of investors, but he said “while companies would benefit from harmonization,“ so would patients. He noted that AdvaMed is working with the Asian Pacific Economic Cooperative to harmonize device regulations by 2020.
Ubl gave senior management at FDA and at the Center for Devices and Radiological Health “enormous credit“ for transparency and a demonstrated interest in interacting with industry, but he said industry is not enthused about the aggregate effect of the proposed changes to the 510(k) process.
“The first thing that I hear from companies . . . is that performance at the agency is deteriorating“ for both clearances and approvals. “The number of days companies spend responding to requests“ by FDA “has tripled“ in recent years, Ubl said, adding that “I think the telling statistic“ is that the number of 510(k)s that have been withdrawn by the sponsor are up by 89% since 2004. Industry's ability to arrange a meeting with reviewers is also increasingly difficult, he remarked, adding that “there's a risk aversion within the agency, and one can understand it,“ given the intense media and congressional attention. “Clearly that's taken a toll“ on morale at FDA, Ubl said.
Ubl made reference to the report on the safety record for the 510(k) program conducted by Battelle (Washington), which was published in September 2010. “They believe the 510(k) process has an excellent safety record,“ Ubl said of Battelle, adding that the report showed “an exceedingly low rate“ of class I recalls of less than 1%. Regarding a similar study of all classes of recalls conducted by Bill Maisel, MD, formerly of the Medical Device Safety Institute (Boston) and now with FDA, Ubl said, “if you backed out two product categories, you'd reduce that 1% by another 30%.“
“I wish they'd had access to that data before“ coming up with the changes proposed for the 510(k) program, Ubl remarked.
Ubl hinted that available capital for investment will slosh to another region of the globe if pressure on medtech in the U.S. continues to rise. “You can't just look at FDA's proposals in isolation,“ he said, adding that “increasingly, this is a global marketplace.“ In terms of the generosity of research and development tax credits, the U.S. ranks 17th in terms of its government's offerings compared to other nations. Ubl observed that “companies are incredulous that nearly 60 changes are“ needed to fix the clearance process, noting that the roll-out of the recommendations “could lead to a severe slowdown on product approvals.“
Ubl opted to pass on a question regarding the rescission of the Menaflex 510(k) by ReGen Biologics (Hackensack, New Jersey), stating that it was “probably not best for me to comment on a specific company issue.“ However, he said that FDA seems confident that it has sufficient authority to rescind a 510(k), but “we happen to believe that the agency has other authorities,“ such as recalls, to deal with product issues.
Still, Ubl indicated some optimism, albeit limited, at the concerted resistance FDA is encountering from several areas of the devices and diagnostics industries. “We are pleased to see this growing alignment“ of concerns about some of the proposals, including by the National Venture Capital Association (Arlington, Virginia), the Medical Device Manufacturers Association (Washington) and the Medical Imaging & Technology Alliance (Rosslyn, Virginia). AdvaMed and these other organizations “seem to be focused on the same issues with the greatest amount of concern and support.“
India looks to become player in med-tech industry
Mavens of the med-tech industry already know they have fans among governments of nations other than the U.S. – thanks in no small part to the higher-than-average wages enjoyed by employees of the industry – but a session held on the last day of AdvaMed 2010 made clear that the colossus of the subcontinent has now declared itself a player in the global med-tech sweepstakes.
India's Central Drugs Standards Control Organization (CDSCO), which currently exercises jurisdiction over devices and diagnostics, has been fairly busy lately with guidances on a variety of issues, including device clinical trials and registration requirements. However, it appears that this is just the prelude as far as India's interest in med-tech is concerned, even though there is not as yet a full-blown regulatory framework specifically for medical devices. That, however, is apparently about to change.
Arun Jha, the joint secretary of the Department of Pharmaceuticals of the government of India, said at the AdvaMed 2010 session, “the government is taking the feel of“ the challenges facing med-tech in the nation, which he reminded attendees has a “middle class of 300 million“ and which has “great expectations“ of healthcare.
“India's medical device regulatory sector is evolving,“ Jha said, and in regulatory terms, the government is moving in the direction of the standards promulgated by the Global Harmonization Task Force, which employs a four-tier device classification scheme for both therapeutic and diagnostic devices. “At the department of pharmaceuticals . . . we have a goal of facilitating and promoting this sector,“ Jha said, “to see that this sector provides the impetus for growth“ of a native med-tech industry. He said the government also seeks “to make healthcare more accessible and affordable“ even as it seeks “to provide the ecosystem for growth“ of the med-tech industry.
Jha noted that the government in India has an established public-sector pharmaceutical research arm, the National Institute for Pharmaceutical Development and Research (NIPER) in Nagar, which is located in the east near the coast of the Bay of Bengal, but he said “we have decided to have a national center for medical devices,“ which will take the form of a med-tech cluster to be located in the state of Gujarat, which is on the other side of the country and borders Pakistan and the Arabian Sea.
Gugarat will be the home for the Greenfield Medical Devices and Equipment Park, which is under construction and is financed by a sum of more than 300 million rupees, the rough equivalent of about $60 million. Jha said Greenfield is “an attempt to make available . . . in one single location“ a series of facilities for research into various types of medical devices. It will be a state of the art facility, he said, and will constitute “an excellent opportunity for manufacturers“ to develop products without having to foot the bill for square footage for their R&D work.
Greenfield “would not only enable them to cater to the growing local market, but also to fulfill the potential of the region,“ by which Jha meant the Asian subcontinent, adjacent parts of the Middle East, and Southeast Asia. One of the plants at Greenfield will offer 20,000 square feet for research into disposable devices, but other divisions will also be in operation once the center is fully operational.
“We are also proposing to have a National Center for Medical Devices“ (NCMD) as part of NIPER, which will be located in Ahemadabad, also found in Gugarat. This center will help develop good manufacturing practices and other quality control standards, dealing with time-consuming but standard issues such as sterilization, process validation and so on. “The center is intended to be complementary to the Greenfield Park,“ Jha said, adding that “will focus on product development and assessment.“