Diagnostics & Imaging Week National Editor

The pendulum on regulation seems to be swinging again – hopefully not just back the other way, but in a direction that is being characterized these days as having to be "smarter."

A laissez faire attitude is currently getting much of the blame for the meltdown of home mortgage markets and other financial institutions in the U.S. And we are hearing calls for the new president to pursue tougher regulations, or at least tougher oversight by regulatory agencies.

For the medical device industry, there is looming legislation on both state and national levels – primarily in Massachusetts and proposals for congressional legislation, by Sen. Charles Grassley – seen as not particularly business–friendly ...or worse, business–hostile.

Now comes the revised Code of Ethics from the Advanced Medical Technology Association (AdvaMed, Washington) – best described as a major overhaul rather than a here–and–there tweaking – providing a much longer list of things that can't be done, things that can't be provided by med–tech firms.

Isn't that onerous regulation?

In answer, Doug Mowen, of PricewaterhouseCoopers (New York), offers an alternative to the pendulum analogy to explain the purpose of the expanded, much more specific code and how it will work in positive, rather than negative ways.

Mowen is leader of the medical device advisory process for PricewaterhouseCoopers, an AdvaMed member, with company staff having served as unpaid consultants to help the association craft the revised rules. And he offered a car part, rather than the pendulum, as key analogy, to show how the revised code has both reactive and proactive elements.

He told Diagnostics & Imaging Week that he was once asked a rather simple question, "Why does a car have brakes."

His quick response was, to keep from crashing into things.

But his questioner provided the much more positive reason: "So you can go faster."

Mowen and Brian Riewerts, the leader for regulated life sciences industry at PricewaterhouseCoopers, in a conversation with D&IW, emphasized that AdvaMed's revised Code does help companies avoid crashing into Department of Justice penalties and other fines. But more importantly, they said, it clears roadblocks for inventors and innovators; and it will help companies grow bottom–line results.

Thus, it is reactive, Mowen said, in that the "medical device industry is learning from the mistakes of the pharma industry" in attempting to avoid make–work regulatory impediments and avoid expensive legal defenses.

But the revised codes also work to preserve and improve the industry's foundation of innovation, which has been so successful in building value and profits.

The industry needs, he said, "clear guidance regarding royalty payments for innovation ... Unless these companies and [medical] professionals can adopt transparent and trust–based means of interactions, the government won't be satisfied that these just aren't in fact bribes."

And he compared these trust–based interactions to quality regulations and good manufacturing practice rules that have moved the industry forward.

The revisions also attempt to clarify areas previously grey, by being much more specific concerning the provision of royalties for product innovators and consulting fees, grants, donations and other types of "reimbursement support" to physicians so that such payments are not "unlawful inducements."

Additionally, it advises that companies should clearly document what such reimbursements cover.

And an entirely new section spells out the provision of materials for evaluation and demonstration at no charge, also with the appropriate documentation.

In terms of building a company's bottom line, Riewerts emphasized that the code has positive value here as well, since it spells out that sales dollars should be put into legitimate sales efforts rather than in the various possible inducements or in wasting resources on "good will."

Such good will payments and gifts can be of various types, from bribes to kickbacks to consultation fees to even the rather inexpensive "swag," branded with a company's name and logo, handed out in physicians' offices and at trade shows."

And the code revisions address several of these.

The word "hospitality" has been deleted from the code. Instead, for instance, it says companies can provide "modest meals and refreshments" and that these should be only "occasional." The code even advises having stated wording concerning limitations on meal costs and what would constitute "modest and occasional."

Riewerts said the revisions offer "a much tighter set of guidelines. And when you take instant meals and all the other out of the equations, you drive a lot of cost savings that can be reinvesting in legitimate consulting arrangements.

"It allows industry, as a collective group, to say, 'No more gifts, no more inappropriate meals, even a wide array of arrangements that may be legitimate but don't add much incremental value."

Asked how many companies would be likely to adopt the code, file the necessary paperwork with AdvaMed to place their names on its web site database of users – and be able to use the ethics code logo – Mowen offered no estimates but pointed to trends that are fueling code adoption.

"We're seeing a broad range of activity and implementation. And like all things in life, there are early adopters, and there are folks not as far along.

"One way to think about it is the idea that the medical device industry innovates differently than almost all industries. Are you best in class, do you want to attract ideas and want physicians to work with you and value their ideas? The companies that are best in class will get good at this and go faster."

Bowen and Riewerts acknowledged that the challenge for companies will not simply be in adopting the code of ethics log, but in seeing that the code is fully implemented.

Clients of PricewaterhouseCooopers, he said, are investing "in people and processes around compliance processing ...Most are looking at combination of systems, red flags and business rules that help them govern these processes real time ...to make sure that the company's policies are being adhered to. Our clients are spending a lot of time getting to the next level of details ...the next level of rules."