Is Early Stage Medical Device Development Going Overseas?

Even though the FDA has recently proposed a new program to provide earlier market access to high-risk medical devices, FDA Commissioner Margaret Hamburg nevertheless came under fire for the agency being to slow to approve medical devices at the annual conference of the Advanced Medical Technology Association (AdvaMed) in Chicago. The implication of her inquisitors was that FDA delays are driving the medical device business to Europe, where device approval standards are more lax. Other health industry research groups disagree, believing that the FDA is acting responsibly, while Europe may be reexamining its lower approval standards.

New Expedited Program

The new FDA program was announced on April 22, 2014, through the issuance of a draft guidance entitled “Expedited Access for Premarket Approval Medical Devices Intended for Unmet Medical Need for Life Threatening or Irreversibly Debilitating Diseases or Conditions.” The Expedited Access PMA or EAP program is designed to provide earlier access to high-risk medical devices that are intended to treat or diagnose patients with serious conditions whose medical needs are unmet by current technology and are subject to premarket approval (PMA) applications. The program features earlier and more interactive engagement with FDA staff during device development and more interactive review of investigational device exemption (IDE) applications. The FDA also intends to work interactively with the sponsor to create a data development plan specific to the device.

In addition to the EAP program, the FDA published a separate draft guidance outlining the agency’s policy on when data can be collected after product approval and what actions are available to the FDA if approval condidtions, such as postmarekt data collection, are not met. Entitled “Balancing Premarket and Postmarket Data collection for Devices Subject to Premarket Approval,” the draft guidance also includes advice on the use of surrogate or independent markers to support approval, cimilar to the data points used for accelterated prescription drug approval.

AdvaMed Discussion

In response to reports that slow FDA approvals have sent medical device startups and clinical trials to Europe, Commissioner Hamburg responded (as reported in MedCityNews) that “It’s not a race to who’s first – it’s a race to get the best possible product to people.” Hamburg continued that “approval in Europe doesn’t mean it’s broadly available in the healthcare systems of those countries,” adding that Europe is “in a moment of examination of their regulatory system for devices” due to the emergence of some safety issues.

One example of this “moment of examination” may involve the European Union recall of tens of thousands of defective breast implants. According to an article in Reproductive Health Matters (RHM), “In the U.S., breast implants are regulated as high-risk medical devices that must be proven reasonably safe and effective in clinical trials and subject to government inspection before they can be sold. In contrast, clinical trials and inspections have not been required for breast implants or other implanted devices in the EU; approval is based on other information. As a result of these differing standards, the PIP [Poly Implant Prothese] breast implants that were recalled across Europe had been removed from the market years earlier in the U.S., a decision U.S. government health agencies can point to with pride.”

In an interview with Wolters Kluwer, Diana Zuckerman, PhD, President of the National Center for Health Research, and co-author of the RHM article, indicated she supported Commissioner Hamburg’s position on this issue. According to Zuckerman, recent studies show that devices get on the market in the U.S. about as fast as they do in other countries. In addition, “It is much easier to get insurance coverage for devices in the U.S.  In most other countries, the national health plans won’t pay for devices unless they are proven safe and effective and sometimes need to be proven cost-effective.  In the U.S., such requirements have been  rare.  It is very easy to get devices on the market in Europe and other countries, but difficult to get coverage until studies prove the device’s value.  For that reason, and because devices cost so much more in the U.S. than other countries, device companies are always going to want to sell their products in the U.S.  Whether their headquarters are in the U.S. or not, they need FDA approval to sell in the U.S.  So, that is not going to influence whether a U.S. company moves to another country.”

From a follow-up discussion at the AdvaMed conference, The Boston Globe quotes Mark Deem, managing partner of the medical device startup The Foundry LLC, as stating that “the horse has already left the barn. It’s gotten to the point where entrepreneurs are just moving all their early stage medical device activities lock, stock, and barrel overseas.” With regard to the FDA’s EAP program, MedCityNews further opines that “Deem worries that it has taken so long for the FDA to realize it’s been shellacked by Europeans that it could be too little, too late.” Zuckerman, however, disagrees.  According to Zuckerman, “the decision of some device companies to leave the U.S. is clearly related to the tax advantages of doing so, not related to the FDA approval process or standards for clinical trials in the U.S.”

 Opposition to the EAP Program

Lest anyone think that the FDA’s new EAP program has full support, on July 22, 2014, members of the Patient, Consumer, and Public Health Coalition sent comments to the FDA indicating their lack of support for the program. While the coalition members sympathize with patients who suffer from life threatening or irreversibly debilitating disease, they believe that “the standards for PMA are already substantially lower than for prescription drugs…and yet, the [EAP program] lowers the bar for certain PMA medical devices even further.” The coalition believes “there is no guarantee that the [program] benefits would outweigh the risks for patients.” While the members indicate their support the program’s emphasis on earlier interactive communication between sponsors and the FDA, they also believe the program “gives undue emphasis on postmarket studies that are poorly monitored, have high loss to follow-up, and are rarely conducted in a timely manner that provides useful results.”

Providers, Employers, Patient Groups Want Laws to Boost Innovation

A group of 58 providers, employers, and patient groups asked Congress in a letter to provide clarity and certainty for appropriate, risk-based oversight of health information technology (IT). The letter comes in response to recommendations provided on appropriate risk-based framework under the Food and Drug Administration Safety and Innovation Act (FDASIA) of 2012 (P.L. 112-144), stating, “[i]t is now time for lawmakers to pass legislation that achieves the complementary goals of protecting patients, ensuring safe and effective care, and fostering continued innovation in the rapidly-growing health IT field.”

Risk-Based Regulatory Framework

Together with the Office of the National Coordinator for Health IT (ONC) and the Federal Communications Commission (FCC), the FDA set up a working group to gather input from stakeholders and experts to inform the FDA on appropriate, risk-based regulatory framework for health IT. The agencies released a proposed strategy and recommendations for a risk-based framework in April 2014. The letter urges lawmakers to solidify these recommendations with legislation and lists the following as the main reasons that the Senate and House of Representatives should act before the end of the 113th Congress:

  • The potential for health IT to improve the efficiency and quality of care, including patients and caregivers using information software to integrate disease management and wellness activities into their daily routines, increasing adherence to care plans, and reducing preventable hospitalization;
  • Current regulatory uncertainty that stifles health care innovation, creating barriers to development of promising technologies “that can help clinicians access more evidence-based medicine, provide patient populations with specific needs more individualized care, and generate better patient-caregiver-provider engagement;
  • Broad consensus that (1) there are three categories of health IT; (2) FDA regulation should focus on the category of technologies presenting the highest risk to the safety of patients; (3) the category of technologies presenting no risk to patient safety should not be regulated; and (4) the third category, which poses some risk, should be subject to risk-based oversight using consensus standards and private certification bodies to verify the function of health IT technologies; and
  • The bipartisan nature of the issue, which is “ready for bipartisan action.”

In support of the multi-group letter, Joel White, Health IT Now Coalition executive director, said, “It is time for modern laws to reflect the technological advancements made in our healthcare system over the past four decades. Developers, healthcare providers, patients and others still face ambiguity on the framework for health IT oversight. Without a clearly defined, risk-based oversight framework, we cannot effectively facilitate innovation in the use of technologies to improve health, protect patients and enhance clinical safety.”

Will New Apple Health Apps Excerbate Privacy Concerns?

On September 9, 2014, Apple unveiled its new iPhone 6 and iPhone 6 Plus as well as several new health applications (apps) meant to provide a plethora of health services, communication, and tracking options for Apple users. While these apps were designed to bridge the patient-client divide and advance the health care options of users, will users also expose themselves to privacy and information stealing data in the process? Although Apple has explained the means these apps employ to overcome privacy and confidentiality concerns, do these measures, especially when considering the recent security breaches in the health information industry, go far enough?

New Apple Apps and Devices

Along with the release of the new Apple phones, the company introduced a smartwatch that has been reported to “double as a fitness device that can track steps, calories, and heart rate, among other things.” Additionally, the new operating system that is slated to be introduced with the new versions of the iPhone, the IOS 8, will include an app called Health, which will serve as a “dashboard for health and fitness information such as heart rate, calories burned, blood sugar, and cholesterol, plus lab results and medications.” Finally, HealthKit, the new tool for developers, allows them to share users’ health care data, if the user so chooses, according to Apple.

According to a CBS report on the new Apple device and app launch, the introduction of these systems have the potential to “revolutionize health care.” HealthKit, which was designed by Mayo Clinic doctors, is expected to be able to collect information for use in many different formats over long periods of time. Dr. John Wald, one of the creators of Healthkit, described the use of the tool in this way: “The grand vision would be once the information is contained within HealthKit, patients can take that on their iDevices or eventually Android and transfer that to wherever they are in the world or country.”

Privacy Guards, Risks

While the Wall Street Journal (WSJ) reported that Apple announced the policy of not allowing developers to use data gathered from HealthKit for advertising or data-mining, it also noted that some experts believe that the Apple policy “leaves room for interpretation.” Specifically, “the Apple guidelines don’t specifically require app companies to account for any disclosures they make,” and according to Deborah Peel, the founder of Patient Privacy Rights Foundation, instead, “users should be able to see exactly how these apps are using their data.”

Moreover, the WSJ discussed how Apple has partnered with “Epic, a large provider of electronic medical records to feed data into HealthKit,” and further noted that “few details of that arrangement have been disclosed.” In turn, the WSJ piece posed the question of whether Apple will sell the data collected by its Health apps, which would be highly sought after by medical researchers and insurers. Finally, the article noted the privacy laws that these apps could be subject too, specifically the Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191), and discussed the extent Apple would have to comply with these measures. While the WSJ stated that “Apple hasn’t said whether it will apply HIPAA protections to the sensitive data it collects,” Dr. Wald was quoted as confirming that HIPPA safeguards were in place and were ultimately the responsibility of the user: “There are extra screens for users to view their HIPAA authorizations, view their privacy and to educate them a little bit about how to secure their device. Once the information leaves our establishment, it’s their responsibility.”

Despite the fact that there is evidence that Apple is attempting to ensure privacy compliance, the question of whether the information would not be appropriately secured so as to prevent a breach of confidential personal medical records is less clear. In light of the recently reported hacked medical reports in health information systems across the country, this could be the largest threat posed by the newest devices, apps, and tools in the health industry.
For a discussion of the FDA’s regulation of mobile medical device apps, please see House Committee Grills FDA on Regulation of Mobile Medical Devices and Mobile Applications as Medical Devices.

Medical Device Excise Tax Program May Require Surgery to Meet its Goals

The Treasury Inspector General for Tax Administration (TIGTA) has issued a report revealing inadequacies in the Internal Revenue Service’s (IRS) current strategy for ensuring compliance with the medical device excise tax created by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). According to the TIGTA press release, the current IRS protocol for processing the Form 720, Quarterly Federal Excise Tax Returns that manufacturers, producers, and importers are obligated to file, is not sufficiently ensuring compliance and reporting of the new ACA tax.

Excise Tax

The ACA, through amendment to the Internal Revenue Code (IRC) (26 U.S.C. 4191), implemented an excise tax of 2.3 percent on the sale of certain medical devices. The tax, set out in regulations at 21 C.F.R 807, was projected to produce $20 billion in revenue for Fiscal Years (FYs) 2013 through 2019. The IRS has issued final regulations and the Department of Treasury has issued notices that are designed to provide guidance and ensure compliance with the new tax.Despite the agency outreach, the TIGTA investigation and report revealed that the number of Forms 720 filed and the amount of revenue reported was lower than had been projected.

Findings

The TIGTA Report identified $117.8 million in medical device excise tax discrepancies between the amount of tax collected by the IRS through the Form 720 process and the amount TIGTA calculated as proper. The TIGTA investigation revealed 219 “failure to deposit” penalties totaling $706,753 that were incorrectly assessed by the IRS. The IRS reversed 133 of those penalties and the remaining 86 were reversed by IRS management after TIGTA identified the errors. A significant fault in the present system that TIGTA identified is the inability of the IRS to determine the medical device manufacturers that are registered with the FDA, which are required to submit a Form 720. Without the ability to identify the tax paying population, TIGTA believes the IRS will be unable to form an effective strategy to ensure businesses are remaining compliant.

Recommendations

TIGTA’s primary recommendation is for the IRS to develop a protocol for identifying non-compliant manufacturers. Another recommendation is for the IRS to review tax returns that resulted in improper payments so the IRS can identify the appropriate amount owed. TIGTA also suggest that the IRS develop a correspondence mechanism so that IRS can obtain information about missing taxable sales and tax amounts.