Hospital compliance programs need to integrate explanted device policy

Medicare requires that explanted medical devices—implantable devices that are removed due to recall, advisory, malfunction, failure, or early battery depletion—must be pursued by the provider as for free replacement or reduced charges under warranty. The failure to do so results in an overpayment for the provider or hospital, which must then be repaid to CMS. In a Health Care Compliance Association (HCCA) webinar, Jesse Schafer, Explant Control Manager, Mayo Clinic, and Peter Casady, CEO and Co-Founder, Champion Healthcare Technologies discussed best practices for medical device warranty credit failures and related HHS Office of Inspector General (OIG) audits.

Since 2010, the OIG has conducted six audits specifically for credit failures on medical device warranties, and found overpayments ranging between $30,000 and $300,000. In these cases, the warranty credit failures occurred because the hospitals:

  • did not pursue available credits;
  • did not report credits received;
  • did not have adequate internal control procedures to coordinate functions among various departments; or
  • relied upon the vendor to manage the device return and credit process (and gaps resulted).

Schafer recommended a workflow among various departments, including compliance, coding, clinical, pathology, supply chain / contracting logistics, accounts receivable, and patient financial services. Hospitals should (1) identify explanted devices that are eligible for warranty credits due to performance issues; (2) secure eligible explanted devices; (3) make sure the devices were returned to the vendor for warranty claims; (4) follow up on warranty claims to confirm approval; (5) make sure the provider then received credit or a no-charge replacement; and (6) adjust claims for credits that are greater or equal to 50 percent.

Medical device stakeholders give House feedback on 4 separate bills

A variety of stakeholders in the medical device industry testified before the House Energy and Commerce Committee with respect to a number of bills related to devices, including the Over-the-Counter Hearing Aid Act (H.R.1652), the Medical Device Servicing Safety and Accountability Act (H.R. 2118), the Fostering Innovation in Medical Imaging Act of 2017 (H.R. 2009), and a bill to amend the Federal Food, Drug, and Cosmetic Act to improve the process for inspections of device establishments and for granting export certifications (H.R. 1736), which would enhance the authorization Medical Device User Fee Amendments (MDUFA IV). While stakeholders took opposing viewpoints with respect to some bills, those that spoke to MDUFA IV, including Director of the FDA’s Center for Devices and Radiological Health Jeffrey Shuren, all expressed their support.

Over-the-Counter Hearing Aid Act

The Over-the-Counter (OTC) Hearing Aid Act would permit the sale of OTC hearing aids for use in adults with mild to moderate hearing impairments. Speaking on behalf of the Hearing Industries Association (HIA), Dr. Thomas Powers of Powers Consulting, LLC supported the sales of OTC hearing aids for mild hearing impairments, but opposed the provision of such hearing aids for moderate use. Hearing impairment, particularly moderate and severe impairments, are complex and, in Powers’ opinion require consultation and fitting with hearing health professionals; in addition, he cited to a study indicating that hearing impaired individuals were more likely to be satisfied and wear hearing aids fitted by a professional.

Frank R. Lin, M.D., Ph.D., Associate Professor in the Departments of Otolaryngology-Head & Neck Surgery and Geriatric Medicine at the John Hopkins School of Medicine and in the Departments of Epidemiology and Mental Health at the Johns Hopkins Bloomberg School of Public Health, on the other hand, opined that OTC sales would make hearing aids more accessible and affordable to the hearing-impaired population; currently, less than 28 percent of the nearly 38 million Americans with significant hearing loss have access to the devices. He argued that alleged safety concerns about the sale of OTC hearing aids to individuals with moderate hearing loss were raised by parties looking to preserve the status quo, which offers little incentive for innovation of new market entry, with, “98 percent of the world’s hearing aid marketplace being controlled by six companies.” He likened the risks of OTC hearing aids to the risk of OTC reading glasses or aspirin.

Medical Device Servicing Safety and Accountability Act

H.R. 2118 would require establishments that service medical devices to register with the FDA, establish a complaint-handling system, and report adverse events to the agency. Joe Robinson, Senior Vice President of Health Systems Solutions for Philips North America, offered his support of the bill on behalf of the Medical Imaging & Technology Alliance (MITA). He noted that improper servicing of medical devices by non-manufacturer entities can injure patients via direct or indirect bodily harm, and can also cause problems for manufacturers down the road. For example, the manufacturer may not be aware of adverse events or may not be familiar with the chain of events that ultimately led to an adverse event, may experience difficulty upgrading parts that have been altered by a third party, or may have its device certification voided. MITA believes that registration and complaint handling is an important first step to improve service and safety.

Robert J. Kerwin, General Counsel for the International Association of Medical Equipment Remarketers and Services, Inc. (IAMERS), adamantly opposed the bill. He argued that the legislation provided a solution for a problem that does not exist, noting that, of the 177 public comments submitted to the FDA in response to its request for comments, including comments on service regulation, nearly none of them made negative comments about third-party device services, and that The Joint Commission, in its comment, stated that it “has no knowledge of any statistically significant level of safety problems resulting from the activities of any kind of maintenance/service provider.” Kerwin contrasted MITA’s opinion that increased regulation is necessary to prevent improper servicing with its members’ decisions to subcontract with IAMERS members to perform repair work. He further emphasized that the language of the bill would classify any type of repair work performed as a complaint, increasing the burden on third-party services, and hurt rural and regional hospitals that rely heavily on third-party servicers.

Fostering Innovation in Medical Imaging Act 

H.R. 2009 would “provide clarity with respect to the regulation of diagnostic imaging devices intended for use with contrast agents.” Currently, the FDA will not approve imaging devices or enhancements for use with approved contrast agents, if the agents are not specifically labeled for that use. MITA approved of the bill’s provision of “a clear regulatory pathway” to promote innovation.

H.R. 1736

Patricia Shrader, Vice President for Global Regulatory Affairs at Medtronic, Inc., spoke on behalf of AdvaMed, the Advanced Medical Technology Association, to offer its support of the bill, which would establish a risk-based inspection schedule based on a medical device facility’s risk profile. Shrader opined that this would allow the FDA to consider a facility’s compliance history and other related factors in scheduling inspections, as opposed to aligning the frequency of inspections with the classification of the devices a facility manufactures. She applauded the bill’s plan to improve FDA and facility communications prior to, during, and after inspections, noting that facilities would no longer need to wonder from day-to-day, during the course of an ongoing inspection, whether an inspector would be able to travel to the facility. The bill would also require the FDA to provide non-binding feedback on proposed remediation plans, so that facilities are not left wondering what changes they should make. Finally, the bill would require the FDA to implement a process to address refused international device certifications—certificates to foreign governments (CFGs)—when those refusals result from lack of FDA confirmation, rather than issues with the devices.

Wright Medical agrees to pay $240 M to settle metal-on-metal hip revision claims

Wright Medical Technology, Inc. (WMT), a wholly owned subsidiary of Wright Medical Group N.V., has entered into a Master Settlement Agreement (MSA) on November 1, 2016, pursuant to which the medical device manufacturer will pay $240 million to settle claims brought by patients as part of a metal-on-metal hip revision multi-district litigation known as In re: Wright Medical Technology, Inc., CONSERVE® Hip Implant Products Liability Litigation, MDL No. 2329 (MDL) and the consolidated proceeding pending in state court in California known as In re: Wright Hip System Cases, Judicial Council Coordination Proceeding No. 4710 (JCCP). In addition, on October 28, 2016, the medical device manufacturer entered into a Settlement Agreement with three of its insurance carriers. Of the $240 million, approximately $180 million will be funded from cash on hand and $60 million will be funded from insurance recoveries (Wright Press Release, November 2, 2016).

Under the terms of the MSA, the parties have agreed to settle 1,292 specifically identified CONSERVE, DYNASTY or LINEAGE revision claims which meet the eligibility requirements of the MSA and are either pending in the MDL or JCCP, or are subject to tolling agreements approved in the MDL or JCCP. Eligibility requirements of the MSA include that the claimant has a pending or tolled case in the MDL or JCCP, has undergone a revision surgery within eight years of the original implantation surgery, and that the claim has not been identified by WMT as having possible statute of limitation issues. Claimants who have had bilateral revision surgeries will be counted as two claims but only to the extent both claims separately satisfy all eligibility criteria.

The MSA, which includes a 95 percent opt-in requirement, may be terminated by WMT prior to any settlement disbursement if claimants holding greater than five percent of eligible claims in the Final Settlement Pool elect to “opt-out” of the settlement. No funding of any individual plaintiff settlement will occur until the 95 percent opt-in requirement has been satisfied or waived.

Although the MSA will help bring to a close significant metal-on-metal litigation activity in the United States, WMT has declared its intention to continue to defend vigorously all metal-on-metal hip claims not settled pursuant to the MSA. As of September 25, 2016, the company estimated that there were close to 600 outstanding metal-on-metal hip revision claims that would not be included in the MSA settlement, including approximately:

  • 200 claims with an implant duration of more than eight years,
  • 300 claims subject to possible statute of limitations preclusion,
  • 30 claims pending in U.S. courts other than the MDL and JCCP,
  • 50 claims pending in non-U.S. courts, and
  • 20 claims that would be eligible for inclusion in the settlement but for the participation limitations contained in the MSA.

The company also estimated that there were nearly 700 outstanding metal-on-metal hip non-revision claims, which are excluded from the MSA, as of September 25, 2016.

In announcing the company’s third quarter earnings, WMT disclosed the loss range applicable to a substantial portion of revision cases of $150 million to $198 million and, in accordance with U.S. generally accepted accounting practices (US GAAP), the company recognized $150 million as a charge within discontinued operations in the second quarter of 2016. This second-quarter loss represented the low end of the range of probable loss for these cases. During the third quarter of 2016, the company recorded charges of roughly $39 million in order to increase its accrual from the low end of probable loss range that had been recognized during the second quarter to amounts more in line with the final agreements and to record accruals for certain other revision cases.

Problems keep growing for bone graft device manufacturer

A popular—and frequently litigated—implantable medical device has come under congressional scrutiny after allegations of data suppression arose. Medtronic manufacturers and markets the Infuse® Bone Graft/LT-Cage® Lumbar Tapered Fusion Device and the Infuse Bone Graft, a two-part product, for joint surgeries. The Minneapolis Star Tribune released a special report on April 10, 2016, raising allegations that the company failed to disclose important safety information from a study that was shut down without explanation.

How does it work?

Infuse contains a bioactive solution that is mixed with water right in the operating room. This solution is an engineered version of the bone morphogenetic protein (BMP), which causes bone formation. Prior to using the engineered BMP, patients with certain issues like degenerative disc disease were forced to undergo multiple surgeries so that a bone graft could be created from living bone in the hip. Infuse’s solution is inserted into a titanium case that is placed between vertebrae.

Secret data?

Medtronic hoped that the Infuse device would be approved for different types of surgeries, broadening its application in the lucrative field of spinal surgeries. Doctors who performed surgeries using the device reported adverse events, and Medtronic reviewed the records of 3,600 patients. Over 1,000 issues were reported, from minor problems to four patient deaths. Medtronic shut down the study without providing data about it to the FDA. Medical device manufacturers are required to report injuries that are possibly related to their products within 30 days of learning of them.

Executives told the Star Tribune that the data was not purposely hidden. They claim that the adverse events database was internally misfiled and discovered five years later, then reported to the FDA. Medtronic maintains that its procedures have been improved and that no patients were harmed by the failure to report.

Some concerns have been raised regarding the specific type of BMP used, rhBMP-2. Some critics believed that not enough was known about the safety of the compound, and pointed out that doctors might use it in a way that has not been adequately evaluated for safety. After Infuse was approved for fusion of bones in the lower spine in a procedure performed through the patient’s stomach, surgeons began using the product in different ways. Some fused bones in the neck, some fused more than two bones, and some approached the surgery from the back. The Star Tribune reported that between 2003 and 2007, at least 85 percent of the BMP surgeries performed in the U.S. were for uses not reviewed for safety and effectiveness.

Medtronic’s response, Senate attention

Medtronic responded to the Star Tribune’s article, vehemently maintaining that the article made false insinuations and left out important information. The company stated that the Star Tribune left out a large amount of the information in the “extensive account of what transpired.” Medtronic defended its actions, stating that the data was immediately assessed and reported when it was discovered five years later, and emphasized that patient safety is a priority.

The matter caught Senator Al Franken’s (D-Minn) eye, and he asked both Medtronic and FDA Commissioner Dr. Robert Califf to provide details information about the injuries that were allegedly covered up. He also requested an explanation about the correlation between injuries and approved versus unapproved uses, and asked if the rate of injury was consistent with other data. He also suggested that medical device surveillance should be strengthened to ensure patient safety.

Litigation

Issues with Infuse are nothing new to the world of medical device litigation. In 2014, the company settled 950 lawsuits for $22 million. Another suit was filed in June 2015, which specifically alleged that Medtronic marketed the product for use in types of surgeries that were not previously researched. Humana even filed a suit against Medtronic for federal racketeering, claiming that Medtronic reportedly conspired with physicians to promote off-label uses for the device.