The CEOs of three medical device makers sat down for a round-table discussion of the challenges and opportunities facing the industry at the annual AdvaMed MedTech conference in Washington, D.C.
William Hawkins of Medtronic Inc. (NYSE:MDT), Stephen MacMillan of Stryker Corp. (NYSE:SYK) and Michael Minogue of Abiomed Inc. (NSDQ:ABMD) spoke about upcoming changes to the 510(k) protocol, the user fee program, transparency initiatives and the steps they’re taking to deal with healthcare reform.
The Medical Device User Fee and Modernization Act calls for device makers help pay the freight for device review, in return for improvements in the agency’s review times.
"We’ve paid the money but we haven’t seen the results," Hawkins said. "As we get ready for the user fee re-authorization, we need to make sure we’re going to get results from the FDA."
That said, the federal watchdog agency needs some beefing up if it’s going to do its job, Hawkins said.
"The FDA is understaffed. They do need more resources to do all the things they need to do. We know that. I think it’s in our interest to help the FDA become a stronger FDA and a better-resourced FDA," he said. "But clearly we don’t want to be just giving them money if they’re not going to be using it to make themselves stronger in areas that really help us."
"What we’re trying to do is strike a balance between patient safety and access to innovation," Minogue added. "If patient safety and the aversion to risk causes innovation to come to the United States last, five-years-plus after it’s been in other countries, that’s not the model we collectively want."
MacMillan said new FDA chief Dr. Margaret Hamburg, who addressed the convention earlier today, inherited an organization with a big PR problem when she took over last year.
"If you look at the environment she walked into, the FDA clearly had lost control and lost the respect of the public and lost the respect of Congress. We all benefit from a stronger FDA, one which is run by the FDA instead of by Congress pulling FDA staffers up every week, critiquing them for what they did," he said. "The bigger issue is the enormous pendulum swing in terms of extreme move to regulation from 20 years of a more deregulated environment. That’s creating all the uncertainty with this whole 510(k) review process. … As they try to drive up the science, the review times and everything else are getting busier and more complicated and that’s making things harder for us."
The Patient Protection and Affordable Care Act — better known as the healthcare reform act — contains a 2.3 percent excise tax on U.S. revenues from medical devices. The CEOs said the tax will have several negative impacts on the industry, including slower hiring, benefits cuts and an increased focus on developing business overseas.
"Even companies that aren’t profitable today are going to get hit with a two-point-something percent tax, so now they’re going to have to make cuts they wouldn’t have had to make before," Minogue said. "You have to come up with a way to make up for 2.3 percent of revenue, so the first thing we’re doing is looking at our own healthcare policy, going to high deductibles to help offset what we expect to see in increasing costs. Second, we’re not adding as many people as we would and third, we’re not placing as many bets on the far-out technology. We’re going to get to the upgrades and the surer bets first."
"It’s also fundamentally a question about where you want your revenue and business to come from," MacMillan added. "A lot of us are going to be that much more focused on growth outside the United States. The unfortunate corollary of that is jobs and driving more innovation offshore. That tax is not going to be healthy for one of the healthiest industries in our country."
And it’s not obvious that medical device makers can just pass the tax along, Hawkins noted.
Another aspect of the various reform movements facing the industry, increased transparency, touched a particular nerve with Minogue. Under one proposal for the FDA’s reform of the 510(k) process calls for public disclosure of submission data by device makers.
"Everything you submit — your CAD, your drawings, your engineering, your indications for use, your clinical studies, all the mistakes you’ve learned — will be disclosed for all the world to see," Minogue said. "This would really be detrimental to innovation and would really punish the smaller companies. It will slow down people investing in big bets and the learning curve will basically be cut away from the innovators. And it will likely be a great source for foreign companies to download and look at everything we have on the road map. … Transparency might not be the right adjective they’re looking for. This thing could be called ‘crazy’ or ‘stupidity’ when you really think about what it could do to innovation in the States."
Another transparency push, the so-called Physician Sunshine provision in the healthcare reform act, drew cautious praise from Hawkins.
"The sunshine bill is a positive in terms of helping to restore confidence and trust in the public’s eyes about the ways we interact with the clinical community and recognizing, in our industry, that the way innovation occurs is through this collaboration with physicians and industry," he said. "We don’t want someone ultimately legislating that we can’t work with physicians."
Another topic touched on by the trio was the worldwide landscape for regulation. Hawkins, who said he traveled to China last month to meet with the minister of that country’s State Food & Drug Administration, cited the move toward so-called "global harmonization" of regulatory schemes.
"We would support [global harmonization] as long as we get to the right level, versus us having the structure to be able to deal with how many different regulatory agencies and the cost and complexity of that. The challenge of that is enormous," he observed. "The FDA has recognized that more and more products are coming into the U.S., either through U.S. companies that have manufacturing operations outside the U.S. or, increasingly, companies that are domiciled outside the U.S. [The FDA is] spending more time setting up offices to make sure they have the ability to provide the same level of oversight and compliance for those OUS operations."
"Every other country in the world is rolling out a red carpet, where the government and industry are working together to try to grow private-sector jobs and grow their economy," MacMillan added. "We’re in a country that’s not doing that and that’s probably the biggest overall concern about where we’re headed. We have to get a common regulatory system around the world or it will become lowest-common-denominator."
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