MDMA: Empowering the Industry with Information

Originally Published MDDI August 2004

Industry Perspectives



MDMA is committed to advocating on behalf of small device manufacturers. While the association has been successful in the advancing industry positions, there is still much work to be done.

Mark Leahey

In May 1993, MD&DI ran a story entitled “New Device Manufacturers Association Off to a Running Start” (MD&DI, May 1993, p. 32). The story highlighted the formation of the Medical Device Manufacturers Association (MDMA) in 1992. The national trade association was formed with the mission of representing the smaller, innovative, entrepreneurial sector of the medical technology marketplace. 

Now in its second decade, MDMA is still promoting policies that foster innovation and improve quality of care, and MD&DI is enjoying its 25th year of publication. Like MD&DI, MDMA strives to ensure that the device community has a true understanding of the policy and technical issues affecting the industry. It is my sincere hope that both organizations continue to grow in the years ahead. The device industry will benefit from their success.

Laying the Groundwork

When the Medical Device Amendments of 1976 were enacted, they were the product of a unique government, industry, healthcare community, and consumer initiative that began in earnest in 1970. Their initial implementation was considered successful because of a multipartisan effort to ensure the reasonable and flexible application of the law in the best interest of public health. 

During the 1980s, however, the medical device industry became the object of increased congressional and media interest. Many were critical of FDA and industry. The almost total absence of an industry defense was coupled with a remarkable lack of positive industry advocacy. This created an environment that led to the enactment of additional restrictive device amendments to the Federal Food, Drug, and Cosmetic Act in 1990 and 1992. It was, and is, the objective of MDMA to reverse this depressing trend of overregulation through initiatives at both the grassroots and national levels.

In the early 1990s, the medical device industry faced tremendous delays related to FDA review of premarket submissions. Some large companies in the industry, represented by their trade association, suggested that the answer was device user fees. MDMA, however, felt that more-extensive reforms were needed at the agency, rather than simply instituting user fees to help expedite its review of medical devices.
In 1996, Jeffrey Kimbell, then executive director of MDMA, wrote an article for MD&DI titled “A Wake-Up Call to Device Entrepreneurs.” In it, Kimbell discussed the coalition that defeated user fees. He wrote, “the coalition succeeded because its message was clear and simple: taxing small businesses and giving more money to an agency with a documented management problem will not solve anything. The entire system is deficient at the core, both in the approval process and in the enforcement arena, and requires a fundamental revision, not an incremental fix” (MD&DI, February 1996, p. 24).

The fundamental revision would come the following year in the form of the FDA Modernization Act (FDAMA). There was close examination of FDA policies surrounding the agency's poor performance. This helped lay the groundwork for taking a comprehensive look at the agency's practices and identified problems that could be fixed by its modernization.

FDAMA represented the most significant FDA reform since the 1976 amendments. It may not even have come about if people had chosen the quick fix of user fees over the more comprehensive approach that was ultimately adopted. This landmark legislation established a risk-based 
regulatory approach to medical devices. The legislation also exempted certain devices from premarket submissions and postmarket surveillance and expanded the third-party-review pilot program. Collaboration between industry and the agency also improved as a result of FDAMA—and this was no small feat, given the strained relationship between industry and FDA in the early 1990s.

The MDMA Approach

Today, MDMA membership is approaching 200 member companies, and the association continues to enjoy tremendous growth. Its success is a result of the aggressive, honest, and steadfast approach it takes when representing the industry and its member companies. It would often be easier to acquiesce to the popular views in Washington and take the path of least resistance. But that road is not always in the industry's best interest.

MDUFMA. During the user-fee discussions of 2002, MDMA agreed that FDA needed additional resources to review premarket submissions. However, it did not believe that FDA should be able to increase fees annually simply because it had collected less money than anticipated the previous year. MDMA also felt that industry should not have to pay the new user fees until additional congressional funds were appropriated in FY03. 

Needless to say, these positions were not the most popular on Capitol Hill or at FDA, but ultimately, the association had to represent the interests of the industry. Unfortunately, our suggestions were not included as part of the Medical Device User Fee and Modernization Act of 2002 (MDUFMA). As a result, industry is now feeling the effect.

In FY03, Congress appropriated less than one-third of the additional funds it had committed to FDA. In FY04, it appropriated less than 5% of the committed money. However, because of the one-sided structure of the user-fee program, industry was responsible for 100% of its funding commitments in FY03 and FY04. In fact, the fees jumped on average more than 34% in just one year, from $154,000 to more than $206,000 (“Small Firms Upset over Large User-Fee Hike,” MD&DI, October 2003, p. 42). 

In addition, during a recent meeting between industry and FDA, the agency projected that for FY05 the original PMA fee would jump to more than $244,000. This spike does not take into account an approximate 10% compensating adjustment that will also be exercised in FY06.

Some in the industry have been willing to forgive Congress's funding commitments without addressing the skyrocketing fees that industry faces. MDMA believes that if Congress is going to be granted relief from its funding commitments, so too should industry. Only when modifications 
permanently stabilize the fees to reasonable levels and permit increases for inflation will the benefits of the program outweigh its potential industry harm. 

MDMA has evolved from a group that some viewed as anti-user-fee to one that is known for its work on a variety of issues. These include FDA, reimbursement, marketplace conditions, and small-business issues. We understand the importance of encouraging industry involvement in Washington. In fact, the issue of device user fees is currently a hot topic being debated on Capitol Hill. Under the original terms of MDUFMA, the program is set to sunset on October 1, 2005, if Congress does not appropriate $60 million in new funds. This level of funding will not be met and as a result legislative modifications will be necessary for the program to continue.

GPOs. In addition to addressing the stifling effect that quarter-million-dollar user fees will have on innovation, MDMA has been the industry leader in working to reform hospital group purchasing organizations (GPOs). Some of the largest GPOs continue to engage in contracting practices that are anticompetitive and harm innovation and patient care. These include bundling of unrelated products and companies, long-term sole-source contracts, private labeling, and excessive fees tied to pseudo e-commerce platforms. MDMA will not relent in its efforts to change such practices until every patient has access to the best medical technology at the most affordable price.

MD&DI has also closely followed the GPO issue over the years. A June 1998 article, “Premier's Innovation Institute: To Play, Must You Pay?” exposed one program. It required manufacturers to pay a $1 million fee “in return for one market penetration study per year for those companies, and then Premier would market the results to its members” (MD&DI, June 1998, p. 12). This was just one example of the conflicts of interest that existed in the GPO marketplace. There were also examples of GPOs accepting preferred stock in exchange for GPO contracts. In addition, it has been reported that GPO executives received huge financial payments for investing in companies that were subsequently granted GPO contracts.

As a result of the reporting appearing in MD&DI and The New York Times, as well as the efforts of the Senate Judiciary Antitrust Subcommittee, the Federal Trade Commission, the Department of Justice, state attorney general offices, and MDMA, progress has been made. But more work needs to be done to ensure that patients have access to innovative, affordable technologies. Without true competition in the marketplace, healthcare costs will continue to rise at unsustainable levels and, ultimately, the patients will suffer.

Statistics show that the overwhelming amount of R&D comes from companies with fewer than 50 employees. Yet because of the increasing problems companies have gaining access to the marketplace, patients cannot use many of these innovative technologies. MD&DI's 2001 business outlook cover story highlighted this problem (MD&DI, March 2001, p. 79). The article reported problems that smaller companies were having reaching the hospital marketplace. 

The survey showed that in 2001, 46% of large companies but only 8% of small ones used GPOs. The article went on to say, “the claims that GPOs increasingly restrict small manufacturers seem to be borne out by survey respondents over the previous several years, as 24% of small companies sold products to GPOs in 1997, 18% in 1998, and 8% in 1999.” This concentration in buying from a select group of vendors decreases competition, stifles innovation, and must end. MDMA is doing all it can in Washington to bring about true, lasting reform, but the battle is far from over.

Looking Ahead

The need to voice your opinion on these critical issues has never been more important. The Senate has already held two hearings on GPOs, and an additional hearing is likely in 2004. All companies who continue to experience problems with certain GPOs are urged to get involved. Since its inception, MDMA has proven itself a successful advocate for the innovative, entrepreneurial sector through grassroots mobilization. But it cannot reform the system without your help.

In addition to the GPO issue, some in Congress have expressed a desire to extend the user-fee program without addressing the problems in FDA. This may occur as early as September. However, a narrow approach that fails to strengthen the program by instituting reasonable fees and true performance goals is unacceptable to MDMA members and industry. 

If modifications are going to be made to forgive Congress its funding commitments, fees must come back to a reasonable level and only increase for inflation. Without industry involvement, positive changes are less likely to occur. You must engage in the process through participation in your regional or national trade association.

Staying Informed

MD&DI has proven to be a wonderful purveyor of information to the employees and executives in the field. The important role of educating industry happens through multiple vehicles, including trade associations and publications like MD&DI. These two groups are vital to supplying industry with the facts and information that can improve the overall industry environment.

Given that MD&DI is celebrating its 25th anniversary, this is an appropriate time to commend the publication for the tremendous service it provides to the industry. For a quarter century, MD&DI has been a critical resource for people in the medical technology industry. The comprehensive and timely dissemination of what's new in our industry enables companies to remain informed on critical issues affecting their companies. Remember, knowledge is power. Engage in the process. 

Copyright ©2004 Medical Device & Diagnostic Industry