Medical Device & Diagnostic Industry
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Originally published March 1996
Henry A. McKinnell, PhD
Chairman, Health Industry Manufacturers Association (HIMA)
Executive Vice President, Pfizer, Inc.
Few people in the medical device industry could have said it better than Senator Nancy Kassebaum. When introducing comprehensive legislation (S. 1477) to reform FDA, the head of the Senate committee with legislative jurisdiction over the agency declared, "Increasing FDA demands on new product development and delays in new product reviews are reducing incentives for research and development, encouraging American companies to locate abroad, delaying Americans' access to new pharmaceuticals and medical devices, and costing American jobs."
In the House of Representatives, Congressman Tom Bliley, a Virginia Republican, chairs the committee that oversees FDA. On reforming FDA, his words are equally forthright: "I am not interested in reinventing the FDA, and neither are my colleagues. What's called for is fundamental reform, and it's up to Congress to deliver."
Judging by Congressman Bliley's past words on the subject, a House bill to reform the agency is likely to contain even stronger medicine than the measures that Senator Kassebaum has prescribed. Even so, the Kassebaum bill is an encouraging development that aims Congress in the direction that industry has long advocated. It is an important first step.
The Kassebaum bill would expedite the development and review process for medical devices, drugs, biologics and certain food additives, and it includes several basic changes that HIMA and the medical device industry have long sought. It does fall short, however, in some critical areas. Most notably, it fails to compel FDA to complete its review processes in the time periods set by current U.S. law. In addition, although the bill includes incentives for FDA to expedite device reviews, those rules wouldn't take effect immediately. HIMA's own reform proposal calls for the immediate establishment of independent third parties to review device applications, especially those for break-through devices.
In other areas, the Kassebaum bill tracks closely with industry's recommendations for reform, particularly with respect to the definition of device effectiveness. Language in the bill would have the effect of allowing doctors, rather than FDA, to determine those treatments that are most effective and in the best interests of patients.
Politically, the cause of FDA reform is light-years ahead of where it was two years ago. The momentum toward medical device reform began in 1993, when Congressman John Dingell's oversight subcommittee issued a report on the FDA device program. That report, "Less Than the Sum of Its Parts," planted the first seeds of doubt about the program--seeds that took root with the 1994 congressional elections. In the new political environment, the Republican Congress made FDA reform a primary issue. Largely in response, the administration has also made some efforts, although they fall short, toward reforming the agency. Although the near-term goal of FDA reform is critical to the industry's sustainability and U.S. competitiveness, I believe it is in the best interest of industry to focus special attention on long-term strategies.
Too much is at stake for patients and companies to sit back and "let the other guy do it." It's time for everyone in the device industry to realize that the future of each company and each individual is tied to how well the industry performs in the next few critical years. In my view, the medical device industry is at a major crossroads. Getting to the other side should not be our only goal.
As vitally important as it is, reforming FDA is not going to solve all of industry's problems. Those who regard comprehensive FDA reform as a cure-all are mistaken. Research and development, clinical trials, and jobs that have been displaced to Europe will not return overnight. Unobstructed by FDA, a wave of innovative, miraculous new products will not suddenly burst forth. Major questions important to the future of the industry will still be unresolved.
Quite simply, all health care is moving into a new era, one in which fee-for-service medicine is largely supplanted by managed-care systems that range from those applying refined case-management techniques to fee-for-service care to those directly employing their own staff. Driven by concerns to improve patient care and to reduce costs, many employers and most managed-care systems are focusing on outcomes measures, cost containment, and technology assessment. Today approximately 7 out of 10 American workers are covered by managed-care plans. That change has come swiftly. As recently as 1993, half still had fee-for-service coverage. At the same time, the changing demographics in most industrialized nations mean that fewer workers will be paying taxes in the future to support government-sponsored health-care systems for the elderly. That's significant because people over 65 require four times as much health care as people under 65, according to estimates.
Meeting the needs of the new cost- conscious marketplace and the unmet medical needs of patients everywhere should be industry's top priority in coming years. That means developing new products that can be demonstrated to improve the quality of care and reduce the cost of care through well-conducted outcomes trials. It also means working with managed-care customers to implement cost-effective solutions, whether those are disease management strategies or treatment criteria for certain technologies.
Advances in medical technology can save hundreds of thousands of lives and also billions of dollars in health-care costs each year--and industry can prove it. Just one example from HIMA's 1995 industry study by The Wilkerson Group illustrates the point. According to the study, implantable pumps--currently in use in Europe--are helping improve the control of diabetes; if such devices were available in the United States, they could save an estimated 3000 lives and as much as $9 billion in health-care costs over three years. For its own good, industry must get facts such as these to the public, to purchasers, and to policymakers. If the industry doesn't make the case for technology and its benefits for patients and for controlling costs for health-care providers, no one else will.
Making the case for technology will mean working with Congress to remove obstacles to innovation and to research and development efforts wherever they may sprout. Calculations based on Wilkerson's financial model for a typical medical device show that today's regulatory requirements have added $9.5 million to the cost of a premarket approval over just a decade ago, and two years to the time it takes a product to generate a positive cash flow. Similarly, for a product involving a 510(k) application, the cost has more than doubled from 1985 levels to $19.9 million, while the time to positive cash flow has increased by two years.
These numbers indicate how crucial it is for industry to educate lawmakers and regulatory officials about the fragile, financially risky process of innovation. Society and industry both benefit in recognizing the special needs of small, high-technology companies where much of the innovative work for lifesaving medical devices takes place, step-by-step, in tiny increments. Legislatively, we must work with Congress to ensure that government regulators act as partners to the industry, not as its adversaries.
As all levels of government are increasingly focused on developing more appropriate and cost-effective regulations, industry must also continue to take steps to enhance its own performance and standards. The medical device industry must begin to conduct itself so effectively that lawmakers have no legitimate reason for stricter regulation in the future.
Companies must strengthen their scientific and self-regulatory functions. Standards for basic science must be raised, and companies must willingly embrace the discipline of appropriate well-conducted, well-controlled clinical trials. To continue to advocate that, in effect, the most efficient form of regulation is self-policing, industry must be able to demonstrate that it can consistently produce good science.
With or without FDA reform, government also has a role to play in the new marketplace as a purchaser. That means industry must continue to participate actively in the legislative process to ensure that governmental health-care programs take into account current market realities and thereby benefit from market efficiency instead of constraining it. Consumers, who inevitably will pay a larger share of the health-care bill, must also be educated about the value of medical technology. Industry must make the facts about products available and therefore help physicians and consumers make responsible choices about their treatment options.
Technology can save money as well as lives. Technological innovation, appropriately utilized, is a key ingredient in cost containment and in maintaining top-quality health care. The facts are on our side. The industry, however, must do what is necessary to make certain that lawmakers, regulators, providers, and patients get these facts. Their decisions--and what we do to shape them--will determine the opportunities and limits to future progress in medical technology and, thus, to the shape of our industry as well.