MDMA Highlights Public Policy Initiatives

Issues surrounding group purchasing organizations, gainsharing, changes to current patent rules, and other governmental moves took center stage at last month's annual meeting of the Medical Device Manufacturers Association (MDMA; Washington, DC). Over the course of two days, attending medical technology executives heard from more than two dozen policymakers, policy experts, and other specialists regarding the current state of federal regulations and initiatives affecting the medical device industry, as well as what may lie on the horizon.

According to MDMA, the conference was its most successful to date, with more than 140 attendees. Those in attendance received updates from key government officials operating in the medical device arena, including Andrew von Eschenbach, MD, acting FDA commissioner; Daniel Schultz, MD, director of FDA's Center for Devices and Radiological Health; and Mark McClellan, MD, PhD, administrator of the Centers for Medicare and Medicaid Services (CMS).

Scrutinizing GPOs

Included among the highlighted presentations was the release of the results from an MDMA-sponsored study into group purchasing organizations (GPOs). Conducted by Hal Singer, PhD, president of economic consulting firm Criterion Economics (Washington, DC), the study concluded that the U.S. healthcare system could save billions if GPOs were to lose their safe harbor protection under the Medicare antikickback statute.

The safe harbor, in place since the 1980s, provides protection for payments by a healthcare supplier to a GPO. Currently, the Senate Judiciary Committee's subcommittee on antitrust, competition policy, and consumer rights is in the midst of holding a series of hearings to investigate the practices of healthcare GPOs. The proceedings represent an effort to determine if the organizations are engaging in anticompetitive practices and whether congressional action is needed to ensure a competitive climate in hospital purchasing. The subcommittee is contemplating legislation to address the issue, including repeal of the safe harbor. MDMA has been a vocal presence at the hearings, advocating for such a repeal.

“The study demonstrates that GPOs cannot serve two masters,” says Mark Leahey, MDMA executive director. “If GPOs are to save money for hospitals and the healthcare system, and help assure delivery of high quality medical technologies to patients, they cannot be compensated by their suppliers.”

Gainsharing Update

The issue of gainsharing also took center stage at the MDMA conference, with Mark Wynn, PhD, director of the payment policy division of CMS, providing attendees with an update on government thoughts and actions on the issue.

Gainsharing arrangements were ruled illegal in 1999 in light of a statute that prohibits hospitals from making any payment to a physician as encouragement to reduce or limit services provided to patients under the physician's care. In 2001, the Office of Inspector General allowed the first gainsharing arrangement, and in February 2005, six additional arrangements were approved. The current programs operate according to a model under which hospitals standardize their use of various devices. The hospitals then negotiate lower prices with the suppliers of those devices because they can assure the manufacturer a higher market share for its products. The subsequent cost savings are distributed among the hospital and the physicians.

Most recently, in early January 2006, a gainsharing demonstration project was approved as part of the Deficit Reduction Omnibus Reconciliation Act of 2005. According to the bill, the Centers for Medicare and Medicaid Services will create six new gainsharing pilot programs. According to Wynn, CMS is in the process of preparing its request for proposals from companies interested in conducting the pilots.

Despite concerns raised by medtech executives at the MDMA conference, Wynn assured the audience that CMS is interested in pursuing broader gainsharing models that do not focus on the standardization of device use. Such broader models could include ones that reward physicians for their efforts in contributing to shorter lengths of hospital stays, faster diagnoses, reductions in surgical complications and infections, reductions in duplicate or marginal tests, the adoption of new information technologies, and other contributions to improved quality of patient care.

Regardless, Wynn was advised by conference attendees to proceed with caution, and gainsharing promises to be an issue that will continue to be monitored closely by MDMA and other industry associations.

Shifting Patent Policy

According to Les Bookoff, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner LLP (Washington, DC), proposed changes to U.S. patent rules, if implemented, could have a significant effect on the patent prosecution practices of the medical device industry. Bookoff said that “patent prosecution decisions made now could greatly affect future rights to significant inventions.” Speaking to MDMA attendees, Bookoff outlined changes proposed by the Patent and Trademark Office (PTO) to the rules governing continuing applications.

For example, a continuation application allows an applicant to refile the disclosure of a previously filed parent application, present different and often broader claims, and receive the benefit of the filing date of the parent application. Under current practice, there is no limit to the number of continuations that an applicant can file. According to PTO, “each continued examination filing, whether a continuing application or request for continued examination, requires the United States Patent and Trademark Office to delay taking up a new application and thus contributes to the backlog of unexamined applications before the office.” The proposed rule changes essentially limit continuing prosecution opportunities to only one, with the narrow exception that “second or subsequent continued examination filings. . .be supported by a showing as to why the amendment, argument, or evidence presented could not have been previously submitted.”

Bookoff pointed out that continuation applications are particularly important to the medical device industry, where commercialization often lags well behind inventive activities. Unlimited use of continuation applications provides medical technology companies with the benefit of being able to monitor the development of a new technology and then craft claims to cover that technology.

“Continuation applications often result in the most commercially significant patents,” says Bookoff. To emphasize his point, Bookoff offered examples of medical device patents that may not have existed if the proposed rules had been in effect at the time the companies filed their patent applications. These patents include four patents that Masimo Corp. successfully asserted against Nellcor's pulse oximeters, as well a patent that Guidant successfully asserted against Medtronic stents.

According to Bookoff, implementation of the new PTO rules could occur toward the end of 2006 or in January 2007. Prior to implementation, he recommends medical technology executives discuss implications of the proposed rules with their patent attorneys in order to prepare strategies in anticipation of the change and upon implementation of the change.

© 2006 Canon Communications LLC

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