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Merger Creates Largest Third-Party ReprocessorMerger Creates Largest Third-Party Reprocessor

Originally Published MDDI November 2005Industry NewsMerger Creates Largest Third-Party Reprocessor

Maria Fontanazza

November 1, 2005

3 Min Read
Merger Creates Largest Third-Party Reprocessor

Originally Published MDDI November 2005

Industry News

Maria Fontanazza

Hospitals reprocess surgical instruments to save money. The merger could save them more than $92 million in supply costs.

Third-party device reprocessors Alliance Medical Corporation Inc. and Vanguard Medical Concepts (Lakeland, FL) are merging. Together, they will form the largest company in the medical device reprocessing industry. The deal could greatly affect the relationship between device OEMs and reprocessors.

The new firm's annual revenue totals about $75 million. The union should be completed by the year's end.

“This merger validates the growing presence of legitimate third-party reprocessing as a separate industry,” says Anthony Viscogliosi. He is a founding investor of Phoenix-based Alliance Medical and principal at Viscogliosi Bros. (New York City).

However, reprocessing devices is still highly debated within the industry. FDA regulations have changed over the past few years, but OEMs continue to warn against multiple uses of single-use devices (SUDs). Organizations like AdvaMed promote stringent enforcement of the reprocessing terms established in the Medical Device User Fee and Modernization Act of 2002.

“I've never been keen on reprocessing SUDs,” says Larry Pilot, a partner at McKenna, Long & Aldridge LLP (Washington, DC). “If it's the manufacturer's intent to have the device used one time only, that intent shouldn't be disturbed.”

As hospitals continue to try to save money, the demand for reprocessed SUDs has grown. Supporters of the practice claim it saves healthcare systems millions each year and reduces tons of medical waste. They've also maintained that certain products should never be reused. According to the Association of Medical Device Reprocessors (AMDR), reprocessed devices offer a 50% cost savings when compared with buying a new device. The three members of AMDR—Alliance Medical, Vanguard, and Minneapolis-based SterilMed—currently perform about 95% of all third-party reprocessing.

Viscogliosi predicts the merger will change both the device and reprocessing industries. He says device manufacturers will begin to develop reprocessible devices or ones that can be safely reused a certain number of times. “The majority of the market will move to multiple-use technologies. It simply makes financial sense for the healthcare providers, as long as it's safe and effective. I think the industry would welcome these steps taken by such single-use manufacturers.” Partnerships between manufacturers and reprocessors will lead the next revolution in medical technology, says Viscogliosi.

Pilot suggests that devices made as reprocessible would just further complicate matters. The purchaser of a device would need to maintain a recording method to keep track of the device's reuse. “Whoever reused the device would have to keep a log. There's a limit on that, because it's on the basis of evidence developed to support, for example, five uses,” he says. “You're beginning to marginalize the possible performance of the device.”

One possible solution could be implemented by manufacturers. Pilot says that companies could set up their own reprocessing centers on-site. This would allow them to protect trade secrets about the initial manufacturing process. However, that solution would raise other issues regarding the consistency of the original device versus the reprocessed one. Aside from performance requirements, manufacturers would also have to consider whether reprocessing changes the properties of a device. “Manufacturers must ask themselves, ‘Is what we release identical to what we manufactured in the first place?' That's a tough one,” says Pilot.

Despite the controversy, SUD reprocessing has become a major industry. With FDA regulatory requirements now in place, reprocessed devices must have validation data that ensure safety and performance.

Copyright ©2005 Medical Device & Diagnostic Industry

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