Medical Device & Diagnostic Industry Magazine
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Originally Published MDDI January 2006

Q&A

New AdvaMed president Stephen J. Ubl will be doing his best to give the device industry higher visibility inside the Beltway. Here's how he plans to do it.

By Erik Swain

AdvaMed's work is never done. The device industry's largest trade association is in the midst of a number of projects. These range from reforming diagnostics reimbursement to conducting and publicizing research on the value of medical technology to gearing up for the reauthorization of the Medical Device User Fee and Modernization Act of 2002 (MDUFMA).

At the helm is Stephen J. Ubl, who became president of the 1300-member association in July of 2005. He brought an extensive background in government affairs with him. He served as AdvaMed's executive vice president for government relations from 1998 to 2004 before starting his own consulting firm. In his first tenure at AdvaMed, he was instrumental in getting MDUFMA and the Medicare Modernization Act of 2003 passed. He has also served as a congressional staffer and as a lobbyist for the Federation of American Hospitals.

In an era of governmental cost containment, Ubl will play a major part in ensuring that innovative medical technologies don't get the short shrift. He spoke to MD&DI editor in chief Erik Swain in October.

Q: What are the most important issues facing the medical device industry?

A: I think there are three key issues right now. On the reimbursement front, we have a rapidly increasing rate of innovation colliding with an increasingly austere fiscal environment. This is driving the development of a number of aggressive cost-containment measures, such as gain-sharing and efficiency standards in the context of pay-for-performance.

Some members of Congress are looking to insert some of these measures into the budget reconciliation process. We are focused on making sure that if any such provisions make it into the final budget bill, they reward quality and don't penalize physicians or other healthcare practitioners for using new and effective technologies. [For more on this topic, see NewsTrends, p. 26.]

The second key issue is pushing for reforms in Japan, America's second-largest trading partner for medical technology. This is really a two-pronged challenge. Japan's system for approving the use of new medical technologies is the slowest and most costly in the world. At the same time, its reimbursement system, which unfairly targets foreign manufacturers with excessive biennial cuts, is opaque and does not reflect the cost of doing business in Japan.

We've been raising this issue aggressively with Congress and the Bush administration. Two of the CEOs on our board [Stryker's Steven MacMillan and Edwards Lifesciences' Michael Mussallem] testified on the challenges that American companies face in Japan during separate House and Senate hearings. And during our September board meeting, some of our CEOs met with Secretary [of Commerce Carlos] Gutierrez and [U.S. Trade Representative Rob] Portman. We are also in regular communication with high-level government officials in Tokyo on these issues.

The third key issue facing industry now is the renewed emphasis on postmarket regulation and communications. The spate of recalls in recent months can serve as a case study on postmarket issues. They demonstrate the complexity of issues surrounding recalls and communication between physicians and patients. Yet some of the lessons coming out are only appropriate for those specific technologies. In general, what you need to know depends on what kinds of patients and devices you're dealing with.

We are closely involved with FDA on postmarket issues. We have work groups on recalls, postmarketing communications, and other relevant topics. We hope to identify improvements without having to invoke a legislative approach that might put too much of an emphasis on the postmarket side. We want to keep a balanced approach, but we know we will have to work harder on postmarket issues. We are eager to work with all stakeholders to make improvements, if possible.

As far as next year goes, reauthorization of MDUFMA looms. Although October 1, 2007, is the deadline, we should have most of the legislative pieces and goals in place by January 1, 2007. That means 2006 is going to be a busy year in terms of getting our work groups on PMAs, 510(k)s, combination products, etc., together to work with FDA and Capitol Hill on developing the next round of performance goals.

You can expect to see AdvaMed push for more ambitious goals. One example is setting a 180-day review goal for breakthrough technologies that address conditions with no other treatment option. Not long ago, expedited reviews for these types of products were taking longer than reviews for regular PMAs. That's unacceptable. In the next iteration of MDUFMA, we will see if [shorter review times] is a goal that can be reached.

Reforming the reimbursement environment for diagnostics will also be a major goal heading into next year. Earlier this year we released a study by [the consulting firm] the Lewin Group [Falls Church, VA] detailing the vital role diagnostics play in our healthcare system and how Medicare's anachronistic payment process consistently undervalues such technologies. So we will be looking for a legislative platform to overhaul the payment system. Such an undertaking would be challenging on our own, so we have formed a coalition with other laboratory players called the Diagnostics Access Coalition.

Q: What other major initiatives does AdvaMed have planned?

A: We are contemplating a significant communications effort going into next year to better define the medical technology industry and to build appreciation for the lifesaving and -enhancing contributions of the industry. Washington tends to speak pharma more than devices, especially when it comes to the discovery model. We need to educate those inside and outside the Beltway about how the device industry really works. The [September 27, 2005] New York Times report portrayed the collaborative relationship between device companies and physicians as inappropriate when it is, in fact, the lifeblood of innovation for the industry. We need to get people to better understand how devices are developed, the iterative nature of device innovation, and the rapid cycles of products.

We also need to raise our game in terms of redefining the value debate. Instead of answering critics who say that the cost of medical innovation is the problem, we want to refocus the debate based on the premise that the cost of disease is the problem, and to position medical technology as a solution.

I am also excited about developing what I refer to as a preceptorship program. In partnership with leading academic centers, I want to build a program in which technology is in the hands of decision makers. We did something similar when I was in charge of AdvaMed's government affairs department. It was very effective in terms of bringing staff and members of Congress out to see procedures and see facilities.

I want to broaden the program to include policymakers from across the government, to bring them into hospitals where they can scrub in and get firsthand experience with advanced technologies and procedures. I'm talking about folks not just at CMS and FDA, but also at HHS, the U.S. Trade Representatives office, and the Department of Commerce. A lot of policymakers don't have a medical background and are struggling to keep up with the issues that are developing in medicine. I think it's impossible not to appreciate technology after you have seen it up close. We also need to engage in broader healthcare issues, such as finding solutions for uninsured Americans and addressing the escalating costs of healthcare overall.

All these initiatives will be approached by developing credible and factual arguments to make and document our points of view. If we cannot prove the value of the industry through quantified research, we will fail in the debate.

Q: How will Lester Crawford's departure from FDA affect the device industry?

A: I don't believe his departure is likely to have a direct effect. The CDRH leadership is fairly well established. We've worked closely with [CDRH director Daniel] Schultz and his team.

That being said, it would be enormously helpful to have stability in the commissioner's office, particularly in light of the upcoming reauthorization of MDUFMA. But the sense I get is that [acting commissioner] Dr. Andrew von Eschenbach is going to be around for a long time. I would prefer a formal nomination, but he has sufficient stature and an exemplary background that indicates he will be able to get things done.

We've actually done some work with Dr. von Eschenbach in the past. He's a urological surgeon, so he obviously has firsthand experience with medical technology. He has also spoken out on PET scanning technology and encouraged coverage for those cancer indications. He's got some appreciation and experience on the imaging side of things and is an expert on prostate cancer. He has also supported genomics-based diagnostic tests.

In general, I think he has a good background and appreciation for the device side, and from a philosophical perspective, I like the fact that in his initial remarks, he talked about the need to remain vigilant and always examine ways to improve the process. Contrary to the media, which focus their attention on postmarket issues, he's brought the perspective: ‘we've got to be vigilant and always make improvements to ensure that needed treatments and therapies are getting to patients.' I look forward to working with him and the CDRH leadership.

Q: You were involved in putting together MDUFMA. What were the biggest challenges? What remains to be done?

A: The biggest challenge at the outset was forging a coalition in support of user fees. This had been difficult previously, because schisms within the industry prevented discussions from moving forward.

But it became apparent that we were facing a perfect storm. The prospects for increased nondiscretionary spending for FDA to meet its challenges were dwindling, particularly post-9/11. And that situation was expected to be exacerbated as new and more-complex applications came into the device center for review.

The drug user-fee model showed that user fees caused a 50% decrease in review times. It was a no-brainer, frankly. The challenge for us was to find ways for small companies to see the benefit of user fees. I've always said they were the ones who had the most to gain [from user fees]. Smaller firms often are supported by venture capitalists that want to see certainty in the market. So anything that could improve the consistency of the review process would work to the small companies' benefit, and the user-fee performance goals provide that consistency.
Another challenge was the paucity of information about the resources necessary to make decisions at FDA. There was not much available about what it costs to perform each type of review. For the next round, we will have a much clearer picture of FDA's performance and the resources it needs. We will have more and better information available that will inform how the program should go forward.

Q: What will be the effect of the Medical Device User Fee Stabilization Act of 2005 (MDUFSA)?

A: MDUFSA was an important mid-course correction for the user-fee program and served to consolidate support for the program. The fee-stability provisions were crucial. Going forward, the rate of user-fee increases will decrease to the single-digit range for each of the remaining two years of the program and all the adjusters that contributed to the unsustainable fee-rate hikes in the first two years of the program are gone. Without this fix, the [FY 2006] fee increase would have been more than 20%.

The threshold for a small-business exemption has been increased to $100 million [in annual revenues] for reduced-fee applications.
And I can't overestimate the importance of the labeling provision for reuse of single-use devices. I consider the accurate identification of single-use devices that have been reprocessed to be a win from a public health perspective. [For more on this topic, see NewsTrends, p. 32.]

Q: Do you expect Congress to adequately fund the CDRH budget in the coming years? Is there anything more that can be done to ensure it?

A: It's true there are enormous budget pressures on Capitol Hill. With all the competition for appropriations, Congress fell short in its funding promises for the first two years of MDUFMA. However, Congress and the administration came to an agreement to fully fund CDRH for the remaining two years of the program, and they've shown their commitment to keeping that agreement. That being said, there is still the possibility of an across-the-board reduction in discretionary spending this year. So we have to stay vigilant. But AdvaMed has much experience working early in the appropriations process. More importantly, we have a lot of members of Congress willing to speak up on behalf of the device industry.

Q: How have the reforms at CMS affected the device industry? Are they being implemented as you expected, or have there been any surprises?

A: In a general sense, industry has made a tremendous amount of progress on the Medicare front. The device provisions included in the Balanced Budget Refinement Act and Medicare Modernization Act of 2003 have resulted in permanent and significant changes, such as pass-through payments for outpatient care, add-on payments for inpatient care, coverage for Category A device trials. We have been successful at establishing the device industry as a key stakeholder in the Medicare debate.

Is there room for improvement? Absolutely. For example, there needs to be reevaluation of the criterion for inpatient pass-through and add-on payments. CMS is permitted to raise them from 50 to 80%, but has not done so. And there are still a large number of applications being declined in those areas. We need to take a hard look to make sure new technologies are being fairly reviewed for add-on payments.

On the coverage side, we are involved with trying to implement CMS's new Coverage with Evidence Development processes fairly. We've already seen it applied for ICDs, and any number of our members could be affected. So we need to proceed cautiously.

I am excited that we hired Ann-Marie Lynch [as executive vice president for payment and healthcare delivery]. She really embodies what I want to do to rebrand AdvaMed as a smart association. She brings more than 15 years of senior leadership experience at CMS, on Capitol Hill, and, most recently, as a political appointee to HHS. We have a number of key personnel slots to fill and I'm committed to attracting the best and the brightest individuals to AdvaMed to complement an already strong team.

Q: How is the implementation of AdvaMed's code of ethics progressing?

A: The code is one of the most important things AdvaMed has done in recent years. The board-level subcommittee involved in developing the code has made tremendous progress in communicating the benefits of the code to our companies, medical professionals, and others. We intend to continue those efforts. The code is intended to be a living document, and we are continuously reviewing it and assessing what changes, if any, can be made to improve it further. We have been aggressive in getting the word out about the code and the need to comply with it.

Q: AdvaMed has made a strong effort in recent years to publicize the value of medical technology, including creating the Institute for Medical Technology Innovation. Are those efforts paying off? What more needs to be done?

A: The institute is another one of the most important things our organization has spearheaded in recent years. It has initiated research in conjunction with Harvard, Duke, and other institutions that will be published in peer-reviewed journals and help quantify the value of medical technology. The ball is rolling in terms of making a stronger quantitative case. There's no question that we have to do a better job of that. We are excited to be working on this with some really first-class research centers.

The nature of advocacy is changing. It's really becoming less about whom you know and more about what you know and, candidly, what you can prove with quantifiable data. So I really believe that we need to strengthen our research base to make our case to policymakers and others.
As an association, intellectual firepower is our product. In addition to the work being done by the institute, I envision each of the major departments at AdvaMed having a research budget to substantiate and quantify data for our advocacy efforts more than we've done in the past.

Q: Is the climate favorable for making sound public policy on healthcare?

A: Next year is an election year, so probably not much will be done then. But 2007 could be significant. The budget may dictate further constriction of healthcare spending. We will need to position the industry as the solution, not the problem, with data underpinning those arguments.

Q: Is the device industry economically healthy?

A: I think it is. Revenues are up. R&D spending is up. I am very bullish on the health of the sector. Look at the demographics. Look at the new waves of technology, from miniaturization to combination products to diagnostics to health information technology. These innovations are revitalizing healthcare and will reduce costs in the long run. On the policy side, I see nothing to interfere with the substantial growth in the sector.

Q: If you could accomplish any one thing in your tenure, what would it be?

A: That's a tough question. I would have to say that I would like to see the industry achieve a higher level of visibility in Washington, both in terms of where the industry is and the value and benefits medical technology can bring. I would like it to escape the shadow of the pharma sector. I would like stakeholders to be better informed about the device industry and to position technology as a solution for the challenges of our healthcare system.

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