July 1, 1996

8 Min Read
FDA and the Cost of Health Care

Medical Device & Diagnostic Industry Magazine | MDDI Article Index

Originally published July, 1996

Ronald C. Allen
President and CEO, Cohort Medical Products Group, Inc.,
Hayward, CA

As the Clinton administration and Congress grapple with finding ways to reduce the cost of health care, both have overlooked FDA, the one government agency that causes health-care costs to continually rise. Since the establishment of FDA in 1938, the cost of providing medical products to the U.S. health-care system has increased each year. Medical device manufacturers have continued to increase the number of staff assigned to managing FDA requirements and educating the agency about their products. In 1975, a medium-size medical product company might have had one person assigned to managing FDA requirements, whereas today a full department exists. For instance, the top 10 orthopedic companies in the United States have increased their regulatory affairs staffs by 39% over the past five years. In addition, a comparison of the advertisements for FDA consulting services in the June 1990 issue of MD&DI with those in the June 1995 issue shows an increase of over 20%.

In order to reduce the cost of health care, FDA should carry out a number of reforms. These include hiring reviewers knowledgeable about the particular products they review, communicating with industry about confusing or specialized application information rather than withholding approval, acknowledging its role in the practice of medicine, and creating and following straightforward policies. FDA may also benefit from modeling itself after a voluntary group such as the American Society for Testing and Materials (ASTM).


After spending millions of dollars on the design, development, and testing of a product, manufacturers have to educate FDA staff, many of whom have no medical, design, business, or product experience. The reviewer is then responsible for reviewing the application and determining whether that product is approvable.

Often, in an effort to avoid making an error, reviewers find that rejection is the safest way to deal with applications that are beyond their understanding or that appear different from those recently reviewed. Under the guise of protecting the public health, applications for products have been and continue to be rejected because FDA reviewers fail to understand or even read them.

An example of an uninformed decision is the rejection of a recent 510(k) notification for a screw that is used to hold two bones together. According to FDA, it was rejected because the bone screw had not been approved to hold those particular two bones together prior to May 28, 1976. The fact that the worldwide orthopedic community has been implanting screws to hold two bones together every day since 1829 made no difference to FDA.

A manufacturer in this situation has but a few alternatives. The first is to drop the project and recapture its cost by increasing the prices of other products sold in the market. Another is to take FDA's recommendation and conduct a three-year multimillion-dollar clinical study to prove that the bone screw will hold the selected bones, just as screws have done for more than 100 years. A third alternative is to attempt to educate FDA on the clinical history of bone screw use. Unfortunately, no vehicle is in place that requires FDA to accept, read, or respond to such information.

A fourth alternative, as some manufacturers have found, is litigation to force FDA to prove that the product fails to meet the regulatory requirements. An increasing number of manufacturers are finding that the cost of litigation, when compared to the cost of an unnecessary clinical study, is the most efficient alternative for gaining approval for their products.

The fact that many current FDA reviewers have not had any practical experience in the areas they are responsible for reviewing is a threat to the public and a cause of the delay in new product approvals. If the agency is responsible for regulating medicine, food, drugs, and devices, it should employ individuals with experience in these areas and assign them to projects within their area of expertise.


FDA's treatment of pedicle screw applications demonstrates that the agency cannot communicate effectively with industry. FDA has received a number of 510(k), investigational device exemption, premarket approval, and down-classification applications from manufacturers seeking to market pedicle screws, which are used to hold a plate or rod to the spine during the fusion process. Such variation in applications is a result of manufacturers' receiving different instructions from FDA. Although early applications had demonstrated that there was preamendment use of pedicle screws, FDA either did not understand the information provided or failed to accept it. FDA's failure to accept data provided in the late 1980s has resulted in hundreds of patient lawsuits against manufacturers, surgeons, and hospitals in the 1990s. The basis of these suits is that the pedicle screw did not have marketing approval and that therefore all parties involved in its manufacture and use were endangering patients.

Manufacturers, surgeons, and medical societies supplied FDA with evidence to dem-onstrate the clinical safety and efficacy of these devices. In an effort to control a situation that threatened the care of patients with disabling spine conditions, FDA required manufacturers to change the labels on all orthopedic screws over a particular size and sent them warning letters stating that training surgeons on the use of pedicle screws was illegal. Changing the labeling requirements subsequently increased the cost of bone screws.

In April 1995 FDA accepted the information that was submitted in the 1980s as proof of the preamendment status of pedicle screws. However, the manufacturers had already spent millions of dollars on unnecessary clinical trials. Surgeons, hospitals, and manufacturers are still defending themselves against lawsuits, recently reported to number in the thousands. Many patients, caught in the middle of a regulatory fiasco, have lost trust in physicians and have become a target for attorneys seeking to litigate. The final cost of this regulatory mismanagement will be hundreds of millions of dollars. FDA will not pay the cost. Neither will the manufacturers, who have already paid for clinical study costs; consultant, lawyer, and legal fees; and those costs directly related to FDA policy changes. The only payers left are the patients and their insurance companies.

FDA inefficiencies and mismanagement, therefore, have a direct impact on the cost of U.S. health care. If the Clinton administration and Congress genuinely want to reduce and control the cost of health care, they should begin by reforming FDA.


FDA must also realistically describe its role in medicine. When manufacturers were notified of the new regulatory requirements regarding pedicle screws, FDA announced to the surgical community that it does not control the practice of medicine. According to the agency, surgeons could use whatever procedures they felt were in the best interest of the patient. This announcement complicated the situation.

In order for FDA to become an agency upon which the public can rely, it must be truthful. For the agency to profess that it does not regulate the practice of medicine is just not true. The fact is that it regulates every product now used to treat patients in every hospital in the United States. Everything from the outside label to the function of the product is regulated by FDA. Physicians would not be successful in their specialty without the use of FDA-controlled products. Once FDA informs the medical community of its role, physicians can inform patients that various treatments are not available to them because the agency has not approved the necessary products.

FDA must also follow its policy of reviewing applications in the order it receives them. Since the first numbers were assigned to applications, the agency has failed to follow this procedure. Manufacturers, believing that FDA had established a method to organize and track the progress of applications, were disappointed that they were not being handled in such a manner. Such a failure directly affects the cost of products.


One way to control the cost of health care may be to dissolve FDA in its current form. Such calls for action have been heard over the past few years inside and outside Congress. If this were to occur, what would fill the void? We suggest a voluntary group com-posed of members of the public, medical doctors, manufacturers, and hospital administrators. One long-standing model, ASTM, comes to mind.

ASTM is a voluntary group that develops standards manufacturers follow voluntarily. The acceptance of such voluntary standards created by members of the public, industry, and government is so widespread that FDA routinely refers to them. What is ideal about this group is that there is no cost to the public, the group has the knowledge to review new technologies, and it reaches effective decisions. Members are experts in their fields and represent some of the best medical minds. This group has established itself as an effective nongovernment organization, through which testing, materials, and performance standards are established for all products. Perhaps FDA should be assigned to assist such an organization on compliance issues and to leave the establishment of standards alone.

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