FDA Faces the Budget Ax

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI April 1998 Column

WASHINGTON WRAP-UP

Budget cuts mean FDA must devise new strategies for medical device inspection and enforcement.

James G. Dickinson

Also:
FDA's New Power
63 Devices Deregulated

Medical device field inspection and enforcement programs took a 12.2% cut in FDA's 1998 budget, which was issued in January (although FDA's fiscal year started on October 1, 1997). These programs face the most severe cuts among all of FDA's activities, which cover food, drugs, cosmetics, veterinary products, and blood and biologic products as well as devices and diagnostics. In addition, budget funding for FDA device reviews was frozen at 1997 levels, which amounts to a reduction when cost of living and other adjustments are taken into account.

How the budget decrease will affect inspections was unknown at press time, but CDRH compliance director Lillian Gill suggested the cut would mean fewer and shorter inspections, new risk-based enforcement strategies, elimination of field-headquarters overlaps in processing product recalls, less travel, and more use of satellite- and videoconferencing to get her office's message out.

Ironically, on January 5—during the same week the cutback figures were issued—FDA's Office of Enforcement released a draft compliance policy guide that announced a crackdown on the commercialization of in vitro diagnostic (IVD) devices labeled for research use only or investigational use only.

How will heightened enforcement be possible on a reduced budget? Branch director Betty W. Collins said enforcement would be carried out through risk-based prioritization—which is likely to be the way most FDA enforcement is handled from now on.

In the case of IVDs, immediate regulatory action (beginning after the comment period closes on April 6) will be taken against the violative commercialization of products that

Also on the high-priority enforcement list are IVDs that lack adequate human-use data and IVDs previously in FDA's second-priority enforcement category whose manufacturer, importer, or distributor has failed to comply with labeling requirements, has failed to begin appropriate clinical studies as required, or has failed to obtain FDA approval or 510(k) clearance within the required 18- to 30-month period.

If FDA's 1998 budget is a sign of the times instead of a temporary deviation, a new era of innovative and very different public health protection measures has begun. These measures will most likely involve European-style third-party audits and certification at the host company's expense instead of conventional FDA regulatory inspections (see "FDA Hopes to Pilot Third-Party On-Site Inspections" on p. 19 of January's MD&DI). FDA will take a background, supervisory role, and its inspectors will rarely be seen on company premises unless a major and direct public health hazard or a felony is suspected.

Although FDA appears to be retreating from old-fashioned enforcement techniques, any impression that it is becoming weaker as a result may be balanced by a new power it received in December from Cleveland federal judge Solomon Oliver—the right to ask for a "disgorgement of profits" order against companies that market adulterated and misbranded medical products.

FDA brought a case against a father-and-son team, Paul M. Monea and Paul A. Monea, and their companies for refurbishing electric grill igniters and selling them as pain-relieving "stimulators." The two had sold 100,000 of the unapproved devices at $80 each. The agency asked for disgorgement of profits. Judge Oliver went one better and ordered restitution of the full price, not just the profits, to those who had purchased the products. Justice Department attorneys who handled this case said that the decision opens the door for FDA to seek the disgorgement remedy more often.

Until now, FDA believed it was futile to ask courts for restitution. In March 1995, when it tried to do so in U.S. v. Ten Cartons, Ener-B Nasal Gel, the trial judge cited a 1981 decision, U.S. v. Superpharm, which held that no such equitable remedies are available in FDA cases. The court of appeals agreed.

Times are changing, noted former FDA chief counsel Tom Scarlett (Hyman, Phelps & McNamara, Washington, DC): "In recent years, the courts have started paying attention to FDA cases. There's a willingness to try new legal theories."

Taking companies to court to set an example may become part of FDA's new, risk-prioritized, tougher-but-cheaper approach to enforcement.

The first major result of last November's FDA Modernization Act appeared in a January 21 Federal Register notice that exempted 63 Class II medical devices from the requirement to file a 510(k) premarket notification. FDA said in the notice that the exemptions would enable the agency to "redirect the resources that would be spent on reviewing such submissions to more significant public health issues."

Like all government policy changes, this one is subject to a comment period. In this case, the period will last 90 days (until April 21), after which FDA will consider whether the list should be modified.

The notice said that under the new law's section 510(m)(2), one day after the list was published, FDA

may exempt a device on its own initiative or upon petition of an interested person, if FDA determines that a 510(k) is not necessary to provide reasonable assurance of the safety and effectiveness of the device. This section requires FDA to publish in the Federal Register a notice of intent to exempt a device, or of the petition, and to provide a 30-day comment period. Within 120 days of publication of this document, FDA must publish in the Federal Register its final determination. If FDA fails to respond to a petition under this section within 180 days of receiving it, the petition shall be deemed granted.

The document exempts only those generic types of devices with characteristics that reasonably resemble those of other products already commercially available, as well as in vitro diagnostic devices for which a misdiagnosis resulting from their use would not be associated with high morbidity or mortality. The Federal Register notice about the Class II device exemptions is located at http://www.fda.gov/cdrh/modact/frclass2.html.

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