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AtriCure to Pay $3.76M for Medicare Fraud Allegations

According to the DOJ, AtriCure also allegedly promoted expensive heart surgery that used the company's devices when less invasive alternatives were appropriate, advised hospitals to up-code surgical procedures involving the company's products to inflate Medicare reimbursement and paid kickbacks to providers to use its devices, all in violation of the federal False Claims Act. The allegations against AtriCure were made in a lawsuit filed under the whistleblower provisions of the False Claims Act. The settlement was coordinated by the Justice Department's Civil Division, the U.S. Attorney's Office for the Southern District of Texas, HHS Office of the Inspector General and the FDA Office of Chief Counsel.

Vesta Introduces Kink-Resistant Tubing at MD&M West

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Vesta's kink-resistant medical-grade silicone tubing will be offered in sizes ranging from 1 to 6 mm ID.

Adding to its ExtruMed line of precision extrusion technologies, Vesta (Franklin, WI) is introducing a new method for manufacturing kink-resistant medical-grade silicone tubing, samples of which it presented at MD&M West 2010. The company's proprietary manufacturing platform enables the creation of kink-resistant tubing in an integrated manufacturing process, representing an improvement over current production techniques. The process for manufacturing the kink-resistant tubing has been in development for more than 12 months. The tubing consists of a silicone inner and outer layer, in addition to an embedded reinforcing member with a spiral wind that runs the length of the extrusion. Development samples have demonstrated strong process capabilities at 1.5 mm ID. "This new technology will offer our customers a cost advantage over current product designs while significantly increasing product performance and reducing the risk of product failure," comments Bill Woinowski, Vesta's R&D manager. The company expects to offer tubing in sizes ranging from approximately 1 to 6 mm ID, without durometer or tensile-member limitations.

VC Flurry in Q4 2009: Device Investment Down but Still Strong

Medical devices, a sector that has seen increased interest from investors during the latter part of the decade, collected $2.9 billion for 291 deals, down 18% from the previous year.

The healthcare industry collected more of venture capitalists' dollars than the IT industry making it the first year on record that IT was not the venture industry's leading investment sector. Healthcare garnered $7.7 billion which was put into 701 deals in 2009, a 14% drop from the previous year. In the fourth quarter, Healthcare companies raised $2.1 billion in 207 deals, a 15% increase from the same period last year. 

Biopharmaceuticals companies remained the biggest draw in the Healthcare industry as investors put $4.2 billion into 302 deals, an 11% drop from the previous year.

How To Avoid Off-Label Device Promotion

Severe legal penalties await companies that promote the use of their medical devices for procedures unapproved by FDA. Federal law prohibits such off-label promotion, but the practice occurs frequently in the medical technology and life sciences industries.
 
Companies engaging in off-label marketing face regulatory, civil, and criminal consequences. A case involving Pfizer and the promotion of its antiinflammatory drug, Bextra, in 2009 illustrates the severity of the penalties involved. The company settled the case with the government for $2.3 billion, and two company executives were facing prison time in connection with the case.
 
In recent years, most of the enforcement actions for off-label promotion have been focused on drug companies. However, FDA, the United States Office of Inspector General (OIG), and the Department of Justice Department are increasingly paying attention to off-label promotion in the device industry, signaling that device companies may eventually receive the same level of scrutiny as their pharmaceutical counterparts.
 
This article will help company executives understand the practices that constitute off-label promotion and its legal pitfalls. The aim is to better equip device companies to prevent off-label promotion and thus avoid fines and, potentially, prison sentences.
 

Express Or Implied

Put simply, FDA prohibits companies from marketing medical devices for uses that the federal agency has not approved. Off-label promotion comes in two forms—marketing a device that has not received FDA approval and promoting an approved device for an unapproved use.
 
Off-label promotion can be explicit or implicit. Explicit off-label promotion occurs when a manufacturer makes direct claims about a product to promote it for an unapproved use. Implicit off-label promotion occurs when a manufacturer indirectly suggests that a device is appropriate for an unapproved use.
 
For example, in 2000 a medical device company that manufactured a product cleared for use as an adjunctive diagnostic screening device for detecting breast cancer received a Warning Letter from FDA. The reason? The company’s promotional materials, including its Web site, implied that the device could be used as a standalone test for breast cancer. Among other things, FDA noted that the company’s Web site compared its product to traditional screening methods such as mammograms and suggested that its product was superior. FDA concluded that the comparison was misleading and constituted off-label promotion, since it implied that the company’s device could be used for something for which it had not been cleared.   
 
Both express and implied off-label promotion violate federal law. The federal Food, Drug, and Cosmetic Act (FDCA) prohibits the “adulteration or misbranding” of any device or drug.1 Under the law, a drug or device is deemed misbranded if its label does not bear “adequate directions for use.”2 Because the labels on a device or drug relate only to approved uses, when either is promoted off-label its label does not bear adequate directions for the promoted use. Therefore, the drug or device is misbranded. For this reason, off-label promotion is illegal. The criminal penalties for such off-label promotion can include incarceration and heavy fines.
 

Promotion Versus Use

Off-label promotion must not be confused with off-label use. The FDCA expressly states that FDA is not permitted “to limit or interfere with the authority of a healthcare practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease within the legitimate health care practitioner-patient relationship.”3 That means physicians are free to use approved devices for unapproved uses—and, indeed, they frequently do.
 
The off-label use of devices may be common in certain patient populations such as children, for example. Historically, the availability of approved pediatric devices has been limited because children are often excluded from clinical trials. Consequently, pediatric surgeons use devices off-label out of necessity. 
 
Any statement made to a third party may be deemed a promotional activity. Frequently, statements made by sales representatives to customers result in problems for manufacturers. However, manufacturers can engage in off-label promotion through various other promotional mediums. FDA and other government agencies may look at the following information sources to determine whether off-label promotion has occurred:
 
  • Marketing materials, such as Web sites, sales brochures, direct-to-consumer advertising, and press releases.
  • Training materials that are presented by the company at professional conferences.
  • Submissions to government agencies made in support of device reimbursement.
  • Securities filings that include information about a product’s research and development or regulatory status.
  • Internal corporate documents that reflect a marketing strategy based on selling a product for off-label uses.
 
Using Physicians To Promote Devices. Companies sometimes use physicians to help them promote their products. For example, a company may invite a physician to present educational information about a product at a conference. While there is nothing wrong with this practice per se, a company can wind up in trouble with FDA if its physician-representative presents information about an unapproved use of the product.
 
As noted ealier, the FDCA includes a practice-of-medicine exemption that allows physicians to use devices in any manner they see fit, including off-label. However, this exemption applies only in the context of a legitimate doctor-patient relationship. As such, off-label promotion can occur when a physician who is representing a manufacturer provides off-label information to members of the general public such as the audience at a conference.
 
Sometimes off-label information is presented at conferences, however. Physician conferences are not subject to FDA oversight. As such, information about the off-label use of a device or drug is a permissible topic for discussion. In order for the presentation to be lawful, though, the conference must be independent from the manufacturer. This means that a physician who presents off-label information must not be a representative of the manufacturer. Further, the manufacturer must not have influence over the conference content or attendees or have any sponsorship role at the conference.
 
In December 1997, FDA published “Final Guidance on Industry-Supported Scientific and Educational Activities” to help companies distinguish between the lawful and unlawful presentation of off-label information at conferences. The document is available on FDA’s Web site.
 
Providing Information To Physicians. In some instances, an off-label use of a drug or device may be the medical standard of care. As noted previously, off-label uses are common in the treatment of children. It is possible that a physician’s failure to use a drug or device in an off-label manner constitutes medical malpractice. For this reason, FDA allows companies to provide physicians with information about unapproved uses under certain circumstances. These include:
  • Scientific and medical journals. Manufacturers may provide physicians with scientific and medical journal articles that discuss off-label uses of a product. However, to do so legally, companies must adhere to a strict set of rules developed by FDA. In January 2009, FDA published “Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices” (often referred to as “Good Reprint Practices Guidelines.”) These practices set forth the requirements for journal articles and the conditions under which they may be distributed. Consult the FDA Web site for a copy of the guidelines.
  • Inquiries from physicians. The FDCA permits manufacturers to respond to unsolicited inquiries from physicians about off-label uses. The response to any such inquiry must be balanced—or include information about both the risks and benefits of the off-label use—and commensurate with the scope of the question. Occasionally, companies get into trouble when FDA determines that sales personnel have, in fact, encouraged “inquiries” from physicians. Any inquiry must genuinely originate with the physician in order for the company to respond legally.
 

Regulatory and Civil Liability

Both the OIG and Department of Justice prosecute off-label promotion cases. As noted above, device companies promoting off-label use face regulatory and civil liability. These consequences include:
 
  • Untitled and Warning Letters. FDA issues an untitled letter to inform a company that it must cease a prohibited activity; FDA issues a Warning Letter when the company fails to address its concerns. FDA is still seeking voluntary compliance with a Warning Letter, but it is intended to do what its name implies: Warn a company that FDA is moving toward prosecution.
  • Corporate Integrity Agreements. A Corporate Integrity Agreement (CIA) results from negotiations between the OIG and a company after the OIG investigates suspected wrongful conduct such as off-label promotion. The CIA sets forth the actions the company will undertake to correct the alleged wrongful conduct. The typical term for a CIA is five years.
  • Deferred prosecution agreements. Sometimes companies that promote off-label use enter deferred prosecution agreements with the Department of Justice. Such agreements allow companies to avoid indictment, trial, and conviction, although they must concede liability and waive certain rights. The government files charges but then holds them in abeyance while the company implements certain agreed upon corrective measures, such as the adoption of a compliance program, over a specified period of time. A deferred prosecution agreement could be described as “corporate probation.”
 
Product Liability Implications. With respect to product liability, off-label promotion can negatively impact a manufacturer’s ability to defend itself against a lawsuit brought by an allegedly injured plaintiff. Most significant, a plaintiff can claim that a company acted negligently when it failed to seek FDA approval for a particular use. The company may not be able to explain why it actively encouraged doctors to use its product for uses that FDA did not approve. Additionally, a company with a history of off-label promotion may find its defensive position further impaired.
 
Promoting off-label device use may preclude a device company from using legal defenses that are typically available in product liability actions. For example, the “learned intermediary defense” and “federal preemption,” two legal arguments that both device and drug companies often rely on to mitigate liability, are compromised.4
 

Prevent Off-Label Promotion

Many device manufacturers know that off-label promotion is prohibited by law but sometimes find it difficult to identify and prevent the types of conduct that constitute off-label practices. For this reason, companies should implement compliance programs aimed at preventing off-label activities. Training employees to spot off-label promotion, avoid engaging in it, and report it to management is fundamental to any off-label compliance effort (see the sidebar, "A Fracture Warning").
 

References

1.     21 USC § 331(b).
2.     21 USC § 352(f).
3.     21 USC § 396.
4.     A white paper on off-label promotion and articles on federal preemption and the learned intermediary defense are available at www.medmarcprotect.com.
 

Sara E. Dyson, Esq. is the loss control manager for the Medmarc Insurance Group, Chantilly, VA. She may be reached at [email protected]. 

Case Study: A Fracture Warning

FDA determined that the company was promoting the device with the training materials, and the promoted use was unapproved. FDA issued the company a Warning Letter for off-label promotion.

Return to "How To Avoid Off-Label Device Promotion."

Scientists' Metal Foam Could Replace Rigid Materials in Medical Implants

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With a modulus of elasticity similar to that of bone, metal foam may replace rigid materials such as titanium in medical implants.

Researchers at North Carolina State University (Raleigh) have developed a "metal foam" material that exhibits similar elasticity to bone. The material could eventually be used in a new generation of biomedical implants, preventing the bone rejection that often results from more-rigid implant materials such as titanium. Lighter than solid aluminum, the metal foam can be made of 100% steel or a combination of steel and aluminum. In a paper titled "Evaluation of Modulus of Elasticity of Composite Metal Foams by Experimental and Numerical Techniques" published in Materials Science and Engineering: A, L. Vendra and Afsaneh Rabiei report that the foam's modulus of elasticity--the measurement of a material's ability to deform under pressure and then return to its original shape when the pressure is removed--is similar to that of bone. While bone has a modulus of elasticity between 10 and 30 GPa, titanium has a modulus of approximately 100 GPa. In contrast, the new metal foam has a modulus that is consistent with bone. In addition, the porous, light-weight material exhibits high-energy absorption capability, and its rough surface fosters bone growth into the implant, improving the implant's strength. Modulus of elasticity is important for biomedical implants, says Rabiei, an associate professor of mechanical and aerospace engineering and an associate faculty member of biomedical engineering at NC State. "When an orthopedic or dental implant is placed in the body to replace a bone or a part of a bone, it needs to handle the loads in the same way as its surrounding bone," she explains. "If the modulus of elasticity of the implant is too much bigger than the bone, the implant will take over the load bearing and the surrounding bone will start to die." This characteristic, the scientist adds, causes the implant to loosen and results in failure. The researchers' composite foam can prevent this phenomenon, known as "stress shielding." For more information on this technology, see "New Material Mimics Bone To Create Better Biomedical Implants" from the NC State newsroom.

Industry Gears Up for 510(k) Changes

But that hasn't stopped the newly formed Minnesota Medical Device Alliance from scheduling its own discussion today about the 510(k) program. A steering committee for today's meeting in Minneapolis includes CEOs from several local start-up companies, device entrepreneurs, legal experts, and venture capitalists.

ASG and Sebra Show Off First Fully Automated Catheter Tipping System

A new system by ASG Medical and Sebra is being touted as the first fully automated product of its kind.

A new system by ASG Medical and Sebra is being touted as the first fully automated product of its kind.

As we mentioned on Friday, many companies wisely plan product launches to coincide with MD&M West in order to generate buzz and to get the technology in front of potential customers. Taking this approach, Sebra (Tucson, AZ) and ASG Medical Systems (West Palm Beach, FL) unveiled their automated tipping system (ATS) at the show last week, which they claim is the first fully automated device of its kind. "The automation that ATS provides, such as the loading of catheters and cutting and loading of the separate soft tips into the tipping process, have always been separate, manual processes," says Dan Woodward, general partner and director or technology at ASG. Such automated capabilities, the companies note, translate into cost savings by reducing labor costs and performing multiple processes per part. Combining ASG's competencies in automated catheter, guidewire, and tube fabrication equipment with Sebra's skill set in radiofrequency (RF) catheter manufacturing systems yielded the ATS. More specifically, the ATS draws from Sebra's Saffire RF tipping technology and ASG's Accu-Cut tube cutting and Accu-Feed tube feeding-technologies to provide a fully automated catheter-tipping process. Capabilities of the system include necking and flaring; singulation; assembly; precision cuts to length; and thermal bonding of two catheter materials for soft-tip applications. In addition to being intuitive and user friendly, the system produces clean, square cuts and precise lengths, according to the manufacturers. It also features a high-resolution touch screen interface and does not require operator data entry.

Flex Fuels Energy to Focus on Device Sector

Last week, Flex announced that it is in advanced negotiations to invest into point of care (POC) diagnostics. POC testing accounts for around a third of the US$30 billion global in-vitro diagnostic testing market.

The medical device target owns a suite of patents and patent applications for its technology, which are intended to be developed into a range of hand held POC and self-testing devices and technology for licence to global manufacturers and distributors. 

The MX Q&A: QED’s Hiroyuki Fujita

 

Hiroyuki Fujita
Credit QED’s breakthrough technology and Fujita’s management philosophy for the company’s rapid growth. The start-up manufactures a patented detector used in MRI machines made by Toshiba and Siemens. The detector measures atypical water distribution in the patient’s body and creates computer images to depict early-stage cancer and stroke risk, according to the company. The small coil speeds up scanning time, provides crisp images, and reduces the time patients need to spend in noisy MRI machines, the company says.
 
Fujita says it took between 1 and 1½ years for him and his Case Western colleagues to develop the RF coils and “ultracompact” MRI preamplifier that augments the signal sent by the patient’s body. QED’s innovations led Forbes to select the company as one of 20 firms on the magazine’s Most Promising Companies list in 2009.
 
QED is in the process of raising $10 million to expand into Asian healthcare markets and develop a new, diversified business line. Fujita invested his own money to seed QED, and he made the early decision to develop the company with grant funding instead of venture capital.
 
Fujita received a doctorate in physics from Case Western and worked as a staff scientist for Picker International, a manufacturer of MRI and CT scanners. He then managed the R&D department at USA Instruments before becoming director of engineering for GE Healthcare. Fujita patented his detector design in 2005. In 2006, he started Quality Electrodynamics while working as director of imaging physics at Case Western.
 
MX: I understand you’ve financed your company through grants instead of venture capital funds. How much seed money did you start with?
Hiroyuki Fujita: We started with $500,000. We received the initial support to develop QED from the Wright Center for Biomedical Imaging, which received significant funding from Ohio’s Third Frontier Program. The Third Frontier Program is designed to build world-class research programs, nurture early-stage companies, and foster technology development in Ohio in key sectors, including biomedical.
 
Why did you take this path to growth, and which organizations provided the
grants?
I wanted to grow the business my way based upon my belief. VCs often go for return on investment within a short period of time, and my vision for business is not a short-term one. Following the initial support we received above, we also received funding from Siemens Healthcare and Toshiba Medical Systems Corp. in the form of nonrecurring engineering costs to develop new-generation MRI radiofrequency coil products, as well as grants from the National Institutes of Health and the State of Ohio.
 
What are the benefits and drawbacks of using grant money?
The benefits are clear. As long as you fulfill the goals you describe in your grant proposal, you are good to continue. The drawbacks are that it often takes a long time to prepare a grant application, apply for it, and await the funding decision. Furthermore, there are no guarantees that you will be awarded the grants you apply for, so it is an unpredictable source of financing.
 
How much of your own money did you invest in QED?
I invested roughly $200,000.
 
What did you learn from your previous experiences as a professor, researcher,
staff scientist, and engineering director that helped you when you launched
Quality Electrodynamics?
I learned a great deal from my previous experiences, which helped prepare me to lead QED. My philosophy is “one step at a time.” Everything is a sum of all the steps that have been taken and accumulated. My past experiences provided me with a well-rounded orientation to approach the problems and challenges that face me and have made me what I am today.
 
You have a doctorate in physics and worked as an engineer. What are the
challenges of adapting your skill set to running a company?
Having a background in physics is helpful because the discipline teaches you to scientifically and methodically approach problems to develop sound solutions. My deep knowledge in physics combined with other previous “real-life” experiences in the industry and my personal belief in doing the right thing as a human being enables me to successfully run this company with my team.
 
What did you learn at Picker International that you were able to use before
patenting your detector design in 2005?
I was trained as a physicist before joining Picker International as a staff scientist. So I learned a great deal from an engineering and manufacturing perspective at Picker International.
 
Your customers include direct competitors Toshiba and Siemens. Is it hard to
attract competing firms, and what concerns do these firms have in dealing with
the same supplier?
It’s a fair question. I don’t think it’s difficult to attract competing OEMs since they know that they can trust me and our company. At the end of the day, everything comes down to mutual respect and trust. We strictly protect our customer’s information. For example, we do not share Siemens information with Toshiba and vice versa. This comes down to the trust Siemens and Toshiba have in me as well as QED’s reputation and integrity.
 
What effect did making the Forbes list of promising companies in 2009 have
for your company?
I knew Forbes was one of the most respected business publications in the world but did not realize how influential it truly is until QED was featured in its pages. Many potential investors and VC firms called us once the Most Promising Companies list was published. Also, I was traveling extensively for QED last October when this issue appeared and saw it in every airport. That really drove home the point of how far Forbes’ reaches and how visible your company becomes if it is featured. Being in Forbes was an effective and influential advertisement for us.
 
How much time did it take to develop your breakthrough technology?
It took roughly 1 to 1½ years to develop our state-of-the-art high-channel-count MRI RF coils and the ultracompact MRI preamplifier that amplifies the signal received from the patient body. Additionally, we had to officially qualify our company as a medical device manufacturer with ISO 13485, FDA, and Japan’s Ministry of Health, Labor, and Welfare (MHLW) in our startup stage before we were able to sell and distribute our products. For the first 1½ years, we were intensely focused not only product development but also obtaining the necessary registrations and approvals to conduct business globally. These certifications are also required to do business with our key customers.
 
What was the most difficult aspect of developing the detector technology?
The number of components in our product can range from 200 to 2000, and all of them must work correctly for our product to function properly. On top of that, we have to be able to make thousands of products consistently from one unit to the next, making sure they are safe to the best of our knowledge and comply with all appropriate standards and regulations such as FDA, CE, and MHLW. Thus, the most difficult aspect of developing the detector technology is to develop the product in a year or so while meeting the highest device performance criteria and assuring the best patient safety and cost performance.
 
What was the germ of the idea for the technology?
The entire MRI industry was seeing the trend of increasing the number of receiver channels on the MRI scanner to accelerate the scan time. As a result, we developed our higher-channel-count MRI RF coils to support the industry trend and enable the emerging technologies.
 
So, just how much faster is the scan time than in a traditional MRI process?
By designing a high-channel-count MRI RF coil, one can improve the temporal resolution in MRI. For example, our 15-Channel Knee Coil for Siemens Healthcare can reduce the scan time by more than 50% compared with a traditional knee coil.
 
How did QED grow so quickly, particularly in this economy? What are the
benefits and drawbacks of growing fast in three years?
I believe that all good companies that are destined to be successful in the future will grow very quickly in the first three years or so because they are energetic, have solid product ideas, and have committed customers. Our partnerships with Siemens and Toshiba led to ongoing, critical projects that maximize our resources. As a result, we were able to add necessary expertise and resources in this tough economy.
 
What I often share with my colleagues at QED is that a company must grow with structure, or it will be out of control. This “structure” to me is the philosophy of the company. As our team has worked to build QED, I always emphasize the importance of ethical leadership, that is, “doing the right thing as a human being.” My role model is Kazuo Inamori, founder of Kyocera Corp. and KDDI in Japan. The values of ethical leadership, and Mr. Inamori’s example of leadership as well as his entrepreneurial achievements and commitment to society, serve as an inspiration to us all as we continue to build QED.