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The Worst-Case Scenario for the Medical Device Industry in the Supreme Court Healthcare Reform Case

The Worst-Case Scenario for the Medical Device Industry in the Supreme Court Healthcare Reform Case

Of the decisions the Supreme Court could issue on the healthcare reform law, a ruling to strike down the minimum coverage and Medicaid expansion provisions while allowing the rest of the legislation to stand would be the worst-case scenario for the medical device industry.

By UpstateNYer (Own work) [CC-BY-SA-3.0], via Wikimedia Commons.

The minimum coverage provision of the Patient Protection and Affordable Care Act (ACA) requires Americans to buy health insurance or face a penalty. Set to go into effect in 2014, it would effectively expand the market for medical device products, says Renee Landers, professor of law in Suffolk University Law School's Health and Biomedical Law Concentration. A ruling by the court to strike down the mimimum coverage provision but not the rest of the statute, which includes a 2.3% excise tax on medical devices, would be a double whammy for the industry.

“Not only would you have the tax, but you wouldn’t have the market expansion that the minimum coverage provision might provide,” Landers says.

Even worse would be the loss of the provision extending Medicaid to Americans under the age of 65 who are at or below 133% of the federal poverty level, says Richard Figueroa, director of health and human services at the California Endowment. Medicare recipients tend to have higher than average medical risk and are thus more likely to use the healthcare system, he says.

“If they also strike down the Medicaid provisions, that would reduce the healthcare market expansion quite a bit more severely,” Figueroa says.

The Supreme Court heard three days of arguments on the ACA back in March. The key questions before the court are:

  • Whether challenges to the minimum coverage requirement are allowed before the provision is actually implemented
  • Whether the expansion of Medicaid is allowed under the constitution
  • Whether Congress has the power to require citizens to buy healthcare coverage or pay a penalty if they don’t
  • If the minimum coverage requirement is unconstitutional, whether it can be severed from the rest of the law

Severability is the most important issue for the device industry, Landers says. If the individual mandate is declared unconstitutional and the justices rule it can be severed from the statute, the rest of the law, including the device tax, will remain in place. A ruling against severability would bring down the entire act—and the device tax with it.

“The court has a range of options, from nothing going down to just some of it,” Landers says. “How much goes down with the minimum coverage provision is anyone’s guess.”

Still, experts heard some clues in the justices’ questioning.

“[Antonin] Scalia, through his questioning seemed to be suggesting that he thinks if the individual mandate is unconstitutional, the entire law should be invalidated,” says Daniel O. Conkle, Robert H. McKinney professor of law at the Indiana University Maurer School of Law. “Other justices, for example justice [Ruth Bader] Ginsberg, seemed to be saying that the court should be very slow to … invalidate the entire law.”

Landers says Scalia was the only justice who seemed to hint that the mandate could not be severed from the rest of the act. Striking down the ACA entirely would be seen as a radical, activist move that would be hard for the court to justify, she says.

Alison Barnes, professor of law at Marquette University School of Law, also believes it’s unlikely that the court will invalidate the entire law.

“I don’t see the tax going down,” she says.

Neither AdvaMed nor the Medical Device Manufacturer’s Association, the medical device industry’s main trade groups, filed briefs in the case. AdvaMed spokesman Gary Karr says the organization hasn’t taken a formal position in the case.

“We really aren’t involved in this case at all,” he says, adding that while AdvaMed opposes the medical device tax, it supports other provisions of the ACA. AdvaMed’s efforts continue to focus on urging legislators to repeal the device tax, Karr says.

Jamie Hartford is the associate editor of MD+DI and MED. Follow her on Twitter at @readMED.

Weekly Vitals: Discrediting Consumer Reports' Claims Against the Medtech Industry, More Pacing Woes for St. Jude, and More

Consumer Reports was front and center in recent weeks as it slammed the medical device industry and the regulatory process, releasing a report with the sensational subhead: "Most medical implants have never been tested for safety." In response, our colleagues at MD+DI presented an interesting counterargument that refutes many of the reports' claims. Both reports are recommended reading for medical device industry professionals. In other news, St. Jude Medical experienced another blow in the wake of its much-discussed Riata lead recall in December, announcing this week that it would pull two CRT leads from the market because of similar risks associated with externalized conductors. Read about these stories and more in our weekly roundup below.

The Value of Electronic Health Records for the Life Sciences Industry

Outcomes-based reimbursement is the future of the health industry, proclaims a recent report from PricewaterhouseCoopers titled “Needles in a haystack: Seeking knowledge with clinical informatics.” And electronic health records (EHR) will likely play a central role in helping healthcare institutions improve patient outcomes and manage their financial performance. By the end of the year, the majority of U.S. healthcare providers are expected to implement EHR. And it is only a matter of time until pretty much all medical records are available on a digitized format.

“With respect to electronic health records, I think there is a tremendous promise in the data that is captured,” says Steve LoSardo, CIO Health Industries Advisory at PricewaterhouseCoopers (PwC). “Whether you are a payer, a provider, a pharma or med device company, it is the first time you can have access to data or information at the point of care.”

Understanding what happens in a physician’s office has been historically difficult for outside entities to understand. The paper records doctors have used traditionally make analysis of patient outcomes difficult. For that reason, understanding the true cost of patient care can also be a challenge.

By contrast, electronic health records are relatively simple to analyze— especially if you can integrate them and put them into some type of data warehouse or an analytical environment for clinical informatics, Lo Sardo says.

The key is that EHRs can provide an improved view of a patient’s experience. They make available information regarding when the patient came into and left the physician’s office, what symptoms they had, which drugs are devices were used in their treatment, whether they were admitted to the hospital, and so forth.

“So the promise for payers, providers, as well as pharma and medical device companies is to really understand what is happening in the clinical setting,” LoSardo says. This insight will lead to improved understanding of reimbursement.

For instance, in the case of a diabetic patient who goes to the doctor’s office, EHRs will keep track of what kind of drugs they were prescribed, whether they also received a glucose monitor, whether they worked with a case worker who helped them understand their disease. “Now all of the sudden, the cost of a disease is better understood,” LoSardo says. “That is something that payers are very interested in: understanding what is the cost of disease versus what is the cost of the drug or the device alone.”

The medical device and pharmaceutical industries will be interested in such information because they want to understand what the cost of treatment and comparative effectiveness of their product versus competitive products.

Providers can use such data to understand how their treatment of patients differs from how other physicians treat patients.

“There are a lot of different angles when looking at [EHR] data but it really comes down to the patient and really understanding all of the places the patient touches in the health system. And really the only place to see that is in these electronic medical records and electronic health records.”

Brian Buntz is the editor-at-large at UBM Canon's medical group. Follow him on Twitter at @brian_buntz.

How the JOBS Act Could Impact Medtech Startups

This week, President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law. The act is designed to make it easier for startups to raise capital. It could provide assistance for medtech startups struggling to raise funds. Entrepreneurs can now raise money from the general public (but are limited to $1 million per year) without registering with SEC. They can do so by going through crowdfunding platforms.

For medtech startups, such opportunities come at a perfect time, since they are increasingly struggling to raise funds. Ernst & Young's “Pulse of the industry – Medical technology report 2011" was released last fall and found investors are increasingly avoiding medtech investments considered to be risky. For example, funds raised during early venture rounds are decreasing and a few mature companies drove the total increase in investments in 2011, while startups are scrambling for funds.

In this environment, the opportunities in the JOBS act could provide benefits to the medtech industry; however the industry's unique characteristics pose several challenges. An article on MedCity News looks at how the nature of the medtech industry will make it more difficult for medtech startups to raise money from novice investors. For example, the slow path to FDA approval and market launch might make investors inpatient. The complexity of medtech products might also make it more difficult for these companies to compete for funds from the general public. Creating buzz around a product and using social media to market it will become even more important in this new funding environment.

Oscillating Gel Could Lead to Development of Artificial Skin

A team of researchers at the University of Pittsburgh (Pitt) and the Massachusetts Institute of Technology (MIT; Cambridge) have demonstrated that a nonoscillating gel can be resuscitated in a fashion similar to medical cardiopulmonary resuscitation. These findings pave the way for the development of new applications that sense mechanical stimuli and respond chemically--a natural phenomenon few materials have been able to mimic.

The material in question is known as Belousov-Zhabotinsky (BZ) gel, a material that was first fabricated in the late 1990s and shown to pulsate in the absence of any external stimuli. Resting in a petri dish, the gel can even resemble a beating heart under certain conditions.

Anna Balazs, professor of chemical and petroleum engineering at Pitt, predicted that nonoscillating BZ could be excited using mechanical pressure. This prediction was confirmed by MIT researchers, who proved that chemical oscillations can be triggered by mechanically compressing the BZ gel beyond a critical stress. A video of this phenomenon appears below.

"Think of it like human skin, which can provide signals to the brain that something on the body is deformed or hurt," says Balazs. "This gel has numerous far-reaching applications, such as artificial skin that could be sensory--a holy grail in robotics."

This Week in Devices [4/6/2012]: MDEA Finalists Announced; Google’s Project Glass; Virtual Dissection; What if Your Home was a Medical Device?

MDEA Finalists Announced

The finalists of the 2012 MDEA Competition can be viewed at

Google’s Project Glass Goggles.

By now you've probably seen Google's latest project. Clearly it promises some exciting things for the day-to-day consumer, even if they make the glasses ad enabled. But what about for the medical industry? Brian Buntz examines the potential of Google's Project Glass as a medical device.

Oddities from the Library of Medicine

Wired profiles the new book Hidden Treasure, a collection of fascinating and sometimes outright strange and disturbing medical devices from the National Library of Medicine.

Medtech Searches for Clarity in the Election Year.

In an extensive report for MD+DI, Maria Fonanazaa says the medical device industry just wants some clear direction when it comes to the key issues and the political conversation in 2012.

Your Home May Someday be a Medical Device

Everything else has a touch screen on it. Why not your floor? Livescience reports that IBM has recently been rewarded a patent to create a floor that is actually a giant multitouch display. Aside from a variety of other uses, IBM would like the multitouch floor to serve as a warning system in medical emergencies.

Virtual Dissection Table

From TED 2012: Jack Choi's company, Anatomage, has created a stretcher-sized, multitouch simulation of the human body that can be used to train medical students...or perhaps play 2012's version of the game Operation?



Obamacare and the Supremes: So, What Are the French Saying?

 Although French journalists are understandably absorbed by their own presidential election, which has incumbent Nicolas Sarkozy running neck-and-neck against François Hollande of the Socialist Party with far right candidate Marine Le Pen playing the possible spoiler, Judge Scalia's now-famous broccoli defense got the attention of Le Monde reporter Corine Lesnes. Under the headline “Les juges et le broccoli,” Lesnes recounts the recent Supreme Court hearing on the Affordable Care Act from a uniquely Gallic perspective.

Providing some context to her readers, who may not be intimately familiar with US-style rugged individualism, Lesnes writes: “In a country that does not have a [national] law forcing motorcyclists to wear a helmet, the very idea that the federal government could require citizens to buy something is seen as an assault on personal liberty.”

She notes that the hearings did not provide much in the way of clarity. Au contraire, they “brought to the fore the inability of a segment of society to think in terms of mutualité” (i.e., the common good). Republican judges are concerned that young people will be forced to subsidize the healthcare of older citizens, she writes, and this may rob them of a degree of personal freedom. Judge Ginsberg, she notes, was compelled to remind everyone that the principle of mutualité, as evidenced by the Social Security Act, harks back to the 1930s and is hardly a novelty in American life.

She also remarks, with a soupçon of irony, that the contentious Obamacare mandate actually originated with the Heritage Foundation think tank. The mechanism that largely funds healthcare reform and that may be declared unconstitutional was originally a Republican idea, she notes.

Fogarty Institute for Innovation Catalyzing Forward-Looking Medical Technology

Fogarty Institute for Innovation Catalyzing Forward-Looking Medical Technology

The U.S. medical technology industry is following a trajectory similar to the domestic automotive industry, observes Thomas Fogarty, MD, the winner of the MDEA Lifetime Achievement Award. At one point in time, not all that long ago, the United States was the global leader in the automotive industry. But in 2010, the European Union made more than twice as many cars than the United States did. And in that same year, China produced more cars than the European Union, according to data from the OICA.

Similarly, the United States, which has long been the leader of medical device innovation, is in danger of losing that title as well, with many companies taking product development activities and production offshore.

To help foster innovation domestically and to improve the lives of people around the world, Thomas Fogarty, MD, created the nonprofit Fogarty Institute of Innovation in 2006. The institute offers investors an environment that facilitates the cost effective development of technology to benefit patients worldwide. Based in the heart of Silicon Valley, on the campus of the El Camino Hospital (Mountain View, CA), the institute attracts entrepreneurs working on promising medical technologies and provides them with mentorship, access to clinicians, and free space to work and do research. In addition, the institute helps the entrepreneurs navigate legal, regulatory, financing, and business challenges. The institute recently launched a fellowship program to advance endovascular training and technology.

Thomas Fogarty, MD, shown here holding his namesake Fogarty catheter, holds more than 150 patents related to medical technology. 
The institute it is committed to fostering innovation in three key ways:
  1. Cultivation: providing onsite multi-faceted mentorship to cultivate innovative ideas that have the potential to make significant improvements to global healthcare. Mentors include Fogarty himself as well as a number of practicing physicians, business experts, executives from big-name and small medical device companies, and experienced medtech innovators. Clinical input.

    One of the first companies to benefit from this mentorship is HeartFlow, which graduated from the institute in 2010. The company, which is now based in Redwood City, CA and employs more than 80 people, has developed game-changing technology to evaluate coronary artery disease. The noninvasive technology uses coronary CT data to reconstruct a patient’s coronary arteries, identify blockages, and simulate blood flow. In so doing, cardiologists can understand how coronary disease affects blood flow through the arteries. This insight can help them understand which treatment will be most effective: a pharmaceutical approach, stents, or bypass surgery. The technology, once broadly deployed, is projected to obviate the need for nearly 1 million cardiac surgeries in the United States, potentially saving $16 billion in the process.
  2. Validation: The institute provides an efficient alternative to conventional clinical research by tapping into its relationship with the El Camino Hospital, which is located adjacent to the institute. Clinical research support is also offered by the Taft Center for Clinical Research, which manages clinical trial activities for El Camino Hospital. The Taft Center offers experience in a range of therapeutic areas.
  3. Education: The institute is committed to share insights related to the development of medical technologies to the medical community at large. The institute itself can only accommodate a few companies and entrepreneurs because of space restrictions.

Brian Buntz is the editor-at-large at UBM Canon's medical group. Follow him on Twitter at @brian_buntz.

Tharo Systems’ H-Series printers operate over USB 2.0

Presentation of MDEA Lifetime Achievement Award is doubly exciting

2011 saw a new award added to the roster of the Medical Design Excellence Awards (MDEAs)—the Lifetime Achievement Award. The bar for this new award is quite high. It honors an individual whose contributions during a long career have had a demonstrable impact on technological, business, and cultural advancements in medical devices. There was no question that the 2011 recipient, Alfred Mann, Chairman and CEO of MannKind Corporation, was worthy of the honor. Mr. Mann’s achievements were off the charts.

2012 brings us an equally worthy candidate, yet with a slight twist. Presenting this year’s Lifetime Achievement Award to Dr. Thomas Fogarty will be a man worthy of the award himself—Dean Kamen. The awards ceremony takes place on May 23, during the MD&M East conference and tradeshow in Philadelphia.

Dr. Fogarty’s accomplishments in the medical device industry include having founded or co-founded more than 33 medical companies. He holds 150 patents on surgical instruments, including the Fogarty balloon embolectomy catheter, which revolutionized vascular surgery. It became the first minimally invasive surgical device, and is still used today.

Circling back to Kamen, he’s been accurately described as an inventor, an entrepreneur, and advocate for science and technology. He has more than 440 U.S. and foreign patents and invented the first wearable infusion pump and the first wearable insulin pump for diabetes. The robotic "Luke" arm shown in the above video is another one of his inventions. So it’s a perfect fit for him to be presenting the award to Dr. Fogarty and it’ll be a real treat to have them both on the stage at the same time.

As an added bonus, Fogarty and Kamen will participate in a live Q&A panel lead by yours truly. The panel will be held at 2:30pm at the show.

Richard Nass