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Articles from 2012 In June

TAVR on the Global Stage

The potential is high for TAVR adoption in emerging markets, according to Venkat Rajan, an analyst at Frost & Sullivan. “It is, however, coming in at a higher price point than traditional valves,” he says, which might limit adoption outside of Western Europe, Japan, and the United States. “But, over time, you can definitely have significant utilization outside of those geographies,” he adds. The relative ease of use of TAVR products bodes well for their global adoption. “It is an interventional approach that is pretty straightforward, so [it could be performed] by an interventional cardiologist or cardiac surgeon or even some other interventionist,” Rajan says. “In some of these emerging markets, where maybe they don’t have full cardiac surgery capabilities, you could see a technology leap.”

The largest share of the TAVR market currently is in Europe and is controlled by Edwards and Medtronic, although a number of other companies are vying for market share. As many as 30% of European patients with aortic stenosis are treated with TAVR, according to Keith Dawkins, MD, global chief medical officer for Boston Scientific. The Millennium Research Group (MRG) predicts the European market will grow at just under 20% per year through 2015. Germany boasts the largest number of TAVR procedures. Because Germany is a maturing market, MRG estimates that growth will hover around 12% through 2015. By contrast, the TAVR market in France is expected to exceeding 30% in average growth rate in the next few years. There were restrictions on the use of TAVR in France, resulting in pent-up demand among patients eligible for the procedure.

Sapien and CoreValve, both of which debuted in Europe in 2007, are the most mature TAVR technologies. Edwards launched the second-generation Sapien XT valve in Europe in early 2010. That product was developed to treat a wider patient group and to reduce vascular complications; it features a lowerprofile delivery system than the first generation of the device.

The New TAVR Frontier

The United States represents TAVR’s next conquest. Investment banking firm Canaccord Adams estimates that the U.S. transcathether valve market could be worth $2.5 billion. At present, Edwards has a lock on the U.S. market, as its first-generation Sapien device is the only TAVR product approved by FDA, but it has been indicated for a specific subset of patients.

Medtronic is now conducting a U.S. pivotal trial for CoreValve to lay the groundwork for regulatory approval in the country. “There are two studies within the trial—the extreme risk study was completely enrolled in January. And we expect the high-risk study to be completely enrolled sometime later this summer,” says Kathleen Janasz, director of public relations, cardiac and vascular group at Medtronic. “We anticipate the CoreValve could be approved by FDA in 2014.”

FDA first approved Sapien in November 2011, when it cleared the way for its use via transfemoral delivery in inoperable patients with severe symptomatic aortic stenosis. FDA’s decision to approve the Sapien device could substantially open the market for TAVR, assuming that the indications for use continue to expand. According to analysts' estimates, the U.S. market for these devices could be as high as 100,000 patients per year.

When Sapien was first approved for commercial use in the United States, the device was already available in 41 countries. FDA’s decision to approve the device boosted Edwards’ transcatheter valve sales 67% in the first quarter of 2012 to $122 million, explained Michael Mussallem, chairman and CEO in a statement.2 At the time of writing, Edwards declined to be interviewed; the company stated that it was in a “silent period” as it awaits FDA’s decision to expand the Sapien’s indication to patients at high risk to open-heart surgery.

The Legal and Competitive Landscape

Medtronic and Edwards have been battling one another in the courts, with each side accusing the other of patent infringement related to TAVR. In one case, a judge at the Delaware District Court awarded Edwards $73 million but dismissed its attempt to block Medtronic from marketing the CoreValve in the United States. Medtronic plans on appealing that decision.

“The litigation between the two companies is also notable because of the sheer number of cases filed against one another.”
—Nathan Lowenstein, a partner at Goldberg, Lowenstein & Weatherwax LLP

Speaking on that case, Nathan Lowenstein, a partner at Goldberg, Lowenstein & Weatherwax LLP (Los Angeles) says that “$73 million is certainly a large number. It’s in the top 10% of patent jury verdicts for cases between January 1, 2005 and December 4, 2011. Of course, Medtronic has a market cap of $39.84 billion, so it is all relative,” he adds. “The litigation between the two companies is also notable because of the sheer number of cases filed against one another.”

The bigger threat in patent litigation relating to the medical device industry, however, is often not monetary damages—which can be significant—but rather the possibility of an injunction, Lowenstein says. “That being said, some courts have been reluctant to grant injunctions in cases involving medical devices, such as in the Edwards/Medtronics case,” he explains. “If a patent dispute results in a running royalty on a device whether by settlement or otherwise, the royalty may affect the product pricing or the profit seen by the manufacturer."

Another consideration for both Sapien and CoreValve is the steep learning curve for physicians. A study at the Mayo clinic reported that physicians may need up to 30 procedures before they achieve proficiency. Valve positioning depends largely on the physician, and the valves are not repositionable, which makes optimal positioning of the devices critical. In addition, the two devices are susceptible to paravalvular leak after implantation. Boston Scientific hopes to address those issues with its Lotus valve, which is designed to minimize aortic leaking and is both fully repositionable and retrievable prior to release.

Also competing in the European market are the German firm JenaValve Technology and Swiss-based Symetis, both of which received a CE mark for their TAVR products in late 2011. Other players looking to enter the market include Direct Flow Medical and Heart Leaflet Technologies. Medtronic is also readying its Engager device to expand its European product portfolio. Some of the smaller TAVR players could ultimately be acquisition targets for big device companies looking for growth opportunity.

Meanwhile, Edwards is working on Sapien 3, its next-generation balloon-expandable valve that is designed to reduce paravalvular leaks. The company is also developing a low-profile, repositionable self-expanding valve that makes use of a motorized delivery system to enable deployment by a single clinician.

Other players looking to enter this market include St. Jude Medical, whose Portico valve has been generating some buzz. “They are someone to consider as being highly competitive, given their size and their presence in other valve markets,” Rajan says. “Boston Scientific is another interesting competitor because it wasn’t in the traditional valve segment,” he adds. “They don’t do the mechanical and traditional tissue valves. But they saw this as enough of an opportunity that they made some strategic acquisitions, and they have a product that is being evaluated.”

FDA Clears Path for Wider Use of TAVR

At present, FDA has approved TAVR only for patients with severe aortic stenosis who are deemed inoperable. On June 13, 2012, the agency’s Circulatory System Devices Panel voted 11–0 to expand the indication for the Sapien to include high-risk patients with severe aortic stenosis who are deemed suitable for surgery. One panel member abstained from voting.

“I sometimes feel like I should get the Nobel Peace Prize for this [decision], and I don’t mean to negate the people who actually did earn a legitimate Nobel Peace Prize.”
—Louis Jacques, MD, director, Coverage and Analysis Group at CMS

“It is pretty clear that [the Sapien] is likely to be expanded now to the more broad claim,” says Jonathan S. Kahan, a partner at Hogan Lovells (Washington, D.C.) who specializes in FDA-related matters pertaining to medical devices. “I think there is still a lot of concern about the risk of stroke, but this product has been on the market overseas for a number of years; I congratulate FDA for finally coming to their senses on this. Obviously, the postmarket studies are going to be critical here but, right now, it looks like the benefits outweigh the risks,” he says. “I think the only question will be whether there will be adoption in the medical community now or whether it will take some time for people to get comfortable with this [technology].”

A Watershed Reimbursement Decision at CMS

CMS announced its first TAVR decision on May 1, 2012, explaining that it would cover the Sapien transcatheter heart valve for Medicare patients under limited conditions for current and future FDA-approved indications.

Scott Gottlieb, MD
 “There are a lot of aspects to this coverage decision that are unprecedented from a policy standpoint,” says Scott Gottlieb, MD. 

The CMS reimbursement for the Sapien depends on a range of criteria including a face-to-face patient evaluation by two or more cardiac surgeons. The coverage requires that a multidisciplinary team of surgeons and interventional cardiologists perform the procedure. It also specifies the types of facilities that may apply for reimbursement, requiring the institution to have a heart-valve surgery program with a cardiac catheterization lab or a hybrid operating room with appropriate imaging systems.

The CMS coverage decision is one of the first to be completed under a mutual memorandum of understanding between CMS and FDA, which aims at streamlining reimbursement decisions for life-saving new technologies. “This decision is particularly important as it highlights cooperative efforts among CMS, the U.S. Food and Drug Administration, the Agency for Healthcare Research and Quality, medical specialty societies, and the medical device industry,” explained CMS acting administrator Marilyn Tavenner in a statement.

The final decision was by no means easy to reach, however. “I sometimes feel like I should get the Nobel Peace Prize for this [decision], and I don’t mean to negate the people who actually did earn a legitimate Nobel Peace Prize,” said Louis Jacques, MD, director, Coverage and Analysis Group at CMS in a meeting organized by the Society of Thoracic Surgeons. Reaching a decision involved obtaining consensus between “about eight different parties who could all agree on maybe 60–70% but who had very strong opinions about the remainder.”

Speaking on behalf of FDA at the aforementioned meeting, Bram Zuckerman, MD, director of the FDA division of cardiovascular devices explained that the multiparty collaboration behind the CMS’s decision represents “a new paradigm” that reflects the needs of the 21st century.

It remains to be seen whether the decision marks the beginning of a new reimbursement paradigm at CMS. However, it was “watershed in many ways,” according to Scott Gottlieb, MD, a resident fellow at the American Enterprise Institute who previously served as a senior policy adviser at CMS. “There are a lot of aspects to this coverage decision that are unprecedented from a policy standpoint,” says Gottlieb.

For instance, the decision marks the first time CMS has required coverage with evidence development for the labeled indication. The clinical trial will monitor patients who have received the TAVR technology for at least one year to monitor their incidence of death, strokes, death, heart attacks, and so forth. “For the first time, they are requiring rigorous postmarket studies— not just registries for the unlabeled uses,” Gottlieb says. “They are requiring manufacturers to pay for the studies, even though they are turning it over to a third party to do.” Such studies would presumably be used to expand the label, he explains, “so now the manufacturers are going to have to try and negotiate how they both satisfy FDA and CMS at the same time."

CMS plans on convening a Medicare Evidence Development & Coverage Advisory Committee meeting in roughly two-and-ahalf to three years to look at forthcoming clinical data related to TAVR. “We will know everyone who has had the procedure,” Louis Jacques said. “We will know certain big outcomes whether that is hospitalization, death, stroke, whatever.”

Looking to the TAVR Future

Future generations of the devices must address risk of strokes, vascular complications and aortic insufficiency, which were side effects for some patients implanted with early versions of the valves. In addition, questions regarding the valves’ durability compared with those implanted by open-heart surgery must be answered. If those goals are met, TAVR could become the standard of care for replacing heart valves and could even be used for treating low-risk patients.

The TAVR market is likely to be strong in the long term, potentially outpacing demand for other cardiovascular products such as stents, balloons, and pacemakers. “I think it definitely has a strong long-term opportunity,” Rajan says. “You have all of these factors that are well profiled in terms of the addressable patient population who currently are not qualified for valve replacement.”

Looking forward, as more clinical evidence and information becomes available on transcatheter valves, the procedure will likely become safer and more widespread. Rajan predicts that future generations of TAVR technology will address some of the “glitches” of existing products. “But, ultimately, TAVR likely won’t completely cannibalize the traditional valve market,” he says. “If a patient is healthy enough, ideally he or she should be getting one of the traditional valves. Given the dynamics of TAVR in terms of ease of implantation, however, it is a significant opportunity,” says Rajan.

"Ultimately, TAVR likely won’t completely cannibalize the traditional valve market."
—Venkat Rajan, Frost & Sullivan

As for which company has the competitive advantage in the TAVR market, it is hard to overlook the sizable head start of the Sapien in the United States. “Edwards should be predicted to hold onto its market share over time. In the years to come, the big TAVR players could go into a price war to steal and recapture that share, which also might increase adoption of the technology,” says Paul Stein, president at SoCal Preclinical Services (Santa Ana, CA).

Venkat Rajan agrees that the cost of the technology will likely come down, spurred by competition among the big players. “But with regards to competition and price, I think price affects these high-end implants only to a degree,” he explains. Ultimately, the selection of TAVR devices will likely be largely based on clinical outcomes. “Sometimes it is hard to compare trial data for one product to another,” Rajan says. “But anything that comes out that shows that one is easier to implant, is safer, has lower complication rates, [and provides] better long term survival, that is probably going to impact the market more.” As with the stent market, Rajan says, the company that ultimately wins the largest share of TAVR market will be the one with the best long-term clinical trial information.


1. Transcatheter Aortic-Valve Replacement, [online] (Waltham, MA: New England Journal of Medicine, [September 8, 2011]); available from Internet:
2. Edwards Lifesciences Corporation’s CEO Discusses Q1 2012 Results - Earnings Call Transcript, [online] (Seeking Alpha); available from Internet: s-ceo-discusses-q1-2012-results-earnings-call-transcript

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Effective Outsourcing Compliance Strategies

The economic downturn, the surging costs of healthcare and the shift of the aging population from private to public insurance are key factors straining the healthcare system in the United States. The urgency to respond to this crisis has served as a catalyst to expedite and prioritize legislative activities focusing on reform. While the industry continues to be heavily scrutinized by enforcement agencies, pharmaceutical and medical device manufacturers are overwhelmed by the sweeping reform legislation. The new wave of regulations has created turbulent times and obstacles for compliance departments. Investing in outsourcing services for establishing and maintaining a corporate compliance program are crucial to sustain growth. This article focuses on innovative, tailored strategies and considerations for outsourcing compliance.

Legislative and Enforcement Trend

Over the past two years, the DOJ and state attorneys general (AGs) have been aggressive in investigating healthcare fraud and abuse. Amendments added in May 2009 expanded the scope of liability of the False Claims Act (FCA), the tool most commonly used to recover damages and penalties. Concurrently, the Health Care Fraud Prevention and Enforcement Action Team (HEAT) formed a collaborative effort between HHS and the DOJ to combat fraud, waste, and abuse.

Often, violations result in hefty CMPs and include criminal retribution, the prosecution of individuals, corporate integrity agreements (CIAs), and in some cases, exclusion from federal healthcare programs. To prevent exclusion, FCA settlements typically result in a CIA between manufacturers and the OIG lasting five years. Among other elements, the agreement requires the implementation of the OIG’s elements of a compliance program, annual reviews by an independent organization, and in some cases reporting and monitoring specific to the activities in violation of the FCA.

 Some states have enacted legislation requiring pharmaceutical and medical device manufacturers to establish a compliance program, adopt a code of conduct, and disclose interactions with healthcare professionals. The Patient Protection and Affordable Care Act (PPACA) has elevated transparency to a federal level by requiring pharmaceutical, medical device, and diagnostic manufacturers of covered drugs to annually disclose physician payments and other transfers of value and ownership or investment interests. The act also imposes civil monetary penalties (CMPs) for violations similar to those under the Social Security Act. Ultimately, Centers for Medicare & Medicaid Services (CMS) will aggregate the information to be publically disclosed.

Key Risk Areas

Although the OIG’s guidance does not specifically apply to medical device or diagnostic manufacturers, the converging focus of enforcement and reform initiatives has lead to the adoption of the guidance across the industry. Device and diagnostic manufacturers that violated the FCA often face CIAs, which also mandate the implementation and maintenance of a corporate compliance program. This article will focus on the key risk areas highlighted by the OIG in its April 2003 Compliance Program Guidance for Pharmaceutical Manufacturers, which parallels key risks within the medical device and diagnostic industry.

The OIG specifically pinpoints federal and state healthcare program reimbursement as a key risk area for manufacturers. It cites the FCA and antikickback statues as related laws and regulations that organizations must abide.

Table I. Overview of commercial risk areas and reporting requirements.
Law Operational Risk Areas Reporting Requirements
Federal and state FCA Commercial and government contracting and price reporting
Government price reporting to CMS, Veterans Affairs, and certain states
Food and Drug Cosmetic Act Promotional and nonpromotional material review and dissemination, advertising, informational presentations given by sales representatives, speaker training and programs, scientific and educational exchange, incentive compensation Federal and state transparency disclosure and compliance declarations
Antikickback Commercial contracting, pricing, consultant and speaker agreements, fair market value assessments, sponsorships, exhibits and trade shows, market research, educational grants and interactions with healthcare providers and healthcare organizations, gifts and items, and meals and entertainment Federal and state transparency disclosure and compliance declarations
Health Insurance Portability and Accountability Act Interactions with healthcare providers and patients N/A 

Within the government-pricing arena, there are several opportunities for both auditing and monitoring to detect and correct potential noncompliance. Best practices among pharmaceutical manufacturers and medical device and diagnostic companies that participate in Medicare, Medicaid, and state healthcare programs include hiring an independent expert within the government programs area to review all government pricing submissions on a quarterly basis and assessing or auditing government pricing on at least an annual basis. The assessment and audit can range from a high-level review of policies, procedures, and the organization’s calculation methodology to detailed transactional testing of data inputs, testing for compliance with the 10-year rule, or even a recalculation to verify accuracy of the submitted calculations.

The second key risk area cited by the OIG within the guidance is activities related to the antikickback statuteand other illegal remuneration. Auditing and monitoring is a critical activity to ensure compliance within this area. Given the magnitude of antibribery and antikickback laws and regulations, medical device and diagnostic companies lean on the expertise of third-party compliance consultants to assist in auditing and monitoring oversight.

The commercial activities that expose manufacturers to the risk of fraud and abuse include participation in federal and state healthcare programs and interactions with healthcare professionals, healthcare organizations, and patients. Table I highlights the scope of commercial governance within the United States, the operational risk areas, and related reporting requirements.

Elements of an Effective Compliance Program

To mitigate risk and respond to the evolving regulatory landscape, organizations are encouraged and in some cases required to build, implement, and maintain a compliance program. Notably, emerging and specialized manufacturers are challenged with resource and financial limitations that impact the prioritization and integration of compliance into business operations. These limitations present hurdles and challenges to building and maintaining an effective corporate compliance program. However, embedding compliance into operations to proactively identify and respond to risk and sustain compliance over time is necessary to protect the growth of the company. Table II depicts key compliance program elements and highlights operational considerations for embedding compliance into operations.

Table II. Compliance program elements and operational considerations.
Compliance Program Element Operational Considerations
Compliance Framework Building and implementing a scalable program
Strategy and planning, establishing a framework for compliance, shared accountability and alignment, committee charter, hotline or helpline, awareness
Corporate compliance committee charter
Policy and Procedure Development Corporate compliance governance (i.e., code of conduct and corporate compliance policies)
Operational governance of medical affairs, sales, and marketing
Training Code of conduct, regulatory and compliance overview, standard operating protocol training, and case studies
Audit and Monitoring Risk assessment; building, maintaining, and executing an auditing and monitoring plan; reporting results; and remediating identified issues
Auditing and monitoring techniques include transaction, procedural and system review, and observation
Disciplinary and Corrective Actions Well-publicized guidelines for enforcing disciplinary actions
Reporting, investigating, and tracking infractions and corrective actions
Consistent and standardization of disciplinary action enforcement
Ongoing Compliance Support Operational support of key compliance functions (i.e., speaker program monitoring, fair market value assessments, federal and state reporting, government programs)

Manufacturers should also expand upon the OIG’s core elements and tailor compliance initiatives to further integrate ethical business practices and guiding principles conducive to a culture of compliance. Considerations for expansion include rewarding compliance excellence, restructuring incentive compensation and rewards to reinforce ethical business practices, international expansion, and establishing a framework for shared accountability and ownership of compliance.

There are outsourcing opportunities across all aspects of compliance, but this article will focus on two of the most commonly outsourced compliance areas: auditing and monitoring and federal and state reporting.

Auditing and Monitoring Program

Outsourcing a compliance auditing and monitoring function can offer an array of benefits for medical device and diagnostic companies. Partnering with a compliance-consulting vendor gives an organization access to the vendor’s expertise across multiple compliance areas. Additionally, outsourcing auditing and monitoring can result in significant cost savings and increased efficiencies because of the cost of maintaining expertise in multiple compliance areas full-time internally. Additional cost savings can be realized in increased utilization per cost incurred because outsourcing fees are typically variable based on the amount of time spent executing billable work. Another key benefit is the potential for added value provided by the expertise of the compliance-consulting vendor and input received from the consultant’s experiences and best practices identified from other clients within the industry.

While auditing and monitoring in the government pricing area can be executed within the company, there are several reasons why outsourcing auditing and monitoring may be beneficial. First, government pricing is a very specific area and requires expertise that is difficult to find within audit organizations. In most cases organizations benefit by partnering with compliance consultants who are well-versed in all government program pricing calculations and keep abreast of changing laws and regulations to properly audit and monitor the pricing submissions. This verifies that the information reported to the government is complete and accurate.

Another reason for outsourcing auditing and monitoring of government pricing programs is to ensure independence in the audit process. To perform an adequate audit or assessment, the person or persons performing the audit or assessment must be independent from the function performing the primary government pricing activities. While most pharmaceutical manufacturers and medical device and diagnostic companies maintain an independent compliance function or internal audit function, due to specialization, it is difficult to retain a government pricing expert within one of those functions that is not also being used by the government pricing group. Organizations find that the best solution to ensure independence is to use a compliance-consulting vendor with auditing and monitoring capabilities within the government pricing area.

Finally, aspects of some government pricing programs provide organizations no choice but to outsource government pricing auditing and monitoring to third-party vendors. One example is with respect to 340B entity audits. Section 1 of the 1996 HRSA Manufacturer Audit Guidelines requires the manufacturer to hire an independent audit organization employed by the manufacturer to perform audits of 340B entities.

A third-party compliance consultant can also help organizations identify their unique risk areas related to kickbacks and other illegal remuneration. This article will touch on three areas where auditing and monitoring is common in order to mitigate risk related to antikickback: speaker programs, grants, and the Foreign Corrupt Practices Act (FCPA).

Speaker program monitoring is a critical activity for most medical device and diagnostic companies that conduct them due to the associated compliance risk. An assessment of speaker programs includes verifying adequate policies and procedures to ensure compliance is in place, nominating speakers in accordance with policies and procedures, and verifying that they were selected based on criteria outlined in the policy and procedure documents. Additionally, an audit can verify that payments to speakers are provided according to internally developed fair market value rates in order to mitigate the risk of perceived kickbacks or additional remuneration for marketing the organization’s products.

Grants, exhibits, and sponsorships are other high-risk areas that require regular monitoring and auditing. Today, many medical device and diagnostic companies provide support for sponsorships and exhibits at regional or local venues, which are primarily promotional in nature and may also include purchasing booth space or advertising. It is critical to have monitoring in place to ensure policies and procedures are adequate; documentation related to approvals, contracts, and retention of disbursement checks is adequate; and there is a documented legitimate need for the grant, exhibit, or sponsorship.

The other major antikickback-related risks are the FCPA and the UK Bribery Act, which prohibit payment of anything of value to a foreign official, foreign political party, or candidate for political office for the purpose of any act of that foreign official. Third-party compliance consultants can assist companies in performing fraud risk assessments of high-risk countries, fraud due diligence reviews of vendors in foreign countries, and transactional FCPA audits at locations or vendors within foreign countries to verify compliance. Compliance consultants may even be able to pull from local resources that understand the local language and culture, which can be an extremely valuable tool in conducting an effective FCPA audit.

Outsourcing auditing and monitoring is not a ticket to never worry about compliance again. The chief compliance officer or executive responsible for auditing and monitoring should treat the outsourced auditing and monitoring consultant as a member of their own team. While the consultant may be able to provide insights into key risk areas they observe at similar organizations, no one knows your particular business better than you do. Chief compliance officers should have a detailed plan to receive regular updates from the auditing and monitoring vendor and meet with the team to frequently adjust the auditing and monitoring plan as needed based on the ever-changing regulatory environment and shift in key risks within the organization.

Federal and State Reporting

Key components when considering and evaluating any outsourced operations should include incorporating compliance goals when evaluating systems and processes and incorporating business activities to ensure the entire process is feasible and sustainable. Key stakeholders from business units impacted by transparency reporting requirements and compliance goals should be included in the initial planning phases of outsourced compliance and reporting considerations. The stakeholders should have a good understanding of the regulatory environment driving internal requirements so that new initiatives are given the appropriate considerations and vetted to ensure they align with the established compliance programs.

With any outsourced compliance functions, operational considerations begin with the regulations. The goals of the compliance program, paired with corporate legal interpretations of the regulations, define the data and information needed to support the program and meet federal and state transparency and reporting requirements. Best practices include using the data to meet reporting obligations and compliance goals such as auditing and monitoring employee activities. It is common when standardizing and harmonizing data and information capture within an organization to go beyond the scope of regulatory requirements. Doing so allows for the use of data to make for a more robust compliance program and allows for additional business insight when appropriate. System and process owners have to be consulted early, so systems used to comply with data and information capture, analysis, and ultimate reporting are appropriately evaluated and assessed for the ability to capture all of the elements of the established standardized data.

Including key stakeholders in the initial planning phases helps to ensure any outsourced activities can be implemented with the least amount of disruption to the business while still allowing for the use of data and information for compliance considerations. Before outsourcing, operational considerations include identifying the nuances and unique qualities of the business activities at hand. Outsourced suppliers and vendors should be able to configure services and supporting systems to capture required data based on the specific legal interpretations and adapt to the business specifics. Systems and processes for managing data must be evaluated to ensure sufficient detail. Often, compliance officers find that implementing requirements for data capture that extends beyond the scope of reporting requirements allows for a more robust approach to using the data in support of monitoring and auditing initiatives. Systems and manual processes must be assessed for the capability to meet these requirements.

Sales activities specific to medical device and diagnostic manufacturing may include equipment loans for demonstration, evaluation, and training purposes. Such activities may be unique to manufacturers and require specific evaluations of these activities while establishing data capture requirements and business rules. This is especially critical when outsourcing program management. The ability to manage programs according to business expectations and capture data and information so that it meets the requirements of the compliance program and aligns with any standards implemented is critical.

Establishing corporate rules for aggregating and compiling data for reporting has to include a feasibility study on current and planned processes. For example, equipment loans or device samples provided to an institution may have to be reported as a transfer of value in a variety of ways, depending on specific federal and state regulations and corporate interpretation of those regulations. Systems used to compile, assign, and aggregate data for reporting must be incorporate such requirement specifics and have the flexibility to do so in a different way for each report generated. Systems that allow for ad hoc reports enable the compliance program to benefit from investments made to meet reporting obligations.

The proposed rule (42 CFR 402 and 403) provides an impact assessment with financial estimates for manufactures to implement the requirements. Included are the costs of building systems to capture and report data and allocate resources to manage physicians and become accustomed to the process for reviewing and correcting data. CMS estimates this burden to be $169,815 for the first year and $126,874 annually for each year thereafter.1 The estimates do not include the cost of developing policies and procedures, implementing those policies through training programs, monitoring compliance, and data retention efforts. Additionally, considerations and resources must be allocated to monitoring legislative changes, capturing legal interpretations of regulations, evaluating policies and procedures when those changes occur, and when necessary making changes to systems and processes to ensure compliance to those regulatory changes.


It can be beneficial to look to recent initiatives used by pharmaceutical manufacturers when building a compliance program and meeting reporting obligations. Successful initiatives would include a corporate commitment to transparency in business activities with covered recipients that extends beyond meeting minimal data collection and reporting. Manufacturers are realizing that the investment required to compile data for reporting can help make for a stronger compliance program. Data is used to evaluate the overall compliance program and pinpoint geographic areas or individuals with repeat offenses of noncompliance. Data capture requirements are included in contractual arrangement, and formats are standardized to ensure third parties provide information needed for compliance. Additionally, proactive communications are used to appropriately inform reportable recipients and institutions of the manufacturer’s commitment to meet its reporting obligation as well as its commitment to compliance. These same initiatives are reasonable and appropriate for medical device and diagnostic manufacturers when implementing a compliance program.


1. 42 CFR part 402 and 403: Medicare, Medicaid, Children’s Health Insurance Programs; Transparency Reports and Reporting of Physician Ownership or Investment Interests; CMS Proposed Rule, section III: Collection of Information Requirements, (19 December 2011); available from Internet:$File/SunshineRegsDec2011.pdf.

Chrissy Spicer is a director of commercial consulting services at Compliance Implementation Services (CIS; Media, PA). She focuses on U.S. commercial, transparency reporting, and government program compliance.

Judy Fox is director of U.S. commercial compliance at CIS and leads the federal and state compliance and reporting and sample accountability service offerings.

Tim Krzeminski is director of audit services at CIS, where he manages the execution of value-added audits across all lines of pharmaceutical manufacturers and their third-party vendors.

Weekly Vitals: Supreme Court Rules on Healthcare, Industry Reacts

While there were, of course, other newsworthy stories this week, the Supreme Court ruling on healthcare trumped them all. Read some of the highlights from the extensive media coverage and reactions from the medical device industry in our roundup below.

You’re Doing It Wrong: Innovative Outsourcing

Two primary drivers of the increase in outsourcing are cost reduction and the speed of product innovation. In theory, because medical device companies do not have manufacturing in their set of core competences, divesting these activities allows them to refocus on their core activities of clinical education, R&D, and product marketing bringing better products to market faster at lower costs.1 The movement to outsource has also been shown to be higher in industries where the rate of change of technology in products and processes is high, like the medical device industry.2

In practice, realizing this increased speed and quality of product innovation is full of pitfalls requiring both device OEMs and their contracting partners to aggressively challenge historic thinking. Failure to do so will certainly cause the reality to miss the theoretical mark. The interdependencies between the boundaries of the firm (e.g. how much work is done internally versus outsourced) and product architecture and design have been studied in other industries and the result is a fairly tight linkage.3 If product innovation is to remain strong in the medical device industry, it is important to understand how these linkages will change as outsourcing increases.

Specifically, the process of marrying product innovation with process innovation represents a major area of opportunity for device companies and their partners, which unless specifically considered, could in fact slow rather than accelerate innovation. Outsourced manufacturers must deliver manufacturing process innovation in support of product innovation rather than trying to make products conform to existing assets.

One interesting 2007 study on the effects of outsourcing on product performance in the automotive industry reviewed major model decisions in the luxury car market in which the manufacturing of some were outsourced and the manufacturing of others were done by vertically integrated automotive companies.4 The outsourced models tended to score better in initial product ratings than those developed and made internally, but as compared over the next five years, the models made by vertically integrated companies caught up. Initial innovation was higher in the outsourced model, but subsequent improvements were higher in the vertically integrated model. To understand the cause of this difference, particularly as it relates to medical product outsourcing, consider the major differences between each potential path in the beginning.
In a vertically integrated model, the sourcing company owns and knows a certain set of manufacturing technologies and assets. This limited starting point creates certain constraints on their ability to stretch to new limits. Desired product attributes get measured against manufacturing capabilities in what is often referred to as design for manufacturability. Product features that push the limits of manufacturability are cut back to reflect the realities of the existing assets, and innovation suffers as a result.

By contrast if the OEM chooses outsourcing, they now have access not just to their assets, but also to a much larger set of assets across many companies. These companies are likely to have capabilities beyond their own such that choosing to outsource can significantly aid in stretching product feature delivery. Initially this path affords more product innovation through fewer asset constraints. It is easy to see how the choice of outsourcing can accelerate product feature enhancement when compared to using existing vertically integrated assets. However, this benefit of outsourcing is only one small step of what can be realized in the right form of partnership, expectation and relationship model.

Pushing Boundaries

As medical device OEMs seek to push the boundaries of device performance to improve patient outcomes and clinical economics, process boundaries must also be pushed. In the ideal state, manufacturing technologies would have innovation at or above the pace of product development, so that product feature enhancements are only rarely governed by manufacturing limitations. Although outsourcing affords a broader range of technology from which to pick, more initial choices is not the same as core process innovation to support products. Over a long enough time frame, manufacturing process innovation must be robust for product development to be significant.

One study of the global dynamic random access memory (DRAM) industry actually led researchers to conclude that vertically integrated firms were able to achieve time-to-market advantages over their non-integrated competitors.5 However, the main mitigating factor for nonintegrated competitors was how much the OEM understood about the various required component technologies. Maintaining the knowledge link between process and product is critical.

The typical engagement strategy between a medical device OEM and an outsourcing manufacturer involves a regular repeating loop of dialogue. The device company submits to the outsource partner a series of product requirements detailed in manufacturing prints. The outsourced manufacturer assesses the requirements against their installed asset base (and occasionally known assets they do not own but could procure), marks up the prints, and wins business when the designers at the device company are willing to adjust their product desires to match the installed asset base. Almost by definition, the order of events in the development process starts with the manufacturing method and tries to conform the product to the asset limitations.

Reversing the Flow

For most traditional outsourcers, the steps in the traditional cycle can be distilled down as follows:

  • Our company specializes in certain manufacturing processes
  • We support this specialization with known assets that have manufacturing limits
  • We review new product designs against our asset limitations
  • We win the opportunities where the OEM design teams can live with our process limits

By contrast, consider an exchange that reverses this flow and selects the manufacturing assets last. To maximize product innovation, the selection of the manufacturing process should be the last step, not the first step. Both the OEM and their outsource partner should consider first aligning around the patient outcome and associated testing methods, move through consideration of the key product specifications that deliver this outcome, and only then consider how the product should be made.

We refer to the reversal of the process as outcome-based manufacturing. It can be summarized as follows:

  • What is the improved outcome we are seeking for the patient, caregiver, or both?
  • What functional attributes of the device drive this outcome and how can they be tested?
  • What mechanical properties of the device and its components drive the functional attributes?
  • What manufacturing processes are best suited for achieving the required specifications?

The latter methodology has a much higher likelihood of driving process technology innovation to support product innovation. It greatly increases the chances of boundary pushing manufacturing methods, driving product innovation by making process innovation part of a concurrent cycle. Companies that take this approach will have many more “new to the world” process breakthroughs and ultimately deliver more value to their medical device OEM base through unlocking product features conventional manufacturing assets cannot.

As outsourcing increases, it will be easy for all parties to slip more into the first method of interaction than the second. A likely potential driver of Novak and Stern’s finding about vertical integration having subsequent product enhancement advantage comes from the distance and arm’s length between the product designers and the manufacturing technology. Unless both OEMs and contract manufacturers focus on outcome based process selection, outsourcing will likely only speed innovation through initial choices in vendors rather than in true process innovation. In fact, there is reasonable research that suggests if improperly managed, outsourcing can actually retard innovation.6

Medical device OEMs can review their supplier relationships against both paradigms through a simple series of questions.

Does my outsourcing partner have a patient- oriented mission, or do they define their business around a certain manufacturing capability (e.g. we are a precision stamping company)? The more your partner aligns with your mission, the more likely they will focus on the outcome for the patient. A review of mission statements of the top outsourcing players show less than 25% mention either patients, healthcare or clinicians. This percentage drops among smaller suppliers.

Can I point to new technologies my partner has delivered in support of my device goals? If your partner understands an outcome orientation, they should have a demonstrated track record of process technology innovation in support of your device development goals.

Will my partner take equipment and process development risks, or do they only deploy capacity after I deliver a purchase order? The best in class manufacturing innovators have confidence in their ability to push the technology envelope and will not wait on air tight contracts to advance the state of the art.

How often does my outsourced partner participate in or lead functional testing development for my devices? The best partners understand that they should be heavily involved in device testing development rather than seeing the boundary of their involvement at the dimensions on the prints.

Does my partner create visibility for me to lower tier suppliers with high technology contributions? As noted in recent work by Thomas Choi and Tom Linton, maintaining visibility to key technologies across the value chain is a best practice of leading outsourcers.7


As the distance between product designers and process innovators increases through outsourcing versus insourcing, it is critical for all parties in the value chain to stay oriented toward maximum total innovation in both product and process. Erica Plambeck and Terry Taylor’s work on outsourcing’s effect of innovation in other industries shows that unless properly managed, outsourcing can positively enhance costs objectives through improving capacity utilization, but weaken the overall incentives for innovation in the industry.8

The medical device industry need not realize this result if both device OEMs and their partners adopt business models that maximize both product and process innovation rather than forcing products to adapt to existing assets. Through actively pursuing a philosophy of outcome-based manufacturing, outsourcing partners can align themselves with their device OEM customers to drive improved patient outcomes and make a measurable difference in clinical economics.


  1. B Dunn and J Finn, “A Strategic Review of Outsourced Manufacturing for Medical Devices,” (Boston, Covington Associates, 2007).
  2. A Bartel, S Lach and N Sinkerman, “Outsourcing and Technological Change,” (National Bureau of Economic Research(NBER)/Columbia University, 2010).
  3. S Fixson, Y Ro and J Liker, “Modularisation and outsourcing: who drives whom? A study of generational sequences in the US automotive cockpit industry” International Journal of Automotive Technology and Management 5, no. 2 ( 2005): 166–183.
  4. S Novak and S Stern,“How Does Outsourcing Affect Performance Dynamics? Evidence from the Automobile Industry,” NBER, 2007.
  5. R Adner and R Kapoor, “What Firms Make vs. What They Know: How Firms’ Production and Knowledge Boundaries Affect Competitive Advantage in the Face of Technological Change,” Atlanta Competitive Advantage Conference Working Paper, 2009.
  6. RA Bettis, SP Bradley, G Hamel “Outsourcing and Industrial Decline,” Academy of Management Executive 6 (1992): 7–22.
  7. T Choi and T Linton, “Don’t Let Your Supply Chain Control Your Business,” Harvard Business Review, December, 2011.
  8. Plambeck and Taylor, “Sell the Plant? The Impact of Contact Manufacturing on Innovation, Capacity, and Profitability,” Management Science, January, 2005.


Peter Harris is chairman and CEO of Cadence, Inc. Areas of expertise include strategy development, change management, transaction development, corporate governance, corporate finance, and values-based leadership. Harris is a public speaker who also teaches leadership and change management at the University of Virginia’s Darden School of Business. He has an undergraduate focus in mathematics and Mandarin, as well as an MBA from the University of Virginia. He is dangerously rusty in Mandarin, but can do rudimentary arithmetic with a calculator.

TAVR: Still the Next Big Thing in Cardiology?

TAVR: Still the Next Big Thing in Cardiology?


iPhone ECG inventor and cardiologist Dave Albert, MD, describes it as a “big deal.”

Celebrity cardiothoracic surgeon Mehmet Oz, MD, calls it “a complete paradigm shift,” the cardiology equivalent of “landing a man on the moon.”

For cardiologist Eric Topol, MD, of Scripps Health (San Diego), it is “a major step forward” that “will be a life-changer for many patients.”

“It is probably one of the biggest new product launches in the cardiac device space since drug-eluting stents,” says Venkat Rajan, industry manager for Frost & Sullivan’s medical device team in North America.

It is TAVR, also known as TAVI (transcatheter aortic valve implantation). Available in Europe since 2007, the technology currently is only available to U.S. patients with severe aortic stenosis who are deemed inoperable. However, a much broader patient population could soon become eligible for the procedure.

“TAVR is indeed a game-changer,” says James Beckerman, MD, cardiologist at Providence St. Vincent Heart Clinic (Portland, OR). “It is maybe not [the cardiology equivalent to] landing a man on the moon—that will be the day we figure out how to prevent aortic stenosis. But in the meantime, TAVR will help more patients with critical aortic stenosis living longer, fuller lives.”

“TAVR is indeed a game-changer. It is maybe not [the cardiology equivalent to] landing a man on the moon—that will be the day we figure out how to prevent aortic stenosis. But in the meantime, TAVR will help more patients with critical aortic stenosis living longer, fuller lives.”
—James Beckerman, MD

Much of the enthusiasm is based on the fact that inoperable critical aortic stenosis was thought to be untreatable for decades.1 In aortic stenosis, calcium deposits hinder the opening of the heart’s aortic valve. “Having aortic stenosis is like standing on a plateau that is getting smaller with time,” Beckerman says. “As it becomes more severe, any wrong move—or any move at all once it becomes critical—sets you up for a long fall [from which it] is hard to recover.”

The problem is huge. Aortic stenosis is the most commonly diagnosed heart valve condition—roughly 300,000 patients worldwide, by conservative estimates, have been diagnosed with the disease. About one-third of them are not eligible for open-heart surgery. More than half of patients diagnosed with the disease die within two years, according to FDA.

Standard treatment for severe aortic stenosis is surgical aortic valve replacement (AVR). In this procedure, a patient’s breastbone is sawn to open up the chest and the heart is stopped. A clinician then removes the diseased valve and sews in a replacement. Performing the procedure typically lasts between six and eight hours and patient recovery time can last months.

By contrast, TAVR can be performed in an hour or two and patient recovery is typically a matter of days. Still, its clinical potential is uncertain. “My concerns are that we don’t know where to draw the line (such as in younger patients) and that it is a very expensive procedure approximating the cost of open-heart surgery,” Topol says. “I would have been even more excited about TAVR if this great innovation also dramatically cut the cost of replacing the aortic valve,” he adds. “Maybe someday?”

A Short History of Transcatheter Valves

The idea of minimally invasive valve replacement dates back to the late 1980s. In 1989 at an interventional meeting in the United States, Danish cardiologist Henning Rud Andersen, MD, claimed that heart valves could be implanted in a closed-chest procedure. After returning to Denmark, Andersen developed a valve-stent device with metal wire and pig valves from a butcher shop. He used the device in a pig to demonstrate the feasibility of the technique, and ultimately performed more than 40 valve-replacement procedures percutaneously in animals. The technology ultimately ended up benefiting his father, who had a transcatheter valve implanted.

The next TAVR breakthrough came in 2000 when renowned pediatric cardiologist Philipp Bonhoeffer, MD, performed the first human percutaneous heart valve implantation in a 12-year-old patient in France (although this procedure involved the pulmonary rather than aortic valve). The valve used in procedure, the Melody, was developed by Bonhoeffer in conjunction with Medtronic. The first transcatheter aortic valve replacement was performed on a human patient in April 2002 in Rouen, France, by interventional cardiologist Alain G. Cribier, MD.

Edwards Sets Sights on TAVR

Intrigued by the technology’s potential, Edwards Lifesciences (Irvine, CA) became one of the first companies to pursue the commercial development of a percutaneous aortic valve. Shortly after the company was spun out of Baxter in 2000, the firm launched a small internal R&D project known as Patriot to investigate its potential. A couple of years later, Edwards learned of an Israeli startup, Percutaneous Valve Technologies (PVT), cofounded by Cribier, that was closer to commercializing TAVR than it was. Edwards bought PVT in 2004 for $125 million, and its first TAVR device, the balloon-expandable Sapien, was launched in Europe in 2007. To date, more than 30,000 patients have been treated with the Sapien and the second generation Sapien XT valve.

Sapien valves from Edwards LifeSciences have been commercialized in 47 countries around the world. More than 30,000 patients have been treated with the devices. Pictured here is the first-generation Sapien THV device, which was approved by FDA in 2011.


Medtronic also had launched an internal program to develop percutaneous aortic heart valves and sought to accelerate commercialization of the products through acquisition.

In 2009, the company acquired two TAVR firms: CoreValve (Irvine, CA), for $700 million, and Ventor (Netanya,
Israel), for $325 million. CoreValve, which was initially founded in Paris in 2001, was a venture-capital backed company that had launched a selfexpanding nitinol-frame TAVR platform in Europe in the spring of 2007; at the time, it was the first TAVR transcatheter aortic valve available in the world. Ventor, which was founded in 2004, had been developing an aortic replacement valve known as Embracer that can be delivered through the transapical approach as well as a percutaneous, transfemoral technology called Engager.

Although Medtronic ultimately spent significantly more on the acquisition of CoreValve than Edwards spent on PVT, both companies “got a fairly good deal,” Rajan says. “Edwards’ move in 2004 was probably a little riskier because the market wasn’t talked about as much at that time,” he says. “[No one] realized that this market was going to be as big as it is and have [such] potential,” he adds. “Edwards got into the market early at the right price. Once buzz started building and it was less of a risk, Medtronic had to pay a little bit more, but [it is] on the market in Europe and should be second to market in the United States.”

To date, more than 27,000 patients have received a CoreValve replacement valve in more than 50 countries outside of the United States.

Rajan does not view being second to the U.S. market as a major disadvantage for Medtronic, especially when you consider
its presence in the cardiovascular marketplace. “Medtronic is equated with cardiac treatments,” Rajan adds. “Unless Edwards has some kind of safety issues, it should hold the top share, but Medtronic should pick up a good chunk just because so much of the market is unaddressed,” he says. “Both Edwards and Medtronic are highlighting transcatheter valves as flagship opportunities for the next five years and outward.” 

Part 1 | 2


Isn’t it Time for a Better IV Pole?: Adventures in Medical-Device Usability

This is a story about usability that has nothing to do with regulation and nothing to do, at least initially, with human factors professionals. The story begins with a patient—Cari Ugent, who was in the unenviable position of spending a few weeks in the hospital connected to an IV pole. If you’re ambulatory in the hospital, which Cari was, and if you’re on an IV, which she also was, then it’s not just a matter of lying there next to the pole; you have to bring it along with you wherever you go. During her ordeal, Cari, being a writer and journalist, and a naturally curious person, began to wonder why her new intimate friend, the IV pole, was so terrible—for example, why she kept injuring her feet on the legs of the pole, why the wheels got hung up on door thresholds, why it was so awkward and top-heavy, why the lines and cords kept getting entangled in the wheels, and why it was so ugly and intimidating-looking.

Stephen B. Wilcox, Ph.D., FIDSA

Then the clincher—when she commented on how difficult it was to disconnect all the pumps (which were all separately plugged into wall sockets) in order to go to the restroom, one of the nurses suggested that she should simply switch to a bedpan.

At that point, Cari put her journalist hat on and started interviewing the healthcare professionals (HCPs) in the vicinity about IV poles. She quickly learned that she wasn’t, in fact, crazy to think that her IV pole was somewhat short of perfect—she got an earful. The nurses and techs told her about how the legs of IV poles damage walls and furniture, about how there are too few hooks and too little pole space, about how intimidating they are for children, etc., etc.

Cari was certainly not the first patient who ever had to contend with an IV pole. No doubt, billions of patients had already gone through some version of what she went through, with many of the same complaints. What was different about Cari, though, was her reaction to the situation. She decided to go into the IV-pole business. She decided to go into the IV-pole business knowing little or nothing about the medical device industry or even about product development, in general, let alone about “user-centered design” or human factors. And, no, she didn’t even have a pile of cash to invest.

Read all Adventures in Medical Device Usability by Steve Wilcox

But she didn’t really think of starting a company at first. She began by creating sketches of possible IV poles, which she showed to the HCPs in the vicinity, refining her sketches on the basis of the feedback she received. It became a way of occupying her time during her long stay in the hospital. Then, when she was discharged, she continued to work on it, and brought her latest sketches with her on the regular visits that followed her discharge.

Before long, she had at least the beginnings of a user-centered design. In fact, she had stumbled onto a seat-of-the-pants version of the design approach that is typical these days for medical devices and is advocated by the FDA.

What she did next was to take her sketches to a design firm, TEAMS Design, a firm with offices in Chicago, as well as in Europe and Asia. Cari managed to find TEAMS, which turns out to be quite a good firm, by searching on the internet without any particular prior knowledge of the field. TEAMS listened to what Cari had to say and then did some research of their own—visiting a number of hospitals to observe IV poles in use and to discuss them with users. From this work (what is called “contextual inquiry” in FDA’s Draft Guidance, Applying Human Factors and Usability Engineering to Optimize Medical Device Design, 6/22/11), they confirmed that the problems Cari had identified were by no means limited to her particular hospital. And they found some additional problems of their own and generally learned about what an IV pole has to do, where it’s used, what gets damaged in the field, and so on.

Cari Ugent, SafepoleThe next step was to come up with a new IV pole design that solved the various problems, as much as possible, while still staying within very tight cost constraints. Let’s face it; nobody’s about to pay $10,000 for an IV pole, even for a perfect IV pole. TEAMS came up with a design and produced a working prototype. One interesting footnote is that TEAMS addressed the functional issues that started Cari on her journey, but they also brought her kicking and screaming to see that other things, like aesthetics, were also important.

At this point, Cari thought it was time to widen her scope, because, so far, she had relied, for her own feedback, on the one hospital where she had been a patient. In other words, she wanted to make sure that she didn’t have a design that was optimized for a single hospital. So she took it to the University of Chicago Medical Center to see what they thought.

What they thought was that they wanted 100 of the poles. Meeting this first order, which also served, in effect, as a “Beta Test”, was how Cari got into the IV-pole business. Her product is called Safepole, shown in the image along with Cari Ugent herself.

As you can see in the image, Safepole improves upon the traditional IV pole in a number of ways. It has enough hooks—8—to reflect the expansion in the number of drips that many patients receive today (unlike in the 1940s, when the typical IV pole design emerged). It has 2 telescoping poles instead of one, so holds more pumps. The device above the pumps is a router that helps to organize the IV lines. Safepole has storage space for an oxygen tank, hooks for Foley catheters, and a built-in power strip. The legs are covered to reduce injuries to patients’ feet, and the cover has a bumper to reduce damage to walls and furniture. It has large, 3 in. wheels, so is less prone to getting stuck on irregularities in the floor. It has a handle (in Cari’s hand in the image) and a utility tray built in (adjacent to the handle).

In other words, Safepole is a dramatically improved product, one that successfully solves many of the problems with the traditional IV pole.

I find the Safepole story interesting for a couple of reasons. First of all, since FDA doesn’t regulate IV poles, it shows that the same methods advocated and required by FDA—contextual inquiry and usability testing—yield good products. These methods are not just about regulation, per se. With everyone scrambling right now to meet human-factors-related regulatory requirements, I fear that we sometimes lose sight of the fact that the regulatory requirements are not just ends in themselves, but are designed to assure good safe medical devices.

Another interesting aspect of the Safepole story is that the key person behind it, Cari Ugent, was not only not trained in human factors, she had no background in anything having to do with developing a medical device. She was a patient who was unhappy with her device and decided to do something about it. No doubt, an advantage she had was that, unlike most of the people reading this, she didn’t know a thousand reasons why she couldn’t just develop her own IV pole, one that, by the way, was the winner of a Gold Award in this year’s Medical Device Excellence Awards in the General Hospital Devices and Therapeutic Products category. In fact, I will reveal, as a member of this year’s jury, that Safepole came damn close to receiving the award for “Best in Show”.

In the meantime, Safepole is in 50 hospitals around the world, and Safepole, LLC has recently been awarded a contract with the GSA.

Not bad for a medical device developed by a hospitalized journalist without a nest egg.

By the way, you can get your very own Safepole from Safepole, LLC ( And, Cari tells me that she’ll listen if you want to talk to her about mergers and acquisitions. She tells me she would even come along with the deal, and she’s got a drawer full of solutions to other annoying problems with medical devices. I guess this user-centered design business gets in your blood.


Stephen B. Wilcox, is a principal and the founder of Design Science (Philadelphia), a 25-person firm that specializes in optimizing the human interface of products—particularly medical devices. Wilcox is a member of the Industrial Designers Society of America’s (IDSA) Academy of Fellows. He has served as a vice president and member of the IDSA Board of Directors, and for several years was chair of the IDSA Human Factors Professional Interest Section. He also serves on the human engineering committee of the Association for the Advancement of Medical Instrumentation (AAMI), which has produced the HE 74 and HE 75 Human Factors standards for medical devices.

This Week in Medical Devices [6/29/12]: Supreme Court Rules on Obamacare and Breakthroughs Aplenty in Cancer Treatment, Transplant Surgery, and Cardiology.

 This Week in Medical Devices [6/29/12]

Supreme Court Upholds Affordable Care Act

  • The Supreme Court laid down its decision on the Affordable Care Act and particularly the constitutionality of the individual mandate requiring all U.S. Citizens to purchase health coverage. The act passed the Supreme Court, but the medical device tax remains a huge concern for those in the medical device industry.
    Source: MD+DI

A Software Engineer Creates a Breakthrough Medical Device for Cancer Treatment

  • The inspiring story of Robert Goldman, a software engineer by trade, whose mission to save his sister resulted in the development of a new type of catheter that could greatly improve chemotherapy treatments for cancer patients.
    Source: ZDNet

World's First Successful Synthetic Larynx Component Transplant

  • A team of Russian surgeons recently completed the first ever surgery to replace pieces of a patient's larynx with synthetic implants. The procedure marks the first successful steps toward transplanting an entire larynx.
    Source: Popular Science

Doctors Able to Inject Oxygen Directly into the Bloodstream

  • Cardiologists at the Children's Hospital Boston in Massachusetts have developed a groundbreaking procedure that allows them to directly oxygenate a patient's blood by injecting them with oxygen-filled microparticles.
    Source: io9

How to Choose a Third-Party Analytical Lab

You need an independent accredited third party laboratory to provide analytical services to support your medical device manufacturing operations. But which lab do you choose? With so many choices, how do you choose the right one?

The choice of which vendor to select is crucial, because you are choosing a partner to trust with your reputation and integrity. Reputation and integrity are the foundation and structure of a business; if these qualities are lost, the damage can be irreparable. Choosing the lowest price provider or the one in closest proximity doesn't assure you of the quality needed to preserve your reputation and integrity.

Making the Choice

To choose wisely and reduce anxiety and concern, you need a systematic and specific process. The following is a guide to selecting the most appropriate analytical partner.
Step 1: Make a List. Start by making lists of positive and negative indicators of attributes of the desired laboratory (see suggestions made in Table I). Enter these into the first column of a spreadsheet. Columns will be for potential candidates being considered. We will build this matrix for final scoring of the potential candidates.
Step 2: Ask Questions. The next step is to formulate some basic questions to assist with your ranking and selection. Here are some examples:
  • Does the lab have a wide range of accreditations, certifications, and client approvals? What are they? (They should include: A2LA/ISO 17025 and Nadcap, if desirable. Nadcap is an aerospace accreditation but is a plus due to the similarity of the alloys and critical nature of the materials involved in both industries.)
  • Will you provide direct access to the engineer or technician conducting the test to answer questions?
  • Can you provide some samples of actual lab reports issued for the type of testing that I require? (Reports will be cleansed of client names and trademarks to ensure confidentiality.)
  • Will all required testing be completed by your lab or will outsourcing be required?
  • Can you supply a significant number of client references, and does the list include a number of known industry leaders?)
  • What are typical turn times for the type testing required?
  • Are prices quoted competitive and are volume incentives available?
Table I. Convert the questions into brief notes in your spreadsheet following the positive attributes.
Step 3: Get Answers. Now let's get some answers. Start with the candidate's Web sites and make note of what you find. A word of caution: Although company Web sites are a ready source of information, remember care must be taken to separate advertising hype from verifiable facts. Look for specifics such as accreditations, scope of work, industries served, materials frequently tested, and a list of major clients.
Now it’s time to make some direct calls to candidates to supplement your data. Be prepared to provide them with a list of the basic testing you require, including the type of materials involved and the specifications you need to meet. Include your desired turn times for each type of test and the expected frequency of your sample submissions.
Ask questions, including the names of clients who you can contact. When calling the references, ask them to verify the basic positive indicators and questions you asked the candidates. .
Step 4: It’s Data Time. At this point you’ve collected the basic data you need. Now it’s time to score the candidates. Go back to your basic spreadsheet and headline the next columns with the names of each candidate or simply label them Lab A, Lab B, etc.
Establish a numerical grade for scoring. For display purposes, Table II uses 1 through 5, with 1 being the lowest and 5 the highest score for each positive indicator, and the same formula is used for negative indicators.
Follow this simple systematic process and you will be amazed at how apparent the correct lab choice becomes. In addition to saving time and cost, you will have a well-documented record of the process.
Table II. Rating scorecard for metallurgical lab candidates.

Maximizing Value

Now that you have selected a lab partner, it is important to learn how to make the most of what you receive from them on an ongoing basis. Here we will examine the process to prove how simple it is to increase that value by building a collaborative relationship.
Partnering is a fundamental shift in the way value is created. The shift is from value that resides in the product or service to value that is created for both parties through the experience of the buyer interacting with the seller. The idea is to move from the traditional buyer-seller relationship to one of mutual collaboration and trust through openness and communication. It is essential that the participants develop common objectives and desired outcomes from the relationship.

Relationship Basics

Quality, speed, ease of doing business, and cost frequently define value for both manufacturers and laboratories. Rank in importance tends to follow this order with little variation.
We will evaluate ways to enhance these key values, but first it is essential to understand some basics in how clients and laboratories operate. It's all about time, which in turn is the primary cost generator.
In testing laboratory operations, the time that lab personnel spend on performing a test tends to be relatively fixed and is generally not the major consumer of time in the process. The bulk of time is spent on sample login and sample preparation. Login involves clearly defining what is to be done, along with specification review and preparing the instructions for the work centers involved. Sample preparation may include sectioning, machining, grinding, mounting, polishing, or preparing the material in solution. Conducting the test and report preparation are the last and often the most rapid operations conducted.
Here are some practical ways the manufacturer can positively affect reduction in time, which reduces cost before even entering an order. This preplanning can assure quality, reduce time and costs, and add to ease of doing business for both partners. Preparing the order accurately and completely is the role customers play that can have the biggest affect on maximizing the value received.
Step 1: Sample Requirements. Start by finding out from your lab partner what the minimum and ideal dimensions are for the test samples you will need tested. Submitting an unusable sample has significant time and cost implications for both partners. At this point you should also learn what sizing and machining the lab will do before testing. You may be able to use this information to submit samples that eliminate or reduce time in a step the lab would need to take.
Step 2: Prepare the Test Order. Point out exactly what you want done and what specifications are required, including the type of material submitted and the required specification revision testing levels. Many specifications are long and may contain requirements for several tests, some of which may not be required by you (the customer), so be as specific as possible. Your lab partner will appreciate it greatly if you furnish a part print or schematic drawing to show how the part should be sectioned for testing, and detailing where the testing is to occur. Be sure to include sample dimensions, configuration, and orientation of the test piece, along with heat treat condition and heat number. End user and product end use are also very important. Specify the number of photos you will need, if any, and clearly identify and label each sample.
To further assist with the order preparation process, many testing laboratories provide order submittal forms and check lists that are useful in ensuring that you are providing the information they need to quickly serve you with accurate, cost-effective data.
As you are preparing your testing order, questions will arise, and it’s important to contact your lab partner immediately. Quickly clarifying concerns up front can save untold time, cost, and anxiety for both partners further down the road.
Here is a tip on what not to do when submitting your order. The temptation is very strong to enter the phrase "test the same as last time" on your order. Your lab partner will often frown on this practice and ask for detail. Remember, your lab partner’s entire operation revolves around receiving and issuing precise data and eliminating risk. There is an easy and accurate way for you to submit the same type of material for the same tests on a repeat basis without resubmitting all of the redundant detail. A solution that is positive for both partners is to place a "blanket order". If you have a need to periodically submit testing requirements for the same material to be tested to the same specifications, you can prepare a "blanket open order" and send new releases referencing this open order each time you submit samples. When you submit the blanket, you can control it by specifying that it is to remain open for either a specific time period or be for a specific amount of money. This method saves time in order preparation and paves the way for guaranteeing price for a specific period.
Some companies shop each test order and do business with multiple labs. Commitment to one lab partner reduces administrative cost and eliminates shopping time.
Step 3: Establish Metrics. So far we have looked at building a partnering relationship based on accuracy in communication that saves time in several ways. Now let's establish some measurement metrics that will verify the increase in value we seek. The relationship you are building obviously creates value, but for measurement purposes we will convert all value gains to cost metrics You will need to do a little more homework here as each company is different. Establish some cost estimates for certain activities such as the following:
  • Cost of each day spent waiting for testing results.
  • Measure what you save by getting results one day sooner.
  • Cost of engineers time in answering calls from the laboratory requesting information not supplied with the order but needed to process your testing order.
  • Measure engineer's time spent plus delays in processing order.
  • Cost of resubmitting adequate size samples if insufficient material supplied with initial order.
  • Measure material cost, preparation time plus shipping cost and time.
  • Cost of preparing and submitting an order.
  • Measure cost saved by issuing blanket orders.
  • Administrative cost of handling accounts payable and preparing remittance.
  • Measure cost saved through commitment to one lab partner.
Step 4: Done! Following the basic guidelines put forth in this article can greatly enhance the value you receive from your material testing dollars. Working with your lab partner in this manner to build a true collaborative communications relationship will assure that value continues to build for both parties. As you learn to fulfill each other’s important needs, shared cooperation will successfully replace negotiation as a way of doing business.

Larry Herker is a contract business development consultant to Sherry Laboratories (Daleville, IN). He has 42 years of international and domestic manufacturing, engineering, and marketing experience, including 11 years as vice president of marketing for Sherry Laboratories until his retirement in 2009. Contact him at

Cardiology: China’s Impact on Market Demand

In 2011, the combined cardiac surgery device markets of Japan, Australia, South Korea and China was valued at $443.3 million U.S. dollars. The market for cardiac surgery devices is growing in the Asia-Pacific region. The country with the fastest growing market for these devices is China. Their market will grow at a CAGR of 13% between 2011 and 2018. China’s rapid growth for cardiac surgery devices is attributed in part to its rapidly expanding economy. Another factor, which is driving the Chinese market, is the growing access of the public to medical professionals. This greater access is attributed to continuing improvements to the Chinese transportation infrastructure, which includes more roads and vehicles. Thus, those living in rural areas who have previously had limited access to healthcare options, are now within serviceable distances of hospitals.

There are a number of cardiac surgery devices that are set to grow in Asian countries. For example, artificial heart valves represent one of the largest market segments in the cardiac surgery device market, which is expected to grow in the near future. Heart valve replacements are either tissue-based or mechanical designs. Because there are significant advantages for using tissue heart valves over mechanical heart valves, the market for the former is slowly cannibalizing the latter. Also contributing to the rise of cardiac surgery procedures is the increasing presence of western foods in Asia. The increasing integration of high-fat diets into Asian cultures is leading to an increase in coronary artery bypass graft (CABG) procedures.

Coronary artery bypass graft (ABG) procedures can either be performed on-pump or off-pump. On-pump coronary artery bypass (ONCAB) procedures require cardiopulmonary bypass (CPB). CPB devices are also known as heart-lung machines. In contrast, off-pump coronary artery bypass (OPCAB) procedures are performed in the absence of CPB devices. Because the heart is still beating during OPCAB procedures, a higher level of skill is required from the physicians. To enhance precision and speed of OPCAB procedures, specialized devices are used. These devices aid in precision and speed, and promise reduced invasiveness over alternative procedures.

Percentage of CABG procedures by country, Asia-Pacific, 2011.

Tissue and Mechanical Heart Valve Markets are Growing Rapidly in China

China is experiencing rapid growth in almost all medical device markets. The cardiac surgery device market is no exception, with many segments within this market growing at double-digit rates. The rapid growth is a combined function of increasing prosperity, awareness, and access to healthcare facilities. Despite these driving factors, the Chinese government is aware that the market growth cannot be sustained in the long run. This is due to limited healthcare budgets.

In an attempt to counter their rapidly rising market, the government is entertaining the idea of implementing cost control for medical devices. Nevertheless, it is expected that the markets for both tissue heart valves and mechanical heart valves will grow. Tissue heart valves, which are also known as bioprosthetic valves, are harvested from human or animal donors. For the most part, animal donor valves which are referred to as allograft valves are used because they are vastly more plentiful. Tissue heart valves have significant advantages over mechanical valves including higher biocompatibility. Because of this advantage, the market for tissue heart valves is growing faster than for mechanical valves. However, tissue valves are much more expensive than their mechanical counterparts. This price discrepancy is driving the market for mechanical valves.

A drawback of mechanical valves is that implantation of these devices necessitates long-term follow-up therapy in the form of anticoagulants. The anticoagulants are required to prevent the formation of emboli, which could lead to death. A side-effect of the anticoagulant therapy is an increased propensity to bleed. Mechanical valves are also facing price erosion as a result of the growing market shares of domestic Chinese manufacturers who are able to produce high-quality variants of these devices. Moreover, the domestic players are able to market their devices at a lower price than the global market leaders for mechanical heart valves. Because of their lower price, accessibility and promise of long service, mechanical heart valves are more popular in terms of unit sales than tissue heart valves. In fact, the unit sales for mechanical heart valves are expected to grow at about 15% year over year from 2012 onwards.

CABG Procedures are Expected to Rise Across Asia

Heart disease is on the rise in Asia and among the Asian countries, Australia has one of the highest incidences of cardiac surgery procedures. This is not surprising because the Australian diet, which is tends to be high in fat, is more similar to European and North American standards than to their Asia-Pacific neighbors. In fact, the number of CABG procedures in Australia is similar to that of Japan, a country with almost six-times the number of people. Regardless of the number of procedures performed per country, the demand for CABG is expected to grow in Asia. Because of its relative simplicity and ubiquity, ONCAB is typically the more popular of the two main types of bypass procedures, the other being OPCAB. ONCAB is the traditional type of CABG procedure that is performed when the heart is stopped. The risk of complications resulting from ONCAB is low at about 1%. However, those with preexisting conditions such as obesity face a much higher rate of complications. To circulate the blood during the procedure, a heart lung machine is employed. The use of heart lung machines have been associated with elevated risk of stroke and impaired mental function.

OPCAB is the newer of the two main types of CABG procedures. Because of its novelty and certain advantages over ONCAB, the number of OPCAB procedures is growing faster than ONCAB across Asia. OPCAB procedures have additional complexity over ONCAB because the heart remains beating. This makes manipulation of grafts and placement of sutures more difficult. During OPCAB procedures, physicians immobilize a portion of the heart with a stabilizer. To assist the physician during the surgery, the heart is mechanically stabilized and held in position using specialized devices. In Japan, OPCAB has been quickly adopted. The medical community has recognized the advantages of this technique and OPCAB is considered the standard type for CABG procedures in Japan. The complexity of OPCAB procedures has led to the growth of other segments of the cardiac surgery device market such as anastomosis assist devices (AADs).

In time, growth in the number of CABG procedures will be limited by the increasing popularity of percutaneous coronary intervention (PCI) procedures. PCI procedures promise similar levels of effectiveness and lower invasiveness in comparison to CABG. Nonetheless, CABG is preferred when more than one coronary vessel is occluded or if the occlusion is considered significant.

The Growing Number of OPCAB Procedures Directly Affects Anastomosis Assist Devices

During CABG procedures, anastomoses are performed to restore continuity of blood flow through the graft. The traditional method of anastomosis requires clamping of the aorta and hand suturing the vessels together, a procedure which requires a great deal of skill and time. Not surprisingly, the difficulty of traditional suturing is compounded by the movement of a beating heart as in the case of OPCAB. To facilitate reproducible and fast anastomoses, AADs have been developed. The implementation of AADs has significantly reduced the difficulty of performing OPCAB, making this type of CABG procedure more accessible.

Medtronic Was the Leading Competitor for the Japanese, South Korean and Chinese Cardiac Surgery Device Markets.

In 2011, Medtronic was the overall leader in the Japanese, South Korean and Chinese cardiac surgery device markets. They were able to hold this position due to their strength in many segments of the market including the lucrative tissue and mechanical heart valve segments, where they are often the leading company. They also participated in the markets for AADS, ONCAB, OPCAB and to a lesser extent the cardiac ablation device segment.

Other major players in the cardiac surgery device market include Maquet, St. Jude Medical, Edwards Lifesciences, Biosense Webster, Sorin Group, Terumo Medical, Thoratec, HeartWare, Teleflex Medical, Boston Scientific and AtriCure. Maquet was a major player in the ONCAB, OPCAB, AAD and endoscopic vessel harvesting device segments. Edwards Lifesciences was involved for the most part in heart valve repair devices which include heart valve replacements and annuloplasty repair devices.

Suggested Action Tips

  • Stay up to date on Chinese government policies that may implement cost control for medical devices.
  • If you are a domestic player in China: Consider lowering manufacturing of tissue heart valves & increasing mechanical heart valve production in the short term.
  • If you are a global market leader: Consider Increasing manufacturing of tissue heart valves & decreasing production in mechanical heart valves.
  • Consider increasing production of cardiac surgery devices involved in OPCAB procedures such as anastomosis assist devices (AADs).


China is experiencing growth in almost all medical device markets; however different variables dictate which segments are becoming less popular and which are growing quickly. Currently China is contributing to continued growth in artificial heart valves, CABG procedures, OPCAB Procedures and AADs. China’s rapidly increasing population will continue to influence and set trends for the entire Asia-Pacific Market. Chinese market dynamics should be considered and weighted heavily when making manufacturing decisions that pertain not only to China, but to Japan, Australia, and South Korea.


 “Asia-Pacific Markets for Cardiac Surgery Devices 2012,”  iData Research.For more information and a free synopsis of the  report, please contact at:

“Chinese Markets for Cardiac Surgery Devices 2012,” iData Research. For more information and a free synopsis of the  report, please contact at:


Kamran Zamanian, PhD is president, CEO, and founding partner of iData Research Inc. He has spent more than 20 years working in the market research industry. He received his Bachelor of Science in engineering from the University of Dundee, and received his Master of Science and doctoral degrees from the University of Manchester in market research and technology. Contact him at

Boston Conference Aims to Demystify Medtech Outsourcing

Outsourcing can be used to help device companies meet these challenges as it can help them cut costs and redirect energy into adapting to the rapidly changing business climate. As Nancy Duarte-Lonnroth, director of quality and regulatory affairs for Celestica HealthTech, explains, "a strategic partner can offer a current and broad surveillance of the global supply chain and anticipate the latest technological developments or availability of components."

Yet outsourcing itself can pose its own challenges. For one thing, contract manufacturing only works if you find the right partner(s) for your particular needs, and, even then, your firm must clearly articulate your needs to them and that relationship is well managed. Examples of other considerations include intellectual property, supply-chain management, and cultural and operational matters when dealing with foreign suppliers.   

Medtech Supplier Partnership

To help medical device professionals get the most out of outsourcing—and to better understand the evolving medtech market, MD+DI has launched an event titled “Medtech Supplier Relationships” that will be held August 22–23 in Boston. (Disclosure: I’ll be chairing the event.)

Following is a brief summary of the topics covered in the conference agenda along with mention of who will be speaking at the event:

 DAY 1

  • The shifting market for medical device supply chain. Mark Leimbeck, Quality and Training Program Manager, Underwriters Laboratories.
  • Key factors in supplier selection. Olen Chiddix, Director of Materials, Pathway Medical Technologies.
  • Building collaborative partnerships. Karen Conway, Executive Director, Industry Relations, GHX.
  • Creating a strategic polymer supply chain. Kathleen Murtagh-Galea, Sales Development Manager, Healthcare, Solvay Specialty Polymers.
  • Panel Discussion: Utilizing suppliers to add value to your devices. Yong Cho, Senior Technical Manager, Genentech; Mark Leimbeck, Quality and Training Program Manager, Underwriters Laboratories; and Mark Bonifacio, President, Bonifacio Consulting Services.
  • Intellectual Property (IP) issues and open innovation challenges when working with suppliers. David J. Dykeman, shareholder and patent attorney, Greenberg Traurig.
  • Case Study: Evaluating suppliers based on risk using an effective supplier assessment tool. Nicholas Pelletier, Product Development, Vention Medical.
  • Working internationally: Utilizing CMOs to gain market entry in new territories. Mark Bonifacio, President, Bonifacio Consulting Services.
  • Overcoming the cultural and operational challenges of working with international suppliers in emerging economiesYong Cho, Senior Technical Manager, Genentech.
  • Medical device supplier qualification and management. Edwin Lindsay VP of Quality & Regulatory, Vascular Flow Technologies.

 DAY 2

  • Supplier controls and validation: Maintaining quality agreements to manage and minimize risk. Michael B. Checketts, Director of QA/RA & Technology, Ametek.
  • Employing design controls to meet internal quality and external regulatory requirements. Paul B Wernke Jr.
    Principal Quality Assurance Engineer, Cordis Corp.
  • Panel Discussion: What will the FDA expect? Strategies to avoid supplier-based FDA warning letters. Michael B. Checketts, Director of QA/RA & Technology, Ametek; Paul B Wernke Jr., Principal Quality Assurance Engineer, Cordis Corp.; Steven Niedelman, Lead Quality System & Compliance Consultant, King & Spalding LLP;  Christopher J. Devine Ph.D., President, Devine Guidance International.
  • Undertaking supplier auditing and ongoing evaluation of suppliers to meet FDA and international requirements. Christopher J. Devine Ph.D. President, Devine Guidance International.
  • Establishing performance management systems and metrics to drive efficiency, reduce costs, boost quality and enhance supplier value. Dan O’Leary, President, Ombu Enterprises.
  • Undertaking robust process validation to ensure end-to-end quality across your supply chain. Scott Frederick
    Manufacturing Engineer, Bradshaw Medical.
  • Conducting a risk-based assessment and management of suppliers, Michael Weber, Director; R&D; Quality Assurance; Manufacturing, IT, Soluble Systems.
  • Creating continuous joint value by measuring effective relationships, Tom Hughes Executive Director, Strategic Marketplace Initiative.

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