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Articles from 1998 In August


THE YEAR 2000: FDA's Absolute Last Word (for the moment . . .)

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

Issues of liability and cost allocation add more rings to the Y2K circus.

In 1894, during the dedication ceremony of the Ryerson Laboratory at the University of Chicago, the distinguished physicist Albert Abraham Michelson delivered a pronouncement that has become one of the classic examples of shortsightedness: "The more important fundamental laws and facts of physical science have all been discovered, and these are now so firmly established that the possibility of their ever being supplanted in consequence of new discoveries is exceedingly remote . . . . Our future discoveries must be looked for in the sixth place of decimals."

Today, the second part of Michelson's statement sounds as quaint as the first, with "the sixth place of decimals" barely skimming the surface of modern science's bottomless computational depths. How ironic, then, that at the end of the 20th century, the fly in the technological ointment is a largely unanticipated "problem" that hinges on the recognition of two simple digits—the final "00" of the date in the year 2000.

The possibility that—without corrective action—a certain percentage of computers or software embedded in devices could malfunction following the last New Year's Eve parties of the millennium has resulted in widespread alarm and engendered an entire short-term industry of doomsayers, symposia organizers, consultants, and code writers. One analyst has published a survey estimating the cost to the United States alone at approximately $520 billion, of which more than 30% has allegedly already been spent on remediation. Advertisements for firms offering "Y2K solutions" tend to combine images of imminence and destruction: a ground-level shot of racehorses thundering toward the viewer or a time bomb labeled "January 1, 2000," its fuse lit and burning.

At FDA, concern that devices or software with year 2000 problems could pose a risk to health has led to the recent issuance of a draft guidance document (available at http://www.fda.gov/cdrh/yr2000/year2000.html), regarding which the agency is currently soliciting comments and suggestions from the public. In this issue of MD&DI, author Jeffrey K. Shapiro reviews FDA's current position on the responsibilities of medical device manufacturers to evaluate, correct, and report date-related problems in their products. A practicing attorney, Shapiro also discusses the product liability implications of a company's response to year 2000 problems, and addresses the potentially convoluted matter of who should pay for repairs.

The one indisputable fact is that the clock is ticking, and FDA is doing its part to emphasize the implacability of a deadline that cannot be extended. At the top of CDRH's Web page titled "Year 2000 Impact on Biomedical Equipment," a running counter registers the time remaining until the fateful double-zero will manifest itself. When I printed this page from my PC, on July 20, there was a glitch in the line that appeared, which read "1 year, 5 months, 14 days, 7 hours, 35 minutes, 55 secon." I tried again, but the last two characters—the "ds" of "seconds"—were still missing. As time flies, marches, or hobbles on, it's almost comforting to know that genuine year-1998 problems, those relics of a dying century, are still around.

Jon Katz

jon.katz@cancom.com


Copyright ©1998 Medical Device & Diagnostic Industry

Y2K: Not Just a Technical Issue

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

"The biggest problem we've seen in making medical devices year 2000 compliant is that some manufacturers are not facing the issue in a timely manner," says Jeffrey K. Shapiro, an associate specializing in medical device law at the Hogan & Hartson law firm in Washington, DC. Shapiro wrote this month's story on who should cover the costs of fixing year 2000 problems. "There's no cause for panic," he notes, "but time is running out."

His impression appears to be borne out by FDA's experience with collecting data from manufacturers for its Web site. FDA has been encouraging companies to make their year 2000 status available to the agency and the public by posting data on a designated Web site. This past January, FDA sent letters to 16,000 companies, including all registered medical device manufacturers, asking them to participate. As of June, FDA reported that only 10% had responded, and most of those were companies saying that they did not have a year 2000 problem. One FDA official told Shapiro he believes that a major reason for this low response rate is that most manufacturers with year 2000 problems are still in the assessment stage and have not even begun working toward a solution.

Jeffrey Shapiro urges readers to tackle Y2K glitches now.

Interestingly, the so-called year 2000 problem could actually start affecting devices as early as next year. "Computer software program designs have other flaws in addition to their using two digits, such as 00, to represent a year. In some programs, the programmers used a date such as 9/9/99 as a flag to trigger certain computer actions." Unfortunately, it is unknown what exactly will happen when these flags are activated. "But we could start to see medical devices fail as early as next year.

"Another problem is that the year 2000 is a leap year, which is very unusual," Shapiro says. "Generally, years ending in 00 are not leap years—but there's a little-known exception for years ending in 00 and evenly divisible by 400, which includes the year 2000. Some programmers likely didn't realize that fact when writing their software, so this is another flaw that will need to be fixed, because after February 28, 2000, some devices will record data one day ahead of the actual calendar day.

"We should bear in mind that the machines that process or manufacture medical devices also rely heavily on software. Medical device manufacturers have a regulatory obligation under the quality system regulation to make certain that the equipment used to manufacture their devices can continue to function properly after the turn of the century."

In his conversations with clients and other medical device manufacturers, Shapiro says there seems to be a tendency to think of year 2000 device problems as a technical challenge for programmers to handle. "While that's true to a degree," says Shapiro, "one of the main reasons why I wrote this article is to remind everyone that it's also very much a managerial and regulatory issue for device companies. There are FDA regulatory and product liability concerns at stake. FDA has said that if a device may harm a patient as a result of a year 2000 problem, the manufacturer has a compliance obligation to fix it. Also, if patients are injured, I have little doubt that the personal injury lawyers will start pursuing product liability lawsuits in a big way."

In addition to his role in the food and drug law practice group at Hogan & Hartson, Shapiro also works with the law firm's year 2000 team, which studies this issue across a range of industries, and Shapiro notes that medical device companies appear to be a little behind their counterparts in other industries in terms of addressing this challenge. "While it's really a minority of devices that could injure patients because of a year 2000 glitch, unless vigilance is practiced, patients could get hurt."


Copyright ©1998 Medical Device & Diagnostic Industry

FDA's New Financial Disclosure Rule: An Unnecessary New Burden

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

A partner at Hyman, Phelps & McNamara, a firm specializing in FDA law, discusses how the agency went too far in requiring financial disclosure forms in device marketing applications.

Starting on February 2, 1999, it will be mandatory for device marketing applications that contain clinical data to include either of two new forms: one specifying the financial interests of the investigators or one certifying the absence of disclosable financial interests. A formal disclosure form will be required for all applications regardless of when the research was conducted. An application will not be approved without one of the forms.

This new FDA requirement stems from the understandable premise that financial interests can potentially bias results. Nevertheless, FDA's rule stretches its regulatory powers further than needed, is likely to impose greater costs than acknowledged by the agency, and adds unnecessary regulatory uncertainty into the device approval process.

A company must submit form 3455 to disclose financial interests if:

  • An investigator's compensation would be greater for a favorable outcome of the study than for an unfavorable outcome.
  • There are payments from the sponsor to the investigators or research institutions of more than $25,000, excluding reimbursement for the costs of the study. Retainers, consulting agreements, and equipment all count against the $25,000 cap.
  • An investigator holds a proprietary interest in the device, such as a patent.
  • Any investigator owns more than $50,000 of a sponsor's publicly traded stock or has any stock ownership in a nonpublic company.

If a disclosure statement is unnecessary, the sponsor must file certification form 3454, signed by the chief financial officer or other senior official. Given the potential for a criminal investigation—or worse—if there are any inaccuracies, the signer should carefully verify the information. If a clinical investigator refuses to provide information regarding disclosable interests, the sponsor must certify that it made a diligent effort to obtain it.

GOOD OBJECTIVE, BAD PRACTICE

Disclosure of potential conflicts is common in many arenas, such as peer-reviewed journal articles. However, there are many reasons to be concerned by FDA's rule.

New regulations should be promulgated only if there is demonstrable need, which the agency did not prove in this instance. The final version referred to "potentially problematic payment schemes." There is a difference between potential problems and actual problems.

Companies should be troubled by FDA's unprecedented intrusion into financial matters. The Federal Food, Drug, and Cosmetic Act lists only a few areas—one being financial matters—in which FDA probing is barred during a company inspection. The new financial disclosure rule allows FDA to obtain these data in the marketing application as a precondition to approval. FDA has also reserved the right to inspect and copy financial records when implementing this rule.

In the preamble to the final rule, FDA stated that "certain types of financial information requested under the rule, notably equity interests, should be surrounded by a reasonable expectation of privacy." However, FDA stated that it could, at its discretion, decide to publicly disclose financial information. Privacy should not be such a trivial issue. As CDRH head Bruce Burlington pointed out at an FDA science board meeting two years ago, "Can I suggest that relevant to the question of burden, we're sort of leaving out the burden of forgoing the traditional American value of privacy? That privacy is a legitimate independent value."

Moreover, FDA's general policy of not releasing financial information may be worth little if a Freedom of Information (FOI) Act request is submitted. An FDA rule authorizes companies to presubmit documents to learn if they will be protected from FOI disclosure. However, one company received such assurances from FDA that its silicone-related documents would be protected, but a federal court overturned the decision. There have been a number of other cases in which industry did not receive the protection it expected.

CREEPING COSTS

FDA's broad disclosure requirements are bound to make compliance more complicated and costly than the agency's projections. These requirements apply not only to the investigators but to their spouses and minor children. (The rule ignores the myriad family arrangements that can arise, e.g., a separated couple.) Furthermore, the term investigator includes all listed or identified subinvestigators who treated or evaluated subjects. Thus, in multicenter trials, there could be numerous individuals about whom company sponsors must gather information.

The complexity of this task is increased because a disclosure is apparently needed if the investigator or family member owned more than $50,000 of the sponsor's stock at any time during the investigation or for one year following, even if the stock's value was below the threshold for the majority of that period.

Companies will need to track money and equipment given to, and agreements made with, the investigators' institutions during the study and poststudy year. Given the stakes of inaccurate certification, companies will need to develop mechanisms to ensure that there are no disclosable financial interests, as well as procedures to track grants to institutions. Financial support exceeding $25,000, exclusive of actual costs, triggers a disclosure.

FDA's rule may force companies to choose between direct research grants, which have high institutional overhead fees but no disclosure, and unrestricted grants, which are more cost-effective but may result in disclosure. Thus, the form of the agreement with an investigator takes on regulatory significance.

FDA clearly underestimated the costs of gathering, assembling, and compiling all this financial information. FDA's estimates ignore costs incurred from creating new procedures. Moreover, the agency asserts that completing form 3454 (lack of disclosable interests) will take a total of one hour—48 minutes for clerical work and 12 minutes of managerial time. However, a CFO who signs an inaccurate form 3454 after 12 minutes of managerial checking is likely to be accused by FDA of inadequate due diligence. Despite what FDA says in the preamble to this rule, companies will need to take more time to ensure accuracy.

ASSESSING DISCLOSURE ITEMS

FDA estimated that there would be few disclosures filed by device companies. Whether this is accurate remains to be seen. If, in the agency's judgment, the financial interests revealed by a form "raise a serious question about the integrity of the data, FDA will take any action it deems necessary." The agency also has reserved the right to audit the data, request further analyses or additional studies for confirmation, and refuse to use an investigator's data.

FDA was asked to develop criteria by which it would evaluate disclosures, but the agency declined to do so. It did say that its assessment would be affected by how well-controlled the study was, meaning that an investigator's financial interests would be less of a factor for multi-center, randomized, blinded, controlled trials. Unfortunately, while many drug and biologic studies meet this ideal model, most device studies don't.

What FDA will do with this new information remains unanswered. At the board meeting, Burlington noted, "If we don't know how we're going to use the results of the financial disclosure, it becomes extremely problematic to have a system that results in everybody reporting something." FDA reviewers are accustomed to evaluating safety and effectiveness data. But how does a reviewer evaluate the significance of a $30,000 grant to an institution or a subinvestigator's spouse owning $52,000 worth of stock? How does FDA weigh this information against the protocol design and the amount of data reproducibility?

The assessment of information by FDA reviewers will be highly subjective. Device companies conducting studies that do not fit the classic model of a well-controlled study and that may have one or more investigators with disclosable interests need to begin considering the ramifications of their disclosure. FDA reviewers may examine data generated by investigator-inventors through a new, much more distrustful prism.

The financial disclosure rule is an unnecessary new regulatory burden that, with inadequate justification, increases the uncertainty of the approval process. Nevertheless, the rule is in place, so device companies need to develop procedures to implement it and assess its impact on ongoing or completed studies. Finally, they need to consider the rule as they select new investigators and enter into financial arrangements with physicians and institutions. The consulting agreement that is signed today may have unexpected regulatory consequences.

Jeffrey N. Gibbs is a partner at Hyman, Phelps & McNamara (Washington, DC).

Photo courtesy of Art Stein


Copyright ©1998 Medical Device & Diagnostic Industry

FDA Emphasizes CEO Accountability

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

WASHINGTON WRAP-UP

A recent Mentor Corp. consent decree draws in corporate subsidiaries and personnel

Faster, better-targeted quality inspections

James G. Dickinson

There was a time when FDA inspectors might show up without warning, disrupt operations, and nitpick every little thing they could find. They could open a paperwork exchange between the company and the agency that could go on for months or even years, punctuated by more inspections and disruptions.

Those days are gone. Instead, FDA is simply holding CEOs increasingly accountable for their companies' regulatory compliance. The leading example of this is the historic federal court consent decree signed in May by the agency and Mentor Corp. (Santa Barbara, CA). Signatories included the company's breast implant subsidiary, Mentor Texas, Inc. (Irving, TX), and, individually, Mentor Corp.'s CEO Christopher J. Conway and president Anthony R. Gette.

The decree represents the middle ground between FDA's tolerating GMP problems on the one hand and slapping $10,000-a-day civil penalties on the company on the other. Mentor must now pay serious attention to eliminating its GMP problems under a tight schedule monitored by an outside, company-paid auditor reporting to FDA.

This is the first time FDA has applied such a measure against a medical device company, although similar tactics have been used in other areas regulated by the agency. The twist in the Mentor decree is that, despite a record of chronic GMP problems at the company's Irving facility, FDA is allowing Mentor to continue marketing the affected products. There are two reasons for this conditional tolerance: None of the GMP problems are considered likely to affect patient health, and a market shortage could result if FDA shut down production.

Shutting down the plant, however, remains an option if Mentor falters in its corrective-action plan, which has performance deadlines as few as 15 days apart. The plan demands that the company completely document its quality assurance and quality control procedures, revalidate its processes, upgrade its device master records, validate all its manufacturing processes, and submit to annual comprehensive GMP inspections by an expert consultant who will report results simultaneously to Mentor and FDA.

The consent decree permits FDA to make its own comprehensive inspections, including taking photographs, at any time. The inspections will be made at Mentor's expense, at base rates of $55.06 per hour for FDA inspectors and $65.99 per hour for analytical and review work, plus travel and per-diem expenses. In addition, copies of the decree must be provided to all affected employees or posted in "conspicuous places frequented by and readily accessible to employees."

The decree's terms can be unilaterally revised by FDA if the agency determines that Mentor is not in compliance. Such revisions could include production shutdown, product recall, and additional recordkeeping and documentation requirements.

Also in May, FDA made public a warning letter written to Mentor CEO Conway on February 28, 1997. In a presumably related incident, similar GMP deficiencies were found at another Mentor subsidiary—intraocular lens maker Mentor Caribe (Caribe, Puerto Rico).

In that letter, FDA district director Samuel Jones cited several quality assurance, validation, and standard-operating-procedure deficiencies. He also expressed "greatest concern" over incomplete validation of the manufacturing process, especially the management's inability to "adequately explain the observed increase in process deviations for haptic thickness in single-piece lenses." Jones suggested that minor process changes at one processing step, perhaps due to a change in supplier, procedure, or equipment, "may unpredictably result in more significant deviations downstream in the process." There seemed to be "a significant and ongoing process instability of currently indeterminate cause" at Mentor Caribe, Jones observed.

"The various in-process inspections, and the 100% final inspection of product may mitigate some of the effects of such a process problem, but cannot be accepted as a substitute for implementation of a properly validated, stable and predictable manufacturing process," Jones wrote.

"We recognize," he continued, "that all manufacturing processes are subject to some irreducible deviations. However, in order to demonstrate that your process has been validated, the rates of observed in-process defects may not be demonstrably increasing over time. Nor ought they be subject to radical variability between work orders of like products."

This was an unusual warning letter, especially given its belated release to the public, so close to the signing of the consent decree with Mentor. The decree involved a different subsidiary but the same parent company and CEO.

Although the GMP problems dealt with in the two documents were ostensibly isolated incidents at very different facilities, they occurred under the same corporate umbrella and in roughly the same time frame. For the new FDA, this was sufficient to focus attention on one individual—the CEO.

No longer does the agency view subsidiaries as stand-alone operations for enforcement purposes, even though they may have enough autonomy within the corporate family to operate that way. FDA's more inclusive enforcement strategy has been steadily evolving for most of the 1990s. Companies will see a lot more of it now that government-wide belt-tightening has forced the agency to do more with less. Increasingly, FDA will look to see whether GMP problems in a subsidiary indicate a systemic problem in the corporate culture. FDA's leaders believe it costs less to enlist the CEO's help in taking remedial measures that affect a corporation's whole structure than to deal with separate problems as they arise. The wholesale approach also better protects public health and safety, which is FDA's main concern.

The trouble with this approach is getting and holding a CEO's attention. Although CEOs bear ultimate individual responsibility for their companies under the law, they are not appointed to work on regulatory compliance, usually lack adequate training and interest, and typically delegate the responsibility to others.

FDA has long been concerned that this delegation of responsibility for regulatory compliance goes too far down the line. Responsibility often lands on low- or mid-level managers who lack the authority and resources to keep the company's operations within FDA's expectations. Increasingly, the agency will leapfrog over the corporate employees designated to handle regulatory affairs to focus on the company's CEO—especially if it perceives a systemic pattern to GMP problems.

While doing so, FDA will likely contact all of the affected individuals in the company, bringing them into its strategy at the same time. For example, Jones's warning letter to Conway was copied to the president, vice president for operations, and RA/QA director at Mentor Ophthalmics (Santa Barbara, CA). It was also sent to the parent corporation's RA/QA/legal affairs vice president and RA/QA director. Mentor Caribe's plant manager also received a copy.

Of course, even though FDA wants CEOs to give its warning letters their full and undivided attention, it won't be easy. A warning letter written to Stryker Endoscopy president William Enquist on April 23, 1998, illustrates the point. An inspection two months earlier had found violations of the quality system regulation that included inadequate staffing, 57 medical device reporting complaints that had been filed with FDA after the 30-day time limit, and inadequate documentation. Vice president Carlos Gonzalez wrote FDA about what the agency's warning letter acknowledged were adequate measures "immediately taken," but the agency still issued the letter to Enquist "because of the nature of the deficiencies found."

In other words, the company's problems were delegated to a subordinate for handling, and the job was done well, but FDA wanted Enquist to continue to pay attention to the problem. Just as letters written to FDA's commissioner are usually delegated to the operational-level official the company is trying to avoid, so will FDA's warning letters meet the same fate at device companies. FDA's challenge will be to break through that barrier—preferably before it has to resort to the attention-getting technique it finally used at Mentor.


FDA's Center for Devices and Radiological Health is developing a new inspection guide for field investigators that will target seven subsystems identified in the quality system regulation. The change will make FDA inspections of device manufacturers faster, more focused, and better harmonized with European inspections, according to Tim Wells, a reengineering inspection team leader for CDRH. A draft of the inspection guide became available in June and was followed by an open public meeting.

CDRH director Bruce Burlington would like to see faster and more-frequent inspections to try to meet FDA's statutory mandate of biennial inspections for medical device manufacturers. Wells's team had been meeting with an ad hoc industry group through FDLI for several months to gain input. This is another example of the new, user-friendly FDA—asking industry how the agency should conduct inspections.

The draft guide will serve as a road map for investigators to evaluate the following seven subsystems:

  • Design controls.
  • Corrective and preventive actions.
  • Management controls.
  • Production and process controls.
  • Materials (components) controls.
  • Facilities and equipment controls.
  • Document, record, and change control.

The industry group warned FDA against including in the guide an encompassing list of questions investigators could ask to assess the subsystems. Wells says the agency acknowledged that efficiency and time savings in inspections could be lost if those questions were included.

Most inspections should not have to evaluate all seven subsystems, many of which dovetail into others. For example, an investigator evaluating the subsystem "production and process controls" may review a sterilizer's validation. It would be hard to assess the sterilizer without also looking into the equipment and calibration under the subsystem "facilities and equipment controls."

A risk assessment should take into account what subsystems need to be evaluated, especially for firms with good compliance histories or those manufacturing low-risk products.

Wells says the new inspection process will be more aligned with Europe's "top-down" approach but with more-intensive record checking. This is a move away from FDA's traditional bottom-up approach, which usually begins with investigators poring over complaint files.

"In the past, we concentrated on the nonconformances," Welles says. Although the new program may still look at nonconformance, it will also assess whether the firm did the right thing when it found a nonconformance. Under the draft program, FDA investigators could look into corrective and preventive actions, which would include complaints and servicing, to assess whether the firm's system for taking action worked and was based on the risks and needs of the situation.

To increase the number of firms it can inspect, FDA will terminate an inspection early if it is apparent that a firm's systems are out of control, according to Phil Frappaolo, deputy director in CDRH's Office of Compliance. In these instances, the inspection would be written up as "official action indicated," leading to a warning letter or other regulatory action.

Comments from the public meeting and other sources will be taken into consideration before the agency finalizes the inspection guide, Wells says. A pilot test in the field will also be completed and assessed before the new inspection program is implemented.


Copyright ©1998 Medical Device & Diagnostic Industry

The Next Wave in Minimally Invasive Surgery

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

Research is heating up in the area of RF, microwave, and high-frequency ultrasound for use in therapeutic devices.

For decades, scientists have been using electromagnetic and sonic energy to serve medicine. But, aside from electrosurgery, their efforts have focused on diagnostic imaging of internal body structures—particularly in the case of x-ray, MRI, and ultrasound systems. Lately, however, researchers have begun to see acoustic and electromagnetic waves in a whole new light, turning their attention to therapeutic—rather than diagnostic—applications.

THREE APPROACHES

Current research is exploiting the ability of radio-frequency (RF), micro-, and ultrasonic waves to generate heat, essentially by exciting molecules. This heat is used predominantly to ablate cells. Of the three technologies, RF was the first to be used in a marketable device. Microwave devices are entering the commercialization stage, and ultrasound devices could be soon. All three technologies have distinct strengths and weaknesses that will define their use and determine their market niches.

Figure 1. Somnus Medical Technology's (Sunnyvale, CA) Somnoplasty system includes an automated RF generator with temperature monitoring and a suite of disposable surgical handpieces that deliver controlled thermal energy into the targeted area to reduce tissue volume and stiffen soft tissue.

"For the most part, the destruction mechanisms are the same, but there are certain advantages to certain techniques," explains Mark Buchanan, vice president of Advanced Surgical Systems, a manufacturer of ultrasound amplifiers in Cambridge, MA. Microwaves don't penetrate very deeply, he says, but they can propagate through almost any tissue type. Ultrasound can penetrate quite deep into the body but can't pass through bone or gas; it can also focus on small points, whereas microwaves cannot be focused. RF waves are applied through electrodes that must contact the target tissue directly.

The underlying principles are pretty straightforward, according to Kevin Larkin, vice president of operations and marketing at Fidus Medical Technology (Fremont, CA). In RF ablation, for example, "You take a catheter with a metal tip, put it adjacent to the tissue you want to ablate, run the current through it, and because of high current density, it essentially burns a crater in that area," he says. Microwave ablation involves transmitting energy from a generator through a catheter tipped with a microwave antenna. "That transducer or antenna can be of varying lengths," he explains, "and if you think of it as a coil of wire that looks very much like a spring out of a ball-point pen, you can image being able to size it from half an inch long to a couple of inches long. Once energized, that antenna releases microwave energy in a radial fashion. If you've positioned the antenna next to tissue that you know you want to have ablated, a field is created, and just like it does in the kitchen, the microwave energy excites [mostly] water molecules, and in motion, they generate heat."

ARRHYTHMIA

Fidus is one of several companies pursuing microwave technology for treating cardiac arrhythmias, an area where RF has already made progress. In 1995, for example, Cardiac Pathways Corp. (Sunnyvale, CA) received an IDE from FDA to begin clinical trials on its cooled RF ablation system for treating ventricular tachycardia, a condition that often arises in heart-attack survivors. In a nutshell, the scar tissue formed by a heart attack can form a return pathway or circuit for the electrical impulses that stimulate heart function, causing it to beat much faster. The objective is to kill these cells and restore appropriate electrical activity to the heart. The name of the Cardiac Pathways device—the Chilli cooled ablation catheter—points out a shortcoming in the first generation of RF ablation devices. Excessive heating of the tissue and the ablation electrode limited the amount of energy that could be safely delivered and therefore restricted lesion size. The Chilli uses a closed-loop fluid circulation system to cool the catheter tip and can therefore prevent coagulation and create wider and deeper lesions by transferring higher energy levels.

Of course, creating long and deep lesions is what microwaves do best. "One of the perceived values is that you can make long or linear or continuous lesions," Larkin says. "For curing, as an example, atrial flutter (or, presumably, atrial fibrillation), what is known already is that it's absolutely a requirement to make a lesion that has some length," he explains. "In atrial flutter, the mechanism is very well understood, and the approach is very well defined: you ablate what's called the isthmus, which is easily located during EP mapping, and in an adult, that can be about one and a half to two and a half centimeters long. So you can see that what you want to do is make an ablation potentially as long as the isthmus. That matches up nicely with microwave energy's ability."

Larkin also points out two more fundamental aspects of the microwave technique. First, because the energy is radiated from an antenna, direct tissue contact is not necessary. "Given that the interior surface of the heart has a lot of irregularities, a microwave approach is a more forgiving approach," he says. Also, with no electrode, there's nothing on the catheter to get hot, so the potential for building up coagulum is basically nonexistent.

Figure 2. The Prostatron uses transurethral microwave therapy to treat benign prostatic hyperplasia. A microwave antenna encased in a urethral catheter is positioned at the bladder neck during treatment (EDAP Technomed, Inc., Burlington, MA).

Fidus is concentrating on atrial arrhythmia, but NASA's Johnson Space Center has developed a microwave device that would compete with the RF device from Cardiac Pathways for treating ventricular tachycardia. "We've been working on a catheter that would be inserted probably through a person's thigh up into the heart and use microwave energy to cook the diseased cells," explains Dickey Arndt, PhD, the primary inventor. "What we wanted to do is increase the temperature anywhere from 10° to 20° above ambient, while at the same time minimizing any heating of the blood or surface tissue of the heart," he explains. "The problem is, we wanted to get a fairly high temperature rise one to two centimeters down inside the heart, and it's difficult to get the heat down that far without cooking everything between the antenna and the target area."

Arndt and his team modeled the thermal and electrical conductivity of the heart and established reasonable frequencies for the microwave radiation, but even then, their work was far from over. "One thing is to come up with a good frequency," he says. "Another is to optimally design the antenna on the end of a catheter so it will effectively transfer energy through the surface of the heart and into the heart tissue. That's basically a matter of impedance matching—we've come up with some schemes for that." Arndt's team has conducted tests with a phantom and beef hearts using fiber-optic thermocouples to measure temperature rise. "The bottom line is, we can get good heat penetration. We can get a temperature rise of 20° at a depth of 15 to 20 millimeters in less than five minutes," he says. "Also, we've monitored the temperature rise of the blood around the antenna, and it's less than 2°." NASA is currently looking for partners to help commercialize the technology.

RF VERSATILITY

Microwaves may be better suited for certain procedures, but RF technology is definitely versatile and remains the best choice for many applications. For example, Somnus Medical Technologies (Sunnyvale, CA) has introduced an RF device for treating snoring and upper airway blockages (Figure 1). The device uses RF energy to create submucosal lesions in the soft palate, which are naturally absorbed into the body, resulting in a reduction in tissue volume. The procedure, called Somnoplasty, reportedly takes less than 30 minutes, with the actual RF ablation lasting less than 5 minutes on average. The company is currently conducting clinical evaluations in the United States and Europe to expand claims to include the reduction or elimination of other obstructions of the upper airway.

Oratec Interventions (Menlo Park, CA) has developed another novel use for RF energy. Rather than ablate tissue, Oratec's device shrinks it. Specifically, the device is designed for orthopedic procedures in which ligaments and tendons need shoring up. "We're denaturing the tissue, manipulating the collagen molecule," explains Hugh Sharkey, Oratec's executive vice president and CTO. "We're not looking to remove the tissue, but to manipulate the collagenous molecules in such a way that we can affect a clinical outcome." The process, known as electrothermal arthroscopy, has been successful in treating various joint instabilities. The conventional treatment for a shoulder instability, for example, would entail pulling the ligamentous shoulder capsule up, folding it over on itself, and sewing it down—a technique known as plication. The RF process simply shrinks the capsule, leaving a scaffold or template for new type-1 collagen to move into. "We don't want these tissues to go away," Sharkey points out. "We want them to become more resilient. So we're working with temperatures on the order of 50° to 75°C. Typically, ablation devices are operating at much higher temperatures."

Figure 3. Transurethral needle ablation, an alternate treatment option for benign prostatic hyperplasia, uses RF waves delivered through the ProVu device shown here (VidaMed, Inc., Fremont, CA).

Temperature control is obviously important in a procedure like this, and Oratec's system monitors not only the temperature of the tip electrodes, but impedance as well. "It's important to note that tissue heats up in response to the current flowing through it," he says, "and it's that step up in resistance where heating occurs." In other words, he says, the wire doesn't heat up because it's a good conductor and the electrode doesn't heat up because it's a good conductor, but the tissue heats up because it's a poor conductor. Sharkey doesn't believe microwaves would do as good a job. "Everybody has put a potato in the microwave and hit hot spots and cold spots. Microwaves oscillate much smaller ions, so it's easy to get cell-by-cell differences in impedance that cause hot and cold spots," he says.

PROSTATIC HYPERPLASIA

Still, there are a few areas where RF and microwave are going head to head with no clear winner. In the urological market, for example, both RF and microwave devices are being used to treat benign prostatic hyperplasia (BPH). According to the Health Care Financing Administration, the condition, commonly referred to as enlarged prostate, is detectable in about 50% of all men over the age of 60 and 90% of men age 85. Roughly half of these cases will require therapeutic intervention. Transurethral resection of the prostate (TURP) is the most common surgical treatment, but it carries a high risk of complications. Less-invasive therapies have been sought for some time, beginning with laser-based devices and balloon dilation, but the simplicity and effectiveness of transurethral microwave therapy (TUMT) and transurethral needle ablation (TUNA) could easily eclipse these earlier treatments.

EDAP Technomed, Inc. (Burlington, MA), was among the first to enter this market with its Prostatron system, one of the few medical devices currently approved by FDA for treating both symptoms and obstructions caused by BPH (Figure 2). The microwave-based Prostatron competes directly with the Targis system, a microwave device developed by Urologix, Inc. (Minneapolis). According to Michael Krachon, technical manager for EDAP Technomed, Prostatron TUMT works by inserting a microwave antenna encased in a urethral catheter into position at the bladder neck. A set of channels running through the catheter carries cooling water to preserve the urethra. The device then delivers up to 70 W of microwave energy to the prostate, heating the gland to 45°–60°C. This heating is maintained for the duration of the treatment, which takes about an hour from start to finish. A fiber-optic thermosensor continuously monitors the treatment temperature.

TUMT can expect stiff competition from TUNA, the RF approach developed by VidaMed, Inc. (Fremont, CA). The company's ProVu uses a disposable cartridge with a reusable handle to deploy two electrode needles through the urethra and into the prostrate (Figure 3). The needles are shielded to prevent damage to the urethra, and a scope is used to ensure proper placement. The ProVu can reportedly achieve an interstitial temperature of 100°C while keeping urethral temperature below 42°C. Both TUMT and TUNA can be performed in the urologist's office in less than an hour and require only minimal anesthesia.

These treatments are still relatively new, and further improvements can be expected. It's unclear, however, whether either technique will come to dominate the other. In the end, it might come down to economics. VidaMed claims that the TUNA procedure will prove more cost-effective than other thermal therapies and has been actively pushing for Medicare reimbursement at the state level. Also, long-term effects have not yet been documented.

EDAP's Prostatron is currently being reimbursed by Medicare in 49 states and by more than 300 private-pay insurance companies. EDAP is hoping to extend the technology to related areas. "Other applications we are looking at," says Krachon, "would be other aspects of prostate disease and, eventually or potentially, other abdominal organ diseases."

RF energy may hold as much potential for treating women's health problems as it does for treating men's. BEI Medical Systems (Teterboro, NJ) has begun distributing its BiSafe system for an outpatient procedure known as large-loop excision of the transformation zone (LLETZ). The system comprises an RF generator and disposable electrodes designed to remove abnormal cervical tissue and coagulate bleeding vessels. Devices of this type have been available for several years, but BEI's is reportedly the first to use bipolar—as opposed to unipolar—energy. According to the company, bipolar energy reduces thermal artifact, allowing for improved diagnosis of removed tissue samples. The company expects to introduce another bipolar device for removing benign uterine fibroids by the end of this year and is conducting clinical trials of its HydroThermAblator, an RF device for treating excessive uterine bleeding.

MAKING WAVES

While RF and microwave devices carve out their market niches, they may soon feel the heat from a technology that could potentially combine the best traits of both—high-density ultrasound. While not new, it has taken nearly two decades to reach its current level of practical application. Although ultrasonic waves require a liquid or gel-like medium for propagation, they could be administered without direct tissue contact. In addition, the focal point—where heating occurs—can be made quite small. So, in effect, ultrasonic generators could be positioned outside the body to ablate a targeted section of tissue within.

"The physics of ultrasound interaction are quite different from microwave," explains Charles Cain, PhD, chair of the biomedical engineering department at the University of Michigan. "The wavelengths are different, the methods of propagation are different." The idea of focusing ultrasound inside the body to effect some change is not necessarily new, he says, but up until now, there have been no reliable ways of monitoring and controlling the process. "For ultrasound, probably the largest problem is feedback and control," he explains. "In other words, since ultrasound systems are very effective at focusing energy at very small volumes, you have to know exactly what you're doing. It's easy with microwave, but with ultrasound, you need to be able to visualize a target volume and verify that you're focusing your energy there and verify that you've done something. If you're doing that noninvasively, you see that's not a trivial thing to do."

Some researchers are logically trying to combine ultrasonic imaging with ultrasonic therapy, as the two processes would take place at different wavelengths. But others expect the big break to come from MRI. Indeed, many of the big MRI firms such as GE, Siemens, and Phillips are reportedly pursuing the technology.

At the Mayo Clinic (Rochester, MN), Joel Felmlee, MD, is helping to work out the bugs in GE's ultrasonic ablation system. "My work so far has been to take a set of equipment developed by GE Medical Systems and do the testing that would be appropriate for a clinical trial," he says. His primary focus currently is on the accuracy of the spot position. "I ask the question, 'Is the spot where you think it is?'" he explains. The spot in question is a cylinder about 1–2 mm in diameter by 4–6 mm in length. "We call it a grain of rice," he says. The GE system strives to put these grains side by side to fill a volume and ablate it. Temperature changes affect the MR image, allowing the clinician to monitor the procedure. "I don't think this is so new in terms of the ultrasound ablation," he says, "but the novelty is you can get it to work within an MR scanner."

Felmlee and his colleagues have been conducting experiments to assess the accuracy of the machine, which is primarily intended for shallow lesions or skin lesions. Some important questions remain to be answered. "We've looked at the accuracy of the positioning system and we're using thermal imaging to understand the focal spot—is it the size that we think it is? We have some lenses that are used to increase the size of the focal spot—is that increase what we expect? Then we'll look at surface effects—as you bring your focal spot closer, can you spare the skin?" Near-field heating needs to be understood better, he says. Though the machine may be focusing at depth, energy is still being directed at the surface. "We need to see what exactly is happening at the surface," he says. "That's the next thing I'd like to understand."

Reliability also needs proving. As Felmlee puts it, "If you're going to put someone on the table, and the therapy is going to take three or four hours, you can't have a breakdown midway through. That's an obstacle for us presently, and during the next six months, we'll see if we can't get past it." Another hurdle will be establishing patient benefit. "There's risk associated with everything we do in medicine, and if this would allow the same or better results with less risk, that's a win. If it would get the same results with the same risk, that wouldn't be worthwhile," he says.

PHASED ARRAYS

Of course, an MRI-guided system will be expensive. That's one of the reasons Cain and his colleagues at Michigan are pursuing ultrasonic guidance. The key, he says, is to use a phased-array system—not unlike a modern phased-array radar system. A phased array comprises multiple elements with amplifiers behind each one to reinforce radiation patterns in one direction and suppress them in others. In contrast to a fixed-focus system, a phased array allows beam steering and phase control. "I think most people are coming around to our way of thinking that these are probably the best way to do this," Cain says. "For example, in cardiac ablation—putting lesions on a beating heart. There, you may have to focus around the ribs, and phased-array systems very nicely allow you to do that. You can actually form a beam on a moving target and in real-time follow that target."

Phased arrays might make the small focal point easier to work with. "If you can think of an ultrasound system as nominally focusing on a spot about a wavelength in diameter, and that wavelength is a couple of millimeters, and if you're trying to ablate a tumor that's a centimeter in diameter, you see the problem is not that you can't get the energy into a small enough volume—it's the opposite: how do you spread it out? A phased-array system allows you to do that."

On the other hand, that small focal spot opens up additional opportunities for intricate surgeries that would be difficult through conventional means. Felmlee in particular expects to see applications in and around the eye. Cain has been investigating yet another application—activation of cancer-fighting drugs. In this instance, the technology would function similarly to photodynamic therapy but would benefit from ultrasound's ability to focus at depth. So far, he says, the effects aren't profound. "But they're interesting enough that a lot of people have started looking at it."

CONCLUSION

In general, all three technologies should become more prevalent in coming years. The idea of removing internal tissue without actually cutting into it is obviously attractive, and new applications ranging from liver-tumor removal to spinal-tissue repair are reportedly in the works. Scientists at Thomas Jefferson University (Philadelphia), for example, have patented an angioplasty catheter that uses microwave radiation to soften arterial plaque prior to balloon inflation. So it seems that even procedures that can't be converted to a strictly radiative approach will still be affected by the technology. "I think it's going slowly right now," says Advanced Surgical's Buchanan, adding, "but it's starting to pick up momentum."


Copyright ©1998 Medical Device & Diagnostic Industry

How to Evaluate Medical Device Technologies

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

Taking a close look at clinical value, barriers to entry, and market size can help investors determine where to put their money.

Whether you're a senior medical device industry executive or a professional money manager, you're looking for the winning technology, product, or company that will help you develop your business, career, and portfolio. A parade of exciting technologies passes before you each year. But what happens to them? Why do so many fizzle at commercialization? Although several important new technologies have driven unprecedented industry growth, young medical device stocks, as a group, have been a resounding disappointment. Since June 1995, initial public offerings (IPOs) are up only 8%, versus 108% for the much lower-risk Standard & Poors (S&P) stocks. What happened?

Clearly, investors underestimated the risks associated with these technologies. They may have also overestimated their potential rewards. An analysis of the medical device companies that went public from June 1995 to July 1997 reveals patterns of success and failure. Understanding these patterns can help an investor capitalize on the many new medical technologies that are invented.

For this analysis, public market values—shareholder value—will be considered a measure of success. Although imperfect, the stock market is probably the most impartial and quantitative reflection of future expectations for risk and reward that we have available.

OBSERVATIONS

The following observations can be made about the industry's public-market performance during this period:

  • Proprietary breakthrough products are most likely to create a valuable franchise.
  • Barriers to a new technology's entry into the market, especially with regard to sales and distribution, are high for products that offer only incremental improvements over competitors' products.
  • Most markets are too small to support a new company.

The implications of these observations are much the same for large and small companies—both will benefit more from breakthrough products by building new, long-term franchises. The difference, of course, is that larger companies can also make money selling me-too products, whereas start-ups usually cannot.

ASSESSING TECHNOLOGIES

The preceding observations can be used as the basis for assessing technologies using three variables: clinical value, barriers to entry, and market size.

The first two, clinical value and barriers to entry, determine the probability of success for a company entering a new technology area. Clinical value, or the extent to which a product meets an unmet clinical need, drives market demand and allows value pricing and high profit margins. Barriers to entry, or the technological, regulatory, patent, and commercial hurdles that others must surmount before bringing a similiar device to market, determine the risk of competition and the potential for market share loss and price erosion. Success is broadly defined as achieving market adoption and a leading market share—in other words, the creation of a franchise, a business that cannot be easily replicated.

Table I. Slightly more PMA-track IPOs showed positive returns, but both types were disappointing overall.

Table II. More PMA-track investments showed high returns than 510(k)-track investments, and there were more PMA home runs.

These two success variables also help determine the value of the investment opportunity. Investors put a high premium on the predictability of growth and earnings and an even higher premium on companies with leading market positions—franchise value. At the end of the day, investors will pay much more for a dollar of profit from a secure franchise than from a volatile, competitive industry.

Price-to-earning (P/E) ratios reflect the amount investors will pay (the share price) for a dollar of anticipated future earnings. On average as of May 1998, the market traded at 22x 1999 earnings. P/E ratios are a function of the expected long-term earnings growth rate and the perceived risk associated with that growth. The P/E ratio can be normalized for growth by dividing it by the expected long-term growth rate. This yields the relative ratio of perceived risk to growth, permitting comparison of one stock to another. For example, the best franchise in the industry, Medtronic (Minneapolis), trades at 1.9 times its growth rate; whereas Guidant (Indianapolis), a good company but one exposed to the volatile stent market, trades at 1.5 times its growth rate.

Figure 1. A technology's likelihood of success can be evaluated by plotting clinical value (horizontal axis) and barriers to entry (vertical axis).

A new technology's desirability can be evaluated by plotting it on a 2 x 2 matrix using these variables (Figure 1).

"High" and "low" are hardly specific measurements, of course, and defining them is the hard part of this exercise. For this analysis, solidly above-average clinical value was characterized as follows:

  • Quantified improvements in patient outcome such as increased lifespan, physical functionality, or the ability to function independently.
  • Reductions in procedural risks such as mortality and morbidity.
  • Improvements in recovery time measured in days or weeks, not hours.
  • Value pricing at more than $1000 per device for a surgical procedure.

The scale for evaluating barriers to entry is based on the following assumptions:

  • The ability to achieve critical mass in sales and distribution defines the midpoint of barriers to entry.
  • Barriers that may be more important than achieving critical mass can be found in Quadrants #1 and #2 and include a significant lead to market or ownership of patents or know-how that blocks other companies from marketing a similar product.
  • A technology that only provides a differentiated approach to an undifferentiated outcome is generally not novel enough to succeed; ease of use is generally not a sustainable competitive advantage.

The most desirable quadrant for a new technology is the high-clinical-value/high-barrier-to-entry quadrant, #1. Yet, although this quadrant may indicate that a technology has the maximum probability of success, it does not indicate how much the technology may be worth. It is market size (price x potential market units x market share), the third variable, that determines a new technology's value. Investors and managements tend to underestimate the risks (variables one and two—clinical value and barriers to entry) and overestimate the potential rewards (variable three—market size) of most new medical technologies.

TESTING THE FRAMEWORK

To test the validity of this investment framework, proxies for the high-clinical-value/high-barrier-to-entry technologies (Quadrant #1) and low-clinical-value/low-barrier-to-entry technologies (Quadrant #4) were chosen—devices that take the premarket approval (PMA) and 510(k) regulatory paths, respectively. The PMA path requires clinical trials, generates quantified claims for clinical value, and confers a lead to market that is a barrier to entry for competitors. The 510(k) confers no claims for clinical value (only equivalence to a preexisting device) and poses no barrier to entry to competitors because it takes only 90 days to obtain.

The sample consisted of all medical device IPOs between June 1995 and September 1997 that were based around technologies in early stages of development or commercialization. This definition included almost every medical device IPO under $700 million in valuation. Consolidation plays and companies that predominantly offered services (such as HMOs) were eliminated from the sample, leaving a total of 57 companies, 22 with products covered by a PMA and 35 with products covered by a 510(k). The total market capitalization today of these companies is approximately $9 billion.

As of the end of May 1998, on average since their IPO, the PMA companies had gained 38.5% in share price, whereas the 510(k) companies showed —9% return. "Home runs" (providing 100% or more return) were marginally more frequent and were much bigger successes among the PMA companies. IPO valuations were higher for PMA companies than 510(k) companies, at $185 million versus $145 million. These findings are summarized in Tables I and II. The divergence in performance between early-stage PMA and 510(k) companies has held up over the past year.

What do these results indicate? In aggregate, more than 60% of medical device IPOs went south—a resoundingly poor record. Even though they did better than the 510(k) companies, returns for the PMA companies were still far behind those of the lower-risk S&P index. Early-stage PMA companies continue to be a disappointment, bringing the percentage of winners closer to 510(k) companies, but the home runs keep getting bigger, offsetting the disappointments in the average return.

In the PMA group, the home runs were Spine-Tech, Inc. (Minneapolis; 472% return); Arterial Vascular Engineering (AVE; Santa Rosa, CA; 235% return); and Closure Medical (Raleigh, NC; 191% return). Winners include the home runs plus Instent (Eden Prairie, MN); Endovascular Technologies (Menlo Park, CA); Novoste Corp. (Norcross, GA); Aradigm Corp. (Hayward, CA); and Endocardial Solutions, Inc. (St. Paul, MN). In the 510(k) group, the home runs were MiniMed Technologies (Sylmar, CA; 292% return) and Ventana Medical Systems, Inc. (Tucson, AZ; 166% return). Other winners include Arthrocare Corp. (Sunnyvale, CA); Bionx Implants, Inc. (Blue Bell, PA); Biopsys Medical, Inc. (Irvine, CA); ESC Medical Systems, Inc. (Yokneam, Israel); SelfCare, Inc. (Waltham, MA); Xomed Surgical Products (Jacksonville, FL); Biosite Diagnostics, Inc. (San Diego); Micro Therapeutics, Inc. (San Clemente, CA); Schick Technologies, Inc. (Long Island City, NY); SpectRx, Inc. (Norcross, GA); and Computer Motion (Santa Barbara, CA). Most of the 510(k) winners were 1997 deals made at valuations 20% below the average.

So, is there magic to a PMA? No, but there is magic to the clinical value and barriers to entry that the PMA represents. Even in the 510(k) group, the home runs were characterized by high barriers to entry and at least some clinical value for the patient.

What about the onerous development time for PMAs? Oddly, this appears to be more positive than it is negative. Think of these stocks, for a moment, as options that trade on the basis of the size of the reward at the end of the development process, the probability of making it through the development process (i.e., past FDA), and the threat of competition. The long PMA development process provides visibility for two of these three major elements of value. The threat of competition is the number-one valuation killer and, therefore, long-term certainty about the nature of the competition adds value. For PMA-track IPOs, the reductions in risk appear to outweigh the long development time.

FITTING DEVICES INTO THE FRAMEWORK

Where do current technologies fall in these quadrants? Quadrant #1 clearly includes implantable cardioverter defibrillators (ICDs), pacemakers, spinal fusion cages, and vision surgery lasers. These products exhibit high clinical value and are limited to few players—ICDs/pacemakers by intellectual property and fusion cages by regulatory timing. Although there will eventually be more competition in the fusion cage arena, the fact that two new companies were able to establish sustainable franchises with these products indicates a successful new start-up technology.

Technologies on the border of Quadrants #1 and #3 might include abdominal aortic aneurysm (AAA) repair products and intracoronary radiation. The companies manufacturing these products are likely to be absorbed by a bigger company (as AAA repair has), but an early start and significant differentiation among the leaders can be hard for bigger players to surmount, leading them to acquire the companies rather than compete. From a management and investor standpoint, this can be considered a success if the acquisition is at a premium to previous financings. For a technology to fall into Quadrant #1, barriers to entry should allow the leader, at least, to establish a franchise.

Quadrant #3 represents technologies with high value but low barriers to entry, which allow prices to degrade and reduce market share assumptions for any given player. Almost all specialty disposable products fall into Quadrant #3, such as interventional cardiology catheters, transmyocardial revascularization/percutaneous myocardial revascularization (PMR) catheters and products, benign prostatic hyperplasia (BPH) ablation treatments, and ablation catheters. Mature implanted products, such as hip, knee, and pedicle screw spinal implants, may also fall into Quadrant #3. Even at maturity, these products tend to have high profit margins (e.g., 60–70%) because they address high-stakes indications, making quality and reputation very important.

Where do stents fall? The universal assumption is that they fall into Quadrant #3—a big-company product line. AVE stands out as a notable exception because of its remarkable success. However, its valuation at a P/E ratio of 15x 1999 earnings per share reflects the assumption that it cannot maintain this success. With fewer competitors (more barriers to entry), the stock would be double today's value. Stents have the short product life-cycle common to products in Quadrant #3. Product differentiation in this quadrant rapidly regresses to the mean and, therefore, companies rely on critical mass for success with these products in this market. Whether AVE is an exception to the rule remains to be seen.

Quadrants #1 and #3 are the primary purview of the major, high-tech medical device companies such as Medtronic, Guidant, and Boston Scientific. Medtronic has strategically targeted Quadrant #1, with almost all of its successful products falling into this space. It is also the most highly valued device company on our P/E-to—growth rate measure. The company has been notably unsuccessful with products in other quadrants, however. Guidant shares Medtronic's attributes on the cardiac rhythm management side but has struggled at times to keep up with the rapid product cycles on the interventional side. Guidant's recent successes clearly indicate that it is recovering, and its rich pipeline in AAA repair and myriad interventional technologies (stents, radiation, e.g.) indicate that it has both business models in hand—no small feat. Boston Scientific lives and breathes in Quadrant #3, targeting critical mass and leadership as an end in itself, introducing hundreds of incremental, high-quality products. The company leaves no new technology unsurveyed and often hedges its bets with multiple partners in a given developing area. In the long term, Boston Scientific will probably maximize growth in this realm but offer lower profitability than Medtronic. As a result, its sales dollars and growth will continue to be valued lower. Orthopedic implant companies also generally fall into Quadrant #3.

In Quadrant #4 fall US Surgical, Ethicon, Baxter, Becton Dickinson, and similar companies. Some of these companies are beginning to extend into the higher-margin Quadrant #3 through acquisitions and internal development, recognizing the tough growth and economic prospects of Quadrant #4. They may be late to market but—presumably—gain market share because of their critical mass. These are the players whose threatening presence has made Quadrant #3 so difficult for start-ups. PMR and BPH treatments are good examples of this.

Quadrant #2 is an odd duck that includes products of marginal or real but poorly quantified clinical value that face a significant barrier to entry. This quadrant, too, can be a healthy environment for start-ups, but is highly situation- or company-specific. Companies in this quadrant include Biopsys, Bionx, and SafeSkin. Biopsys co-opted the critical mass of a partner to lock up access to biopsy tables, and SafeSkin has a new way of making latex gloves that reduces allergic reactions to them, a minor clinical but economically valuable product benefit.

CONCLUSION

So, what should be done now? Is starting a new medical device venture too difficult? Are the odds of success too low? No. Recent experience indicates that great successes are possible and investors are oriented toward highly rewarding opportunities in the long term. However, the one lesson that should be taken away from this recent era in medical device start-ups is that novel proprietary technologies that address important and previously unmet clinical needs are the secret to success. If the medical device industry focuses on such high-value opportunities, the industry's growth, profitability, and value should increase from today's already heady pace.

Robert C. Faulkner is senior medical products analyst at Hambrecht & Quist, LLC (New York City).


Copyright ©1998 Medical Device & Diagnostic Industry

The Differences between U.S. and E.U. Laser Standards

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

HELP DESK

Karl J. Hejlik, writer and editor for the Laser Institute of America, a professional society that fosters laser applications and safety, describes the differences between U.S. and European standards for medical laser products.

What is the status of the FDA laser radiation standard for medical devices, especially low-power, laser-based diagnostic sensors, compared to the standard in the European Union?

Since the first European standard for laser products (IEC-825) was published in 1984, there have been significant differences between it and the U.S. standard published by FDA's Center for Devices and Radiological Health (CDRH). Over the years, these differences have caused confusion and noncompliance and have increased costs for many manufacturers who ship products to both the United States and Europe.

Both standards have been revised in the past and are now being simultaneously reworked, so harmonizing them is analogous to shooting a moving target from a moving vehicle. Nevertheless, it's been tried. In the most recent effort (Spring 1996), CDRH informally distributed proposed changes to its standard to laser manufacturers and various other interested parties for their input. However, the center could not predict when a formal proposal or revised standard would be completed.

Although a complete examination of these suggested revisions is not possible here, a couple of issues are worth noting.

One change that would affect manufacturers is CDRH's adoption of the International Electrotechnical Commission (IEC) definition for laser classes, including the historically troublesome Class 3A. Although it is hoped there would be only a small number of products affected, there are products in the United States currently defined as Class 3A that would become 3B. This would mean stricter control measures for those devices, as laid out by the American National Standards Institute's Z136.1, "For Safe Use of Lasers."

Another issue is extending the CDRH standard to include light-emitting diodes (LEDs). Although the standard does not require LED sources that are inherently Class 1 to be tested, market pressure is often put on the manufacturer to carry out third-party testing, according to CDRH.

The IEC standard already includes LEDs but exempts inherently Class 1 LED products. For consistency, IEC has extended this exemption to inherently Class 1 laser products. Many experts think that if FDA allows this exemption, underclassified products could be placed on the market, since it is unclear how unlabeled and untested products could be accepted as inherently Class 1.

Industry response to CDRH's proposal to include LEDs in its laser standard was generally negative, so it is unknown whether the two standards can be harmonized on this point.

Other changes proposed by CDRH deal with sampling intervals, repetitive pulses, radiance and irradiance measurements, emission indicators, and beam attenuators.

Medical laser products are defined as those intended for irradiation of the human body for surgery, therapy, or diagnosis. Under both U.S. and European standards, Class 3B and 4 medical laser products must incorporate a means for measuring the level of irradiation to the human body. In the current effort to harmonize the standards, there is an emphasis on accuracy and stability of performance. CDRH proposes that outputs be within ±20% of the preset or selected value. An alarm indicating unacceptable deviance and an emergency stop control would be required on all medical laser devices.

Many devices used in the medical field for diagnosis and other purposes would not be considered medical laser products under the standards and thus would not be subject to any additional regulation—for example, diagnostic devices that only come into contact with cells or tissue samples.

The issues surrounding the U.S. and European standards for laser products are very complex. Questions about laser standards or other laser-related application or safety concerns can be directed to the Laser Institute of America at 1-800-34-LASER or 407/380-1553.


"Help Desk" solicits questions about the design, manufacture, regulation, and sale of medical products and refers them to appropriate experts in the field. A list of topics previously covered can be found in our Help Desk Archives. Send questions to Help Desk, MD&DI, 11444 W. Olympic Blvd., Ste. 900, Los Angeles, CA 90064, fax 310/445-4299, e-mail helpdesk@devicelink.com. You can also use our on-line query form.

Although every effort is made to ensure the accuracy of this column, neither the experts nor the editors can guarantee the accuracy of the solutions offered. They also cannot ensure that the proposed answers will work in every situation.

Readers are also encouraged to send comments on the published questions and answers.


Copyright ©1998 Medical Device & Diagnostic Industry

Using IEC 60601-1-2 for Testing Medical Devices


For effective EMC testing, medical manufacturers should customize a standards document such as IEC 60601-1-2.

As the electromagnetic spectrum becomes increasingly congested and electronic devices proliferate, ensuring electromagnetic compatibility (EMC) among electrical and electronic equipment becomes a critical issue.

Ensuring EMC is a vital issue for companies producing electrical and electronic medical devices. These types of devices must perform as intended and not interfere with other equipment, or the results could be catastrophic. For medical manufacturers, making sure that devices meet EMC standards is not only a marketing necessity, but also a societal concern.

There are several EMC specifications, but none of them alone will provide appropriate testing guidelines for highly specialized medical devices. To reduce confusion and ensure that devices will be tested appropriately, medical manufacturers should use an existing standard as a guide for developing a customized testing plan.

IEC 60601-1-2

The International Electrotechnical Commission (IEC) is a worldwide body that promotes international standardization in electronics. In 1993 it released the 60601-1-2 standard, "Medical Electrical Equipment—Part 1: General Requirements for Safety, Amendment No. 2. Collateral Standard: Electromagnetic Compatibility Requirements and Tests."1

The IEC 60601 standard offers a solid basis for medical device testing. Although they are relatively new, the IEC 60601-1-2 requirements have quickly become recognized throughout the world and are instrumental in testing to the European Medical Devices Directive. Organizations such as the American National Standards Institute (ANSI) use the IEC 60601 standard as a basis for their own requirements.

This document specifies acceptable levels for immunity and refers to other documents to specify emission levels. However, these levels may not be strict enough to ensure that equipment will operate as intended. Manufacturers should use the IEC specifications as a guide but tailor them to produce product-specific limits.

TEST SPECIFICATIONS AND LIMITS

The IEC 60601-1-2 standard specifies test limits for emissions, immunity, electrostatic discharge (ESD), radiated radio-frequency electromagnetic fields, bursts, and surges.

Emissions. Equipment should comply with the conducted and radiated emissions requirements of the International Special Committee on Radio Interference (CISPR). Classification of equipment for this purpose is based on intended use and determined by the manufacturer.

Equipment may be tested for emissions at a standard test site, which would include a turntable and ground plane, and have known attenuation curves. Equipment may also be tested after it has been installed on the users' premises. It is recognized that medical equipment may have unique installation considerations and that type testing of the installation is the only practical solu-tion to demonstrate compliance to the requirements.

Manufacturers should refer to CISPR 11 for the appropriate requirements and amplitude levels once the class of equipment and test location has been determined.2

Currently, there are no requirements for low-frequency emissions, harmonic distortion, and voltage fluctuations, but some equipment that operate in an intermittent mode will have to meet specific variations of the CISPR 14 Click requirements.3

CISPR 11 covers a frequency range from 150 kHz to 18 GHz. Conducted emissions for low- and medium-voltage power mains (100–415 V) are performed from 150 kHz to 30 MHz. The frequency range for radiated emissions is from 150 kHz to 18 GHz. Depending on the class and use of the equipment, various frequency ranges may be defined. Only the magnetic component of the radiated field is measured from 150 kHz to 30 MHz. Above 30 MHz, both the vertical and horizontal components of the field must be measured.

Amplitude limits in general are established to protect the public broadcast services, not for equipment that may have to operate in close proximity to sensitive medical equipment.

The specification also refers to frequencies designated by the International Telecommunication Union: 2450 MHz for industrial, 5800 MHz for scientific, and 24,125 MHz for medical equipment.

Immunity. General immunity requirements are specified in IEC 60601-1-2. Test levels are given and test methods are based on the IEC 801 series of immunity requirements. If lower limits are justified, accompanying documents should explain this and describe any action that will, as a consequence, be taken by the installer or user.

Accompanying documents should include guidelines for avoiding or identifying and resolving adverse electromagnetic effects. If the use of the equipment is restricted because of its electromagnetic characteristics, relevant restrictions should be described in the accompanying documents.

Compliance with the requirements should be checked by verifying that the equipment continues to perform its intended functions as specified by the manufacturer or fails without creating a safety hazard.

ESD. Equipment should comply with the current edition of IEC 801-2.4 A limit of 3 kV applies for direct contact discharge to all conductive accessible parts and coupling planes. A limit of 8 kV applies for air discharge to nonconductive accessible parts.

Radiated Radio-frequency Electromagnetic Fields. Equipment should comply with the IEC 801-3 requirements, which are being updated.5 A limit of 3 V/m should be used over a frequency range of 26 MHz to 1 GHz. Other levels apply to equipment used in shielded locations, such as x-ray and MRI facilities. The 3-V/m requirement is decreased in proportion to the increasing shielding effectiveness of the location.

There are provisions for amplitude modulation of the signal, depending upon the passband of the equipment under test (EUT). If the EUT does not have a passband, the signal should be amplitude modulated at 1 kHz.

Bursts. Test methods and instruments specified in IEC 801-4 should be followed.6 A 1-kV level applies to equipment connected to the power line with a plug. For permanently installed equipment, a level of 2 kV applies. Interconnecting lines longer than 3 m should be able to withstand a 0.5-kV surge.

Surges. Test methods and instruments specified in IEC 801-5, which is currently still under consideration, should be followed.7 Power lines should meet levels of 1 kV for differential mode and 2 kV for common mode. Signal lines need not be tested, and telecom lines are covered by other standards. Ring wave and damped sinusoid tests are not applicable.

There are future provisions for voltage dips, short interruptions, and voltage variations on power lines, as well as for conducted immunity above 9 kHz and magnetic field immunity.

CUSTOM STANDARDS

Manufacturers of electrical and electronic equipment for any use are recognizing the need for specifications that ensure compatibility among equipment. Medical electronics manufacturers
also recognize that such generic standards are not necessarily appropriate; they may be too severe, or, even worse, not severe enough to protect their products. To lessen confusion and to ensure that test specifications will be appropriate, medical manufacturers should use an existing document such as IEC 60601-1-2 as a basis for creating their own product-specific standards.

REFERENCES

1. "Medical Electrical Equipment Part 1: General Requirements for Safety, Amendment No. 2. Collateral Standard: Electromagnetic Compatibility—Requirements and Tests," Geneva, IEC, Bureau Central de la Commission Electrotechnique, 1st ed, 1993.

2. International Special Committee on Radio Interference, CISPR Publication 11, "Limits and Methods of Measurement of Radio Interference Characteristics of Industrial, Scientific and Medical (ISM) Radio Frequency Equipment (Excluding Surgical Diathermy Apparatus)," Geneva, IEC, 2nd ed, 1990.

3. International Special Committee on Radio Interference, CISPR Publication 14, "Limits and Methods of Measurements of Radio Interference Characteristics of Household Electrical Appliances, Portable Tools and Similar Electrical Apparatus," Geneva, IEC, 2nd ed, 1985.

4. IEC 801-2, "Electromagnetic Compatibility for Industrial-Process Measurement and Control Equipment, Part 2: Electrostatic Discharge Requirements," Geneva, IEC, 2nd ed, 1991.

5. IEC 801-3, "Electromagnetic Compatibility for Industrial-Process Measurement and Control Equipment, Part 3: Radiated Electromagnetic Field Requirements," Geneva, IEC, 1st ed, 1984, 3rd impression, 1991.

6. IEC 801-4, "Electromagnetic Compatibility for Industrial-Process Measurement and Control Equipment, Part 4: Electrical Fast Transient/Burst Requirements," Geneva, IEC, 1st ed, 1988.

7. IEC 801-5, "Electromagnetic Compatibility for Industrial-Process Measurement and Control Equipment, Part 5: Surge Immunity Requirements," draft, Geneva, IEC, July 1992.

Gary Fenical is a senior EMC engineer with Instrument Specialties Company, Inc. (Delaware Water Gap, PA).

Illustration by Sarah Whitehead


Copyright ©1998 Medical Device & Diagnostic Industry

The Packaging Sector Responds to Challenges from Industry

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

PACKAGING

Spurred by economic and regulatory pressures, device packaging is going through an upheaval that's leaving innovative materials and improved service in its wake.

Compared to other arenas in the healthcare industry, medical device packaging might seem mundane to the disinterested observer. However, these are interesting times for medical device packaging—all too interesting for some people's liking.

Steve Franks, executive vice president of TM Electronics (Worcester, MA), explains, "There are a lot of issues, from testing to materials to process quality control. Packaging has become a significant part of product development and the process control cycle in the past few years."

A slew of economic and regulatory pressures, combined with the increased attention medical device manufacturers have given to packaging in recent years, have led to packagers being scrutinized like never before. The demands, some of which seem contradictory, in turn are leading to innovations and improvements in many areas.

The U.S. medical packaging market is expected to reach $3.8 billion by the year 2000, an annual growth rate of 5.8%, according to a study by the Freedonia Group, Inc. (Cleveland), titled "Medical Packaging: Supplies & Devices." This study supports the feeling among most in the industry that the gains are from an increase in volume, not an increase in profit margin. The study says that real growth, as measured in the number of containers consumed, is expected to increase 3.3% annually.

It is imperative for packaging suppliers to keep costs down while increasing production capacity and maintaining the same quality standards. But significant changes to the manufacturing process require revalidation, which can be costly in its own right.

Medical device manufacturers are facing the need for cost reduction because of managed health care, according to William P. Daly, president and chief executive officer, Beacon Converters, Inc. (Saddle Brook, NJ). They are asking their suppliers to come up with new ideas to reduce packaging costs while simultaneously providing increased service to their customers by assisting with package development, doing increased testing associated with dock-to-stock programs to ensure package stability during shipping, and providing ongoing technical support.

In many cases, manufacturers have consolidated or formed buying groups and are looking for suppliers to fill large orders at low cost. "If you're not changing along with them, you will be left out of the ball game," says Dick Simmons, vice president of medical marketing at Plastofilm Industries (Wheaton, IL), the medical, electronic, and consumer packaging division of Ivex Co. "Margins will always be under attack. You have to be more efficient in order to maintain profitability."

Perfecseal's (Philadelphia) Bill Singer, director of global marketing, acknowledges the difficulty of changing packages when material has to be validated or qualified. A device company's ideal situation is to approach a current supplier and attempt to lower its price. "Some suppliers are able to bring savings by offering new products, but the challenge is to bring cost savings to existing products, which don't add problems with regulations."

Such a challenge can be frustrating. "Manufacturers think they can milk a lot of money from a medical device by changing the packaging," says Curt Larsen, principal packaging engineer, SIMS Deltec (St. Paul, MN). "That may be true some of the time, but packaging affects a small part of the price, so sometimes they're missing the boat."

A well-thought-out plan, however, proves that changes in packaging can indeed help. "Going to a soft pack, with EVA/Surlyn film, has had a sweeping impact," says David Schleder, director of manufacturing, Burron OEM Div., B. Braun Medical Inc. (Bethlehem, PA). "The soft packs give a little bit, so you can put more into smaller boxes and have less volume, which leads to decreases in storage and shipping costs."

NEW MATERIALS

Hal Miller, director of packaging technology, Johnson & Johnson (New Brunswick, NJ), says that the true challenge is reducing packaging costs without necessarily resorting to whatever has the cheapest price. Suppliers must learn to think differently and not just make new materials that improve needs, but ones that truly have an impact on the industry. The development of metallocene catalyst polymers is one example. "It's an economical polyethylene material with the properties of polyester and nylon, but at a much-reduced price."

The advantage of those materials, says Michael Scholla, medical packaging segment leader at DuPont Nonwovens (Wilmington, DE), is that "one can produce film with the same strength at a lower gauge, because of the narrow molecular weight range of the polymer." One such material is Perfecseal's SheiLLD, a linear low-density polyethylene (LLDPE) film that is 150% stronger at 3-mil gauge than conventional 4-mil LLDPE film. Scholla adds that he sees "a lot of companies working on developing film, both flat and flexible, that works well with Tyvek that hasn't been coated." These films often have an adhesive built in that functions like a traditional Tyvek coating, thereby eliminating the need to coat the Tyvek and consequently saving money.

Rexam Medical Packaging (Mundelein, IL) has been using polymer blend systems to make peelable seals. "Several variants of this technology have grown significantly in areas such as syringe and glove packaging for radiation sterilization," says Joe Spitz, vice president of technology. "We have also expanded the use into foil laminate structures."

Another development is the first new version of Tyvek in 20 years. Tyvek 2FS is expected to debut this summer after DuPont files a patent application. Tyvek 2FS is designed for flexible form, fill, and seal applications and has a lower basis weight than its predecessors—1.6 oz/sq yd versus 1.9 and 2.2 oz/sq yd.

For device manufacturers that do not use Tyvek packaging, there have also been innovations in paper, including tighter weaves, unique coatings, visible seals, and better seal integrity.

STERILIZATION

After packagers choose a material, they must determine the best sterilization method for it. New ISO 11607 standards will influence this decision. While ISO 11607 calls for material producers to determine which sterilization methods to use for their products, many say that in the end it is the packaging engineer's call. The most common types of sterilization are EtO, gamma and E-beam radiation, plasma, and high-energy pulsed light.

"Companies that want to sell internationally have to meet those new standards," says Bill Young, director, Griffith Analytical (Burr Ridge, IL), a division of Griffith Micro Sciences, a contract testing and consultative laboratory. "What's critical is that you understand where the overlaps are between FDA regulations and ISO, and also where the differences may be."

Burron's Schleder explains that "sterility validation is an issue because of federal regulations on parts-per-million exposure levels to protect the people who handle sterilized product. The parts-per-million went down from 50 to 1. It's costly, but it's not that complicated."

Bruce Hergert, vice president of research and development at Perfecseal, says that the challenge hasn't been coming up with new kinds of sterilization but rather a more porous material to lower the cost of sterilization.

TESTING, TESTING

ISO 11607 will also have an impact on seal-strength and integrity testing. There is pressure on manufacturers to come up with easy-to-use quantification methods and methods with the same type of testing, but improved for speed. "When testing porous packages," TM Electronics' Franks says, "there will be a bit of change in the way one approaches test methods. A company may have to change the range that its testers can handle" because of the increasing use of uncoated Tyvek and paper.

"The FDA has pretty much bought into the [ISO] standard, so we will see a step up in quality," says John Spitzley, associate fellow of packaging, Medtronic (Minneapolis), and a member of the U.S. working group that helped develop ISO 11607 and its guidance documents. "Overall, sensitivity levels and the reliability of the tests will improve."

The new standards make process validation crucial for a packager, says Donald Barcan, president, Donbar Industries, Inc. (Long Valley, NJ), a package engineering consulting firm. "If one can show that the processes have high reliability and are under control, one can reduce the quantity and type of testing required to release the product for sale," he says. "The manufacturers will benefit in the long run because they will have a higher level of confidence in what they're producing. If everything goes well, it would lower the cost of producing the package. Unfortunately, at the present time many companies look at the new standards as a burden, cost-wise and time-wise."

MORE REGULATIONS

Many manufacturers and packagers are equally frustrated with several other European and U.S. governmental regulations. For example, the industry is still trying to come to grips with the European Union's (EU) Packaging and Packaging Waste Directive, which was adopted in 1994 but still has not been written into law by several member nations. The directive requires that packages be designed to increase reuse and recovery and limit the amount of material used to the required minimum, and seeks to minimize the amount of heavy metals contained in printing inks. Companies that cannot recover their own materials may fund the recovery and recycling of others.

Most European countries place this responsibility on the company who serves as the packer, which is usually the device manufacturer. But the United Kingdom spreads the responsibility among the raw material suppliers, the converter, the packer, and the retailer, who is usually the manufacturer. Manufacturers are thus placing pressure on suppliers to use lighter materials that can be reused or recycled.

Paul Fielding, regulatory affairs manager at Rexam, says that this pressure highlights a conflict of interest because while lighter materials are less expensive, recycled materials are more expensive.

There are also gray areas concerning which devices need to meet these standards. For example, a blood bag is considered a device when it is empty, but packaging when it is filled. The same is true for a syringe. But European medical device and packaging trade associations have been unable to get these products exempted from the directive.

However, that does not excuse manufacturers who ignore the regulation, says Howard Dobbs, group director of international regulatory affairs, Smith & Nephew, Inc. (Memphis). "If you have not implemented the directive quite as quickly as it should have been, you can say, 'I quietly forgot about it because everybody else has.' You may be able to get away with that for six months to a year," he says. "But my advice is to go back to your suppliers and get the necessary documentation to prove you're meeting the necessary requirements."

The other European regulation that has everyone up in arms requires packaging labels to have descriptions in as many as 13 languages. This regulation could drive up printing costs and lead to other problems. "The amount of labeling is dictating the size of the package, rather than the device and the device's needs," says SIMS Deltec's Larsen. "That costs money."

At the MD&M West Conference and Exposition (Anaheim, CA) in January, Dobbs explained, "I basically told manufacturers that they may be able to get away with using five languages on the label—English, French, German, Italian, and Spanish. I would probably rethink that today. I think it depends on the product. Those five languages account for 80% of the European population, so if you're just selling to those five, that's all you need. But if you sell to all EU member states, you will likely want to add other languages, for example, Dutch and Swedish."

Dobbs said that the state of confusion can be attributed in part to the European regulatory authorities having been preoccupied with other matters while this regulation was being established. However, he predicts that the industry will probably see more enforcement over the next few years, although the chief means of enforcement might be companies blowing the whistle on their competitors, a thought which he calls rather depressing.

One way for American companies to handle the labeling situation would be to print labels with the five basic languages at its main plant and have its European distributors affix additional labels with any other relevant languages. Another solution is to use symbols as much as possible.

U.S. device manufacturers and packagers have their hands full with FDA's new rule requiring that all devices and packaging with natural-rubber latex be labeled as such. Natural rubber can pose a health risk to people who are sensitized to natural latex proteins.

"This regulation is causing our customers a great deal of turmoil," says Spitz. "Many are spending significant resources to change materials to avoid the need for a labeling change. On the packaging side, it affects the devices that are packaged in cold- seal packaging, which uses natural-rubber latex as one of the significant ingredients in the peelable coating. This has also impacted the dressings industry and packaging of devices that use cold-seal banding to hold coils of tubing and the like." Rexam is working on developing natural rubber–free cold-seal coatings to address the problem.

Finally, everyone is waiting to see how FDA will implement the Modernization Act of 1997 as pertains to medical device packaging. Cathy Nutter, senior scientific reviewer, FDA Center for Devices and Radiological Health, told attendees of the medical packaging symposium at the MD&M East Conference and Exposition (New York City) in June that medical device packagers may not need to present as much data to FDA as they used to, but they will have to make sure they have thorough documentation in their own files.

The agency will incorporate international standards where it can, and in some cases all a packager will need to do is send FDA a document showing how proposed changes to packaging conform to the regulatory requirements. However, all supporting data, including all documents showing the company's internal thought process, must be kept on file in case agency inspectors want to see them.

CONCLUSION

Despite the many upheavals and new regulatory challenges that medical device packagers are faced with, the changes have benefited the industry as a whole. While trying to meet these new regulations that would put companies more on a par with one another, packagers have found ways to decrease costs while increasing production and maintaining—or even improving—quality.

"Things like quality and service used to separate some suppliers from the pack," says Plastofilm's Simmons. "Now they are necessary to get in the door."

Erik Swain is senior editor of Pharmaceutical & Medical Packaging News, a sister publication to MD&DI.

Photo by Roni Ramos


Copyright ©1998 Medical Device & Diagnostic Industry

Device Professionals Enjoy Solid Salary Gains and a Hot Labor Market in 1998

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

An MD&DI August 1998 Column

Respondents to MD&DI's 10th annual salary survey say challenging assignments are sometimes more important than hefty paychecks.

Medical device manufacturers are expecting more from their employees, and 1998's salaries and compensation packages reflect the increased work hours and responsibilities of today's industry professionals. MD&DI's 10th annual salary survey found that, on average, employees of medical device and in vitro diagnostic manufacturers earn a healthy $72,000 per year, with a total compensation package valued at $91,600. Respondents reported an average annual raise of 6.7%, with at least half receiving an increase of 5% or more. Medical device professionals are faring better than workers in other industries: According to figures from the U.S. Labor Department, the average hourly earnings of U.S. workers in all industries are about 4% higher than a year ago.

For the first time in the history of MD&DI's survey, the South edged out the rest of the country's regions, providing the highest total compensation to industry personnel. Traditionally, the South has been known for low salaries. "One of my clients once said, 'Don't you know Southern companies pay two-thirds sunshine and orange juice and one-third salary?'," says Sandy Lozano, owner of HR Professional Consultants, an executive recruiting company based in Ft. Lauderdale, FL. "In the past few years, as more mergers have occurred in the South, and the competition to recruit talented individuals has heated up, Southern companies have been making a larger effort to match salaries paid throughout the rest of the nation."

To help readers make relevant salary comparisons, MD&DI has devoted a full page to each of seven job functions:

Another indicator of appropriate reimbursement is the salary approximation worksheet provided. Experience, job function, and job responsibility continue to highly influence compensation; the importance of gender and region has varied from year to year. This year, men completing the survey should add $5820 to the base salary.

This added salary boost for men is reflected in industry averages as a whole. As in past years, respondents to the 1998 survey are overwhelmingly white men; however, women did account for 17% of the replies. Women have made gains salary-wise, earning an average $57,800 to their male counterparts' $75,200. This represents pay of 77 cents to every dollar earned by men, better than the national average of 74 cents/dollar.

The typical respondent to this year's questionnaire is a 43-year-old white male holding a bachelor's degree and working for a company that employs 2110 workers with 1997 sales approaching $75 million. He has worked in the industry 11 years—7 at his current company. He spends 49.5 hours on the job each week and supervises five employees.

CHANGING EXPECTATIONS

This year's survey confirms a well-known maxim: The workplace today is not what it was 10 years ago. Employers and employees have new expectations—both about the work they'll do and about how they'll be compensated for that effort.

Employers' new demands are evident in the very expectations they have for new employees. Companies now want potential hires to already possess all of the knowledge and skills necessary to perform all tasks associated with a given position.

"Despite the fact that we're in a very competitive, candidate-driven market with a shortage of technical talent, companies haven't relaxed their standards of excellence," says Ken Larsen, director of medical recruiting for Fortune Personnel of San Antonio (San Antonio, TX). "If anything, companies probably need to be more flexible and not expect to find a 'perfect' candidate who has every single skill they're seeking. The goal should be to find someone with 75–80% of the desired skills, then grow the person into the rest of the position."

"Companies are expecting much more in minimum criteria for the people they're hiring," Lozano concurs. "Ten years ago, in lieu of a degree, manufacturers would accept several years of experience. Now, at the minimum, you need a bachelor's degree. Preferably, you have a master's or even higher degree, plus three to five years of industry experience." Of those responding to MD&DI's 1998 survey, nearly half have completed some postgraduate study or an advanced degree, so competition for key positions could still be strong.

Further, manufacturers want employees to possess a wider range of skills. "Companies want employees with diversified talents," says Lozano. "In the past, you could focus expertise in just one area—like manufacturing. Now, in addition to understanding the manufacturing and production processes, you should know how design ties in to packaging, marketing, and other areas. You need to understand what other groups within the organization will need to create a viable product and get it to market quickly, and you have to be able to deliver those tangibles quickly and well."

Finally, companies also expect their workers to be very committed. Fortunately, employees hold a similar goal-oriented perspective, finding personal satisfaction in a job well done.

"The past generation clocked a 40-hour workweek—their goal was to complete so many hours' worth of work," says Larsen. "Today, employees' focus has shifted to meeting set goals for product offerings and the bottom line, and they'll put in as many hours as it takes to reach those goals." MD&DI's survey substantiates this finding. In addition to logging extra hours, when asked to rank various factors' effect on their job satisfaction, respondents said challenging assignments were more important than both a compensatory salary and a comprehensive benefits package. Further, respondents scored a manageable workload and flexible hours lowest in their list of preferences.

In exchange for embracing diversified responsibilities and longer hours, employees are expecting—and getting—new perks. Still, it's generally easier negotiating extra benefits with a new employer than with a current one. "More and more candidates are getting sign-on bonuses, and they're getting larger bonuses than have been offered in the past," says Larsen. "Companies will also go the extra mile on the family side—paying for private schooling for elementary school–age kids, providing extra vacation time, and paying real estate fees in relocation situations."

Lozano adds, "Sign-on bonuses used to be reserved for higher-level executives, but today even technical engineers are getting nice-sized checks when they take a new job."

For employees who have been at their jobs for a while, as the average person surveyed this year has been, more and more people are receiving performance-related bonuses. Two years ago, 49% of respondents reported bonuses averaging $7890 as part of their overall compensation; this year, 59% received bonuses averaging $9100. "There's a definite trend toward letting even lower-level employees become full participants in the success of a company," says Larsen. "Traditionally, only top executives got bonuses, but larger companies are extending this benefit even to the lower echelons. Smaller companies compensate with stock options, which is more attractive—and probably more rewarding too—for more entrepreneurial spirits."

WHERE THE JOBS ARE

While the average respondent rated his job satisfaction at a pleased 3.8 on a 5-point scale, 47% said they are either actively engaged in or considering a job search. Before dusting off that resume, professionals should bear in mind a few items.

"In addition to having a well-diversified set of skills, job candidates must have a realistic, true view of how much money they can command," says Lozano. "Too many people expect to get a 25–30% salary increase and end up pricing themselves right out of the market. It's also bad to job hop. Employers are looking for people who have been at their current job for three to five years."

Right now, the hottest fields are in mechanical and electrical engineering, plastics, software engineering, information technology, and management information systems.

Prospects for the future are bright also. "Every candidate now seems to have two or three choices," says Larsen. "The medical industry—and careers in this industry—should stay hot for another 10–15 years due to the aging of the baby boomers, rapid changes in technology, and the need to keep health-care costs down. The only way to reduce costs is through innovation and creativity, which means good jobs for talented people."

CONCLUSION

More than half of the respondents to this year's survey seem happy in their jobs as well as in their chosen field. While high salaries, great job opportunities, and substantial compensation packages are enticing incentives to continue working in the medical device and diagnostic industry, quite a few respondents said there's an even more-rewarding aspect to their careers. In the words of one respondent, "I am saving lives." That can be compensation enough for many.

METHODOLOGY

The data for this year's survey were obtained from a mail survey designed jointly by MD&DI and Readex Research, Inc. (Stillwater, MN), and conducted by Readex in February and March. Surveys were mailed to 1375 medical device professionals, 756 of whom provided usable responses, for a 55% response rate.

The survey results are based on the responses of 666 individuals who identified themselves as full-time professionals working for companies that manufacture medical devices or in vitro diagnostics. Responses were segmented according to the seven job functions outlined earlier as well as by the respondents' level of responsibility as follows: CEOs and presidents, vice presidents and directors, department heads and supervisors, and engineers and scientists.

The margin of error for percentages based on the 666 responses used is ±3.7% at the 95% confidence level.

REPRINTS

The 10th Annual MD&DI Salary Survey is available as a bound reprint, containing a copy of this article, tabular breakdowns for the industry as a whole, and previously unpublished tabular breakdowns for the seven surveyed job functions.

Copies cost $60 each. For more information or to place an order, contact: Samatha Smith, Canon Communications, 3340 Ocean Park Blvd., Ste. 1000, Santa Monica, CA 90405; 310/392-5509, fax 310/392-4920.


Copyright ©1998 Medical Device & Diagnostic Industry