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DePuy Orthopedics Gets Hit With Class I Recall Over Lower Extremity Product

 The LPS Lower Extremity Dovetail Intercalary Component 

DePuy Orthopedics's voluntary recall of the LPS (Limb Preservation System) Lower Extremity Dovetail Intercalary Component has been classified as a Class I recall by the FDA.

DePuy had initiated the recall July 11 because of the potential for the intercalary component to fracture when a person is walking. That can also cause pain, infection, loss of function, loss of limb, neurovascular injury and the need for repeat surgery.

The products were made and distributed from February 2007 to May 2013. Patients are being notified by surgeons and can discuss the risks of the implant fracture and the method for detecting implant failure with their patients.

Those not experiencing symptoms do not need to have any kind of revision surgery, DePuy has determined. 

UPDATE: A DePuy spokeswoman said that 96 components were sold globally between February 2007 and May 2013. The company has received seven complaints of fracture.

 -- By Arundhati Parmar, Senior Editor, MD+DI
arundhati.parmar@ubm.com

Want to know more about patient-specific implants and instruments in orthopedics? Register for the MEDevice San Diego Conference & Showcase, Sept. 26-27?

New Law Would Give FDA Access to $85 Million in Sequestered User Fees

On Thursday, lawmakers on Capitol Hill introduced legislation that would exempt FDA user fees from sequestration. The automatic budget cuts caused by sequestration took effect several months ago.

Sequestration is based on a 2011 law calling for $1.2 trillion in spending cuts. Few agencies were spared from the knarly throes of sequestration. If FDA regulators can't avoid sequestration, the agency will lose access to $85 million in user fees. These fees are used by regulators to review medical device and drug applications.

First enacted in 1992, drug user fees were credited with faster review of premarket pharmaceuticals. Ten years later, medical device user fees were introduced. These fees are renewed every 60 months to help boost the FDA budget.

"Whether one agrees or disagrees with sequestration, I don't believe private dollars should be held hostage by the policy," stated Rep. Anna Eshoo (D-CA). Other lawmakers named on the bill include Mike Rogers (R-MI), Doris Matsui (D-CA) and Leonard Lance (R-NJ).

NuVasive Sees Losses amidst Royalty Cost Increases and OIG Probe

NuVasive (San Diego, CA) faced Q2 losses due to its ongoing patent war with rival Medtronic. The company also faces a probe by the Office of the Inspector General at the United States Health & Human Services Department.

For Q2, NuVasive posted losses of $6.5 million on total revenue of $165.7 million. This represents sales growth of 7.3% from the same period during 2012.

Unfortunately, this small wave of good news was metered against a vast tide of red ink. The company faced a $7.9 million increase in royalty reserve costs following a ruling by a federal judge. In total, the company must pay Medtronic $101 million in patent infringement damages and royalties.

In a regulatory filing, the company revealed that the HHS Office of the Inspector General issued a subpoena in connection with alleged improper Medicare and Medicaid claims. The subpoena covered documents created from 2007 until this year.

The company did note that it is working with the OIG to understand the scope of the issue, but NuVasive alleges that it doesn't have a full understanding of the issue at the time. Since the OIG subpoena is very broad, the company doesn't know the full impact it will have.

"Results in the first half of 2013 demonstrate solid execution against a multi-year plan, and give us increased confidence in our ability to execute to the full year guidance we have outlined. Importantly, we are cultivating the pillars of NuVasive's foundation to sustain earnings growth well into the future," stated CEO Alex Lukianov.

Researchers Turn to Energy Sector to Improve Medical Device Cybersecurity

Last month, FDA regulators issued a dire warning to the healthcare industry, stating that "medical device manufacturers and health care facilities [must] take steps... to reduce the risk of failure due to cyberattack."

In particular, regulators called out both heathcare facilities and medtech manufacturers to step up their defenses. Since these groups create attack surfaces that adversaries can breach, it's essential to concentrate on strong security.

Building solid defenses requires more time and effort than creating offenses. For example, a homeowner might purchase new door and window locks for a home. With a $10 crowbar, a thief can defeat these basic countermeasures. Addressing every vulnerability in a system can significantly increase the cost of that system.

One sector that faces increased security risks is the energy sector. Power grids, oil rigs and pipelines could be damaged or manipulated by hackers due to the centralized industrial control systems that automate many operations. While there are obvious differences between a pipeline and a pacemaker, there are also similarities: With an industrial control system, a hacker could potentially open or close switches, leading to oil overflows, leaks, fuel shortages and other issues. If hackers break into a wireless pacemaker, the plumbing of the human body could come under attack.

The energy sector addressed these security issues by identifying high-risk devices, replacing them, and creating industry-wide standards. With the medical device industry, following this same guidance could help improve patient safety.

In the medical device industry, the evolution of technology can resolve problems while posing new issues. For instance, for more than 50 years, modifying a pacemaker required surgery, extracting the device and reimplanting it. Now, such devices can be updated via wireless, which has eliminated the need for many surgeries. It has also enabled the hacking of such devices, making it possible to kill a person by attacking the implanted device within.

Covidien Sees Tepid Q3, Restructuring Could Be on Horizon

Covidien's third quarter earnings reflect lagging sales amidst a challenging economic environment. While the company is currently gaining ground in emerging markets, growth in the United States is tepid.

The company also announced disappointing results earlier for Q1, when it had experienced an 11.7 percent decline in profit.

The company is well-placed to achieve its long-term earnings and revenue targets based on its strategic R&D investments, new product cycles and effective executions. In addition, the company is going through a series of share repurchases and dividend offerings that help enhance shareholder value.

However, the company faces tough competition amidst pricing pressure. In addition to these factors, foreign exchange translation could dampen growth at the company.

Revenues in Q3 are up 3% (or 5% in constant currency) to $2.5 billion. For the most part, higher sales in the company's medical devices segment drove this growth. Revenues in the U.S. decreased 3% to $1.3 billion. On the other hand, international sales increased 10% (14% in constant currency) to $1.3 billion. For the third quarter, net income decreased to $356 million from $453 million in Q3 of 2012.

Many segments saw growing revenue, including energy devices, oximetry and endo-mechanical devices. However, both medical supplies and vascular devices faced weak revenue.

In recent comments, CFO Chuck Dockendorff responded to investor concerns about expenses at the company.

"We are very well aware of what we call corporate costs of $400 million. We are looking at our overhead, both on corporate and G&A [general and administrative expenses] around the regions in our company. And we will be initiating programs to take that down. We will be looking at our manufacturing footprint and some of the optimization we can [have] there. We feel very comfortable about future opportunities to reduce these expenses," stated Dockendorff. For Covidien, restructuring may be on the horizon.

The company was in the news earlier as being named as a rival in a $1-million bet, sponsored by Masimo, which alleges that its pulse oximeters offer better accuracy.

Will Covidien Be Restructuring Soon To Reduce Expenses?

Will Covidien Be Restructuring Soon To Reduce Expenses?

Covidien reported its fiscal third-quarter earnings Thursday, which mostly met analyst expectations.

The Dublin, Ireland, firm saw revenue climb 3% to $2.58 billion in the quarter ended June 28, from $2.51 billion in the same quarter a year ago. Profits fell to $356 million, or 85 cents per diluted share, down from $453 million, or 81 cents per diluted share in the comparable period in 2012. Still, earnings-per-share beat analyst estimates by two pennies. Having spun off its pharma business - Mallinckrodt on July 1, the company may soon look to reduce expenses, which likely means that job cuts are looming. 

Overall, in its fiscal third quarter, most Covidien businesses saw growing revenue, including the medical devices, endo mechanical, oximetry and energy. But there were weaknesses in the vascular and medical supplies business, according to a research note published by Glenn Novarro, senior medical device analyst at RBC Capital Markets.

But perhaps the most interesting bit of news on the conference call with analysts came when CFO Chuck Dockendorff answered Bank of America analyst Bob Hopkins question about expenses. Hopkins asked (his question is edited) :

Now that we're post the Mallinckrodt spin, obviously your overhead expenses are still roughly $400 million. They were $400 million when you were a $12 billion business, and now you are a $10 billion business.  So I was wondering if you could comment on the potential for incremental restructuring as you look forward to offset some of that relatively higher expense base?

And Dockendorff responded this way (his comments are edited):

... We are very well aware of what we call corporate costs of $400 million. We are looking at our overhead, both on corporate and G&A [general and administrative expenses] around the regions in our company. And we will be initiating programs to take that down. We will be looking at our manufacturing footprint and some of the optimization we can [have] there. We feel very comfortable about future opportunities to reduce these expenses. [But if] you lose 20% of your business, you can't go in and eliminates [expenses] dollar for dollar because there are just some fixed expenses. You can't eliminate 20% of our board, [for example]. But I think at the end we see opportunities for restructuring and expense reduction that far exceed the amount of business that we lost with the pharma spin and any lead behind costs that we have there.

Given this focus on reducing expenses, all eyes will be on Sept. 12, when Covidien executives will reveal more about restructuring to investors and analysts.

[Photo Credit: MarsBars]

-- By Arundhati Parmar, Senior Editor, MD+DI
arundhati.parmar@ubm.com