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2. Realizing That Safety and Efficacy Is More Than FDA

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Safety and efficacy, though, is about more than getting regulatory approval, Murdeshwar says. It is about ensuring whether there is really a market out there for the device.

What is the motivation for your user to switch to your device from the device you are using today? How do you avoid misinterpreting the clinical needs? Murdeshwar thinks the two questions are especially important because health professionals are conservative when it comes to switching to new devices. "It's a little naive to think the user is going to switch. They're comfortable with a device, and they've used it for years."

Safety and efficacy? "Sure it is FDA, but you have to sell this and make money," Murdeshwar says.

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[Image courtesy of Pixabay]

1. Proving Safety and Efficacy

    Arrow  backRegulations

Getting FDA and other regulators into the process early as a guide is important, as is maintaining the dialogue. When Murdeshwar talks about seeking guidance, he doesn't mean asking FDA how to do something. It's more about explaining planned approaches and protocols and asking if they are acceptable.

"I send them protocols, they read through our protocols, they come back with questions. We sit down and have discussions with the questions they have. And then we do the work," Murdeshwar says. "People who don't have this direction end up copying what someone else did. When you copy what someone else did, you lose your way. You're trying to answer questions they might not even be interested in."

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[Image courtesy of Pixabay]

4 Things You Need to Develop Medical Devices

    Creativity
Here are four aspects of medical device product development you should especially watch out for, courtesy of a top research engineer at a major medtech manufacturer.

Nikhil Murdeshwar OlympusChris Newmarker

As a principal research engineer at Olympus, Nikhil Murdeshwar is in charge of the initial design work on new cutting-edge products for the Japanese multinational. Let's just say Murdeshwar has learned a thing or two over the years when it comes to the pitfalls device companies can run into with new product development. (Discover how consumer technology is driving connected device design at BIOMEDevice San Jose, December 7-8, 2016)

Here are four product development challenges that Murdeshwar says you should especially watch out for.

Read on to find out more >>

[Image courtesy of Pixabay]

Apple Has No Major Healthcare News, Yet

The company on Wednesday unveiled an iPhone 7 and 7 Plus and Apple Watch you can swim with, but was light on healthcare news.
 
Nancy Crotti

Apple Watch Series 2

The Apple iPhone 7 will be water-resistant, faster, have more storage, a brighter display, stereo sound, wireless earbuds, and will connect regular headphones via its Lightning charger cable. And you will be able to play SuperMario on it.

There wasn't as much healthcare news, though, during Apple's big two-hour presentation Wednesday. Though, don't count the high tech giant out in the space yet, given CEO Tim Cook's expressed excitement about the area

What healthcare news there was mostly involved the Apple Watch.

Apple execs actually spent a lot of time touting Apple Watch, hoping to drum up more excitement for it among fitness enthusiasts, including swimmers and runners. The watch Series 2, can withstand the same amount of water pressure as a standard waterproof watch, and its speaker ejects water when the swim is over, Apple chief operating officer Jeff Williams told an audience of Apple employees, fans, and journalists.

"You can wear your watch with confidence in the water," Williams said. "We think swimmers are going to absolutely love this."

Meanwhile, Apple also recently announced developer guidelines to address the safety, privacy, and regulatory concerns related to mobile medical applications on its devices. 

Product Development Models Driving Innovation

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As for the iPhone 7, its iPhone 7 Plus version will have two cameras to allow for telephoto photography with up to 10 times the magnification of a standard smartphone camera. The iPhone 7 will be available with 32, 128, or 256 gigabytes of data storage and will retail for the same $649 price as the 6s. The 7 Plus will sell for $769, with 128 or 256 gigabytes. Both will be available for pre-order on Friday, September 9, with shipping expected one week later. They will come with the new iOS 10 operating system, which updates messages with graphics to add expression and animation, allows Siri to work with apps, and features redesigned maps, photos, Apple Music and news apps, and the Home app, to manage home automation.

Those new earbuds, called AirPods ($159), charge in their case, and can connect wirelessly with any Apple device. Listeners can contact Siri with a double tap on one of the pods, which recognize the sound of the wearer's voice and reduce external noise. If you still want to use your old earbuds, Apple is including an adaptor with every new phone, but as rumored, is doing away with the headphone jack.

Nancy Crotti is a contributor to Qmed.

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[Image courtesy of Apple]

Theranos' Fall: What You Really Should Know

Strict secrecy, legal threats, and suicide are detailed in an in-depth Vanity Fair story. 

Nancy Crotti

Elizabeth Holmes Theranos
Theranos and its founder Elizabeth Holmes were once Silicon Valley stars, touting a technology supposedly able to find disease in a single drop of blood. (Image courtesy of Theranos)

An in-depth story in Vanity Fair details the unraveling of troubled blood-testing company Theranos, describing the company's attempts to enforce secrecy and the Silicon Valley culture that allowed it to get off the ground.

The article chronicles how founder Elizabeth Holmes shopped her idea of performing multiple tests from a single finger-prick of blood to experts and the media, and attracted millions from investors without revealing how, or whether, the technology worked. It also skewers the white-male-laden culture of gambling and greed that has fueled many a tech startup.

When doubts began swirling publicly about the accuracy of Theranos' proprietary Edison technology, spurred largely by reports in the Wall Street Journal, employees were forbidden from speaking about them. After Holmes reportedly addressed them two days later, employees professed loyalty by chanting an epithet aimed at reporter John Carreyrou, says the story, which cited numerous insiders as sources.

One employee in particular, chief scientist Ian Gibbons, was so conflicted about the possibilities of harming other employees should he reveal the technology's inadequacies and the potential danger to the public if he didn't, that he died by suicide, the article says.

Instead of a condolence call from Holmes, Gibbons' widow received a call from Theranos demanding that she "immediately return any and all confidential Theranos property," it adds.

The company declined to comment about the Vanity Fair piece.

Product Development Models Driving Innovation

Learn how to meet tough regulatory requirements and design devices hospitals will actually buy in this special conference track at MD&M Minneapolis on September 21. Qmed readers get 20% off with promo code Qmed16.

Aspiring Theranos employees would not learn their job descriptions until after they were hired, the article says. Employees were also forbidden from talking with others in the company about their work, and were threatened with legal action should they discuss it publicly. Company lawyers also threatened Gibbons' widow for speaking publicly about Theranos, the story says.

Holmes believed the Journal would publish one story and leave it be, but Carreyrou carried on, breaking story after story as government regulators and investigators began demanding answers. Carreyrou also reported that Walgreens had agreed in 2013 to invest about $50 million and open Theranos blood-testing facilities in 40 of its Arizona drugstores, despite never having been allowed inside a Theranos lab. Walgreens kicked Theranos out of those stores in June.

A Center for Medicare and Medicaid Services report in January described hematology testing practices at Theranos' Newark, CA, lab as "deficient," saying they posed "immediate jeopardy to patient health and safety." Two months after that, a study in the Journal of Clinical Investigation found that Theranos's blood tests were unable match the accuracy of more conventional tests. Another Wall Street Journal article claims the company knew its technology had problems, but still used it on patients. CMS has since disclosed that the company failed 87% of its quality-control tests for one hormone test.

After giving Theranos a chance to correct deficiencies, CMS imposed heavy sanctions on the company, including banning Holmes from the industry for two years. Theranos closed the Newark lab until further notice, kept its Palo Alto lab open, and recently announced that it would appeal.

Theranos has been trying to right the ship, bringing some medtech and regulatory heavyweights on board, and establishing a compliance and quality committee in July. Last month, Holmes addressed a conference of laboratory scientists about a new Theranos technology, but did not speak about Edison or the company's woes. 

Those woes are many. Theranos is facing federal class-action lawsuits from patients, and the company is reportedly under investigation by the U.S. Justice Department, the SEC, and the FBI. 

Nancy Crotti is a contributor to Qmed.

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How 3-D Bioprinting Is Becoming a Reality

Researchers at four universities have been overcoming major obstacles in the field.

Nancy Crotti

Regenova Cyfuse
The Regenova 3-D bioprinter loads groups of cells called spheroids into fine needle arrays. (Image courtesy of Cyfuse)

FDA approval of 3-D-printed body parts may be years off, but obstacles to creating human replacement parts are falling away, thanks to resourceful scientists and new technology.

Researchers at four universities are conquering the barriers, one by one. Indiana University-Purdue University Indianapolis (IUPUI) and Johns Hopkins University are using a bioprinter that preserves cells better than the traditional scaffold 3-D printing technique, according to a report in TechRepublic.

In scaffolding, 3-D printers squirt bio-ink through a nozzle to create objects in layers, a process that can kill the cells. IUPUI and Johns Hopkins are the only U.S. universities that possess a robotic 3-D printer called the Regenova. Made by Tokyo-based Cyfuse Biomedical, Regenova builds structures by placing groups of cells called spheroids in fine needle arrays, according to pre-designed 3D data. The cells can then bond and fuse into tissue.

The Regenova can print tubular body parts, such as veins and arteries, the report said. The IUPUI researchers are working on tissue engineering and regenerative medicine projects in vascular and musculoskeletal biology, dermatology, ophthalmology, and cancer, according to a university statement.

How 3-D Printing Will Transform Medtech

Find out how process innovations in 3-D printing are enabling next-generation medical devices at the MD&M Minneapolis conference on September 22. Qmed readers get 20% off with promo code Qmed16.

Enabling the cells to create their own external structure--an extracellular matrix--rather than adding it as bio-ink, yields tissues that are much more likely to gain FDA approval, according to Nicanor Moldovan, PhD, an adjunct associate professor of biomedical engineering and of ophthalmology. That's because the gels used in traditional 3-D bioprinting can leave behind fragments that FDA might consider foreign, and even toxic.

"The FDA wants to see the least departure from what is normal in an organism from the standpoint of biosafety and compatibility," Moldovan told TechRepublic. "This doesn't leave a biological signature behind--it's just a way to keep the cells together until they fuse."

Moldovan predicted an FDA-approved construct may be available in at least five years. 3-D bioprinting could prove very lucrative, according to IDTechEx. The British research firm predicts that it could reach an almost $9 billion market by 2014.

At Wake Forest Baptist Medical Center in Winston-Salem, NC, researchers printed ear, bone, and muscle tissue that matured to replace injured or diseased tissue of any shape, according to their study reported in Nature Biotechnology.

The scientists used an integrated tissue and organ printing system that deposits biodegradable, plastic-like materials to form the shapes of ears, bones, and muscles, along with cells contained in hydrogel, TechRepublic reported. The researchers believe these structures could one day be used in humans.

At Penn State, researchers have jumped from 3-D printing artificial cow cartilage in June to experimenting with human cells. Cartilage has only one cell type and no blood vessels. The researchers made cartilage tissue strands and fused them to form a single piece of cartilage.--and they have already begun experimenting with human cells.

A company called Advanced Solutions Life Sciences is working with the University of Louisville (KY) to build a 3-D heart. The team is building capillary beds to enable blood flow with plans to add different cell types, such as heart and liver.

Nancy Crotti is a contributor to Qmed.

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New Guidances on the No New 510(k) Rationale

While straightforward in principle, the question of whether or not a new 510(k) is required, and what documentation is required otherwise, is one that both industry and FDA struggle with.

William A. Hyman

Perhaps from shortly after the dawn of the 510(k) there has been the question of what changes to an existing 510(k) cleared Class II device require a new 510(k) submission. There is a companion question of how to document that a new 510(k) is not required when that decision is made. Generally, this has been handled with a letter-to-file, and in some circle this documentation became known as the "no 510(k) rationale." This documentation is separate from the technical documentation that might accompany changes such as those mandated by the Quality System Regulations.

Recently, FDA provided new draft and final guidances on the no-510(k) issue, including the recommended content of such letters-to-file. And in one case, FDA also re-raised the question of whether the agency should be notified about changes that were determined by the manufacturer to not require a new 510(k).

Learn about the latest shifts in FDA regulations on usability and designing for user needs at the MD&M Minneapolis conference on September 21, 2016.

The two relevant new draft guidance documents are "Deciding When to Submit a 510(k) for a Change to an Existing Device," and "Deciding When to Submit a 510(k) for a Software Change to an Existing Device." The first would replace the similarly named 1997 document. Both of these drafts include flow charts and a Q&A summary format, which require yes/no answers to navigate the chart. Some readers will remember a previous replacement draft for the 1997 version from 2011. The 2011 draft produced so much ire that Congress passed a law that included ordering FDA to withdraw it and take it down from its website, but some may have saved a copy.

In its Appendix B, the new non-software draft expressly addresses "recommendations" for the documentation of a no-510(k) decision if that is the result of the analysis. This includes that the documentation be prepared in a way that an FDA investigator or other third party could understand what the change(s) were and the rationale underlying the manufacturer's conclusion that a new 510(k) was not required. This must go beyond simply highlighting the path through the provided flowcharts or simple "yes" or "no" answers to the question without details or "robust" justification. Example drafts of such file letters are also provided.

Curiously, the software draft does not contain this level of detail. Perhaps the two documents need to be read together in the case of software changes, but this is not explicitly stated. The only reference to the general draft in the software draft is to go to the general one if your device isn't software. An FDA review of letters-to-file might result in the agency concluding that the manufacturer's decision was wrong. In this case, FDA could initiate further regulatory action including civil and criminal charges. Third parties reviewing such letters might include litigants seeking to discover and second guess the decision to avoid further FDA scrutiny with respect to any changes made, and to note in turn that the device currently being sold is not exactly the device that was cleared, or perhaps used as a predicate for a later 510(k).

Neither of the FDA drafts suggest that the agency be notified about changes covered by a no-510(k) decision (i.e., it is an internal matter that might be discovered later by FDA but might not be). In this regard in 2010, during a flurry of activity on the possible need to reform the 510(k) process, FDA conducted its own review, which resulted in a recommendation that "CDRH explore the feasibility of requiring each manufacturer to provide regular, periodic updates to the Center listing any modifications made to its device without the submission of a new 510(k), and clearly explaining why each modification noted did not warrant a new 510(k)."

This idea was not greeted with enthusiasm by industry and was never implemented. However, it recently resurfaced in an FDA letter to syringe infusion pump manufacturers pertaining to a labeling change. The letter states that if it is decided that a new 510(k) is not necessary, "please update your existing 510(k) with your revised labeling by submitting an amendment ... referencing the original 510(k) number."

The letter also notes that doing this "is not specifically recommended in the guidance," referring to the 1997 change document. Thus, at least in this instance, FDA is calling for no-510(k) decisions to be reported rather than just internally filed.

There are three interesting word usages here. One is whether or not an action that begins with "please" creates a mandate. If such a statement does create an obligatory requirement, then FDA has created what is in effect a new regulation by letter rather than by going through the regulation process. If it does not create a requirement, then what are the consequences, if any, of not doing it other than perhaps the coercive effect of being out of sync with the desires of the FDA?

This issue also arises with respect to the "recommendations" of Guidance Documents. In principle, you don't have to follow such recommendations because they aren't binding. However, the consequences of not following them can be problematic and more burdensome than following them.

The second interesting word choice is the use of the word "amendment," since in general 510(k)s cannot be amended or supplemented. This is clearly stated by FDA, as in "There are no provisions for a 510(k) amendment or supplement to the existing 510(k)." Special 510(k)s, which might come close to being an amendment, are notably not mentioned here or in the guidances. This is unlike PMAs, which have a specific and sometimes heavily used supplement process.

The third phrase cited above that is of interest is the idea that something that was not "specifically" recommended was perhaps somehow otherwise recommended, as opposed to being absent entirely. Or was it somewhat recommended, or maybe hinted at?

Change can be challenging. In addition to the engineering and clinical implications, which we shouldn't forget, there is the question of when the wide gray line of regulatory requirements is breached. While straightforward in principle, the question of whether a new 510(k) is required, and what documentation is required otherwise, is one that both industry and FDA struggle with. In general, unnecessary paper work, almost by definition, is to be avoided while effective regulatory review is, at least for FDA, its raison d'etre. Guidance documents are intended to clarify the bounds of this struggle, but whether they do in fact make the line darker and thinner is itself open to debate. 

William A. Hyman is a professor emeritus in the department of biomedical engineering at Texas A&M University and adjunct professor of biomedical engineering at the Cooper Union. Reach him at [email protected]

[image courtesy of STUART MILES/FREEDIGITALPHOTOS.NET]

St. Jude Sues Over Cybersecurity Accusations

The lawsuit in federal court in Minnesota claims a conspiracy to manipulate St. Jude's stock through false accusations of cybersecurity flaws in the company's cardio devices.

Chris Newmarker

Lady JusticeSt. Jude Medical on Wednesday said it has filed a lawsuit in federal court against activist investor firm Muddy Waters Capital and cybersecurity outfit MedSec, as well as three principals in the firms.

The suit claims the firms sought to wrongly profit off a short-selling scheme involving St. Jude's stock, spreading false and misleading claims about the security of St. Jude's pacemakers and defibrillators in order to lower the value of the medical device company's stock. 

St. Jude Medical's stock fell about 5% in value on August 25, when Muddy Waters and MedSec made their claims about security vulnerabilities. The company's stock has yet to fully recover, though it was up about half a percent in value after news of the federal lawsuit on Wednesday. St. Jude now wants the firms to turn over their profits from the short-selling, as well as pay relief and damages. 

"We felt this lawsuit was the best course of action to make sure those looking to profit by trying to frighten patients and caregivers, and by circumventing appropriate and established channels for raising cybersecurity concerns, do not use this avenue to do so again," St. Jude Medical CEO Michael T. Rousseau said in a news release.

"We believe this lawsuit is critical to the entire medical device ecosystem--from our patients who have our life saving devices, to the physicians and caregivers who care for them, to the responsible security researchers who help improve security, to the long-term St. Jude Medical investors who incurred losses due to false accusations as part of a wrongful profit-making scheme," Rosseau said. 

Mark Carlson, vice president and chief medical officer at St. Jude Medical, added that the action was taken because of the "irresponsible manner in which these groups have acted."

Muddy Waters responded in a shared statement: "It is not unusual for a company like this to try to silence its critics, and we are always prepared to vigorously defend our right to criticize a company that puts its profits before its patients."

Muddy Waters and MedSec have claimed appalling security problems related to a host of St. Jude cardio devices. They mentioned demonstrations of two types of attacks against St. Jude implantable cardiac devices: a "crash" attack leading to device malfunction or even pacing at a dangerous rate, and a battery drain attack. The weak spot in St. Jude's device ecosystem is its [email protected] home monitoring systems, which Muddy Waters and MedSec described as "keys to the castle."

St. Jude Medical officials have claimed that the firms' report demonstrates a fundamental lack of understanding of medical device technology. They point to a University of Michigan study in which researchers reproduced experiments that led to the allegations, but came to "strikingly different conclusions." For example, the Michigan researchers found the error messages cited by Muddy Waters as proof of a successful "crash attack" into a home-monitored implantable cardiac defibrillator are simply the error alerts that display when the device is not properly plugged in. 

Product Development Models Driving Innovation

Learn how to meet tough regulatory requirements and design devices hospitals will actually buy in this special conference track at MD&M Minneapolis on September 21. Qmed readers get 20% off with promo code Qmed16.

Besides Muddy Waters and MedSec, the lawsuit also names Muddy Waters founder and research director Carson Block, MedSec CEO Justine Bone, and Hemal Nayak, a University of Chicago professor who is a director and advisor to MedSec. The lawsuit claims they were all "concerned only about profiting from the short-sale plays and not patient safety."

St. Jude Medical also claims defamation around what is says were three false claims in the accusations: The batteries and telemetry circuitry in St. Jude's cardio devices are supposedly vulnerable to a "drain" attack, the devices are susceptible to a "crash attack" rendering them useless, and a lack of willingness on St. Jude's part to ensure the safety of its devices from such attacks. 

When it comes to the claim of depleting the batteries with an attack, St. Jude says MedSec's tests failed to replicate real world conditions simulating an implanted cardio device, and that such a drain attack cannot happen in such conditions.

The so-called "crash" they claimed to induce, according to St. Jude, was not a security flaw but actually a design feature: "Defendants claimed to have set off red warning lights and rendered a CRM device useless when in fact it was working as designed and providing continued therapy: a 'lockout' feature had simply stopped defendants in their tracks."

Muddy Waters, MedSec, Block, Bone, and Nayak "intentionally constructed their false implication about St. Jude's devices using nonspecific claims unsupported by any evidence, even though, pursuant to industry standards, defendants' researchers could have gained St. Jude's cooperation--directly and/or through governmental or other channels--to investigate their theories," St. Jude Medical claims in the lawsuit.

Chris Newmarker is senior editor of Qmed. Follow him on Twitter at @newmarker.

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[Image courtesy of AJEL on Pixabay.]

St. Jude Medical Strikes Back

St. Jude Medical Strikes Back

St. Jude Medical has filed a lawsuit against research company Muddy Waters and cybersecurity company MedSec, alleging false statements, false advertising, conspiracy, and the related manipulation of the public markets.

The legal action is the latest development in the unfolding drama between the device maker and the duo, which started in late August when Muddy Waters published a research note claiming St. Jude's cardiac devices are more vulnerable to cybersecurity attacks and should be recalled. The device maker was not given prior notice of the findings. Basing it claims on an assessment by MedSec, Muddy Waters shorted St. Jude stock; MedSec reportedly was to receive financial compensation from this transaction. St. Jude Medical ($STJ) stock dropped 10% on August 25, the day the report was released, but has since recovered most of its losses.

The lawsuit, filed in the U.S. District Court for the District of Minnesota, names Muddy Waters Consulting LLC, Muddy Waters Capital LLC, MedSec Holdings, Ltd., MedSec LLC, and three principals as defendants. The suit alleges that the defendants "intentionally disseminated false and misleading information in order to lower the value of St. Jude Medical's stock and to wrongfully profit from a drop in share value through a short-selling scheme," according to a press release.

 Learn about emerging trends for medical device companies at the MD&M Minneapolis Conference, September 21-22.

"We felt this lawsuit was the best course of action to make sure those looking to profit by trying to frighten patients and caregivers, and by circumventing appropriate and established channels for raising cybersecurity concerns, do not use this avenue to do so again," Michael T. Rousseau, St. Jude Medical CEO and president, said in the release. He added, "We believe this lawsuit is critical to the entire medical device ecosystem--from our patients who have our life saving devices, to the physicians and caregivers who care for them, to the responsible security researchers who help improve security, to the long-term St. Jude Medical investors who incurred losses due to false accusations as part of a wrongful profit-making scheme."

A Muddy Waters spokesman told MD+DI, "It is not unusual for a company like this to try to silence its critics and we are always prepared to vigorously defend our right to criticize a company that puts its profits before its patients."

MedSec did not immediately respond to a request for comment.

St. Jude Medical had hit back at the original research report in an August 26 rebuttal, but Muddy Waters doubled down on its claims in an August 29 note titled, "STJ: Still Non-Secure." Writing that the company's refutation included "fluff (~80%)," the research firm stated, "there are no changes to MedSec or our conclusions about the lack of security in the STJ device ecosystem, and our belief in the need for recall and remediation."

The battle continued, with St. Jude Medical claiming the next day that a video shown as proof of a crash actually showed a security feature.

In the lawsuit, St. Jude Medical included a third-party examination of the research report by experts from the University of Michigan. These experts "found that 'the evidence does not support their [Muddy Waters/MedSec] conclusions," according to the press release.

"Our top priority is to reassure patients, caregivers and physicians who use our life-saving devices that we are committed to the security of our products and to ensure patients and their doctors maintain ongoing access to the proven clinical benefits of remote monitoring," said Mark Carlson, vice president and chief medical officer at St. Jude Medical, in the release. 

[Image courtesy of GRAPHICS MOUSE/FREEDIGITALPHOTOS.NET]

Reimbursement Challenges Drive Shift to Consumer-Based Billing

Reimbursement Challenges Drive Shift to Consumer-Based Billing

In an uncertain reimbursement climate, some device manufacturers are considering new ways of billing to ensure revenue and profitability.

Rina Wolf

The medical device industry is facing a number of revenue-related pressures impacting growth and profitability due largely to healthcare reform initiatives, changes in purchasing and supply chain management, and billing and reimbursement issues. To succeed against this backdrop and ensure the greatest opportunity for product adoption, manufacturers must not only demonstrate a device's value proposition in clinical and economic terms, but pursue strategies that optimize their ability to obtain timely reimbursement. 

Value-Based Reimbursement Has Redefined Device Purchasing

Accountable care and value-based reimbursement is causing a significant shift in healthcare, with providers facing mounting pressure to improve the effectiveness and quality of patient care at an optimal cost. As the industry moves toward capitated payments for healthcare services, such as Medicare's Bundled Payments for Care Improvement (BPCI) initiative where hospitals agree to payment arrangements that include financial and outcomes accountability for episodes of care, providers must understand their costs at the patient level to succeed and remain profitable. 

 Learn about emerging trends for medical device companies at the MD&M Minneapolis Conference, September 21-22.

With supply chain costs the second-largest and fastest-growing expense behind labor costs, medical devices are targets for cost containment measures. Hospitals and health systems are taking direct responsibility for medical device purchasing decisions with a focus on reducing these costs and the number of manufacturers used. Device manufacturers must demonstrate their ability to provide better outcomes at lower costs, and show superiority to other options. 

According to Emergo's 2016 Medical Device Industry Outlook report and survey, startups and smaller medical device manufacturers indicated that with decreasing private physician purchasing influence, they believe that large manufacturers will have more negotiating power with both providers and payers, hindering their ability to compete and introduce new or cutting-edge devices into the marketplace.

Wolf

Payer Challenges and Barriers to Reimbursement

Following the intensive process of demonstrating clinical utility for approval by FDA, coverage issues and timely third-party payment can be significant impediments to the adoption of many innovative medical devices that can spell success or failure for a medical device company. Reimbursement has a direct impact on device adoption--if providers face difficulty getting paid, they will be less likely to support the new device or therapy. 

From the payer's perspective, demonstrating long-term clinical and economic value and real-world effectiveness is necessary to gain coverage and drive utilization. Coverage decisions typically include assessment of whether or not devices are "reasonable and necessary" or meet payer medical necessity criteria. Payers will not cover emerging devices and related procedures they consider investigational or experimental. 

As we are seeing with our customers in the emerging molecular diagnostics and genetic testing markets who face similar challenges, from a billing and claims management perspective, documentation is becoming more and more critical to substantiate payment. Payer requests for additional information to process billing claims is increasing. Several of the most common claim issues and reasons for payment denials include: 

  • Services billed with no medical necessity documentation to support the claim
  • Documentation for a service by a health professional deemed insufficient or inconclusive
  • Services provided to a patient deemed experimental or investigational
  • Claims for services coded incorrectly
  • Not approved by FDA
  • Humanitarian device

Effective billing and revenue cycle management for medical devices is also impacted by increasing requirements for new data and reporting, new billing codes, and ongoing payer and regulatory updates that will routinely challenge the ability to get reimbursed. 

One significant regulation that is being phased in currently is FDA's requirement for a unique device identification (UDI) system to improve patient safety, facilitate recalls of devices that malfunction, and improve supply chain efficiency. By 2020, most medical devices will need to include a UDI in human and machine-readable format. CMS and FDA are lobbying for universal health insurance claim forms to include the UDI in order to improve postmarket surveillance and device performance. Claim-based UDIs would also help determine costs and outcomes and help track manufacturer rebates.

Providers without the automated system ability to process medical device claims to 100% reconciliation, coupled with the lack of aggressive and purposeful claims followup, may face significant challenges in receiving reimbursement, which may erode the successful adoption of medical devices. 

Consumer-Based Billing an Emerging Reimbursement Strategy

Device manufacturers are seeking better ways to ensure revenue and profitability by optimizing their ability to obtain timely reimbursement. Startups and smaller medical device manufacturers in particular are finding significant opportunity to improve adoption, gain competitive advantage, and enhance revenue through a reimbursement strategy based on direct-to-consumer billing for their devices and wearables once prescribed by a physician versus having the healthcare provider bill for the device. 

In-house billing allows manufacturers to maximize unit pricing for their devices, aggressively monitor and appeal third-party claims, and take direct control of revenue cycle performance to ensure a high probability of getting reimbursed. Because ordering physicians no longer have to contend directly with billing and reimbursement issues, they are less encumbered in their selection of a preferred medical device. 

Automated billing and revenue cycle systems designed specifically to support medical device claims processing provides a rules-based workflow that requires little staff intervention and easily scales to match company growth. Operational alerts and business analytics provide real-time visibility into revenue performance and profitability. 

One medical device company adopting an in-house billing strategy has seen an uptick in reimbursement per unit of 30% or more, with a nearly 50% reduction in claims denials and a four-fold increase in appeals success. Device manufacturers are also seeing much higher payer coverage in general, and growth in contracts compared to medical device companies that do not control their own billing.

A significant advantage of in-house billing is that medical device companies are able to work reimbursements from any rejections and denials in a timely manner (that might otherwise have been lost revenue through traditional provider billing) by using automated processes that help them identify root causes of denials, manage resolutions, and reduce write-offs.

Evaluating new reimbursement strategies is necessary to not only increase revenue and grow market share, but to make the difference between surviving and thriving in this era of healthcare reform and reimbursement uncertainty. 

Rina Wolf is vice president of Commercialization Strategies, Consulting, & Industry Affairs for San Diego-based XIFIN, Inc.  She can be reached at [email protected].

[Images courtesy of NUTTAKIT/FREEDIGITALPHOTOS.NET and RINA WOLF]