This month's headlines
 

'No' to tax on medical device manufacturers. IMDA was slated to go on record as opposing a proposed 10-year, $40-billion tax on medical device makers, part of healthcare reform legislation being considered at press time. Outcry over 510(k) process could spell changes. The well-publicized saga of ReGen Biologics and its Menaflex collagen scaffold has raised questions about how the FDA clears devices for marketing. The result could be tougher regulations. Vital/Med Systems featured in Repertoire. A "Distributor Profile" in the October 2009 issue of Repertoire magazine traces Dave Campbell's career from his college degree in aerospace engineering and Ph.D. in fluid physics, through the founding and growth of Vital/Med Systems. Top 10 medical innovations for 2010. A panel of Cleveland Clinic physicians and scientists unveiled their Top 10 Medical Innovations for 2010 at Cleveland Clinic's recent 2009 Medical Innovation Summit in Cleveland. Some are device-related, others biotechnology-related, and still others (such as exercise for treatment of Parkinson's) are neither. To build a world-class sales organization, find good people…now! Many companies get aggressive about recruiting only when they need somebody to add to their team or when they need to replace somebody who has just left. But recruiting is a process, not an event. It must be ongoing and continuous.

Keystone, Colo., is the site of the 2010 Annual Conference, May 16-18.

'No' to tax on medical-device manufacturers IMDA goes on record opposing the proposed 10-year, $40 billion fee

IMDA was slated to go on record as opposing a proposed 10-year, $40-billion tax on medical device makers, part of the healthcare reform legislation being considered at press time by the Senate Finance Committee. (See September 2009 IMDA Update.)

IMDA's name was scheduled to appear with that of more than 250 other associations and companies (predominantly medical products manufacturers) in a series of ads directed toward members of Congress. The IMDA board unanimously approved the association's position on Monday, Oct. 19.

The ads were to be taken out by the Medical Device Manufacturers Association and were to follow by several days a letter sent to Speaker of the House Nancy Pelosi, Senate Majority Leader Harry Reid and other key lawmakers expressing displeasure with the proposed $40 billion tax. That letter had 241 signatories.

IMDA took the action it did at the urging of Chairman Dave Campbell of Vital/Med Systems, who feared that if manufacturers were forced to pay the tax, they would pass most of it along to their distributors (because, presumably, they would be unable to pass it on to hospital customers, due to GPO contracts). "I think this proposed tax could put some of us directly out of business, if unable to withstand or tolerate the margin reduction," he said.

The fee 'would have a devastating impact on innovation, investment and the nation's economy.'

Letter to Pelosi

In the letter to lawmakers, which was penned by MDMA, signatories said that the proposed $40 billion fee "would have a devastating impact on innovation, investment and the nation's economy." It continues:

"The proposed tax of $4 billion annually equates to roughly a 3.5% tax on total revenues (not profits) for a given company. It is important to keep in mind, however, that the medical device industry relies upon emerging companies to develop innovative products, often requiring tens or hundreds of millions of dollars in investment. As currently structured, the tax's sliding scale up to $25 million in annual revenues will do little, if anything, to preserve critical revenue for emerging companies and is well below the fee relief afforded smaller drug companies (drug industry fee relief up to $400 million in annual sales to the federal government). In addition, companies and venture capitalists have stated that often a medical device company needs $100 million in annual revenues before the first dollar of profit is generated.

"Proponents of the tax conclude that due to an increased pool of insured beneficiaries, the adverse effect on device manufacturers will be minimal since more beneficiaries will have access to these products. The facts do not justify this assumption, however. Given that the majority of products that will be the most impacted are used in acute care settings where there are legal obligations to treat a patient, the effect of expanded coverage will likely be negligible. . . .

"In addition, given that the overwhelming majority of medical products are reimbursed through hospitals under a bundled payment structure, the device industry will already be negatively impacted by $155 billion in cuts to the hospital industry over the next 10 years."

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The story seemed to end happily for ReGen Biologics. In December 2008, the Hackensack, N.J.-based company received FDA clearance to market its Menaflex meniscus-repair product in the United States. (The device is recommended for the treatment of meniscus tears, and is inserted into the knee to stimulate the growth of new meniscus tissue following a tear of the medial meniscus.)

But the clearance came only after years of a bitter struggle with the FDA. Worse for ReGen Biologics, it was followed by some damaging publicity, including a blowout in the Wall Street Journal in March 2009 titled "Political Lobbying Drove FDA Process." Serious questions were raised not only about the approval process for Menaflex, but for new medical devices in general. The result could be the development of tougher regulations surrounding FDA marketing clearance.

Too lax?

At issue is which new devices -- particularly those considered class III -- should undergo the rigorous PMA (premarket approval) process, and which should be allowed marketing clearance under the more lax 510(k) process. Class III devices are those that the FDA has identified as implantable; life-sustaining; or posing a significant risk to the health, safety or welfare of a patient. (Class I and Class II devices are deemed to be of lower risk.)

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In the PMA process, the manufacturer must provide evidence -- typically including clinical data -- demonstrating reasonable assurance that the new device is safe and effective. It is the most stringent type of premarket review. In the 510(k) process, the manufacturer must demonstrate only that the new device is substantially equivalent to a device already on the market.

Critics charge that the FDA has become too lax in allowing manufacturers of class III devices gain market access through the 510(k) process.

Indeed, the issue has been brewing for some time. The Safe Medical Devices Act of 1990 required FDA to re-examine the Class III device types for which PMAs were not yet required to determine if they should be reclassified to either class I or class II, or remain in class III. The FDA was then to have drawn up regulations requiring that all class III devices eventually be reviewed through the PMA process. But that never happened.

As a result, the FDA Amendments Act of 2007 mandated that the U.S. Government Accountability Office study the 510(k) process. In January 2009, the GAO issued a report calling on the FDA to "expeditiously take steps" to issue regulations in compliance with the Safe Medical Devices Act of 1990. (To see the full report, go to http://www.gao.gov/new.items/d09190.pdf.) 

What drove the GAO to make its recommendation were its findings that in fiscal years 2003 through 2007:

• FDA reviewed all 13,199 submissions for class I and class II devices through the 510(k) process, clearing 90 percent (11,935 submissions) for marketing.

• FDA reviewed 342 submissions for class III devices through the 510(k) process, clearing 67 percent (228 submissions) for marketing.

• FDA also reviewed 217 original PMA submissions and 784 supplemental PMA submissions for class III devices, approving 78 percent and 85 percent, respectively, of these submissions for marketing.

Bad publicity hits the streets

In December 2008, just as the GAO was putting the finishing touches on its report, ReGen received 510(k) clearance to market Menaflex. Three months later, the ReGen saga was recounted in a 2,200-word Wall Street Journal article, which painted a picture of an FDA capable of being bullied by companies and Congressional representatives, and plagued by internal tensions between reviewers and management. (See chronology.)

In the wake of that article and subsequent outcry, the FDA itself recognized the shortcomings of its processes and issued a report Sept. 24 highly critical of its own procedures. (To read the entire report, which contains a chronology of FDA's interaction with ReGen Biologics, go to http://www.fda.gov/downloads/NewsEvents/PublicHealthFocus/UCM183642.pdf.) 

"In general, we found that over the 17-year review history of the [collagen scaffold] device, multiple departures from processes, procedures, and practices occurred," said the report's authors. "Our ability to assess the effect of these departures on the decision-making process was in many cases undermined by the failure of important decision-makers to sufficiently explain and document the bases for their decisions in an administrative record. This failure constitutes a clear deviation from the principles of integrity used in this review and undermines the ability of the agency to counter the suggestion that lobbying on behalf of ReGen affected the decision. Beyond all that, because the 510(k) review process relies on predicate devices, this failure to sufficiently explain and document the basis for clearing the CS device will almost certainly affect subsequent review decisions."

Missed this year's Manufacturers Forum in Charleston? Check out the manufacturers who attended this year's Forum, as well as those who helped sponsor the Annual Conference, by going to the "Members Only" portion of the IMDA Website, www.imda.org. Imda.org is your portal to the market.

To address some of these shortcomings, the FDA commissioned the Institute of Medicine to study the 510(k) premarket notification program. The FDA announced that as that study was progressing, its own Center for Devices and Radiological Health would convene an internal working group to "evaluate and improve the consistency of FDA decision-making in the 510(k) process."

"Our working group and the [Institute of Medicine's] independent evaluation will help us determine how the 510(k) process can be improved to better support FDA's mission to protect and promote the public health," said Jeffrey Shuren, M.D., then-acting director of the FDA's Center for Devices and Radiological Health. The study was scheduled to be completed in 2011.

Manufacturers respond

In response to FDA's announcement, Janet Trunzo, executive vice president of technology and regulatory affairs for the Advanced Medical Technology Association (AdvaMed), a trade group for medical products manufacturers, spoke out in support of 510(k), calling it "a well-defined, science-driven method used by FDA as part of a comprehensive regulatory framework to meet the needs of patients and the diversity of medical technology.

"We look forward to IOM's thorough and unbiased analysis of the 510(k) process, as we believe it will underscore the strengths of FDA's current regulatory approach and dispel many of the misconceptions about the process," said Trunzo.
 

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A "Distributor Profile" in the October 2009 issue of Repertoire magazine traces Dave Campbell's career from his college degree in aerospace engineering and Ph.D. in fluid physics, through the founding and growth of Vital/Med Systems, the specialty distribution company he owns today. It is an interesting story indeed.

IMDA Announcement Looking for lines? View a list of all medical devices receiving FDA marketing clearance in September by visiting the FDA Website. You might find a company in need of your expertise.

Campbell began his career as a research scientist with a private company on contract with the U.S. Atomic Energy Commission. When the department was dissolved in the early 1970s, he landed a job with a biomedical company in New York, thanks in part to research he had done in blood flow. He left the job a few years later to work for a small anesthesia supply company. The company ran into financial difficulties, however, and Campbell was forced to leave. But he had already made plans to start his own company. "I was fired on a Friday and ran into my old boss the following Wednesday," he tells Repertoire. "He was very surprised to learn I already had new business cards!" Thus was Vital/Med Systems born.

Like many IMDA members, Campbell was a jack-of-all-trades in the company's early days. "I was working out of my home and delivering products out of my car," he says. Needless to say, Vital/Med Systems grew, a fact that has brought about its own challenges and opportunities. The article relates Campbell's emphasis on electronic marketing, about which he spoke at the 2009 IMDA Annual Conference in Charleston, S.C. It also talks about his attempts to move from being a "B"-list vendor to an "A"-list company at his accounts.

To read the entire article, go to http://www.repertoiremag.com/Article.asp?Id=3283.

"Distributor Profile" is a regular feature in Repertoire. Written by the magazine's senior editor, Laura Thill, the feature spotlights an independent distributor. While Repertoire's editorial content leans toward general-line distribution, the magazine is also eager to feature specialty distributors. Interested IMDA members can contact Laura Thill.

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A panel of Cleveland Clinic physicians and scientists unveiled their Top 10 Medical Innovations for 2010 at Cleveland Clinic's recent 2009 Medical Innovation Summit in Cleveland. Some are device-related, others biotechnology-related, and still others (such as exercise for treatment of Parkinson's) are neither.

Four major criteria served as the basis for qualifying and selecting the Top 10 Medical Innovations, according to Cleveland Clinic. Nominated innovations were required to:

• Have significant potential for short-term clinical impact (either a major improvement in patient benefit or an improved function that enhances healthcare delivery).

• Have a high probability of success.

• Be on the market or close to being introduced.

• Have sufficient data available to support its nomination.

The Top 10 are:

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10. Whole-slide imaging for management of digital data in pathology. A technology for creating digital pathology slides that can be viewed, stored and streamed over the Internet, and analyzed on a computer.
9. Devices for occluding left atrial appendage to reduce stroke risk. Device alternatives to long-term warfarin use that can prevent clots from developing in patients with atrial fibrillation.
8. Oral Thrombopoeitin (TPO) receptor agonist that stimulates platelet production. A recently approved drug that stimulates production of cells in bone marrow that form platelet cells in the blood.
7. Outpatient diagnosis of sleep-related breathing disorders. Self-contained, at-home sleep-monitoring devices for screening, diagnosing, and treatment assessment of sleep-related breathing disorders.
6. Forced exercise to improve motor function in patients with Parkinson's. Pedaling at 90 RPM on a tandem bike to dramatically improve motor functioning of patients with Parkinson's disease.
5. Fertility preservation through oocyte cryopreservation. A technology said to be rapidly improving, which allows eggs of a healthy woman to be safely frozen and stored, ready to be thawed and fertilized at a later date.
4. Non-Vitamin K antagonist oral anticoagulants. An alternative to the oral anticoagulant warfarin, these are said to provide a convenient and safe way for patients to dose themselves and prevent blood-clot formation.
3. Continuous-flow ventricular assist devices. Tiny 3-ounce devices surgically attached alongside the heart that take over the pumping ability of the heart.
2. Low-volume, low-pressure tracheal tube cuff to reduce ventilator-associated pneumonia. A device that is said to reduce the risk of ventilator-associated pneumonia and death in the hospital ICU by providing continuous effective airway seals.
1. Bone conduction of sound for single-sided deafness. A new non-surgical, removable hearing and communication device designed to imperceptibly transmit sound via the teeth to help people with single-sided deafness.

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Traveling throughout North America, speaking to and coaching CEOs, sales managers, and salespeople, we at Sales Coach International find ourselves working to help companies build and grow world-class, productive sales forces. In doing so, we are asked often for the Reader's Digest version of what to do in order to get started on that monumental task. In fact, there are only 5 areas to focus on when building a world-class sales organization:

• Finding good people.

• Getting them to join the team.

• Getting them trained and producing.

• Growing them into top producers.

• Keeping them.

In Part 1 of this three-part series, we will focus on the necessary steps to finding good people, and then getting them to join your team.

Finding good people

The process of recruiting good talent to your organization seldom happens by chance. Many companies get aggressive about recruiting only when they need somebody to add to their team or when they need to replace somebody who has just left. But recruiting is a process, not an event. It must be ongoing and continuous. Can you imagine only going after a new customer when you lose an existing one?

I believe that too many companies out there today are not in a constant hunt for talent, even when they are unhappy with the production of some of those currently on the team. When you are dealing with a sales team, YOU ARE NEVER FULLY STAFFED!

For many sales managers and leaders of sales organizations, the recruiting process is treated as a necessary evil and something to "get out of the way as quickly a possible." Often this is the case because the goal of many managers is to build sales. We believe that the sales manager's job is not to grow sales, but rather, to grow salespeople, both in quality and quantity, on a regular basis. Just as it takes time and effort to build a pipeline of business, so too does it take time and effort to build a pipeline of top-notch sales candidate prospects.

Know what you're looking for

In order to do this, you must first be very clear on what the top-performing sales rep looks like. What characteristics does he or she have that makes him successful? What type of experience does she have? What soft selling skills does he possess? How about specific selling skills? What computer skills does he have or need? What type of communicator is she?

You need to write down, in bullet point format, the profile of the type of individual who would be a heavy hitter for your team. Once that is in writing, get it in as many hands as possible. Let your entire staff know what you are looking for. Let your clients, your vendors and your entire network know. If you are the only person in your company who knows your idea of the ideal sales candidate, you seriously limit your chances of finding them. The more people who know you are looking, and what you are looking for, the better your chances of finding him or her.

As a salesperson or manager, you realize that the rep's job is to identify prospective clients and then methodically look to get them to do business with you. This is often done through a series of touches, such as prospecting calls, e-mails, faxes, lunches, meetings, presentations, etc. Salespeople can continue this courting process for days, weeks, months, and sometimes even years to get the right prospect to do business with them. When bringing new talent to your team, you must take the same approach.

Remember, the best prospective salespeople for you are probably already working in sales, making a good living. They're not necessarily looking to change careers. So, how will you initiate contact with them? What will you say in the initial meeting to introduce your company to them? How will you overcome their objections? What questions will you ask? How will you maintain contact with them after the first meeting? This makes sense when going after one's account doesn't it? Then why not prepare this way when pursuing a sales professional who could possibly secure the next 20 of those accounts for your company?

IMDA Announcement Refer a member and get $50 Every time IMDA gains a member, our collective voice grows louder, our collective wisdom becomes greater, and our collective influence in the market grows. It's good for everyone. And there's no better source for new members than current ones. After all, you know the market, you know the people. That's why IMDA is offering members $50 for every new member who joins as a result of your referral. So when you're walking the floor at your next trade show, or taking a break at your next sales meeting, keep an eye out for companies that might benefit by joining IMDA. Collect business cards and send them to headquarters. Fifty bucks is nice. But the added wisdom, knowledge and camaraderie that a new member brings are even greater payoffs.

Getting them to join the team

Now that you have spent countless hours, days, and months hunting your prey, suppose you finally have him/her in your sights. They have agreed to sit down with you for a formal interview. What's next?

Go back to the "big-customer prospect" analogy for a moment: Once our sales rep has identified a prospective BIG client and scheduled an initial sales presentation meeting, we fully expect her to do her homework thoroughly. We want her to know as much as she possibly can about this company and this prospect before the meeting. We expect her to be fully prepared to ask all the right questions to find out all of the prospect's needs, pains, fears and desires. We fully expect our rep to be armed with appropriate responses to all of the potential questions and/or objections that the prospect may have. Additionally we will have the full expectations that she has prepared and practiced a very thorough and professional presentation of our company, its products and services, features, advantages and benefits. This is only natural when we think about it in our sales process.

Don't wing it

However, when we invite the potential big-dog sales professional to our company to take a look at what we are all about, we oftentimes wing it. I have witnessed hundreds of sales interviews in which the sales manager grabs the candidate's resume, gives it the once over, and then proceeds to find out a little about the candidate, all the while preparing to vomit all of the reasons why the candidate should come to work for him.

Sitting in front of the sales manager is a person who could potentially create the next 20 big clients for the company, yet the sales manager decides to fly by the seat of his/her pants! Very little preparation was done prior to meeting with the candidate. Questions were not prepared to discover the true person, that is, their needs, pains, fears, and desires in regards to a career change. Answers to potential questions or objections from the candidate were not prepared and practiced. A thorough presentation of the features, advantages, and benefits of employment with the firm was not prepared and practiced in advance. Nothing was done to show the candidate how we are different, better, stronger and more beneficial to work for than the candidate's current employer.

Your most important sale

It is our belief that the interview and hiring process is the most important SALE that you, as a company leader or sales manager, can make for your company. That's why you must prepare well in advance if you are to have a shot at the top talent. Even more so, your entire organization must present an air of success and enthusiasm about the workplace, especially when you are bringing in the top candidates for the initial interview. Ask yourself these questions: "Would I be impressed with my company if I were recruited? Would I be excited to come to work here? Would I pull up stakes in my current successful career to come work here?" If the answer to any of these questions is "Yes," ask WHY, and then work to build on that. If the answer to any of these questions is "No" or "I'm not sure," then get to work.

Many sales managers think that money is the only thing that will lure a top hitter away from his/her current career. With lack of preparation, this could very well be true. But if that is the case, shame on you!

Only by taking the time to thoroughly find out 1) what a potential candidate is looking for, and 2) what they are missing from their current employer or opportunity, can you design a proper plan for them with you. Assume nothing! You earn the right to build their dream opportunity only when you shut up and LISTEN. . .just as in a sale. If all parties at the table want the same thing, a deal can be made. As salespeople, we are taught not to worry about price until we have established value in a sale. Similarly, don't worry about compensation for a prospect until you have established value in the interview.

Don't hesitate to correct a mistake

There's just one more thing to remember about the recruiting and hiring process. Regardless of your planning and preparation, you will make a bad hire from time to time. Do not become hesitant to take action and make a decision! You do not have a crystal ball. You cannot predict the future. There is no guarantee that every choice you make will be the right one. There is, however, a guarantee that if you fail to do the things mentioned in the paragraphs above, you will have a much harder time getting your sales team where you want it.

Use the same planning, preparation, and tenacity to identify, hunt, and land top sales professionals for your team that you expect your people to do to identify, hunt, and land big clients. GET BUSY!

Gerry Layo is CEO of Sales Coach International, Granite Bay, Calif., which -- through speaking engagements, workshops and extended coaching/consulting engagements -- is dedicated to helping companies in the areas of sales, sales leadership and customer service. He conducted two IMDA training seminars in 2008. Visit his website at www.gerrylayo.com or e-mail him.

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IMDA Update Published by IMDA 5204 Fairmount Ave., Downers Grove, IL 60515 Phone:  (630) 655-9280 (866) IMDA-YES (866-463-2937) Fax: (630) 493-0798 Website:  www.imda.org E-mail:  imda@imda.org   Staff Katie Swartz: Executive Director Judy Keel: Executive Vice President Patti Perillo:  Senior Administrator Mary Moran:  Chief Financial Officer Mark Thill, Editor & Communications Director (847) 255-0716 Mitchell Kramer, Legal Counsel (800) 451-7466 Barbara Kramer, Legal Counsel (734) 930-5452 George Ayd, Jr., Insurance Administrator (703) 652-1309         2009-2010 Directors President Kevin Trout, Grandview Medical Resources, Inc. (412) 914-0950 President-Elect Anthony Marmo, Martab Medical (201) 512-1100 Secretary/Treasurer Hal Freehling, Jr., O.E. Meyer Company (419) 609-1633 Chairman of the Board Dave Campbell, PhD, Vital/Med Systems Corporation (303) 660-0888 Directors-at-Large Tom Birmingham, Bay State Anesthesia, Inc. (978) 682-6321 George Howe, Mercury Medical (727) 573-0088 Philip M. Reilly, KOL Bio-Medical Instruments, Inc. (703) 378-8600 Don Reiter, Specialty Respiratory Care, Inc. (818) 717-8807 x19 Bill Schultz, IPV Medical, LLC (760) 212-2769 Past-President Shawn Walker, Bay State Anesthesia, Inc. (978) 682-6321 Manufacturer Representative to Board Tim Beevers, Beevers Manufacturing & Supply (503) 472-9055 The ideas presented in this newsletter may or may not be applicable to your particular situation.  Always consult your tax advisor, attorney or CPA before putting them into effect.