Whither medical innovation? Mixed bag for U.S. innovators. It's true that U.S. medical innovation has been dealt some setbacks recently. But while the news is glum, there is cause for hope, says Kelly Slone, vice president, federal life science policy and political advocacy, National Venture Capital Association, and director of NVCA's Medical Industry Group. Innovation scorecard for 2011. How did medical innovators fare in 2011? Not so well. This fall, for example, Scale Venture Partners announced it would cease healthcare investing permanently. The company's decision followed by one week a decision by Morgenthaler and Advanced Technology Ventures, long-time, established funds, to spin out their healthcare investment practices; and by one month a decision by Prospect Ventures to forego raising a fourth healthcare fund and return committed capital to limited partners. Prove it! Consultant Winifred Hayes is convinced of one thing. Whether Obama gets re-elected or not, or whether the Supreme Court strikes down key provisions of the healthcare reform act or not, one thing won't change: Providers will continue to strive for quality-based, evidence-based healthcare. And that means they'll continue to demand evidence from their suppliers about the efficacy and value of the medical devices and equipment they sell.

Visit the Grand Ole Opry in Nashville before or after the 2012 Annual Conference, April 29-May 1.

It's true that U.S. medical innovation has been dealt some setbacks recently. (See related article below.) But while the news is glum, there is cause for hope, says Kelly Slone, vice president, federal life science policy and political advocacy, National Venture Capital Association, and director of NVCA's Medical Industry Group, or MedIC.

For one thing, Food and Drug Administration officials are at least talking about the importance of preserving innovation, she says.

Last year, MedIC called for the Department of Health and Human Services to 1) devise a more expeditious process for approving novel diagnostics, devices and therapeutics; 2) improve the quality, predictability and staffing of the FDA's Center for Devices and Radiological Health, 3) speed the implementation of FDA initiatives to enable timely review of guidance documents and applications; and 4) increase the use of non-government, outside experts to facilitate and strength the FDA review and approval process.

"These are not the kind of issues you can turn around in a year," says Slone, speaking with IMDA Update. "But we believe things are different from last year. Now, the FDA is talking about how they can improve the approval process for medical innovation. They're acknowledging that medical innovation is important and a focus for the agency. Before, we weren't hearing anything about innovation or FDA's impact on it."

One sign of change was the FDA's release in October of its "blueprint for innovation," says Slone. Titled "Driving Biomedical Innovation: Initiatives for Improving Products for Patients," the blueprint addressed concerns about the sustainability of the medical product development pipeline. It focused on implementing the following actions:

• Improving consistency and clarity in the medical device review process.

• Training the next generation of innovators.

• Streamlining and reforming FDA regulations.

• Rebuilding FDA's small business outreach services.

• Building the infrastructure to drive and support personalized medicine.

• Creating a rapid drug development pathway for important targeted therapies.

• Harnessing the potential of data mining and information sharing while protecting patient privacy.

Obstacles

Despite the good news, some serious obstacles remain for medical innovators. In August, for example, the Institute of Medicine recommended that the FDA scrap its 510(k) clearance program for medical devices.

The 510(k) clearance process was created to provide an expedient way to evaluate moderate-risk Class II devices, the IOM committee pointed out. Unlike the premarket-approval (PMA) process for high-risk Class III devices, 510(k) clearance generally relies on "substantial equivalence," that is a determination that new devices are sufficiently similar to comparable products that have been previously cleared or were on the market prior to 1975, when the 510(k) process was put in place. However, relying on "substantial equivalence" cannot assure that devices reaching the market are safe and effective, the IOM concluded, because the majority of the devices used as the basis for comparison were never reviewed for safety or effectiveness. What's more, the IOM found substantial weaknesses in current postmarket oversight of devices.

FDA's resources would be better invested in developing a new framework that uses both premarket clearance and improved postmarket surveillance of device performance to provide reasonable assurance of the safety and effectiveness of Class II devices throughout the duration of their use, the committee said.

If there's any good news to come from the IOM's report, it is that few people paid serious attention to it, says Slone. Not even the FDA supported it. "We believe that preserving the 510(k) process is critical to innovation," she says.

IMDA announcement Be a hero Let your manufacturer partners know that the 2012 IMDA Conference should be the venue for their annual distributor sales meeting. At the 2011 meeting in San Antonio, several vendors took advantage of the fact that their key distributors were already gathered in one place to hold their sales meetings. It's convenient, easy and economical. IMDA Executive Director Katie Keel is reserving rooms for such meetings immediately before and after the Conference, which will be held in Nashville, Tenn., April 29-May 1. Let your manufacturers know now about this opportunity. Ask them to give Katie Keel a call at (866) 463-2937 for more details. Or better yet, if you've got a manufacturer who might benefit, let Katie know; she'll take it from there.

MedIC is supportive of the recently announced pilot program by FDA and the Centers for Medicare & Medicaid Services to concurrently review a handful of medical devices each year. Presumably, concurrent review would lead to better coordination of premarket approval by the FDA and national coverage decisions by CMS. "We believe that any new ideas are worth trying," says Slone.

But MedIC continues to have reservations about the Patient-Centered Outcomes Research Institute, or PCORI, which was established by Congress through last year's healthcare reform law. An independent, non-profit organization, PCORI is charged with providing evidence on how disease and other health conditions can most effectively be prevented, diagnosed, treated, monitored and managed.

Last year, when speaking with IMDA Update, Slone said even though PCORI's goal was positive, it could in reality halt or slow down innovation, because many medical technologies, when first introduced, suffer from shortcomings, which are often corrected in following generations.

One year hasn't caused her to change her mind. "Our opinion is still the same," she says. "It's definitely something we need to really keep watch over." That said, PCORI -- or at least the concept of providing evidence on the effectiveness, benefits and harms of different treatment options for different patients -- is here to stay. "It's something that will be long-term."

Investment dollars limited

"The story right now is, investment in healthcare isn't going into medical devices and biotechnology," says Slone. More and more of those dollars are flowing into healthcare services and information technology...and out of the United States. "The industry is shrinking," she says. Venture capital funds are drying up. "We think that's a concerning trend that people need to understand, because venture capital fuels medical innovation."

Medical device innovators will continue to pursue the European market because the regulatory environment and reimbursement are more favorable there, she says.

But it's not just the federal government's actions (or inaction) that are slowing down innovation in the United States. In a cost-conscious market, providers themselves are putting up a red light to innovation. "If it's all about cost, that's not a healthy environment to grow medical device innovation," says Slone.

Providers need to understand that medical device innovation is an incremental process, she adds. "A lot of medical devices don't work well at first. If you're...not calculating that in, that will be negative for medical devices. But if providers have an understanding of how the medical device innovation process flows, if they can see the long-term outcomes of medical devices, then that's a different story."

Return to top

IMDA Announcement More than 1,000 strong More than 1,000 people are now members of IMDA's LinkedIn group. Shouldn't you be too? Go to www.imda.org and click on the LinkedIn graphic. You'll be connected to 1,000+ people with an interest in specialty sales and marketing. Share ideas. Learn about new lines. Get yourself out there. Check in with LinkedIn every day. IMDA has a Facebook page too! Go to www.imda.org to check it out.

 

Innovation scorecard for 2011 Survey shows disturbing trend in venture capital activity in medical market

How did medical innovators fare in 2011? Not so well.

This fall, for example, Scale Venture Partners announced it would cease healthcare investing permanently. The company's decision followed by one week a decision by Morgenthaler and Advanced Technology Ventures, long-time, established funds, to spin out their healthcare investment practices; and by one month a decision by Prospect Ventures to forego raising a fourth healthcare fund and return committed capital to limited partners.

IMDA announcement Refer a manufacturer and win big Bring a co-worker to the 2012 IMDA Conference in Nashville...for free! Simply provide IMDA Executive Director Katie Keel the name and contact information of a manufacturer IMDA should contact about exhibiting at the 2012 Manufacturers Forum. You'll automatically be entered in a drawing to win a free "additional-attendee" registration. Contact Katie Keel at (866) 463-2937.

The National Venture Capital Association believes this is a disturbing trend, with potential long-term impact on U.S. medical innovation.

In fact, in October, the NVCA's MedIC Coalition released the results of a survey of more than 150 venture capital firms, which identified more troubling trends for medical innovators. MedIC was founded in 2010 as a partnership between NVCA, member venture capital firms and early-stage portfolio companies. Its mission is to preserve U.S. leadership in medical innovation.

Investment dollars flee the U.S. market

"This report confirms what has been suspected for some time, which is that venture capitalists are shifting investment capital away from lifesaving and life-sustaining products and into areas less regulated by the FDA as well as into other countries," Beth Seidenberg, M.D., partner at Kleiner Perkins Caufield & Byers, and chairwoman of the MedIC Coalition, was quoted as saying.

The survey found that U.S. venture capital firms have been decreasing their investment in biopharmaceutical and medical device companies over the past three years and expect to further curtail such investment in the future. The reason? Concerns about FDA regulatory challenges as well as reimbursement challenges.

Thirty-nine percent of respondent firms reported decreasing their investments in life sciences companies over the last three years, and the same percentage said they would further decrease these investments over the next three years, some by greater than 30 percent. This is roughly twice the number of firms that have increased and/or expect to increase investment, according to NVCA.

What's more, survey respondents expected to see significant investment decreases in companies fighting serious and highly prevalent conditions, including cardiovascular disease, diabetes, obesity, cancer, and neurological diseases, NVCA reported.

Venture capitalists and the companies in which they invest are increasingly looking to Europe and Asia to bring their medical products to market. According to the NVCA survey, 36 and 44 percent of firms plan to increase investment in life science companies in Europe and Asia, respectively, while only 13 percent plan to increase in North America. Correspondingly, 31 percent of firms indicated plans to decrease investment in life science companies in North America while seven percent and zero percent of respondents plan to decrease investment in Europe and Asia, respectively.

Additionally, a majority of the respondents indicated a continued trend for U.S.-based startup medical companies to seek regulatory approval and commercialization of their products outside the United States first and to establish and grow operations abroad.

Return to top

Winifred Hayes, Ph.D., thinks Barack Obama and Congress missed the boat on healthcare reform by focusing first on access instead of on the fee-for-service system, which encourages more of everything and leads to skyrocketing healthcare costs.

But regardless of her political analysis, she's convinced of one thing. Whether Obama gets re-elected or not, or whether the Supreme Court strikes down key provisions of the healthcare reform act or not, one thing won't change: Providers will continue to strive for quality-based, evidence-based healthcare. And that means they'll continue to demand evidence from their suppliers about the efficacy and value of the medical devices and equipment they sell.

A graduate of the University of Maryland, School of Nursing, with Primary Care Nurse Practitioner and Master of Science degrees, Hayes is the founder of Hayes Inc., a Lansdale, Pa.-based company that helps providers integrate evidence into their decision-making process. The company evaluates medical technologies to determine their impact on patient safety, health outcomes, resource utilization, and return on investment.

"Money is getting tighter and tighter, and it's clear the feds are looking more and more at the outcomes that providers are achieving," says Hayes, who received her Ph.D. from the Johns Hopkins University Bloomberg School of Public Health. The challenge for policymakers is figuring out how to change the way providers are reimbursed so they are incentivized to focus on clinical outcomes and efficiencies, instead of on performing more procedures.

"Whether you're looking at accountable care organizations or a variation on that theme, we'll see more and more approaches that deal with pay-for-performance and value-based purchasing," she says. "That trend is not going to disappear even if Obama is not re-elected, even if you see Obamacare overturned."

IMDA Announcement Looking for lines? View a list of all medical devices that received FDA 510(k) marketing clearance in November by visiting the FDA Website. You might find a company in need of your expertise.

No more

Policymakers aren't the only ones pushing providers in this direction, says Hayes. "Employers are saying, 'We can't continue to provide health insurance when every year, costs go up, often by double digits.' You can't just keep supporting that."

From a supply chain point of view, it's reasonable to expect hospitals to zero in on physician-preference items, says Hayes. Traditionally, they have done so either by 1) trying to get their clinicians to standardize on one brand or two, 2) setting a price cap on devices and equipment over which they will not pay, or 3) more tightly controlling the access the vendors have to decision-makers in their facilities. Most commonly, they employ a combination of all three.

"But another way they're doing so is by taking a look at what the scientific evidence has to say about a product, and if it doesn't meet certain criteria for quality of evidence -- through technology assessment or value analysis -- then that product won't be introduced in that hospital," says Hayes.

"From my point of view, it's unreasonable to think that the provider sector, and in turn the payer sector, are going to tolerate adding on more and more new technology without high-quality evidence to say it makes any difference."

Little sympathy

And even though innovators bemoan the fact that, by definition, new devices lack a track record, providers and payers have little sympathy for their plight. "The payers, in particular, are saying, 'We just can't keep paying for [technology], hoping it will make a difference. If you're asking for more money for a procedure, you'll have to provide data'" to show its effectiveness, she says.

A case in point is the da Vinci surgical robotic system, says Hayes. Some payers are refusing to reimburse providers any more to perform procedures with it, because there's no convincing data to show that the da Vinci produces outcomes that are superior to other minimally invasive approaches.

"The reality is, in the absence of clinical evidence that shows improvements in either efficiency, safety or effectiveness, if a new product costs more than the product it's replacing, or if it's something brand new for which there's nothing comparable, [vendors] are going to have a problem," says Hayes.

Role of early adopters

There will always be the need for early adopters of new technology, she says. "But that doesn't mean every hospital should be one." Hospitals that elect to be early adopters should limit it to a few select service lines, where they have the expertise and where they are willing to make that kind of investment.

"A lot of times, there's a disconnect between what goes on in the supply chain and the hospital's strategic plan," she says. "If the hospital aspires to be the cardiac center in its area, then they should be early adopters in that area, but perhaps not in orthopedics."

IMDA members have to carefully consider how the technologies they carry fit into this new paradigm. "They need to think about, 'How does [a new technology] support improved efficiencies within the hospital?'" says Hayes. "And even if it doesn't improve outcomes, but it does result in improved efficiency, that's a plus."

Return to top
 

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 Keel: Executive Director Judy Keel: Executive Vice President Patti Perillo:  Senior Administrator Mary Moran:  Chief Financial Officer Mark Thill, Editor & Communications Director (224) 735-3297 Laura Thill, Associate Editor (224) 735-3296 Mitchell Kramer, Legal Counsel (800) 451-7466 George Ayd, Jr., Insurance Administrator (703) 652-1309               2011-2012 Directors President Anthony Marmo, Martab Medical (201) 512-1100, ext 225 President-Elect Hal Freehling, Jr., O.E. Meyer Company (419) 609-1633 Secretary/Treasurer Don Reiter, SRC Medical (818) 717-8807 x19 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) 573-4907 Bill Schultz, IPV Medical, LLC (760) 212-2769 Don Sizemore, D&D Medical, Inc. (615) 859-2337 Past-President Kevin Trout, Grandview Medical Resources, Inc. (412) 914-0950 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.