Bum Tornier Elbow, Abandoned Patient, Inversion and a $3.3 BILLION Merger/Sale/Deal. Protect those shareholders! Follow the Money!

FiDA highlight

Just a reminder:  Doug Kohrs, the former CEO of AMS, American Medical Systems/Endo Pharmaceuticals now from Dublin, Ireland (producer of FAILED pelvic surgical mesh) and CEO of Tornier-a Minnesota company-now from the Netherlands-that made the elbow that failed in my brother after just 4 months-left abruptly and gave himself $2.6M when the company was failing to bring in a profit.

Medical-device maker Tornier sold in $3.3B deal

Oct 28, 2014, 1:17pm CDT

Katharine Grayson

Staff reporter-

Minneapolis / St. Paul Business Journal

Orthopedic-device maker Tornier has been sold to Wright Medical Group Inc. in an all-stock deal worth $3.3 billion, the companies announced Monday.

Memphis-based Wright Medical Group, which makes surgical devices and bone-growth products, will own 52 percent of the combined company's stock when the deal closes.

The combined company will operate as Wright Medical and be led by Robert Palmisano, Wright's president and CEO. Tornier CEO David Mowry will serve as president and chief operating officer.

Tornier is based in the Netherlands, but its U.S. headquarters and top executives are based in Bloomington. The business ranks as Minnesota's 10th-largest medical-technology company, according to Business Journal research.

Tornier's Bloomington office will serve as the U.S. headquarters for the combined company's upper extremity business unit, Tornier said in a regulatory filing. Wright's U.S. headquarters and executive team will be based in Memphis. Its global headquarters will be based in the Netherlands.

Tornier makes devices for the treating orthopedic problems in shoulders, hand, elbows and other extremities. The company generated $311 million in revenue last year. Wright's sales totaled $242 million in 2013.
___________________________________________________

UPDATED: Wright, Tornier merge in$3.3B inversion deal to create extremities and biologics pure play

October 27, 2014 | By Varun Saxena

Wright Medical Group ($WMGI) plans to merge with peer Tornier ($TRNX) in an all-stock transaction designed to create a pure-play orthopedics extremities and biologics company valued at $3.3 billion. The resulting entity is expected to be a midsized growth company that's in what it says are the three fastest growing areas of orthopedics--upper extremities, lower extremities and biologics.

The newly combined company will be incorporated in the Netherlands, where Tornier is currently headquartered. The inversion deal is one of the first since release of the Treasury Department's rules to deter the tax-saving practice. One of them was a med tech deal between hospital products and services companies Steris and U.K.-based Synergy Health.

During the conference call describing the deal, company officials said the short-term tax advantages will be minimal, according to the Wall Street Journal.

The deal values Tornier at a premium of 28% over its Oct. 24 closing price. Wright shares climbed 6% to $33.50 in after-hours trading on the news, while Tornier gained 31% to $31.44. Each share of Wright common stock will be exchanged for 1.0309 ordinary shares of Tornier.

"Together, we will have one of the most comprehensive upper and lower extremity product portfolios in the market, extending our leadership position and further accelerating our growth opportunities and path to profitability, all of which we believe will generate long-term value for our shareholders. In addition, this will provide our employees with opportunities for career growth and development as part of a much larger, dynamic organization," Robert Palmisano, CEO of Wright Medical, said in a statement.

He will become CEO of the newly combined company, to be known as Wright Medical Group N.V. The U.S. headquarters for the Lower Extremity and Biologics businesses will be in Memphis, TN, where Wright is currently headquartered. The U.S. headquarters for the Upper Extremity business will be based in Bloomington, MN, at an existing Tornier facility. Wright shareholders will own 52% of the new company and Tornier shareholders, 48%.

"Both companies have built a deep and loyal customer base and have highly complementary product portfolios, positioning the combined entity to deliver meaningful value to our shareholders. We believe that partnered together, Wright and Tornier will become the fastest-growing company in the Extremities-Biologics industry," said Tornier CEO David Mowry, who will become COO of Wright Medical Group N.V.

The news comes on the same day as Wright's announcement that it received PMA approval from the FDA for its Augment Bone Graft as an alternative to autograft for ankle and/or hindfoot fusion indications.

Both companies make implants to fix or replace the wrist and ankle as well as biologics to encourage healing and tissue regeneration. Tornier's U.S. portfolio also includes implants for the shoulder and elbow, as well as surgical tools enabling sports medicine.

The new company is expected to have revenues growing in the mid-teens with adjusted EBITDA margins approaching 20% in three to four years. Cost synergies are expected to be in the range of $40 million to $45 million within the first three years after the transaction completes; synergies will be due to overlapping public company expenses, support function and system costs as well as process and vendor consolidation. Wright expects the transaction will be accretive to the new company's adjusted EBITDA in the second full year after the transaction completes.

Separately, Tornier reported Q3 revenues were up 14.9% year over year to $76.7 million. Meanwhile, Wright's quarterly net sales of $71.3 million were up 24%. The transaction is expected to close during the first half of 2015.

- read the release
- here's the Wall Street Journal article (sub. req.)

Related Articles:
Stryker to buy Small Bone Innovations for up to $375M
Wright revives prospects of bone graft with FDA resubmission
Wright ends an up-and-down year on a high note
Wright buying implant outfit for $80M with eye on Europe
Tornier snags OrthoHelix for $135M

Editor's Note: This article has been updated to indicate that the transaction involves tax inversion.
___________________________________________________________________

BUSINESS

Wright Medical, Tornier to Combine inAll-Stock Deal

New Company Will Be Based in Tornier’s Current Home of the Netherlands

By LAUREN POLLOCK  Wall Street Journal

Updated Oct. 27, 2014 6:20 p.m. ET

Medical-device companies Wright Medical Group Inc. and Tornier NV agreed to combine in an all-stock deal that would move Wright’s headquarters to the Netherlands.

The companies, which both make orthopaedic devices, said their combined equity value is about $3.3 billion. Wright shareholders will own about 52% of the combined company, while Tornier investors will have 48%.

This deal follows other acquisitions prompted in part by potential tax advantages, known as inversion deals. In recent weeks, the Obama administration has moved to stem that wave of corporate inversions by unveiling new tax rules.

On a conference call, the companies downplayed the tax implications of the deal, saying the near-term advantages are minimal.

The combined company will be called Wright Medical Group NV and will be led by Wright’s current CEO, Robert Palmisano, but it will be based in the Netherlands, with a U.S. home at Wright’s current Memphis base.

Tornier CEO David Mowry will be chief operating officer of the combined company. The board will be made up of five representatives from each company’s existing board.

Wright makes extremity and surgical tools, while Tornier makes tools for surgeons who treat musculoskeletal injuries and disorders of the shoulder, elbow, wrist, hand, ankle and foot.

Write to Lauren Pollock at lauren.pollock@wsj.com

_______________________________________________

New York Times

SHAREHOLDER ALERT: Law Firm of Levi & Korsinsky, LLP Launches Investigation Against the Board of Directors of Wright Medical Group, Inc. Regarding the Fairness of the Sale of the Company to Tornier NV

Published: October 29, 2014

NEW YORK--(BUSINESS WIRE)--Oct. 29, 2014-- Levi & Korsinsky is investigating the Board of Directors of Wright Medical Group, Inc. (“Wright Medical” or “the Company”) (NasdaqGS: WMGI) for possible breaches of fiduciary duty and other violations of state law in connection with the sale of the Company to Tornier NV.

Click here to learn more about the investigation: http://zlk.9nl.com/wright-medical-wmgi.

Under the terms of the transaction, Wright Medical shareholders will receive 1.0309 Tornier common shares for each share of Wright Medical stock they own, representing an approximate value of $24.79 per share, based on Tornier’s recent closing price. The investigation concerns whether the Board of Wright Medical breached their fiduciary duties to stockholders by failing to adequately shop the Company before agreeing to enter into this transaction, and whether Tornier NV is underpaying for Wright Medical shares. In particular, at least one analyst has set a price target for Wright stock at $40 per share.

If you own Wright Medical common stock and wish to obtain additional information, please contact Joseph E. Levi, Esq. either via email at jlevi@zlk.com or by telephone at (212) 363-7500, toll-free: (877) 363-5972, or visit http://zlk.9nl.com/wright-medical-wmgi.

Levi & Korsinsky is a national firm with offices in New York, New Jersey, Connecticut and Washington D.C. The firm’s attorneys have extensive expertise in prosecuting securities litigation involving financial fraud, representing investors throughout the nation in securities and shareholder lawsuits. For more information, please feel free to contact any of the attorneys listed below. Attorney advertising. Prior results do not guarantee similar outcomes.

Source: Levi & Korsinsky

Levi & Korsinsky, LLP
Joseph Levi, Esq., 212-363-7500
or
Eduard Korsinsky, Esq., 212-363-7500
30 Broad Street - 24th Floor
New York, NY 10004
Toll Free: (877) 363-5972
Fax: (866) 367-6510
www.zlk.com

Warranty on hips, knees: Consumers Union petition needs your signature!

Guarantee that knee, fix that hip!

The most important (and expensive) product you may ever buy doesn't come with a warranty. It's time we change that.

Medical device manufacturers are making billions by selling knee and hip implants to Americans who want to feel better and play longer. But when these devices fail, patients – as well as taxpayers – are faced with costly bills to replace them.

Manufacturers claim implants are safe and of high quality. If that's true, why aren't all the major companies (only Biomet warranties one of its knee products) backing up these implants when they fail? 

Consumers Union has sent the top six hip and knee makers details of what should be in a strong 20-year warranty, and asked them to comply. Sendyour own message now, and let's make sure manufacturers – notpatients – are on the hook when products fail!

Artificial hips and knees need a lemon law, says Consumer Reports

By Joel Keehn   FiDA highlight

Published September 10, 2013

Consumer Reports  On Twitter:  @ConsumersUnion and @CUsafepatient

Imagine if you had to take a new car back to the dealer to get a defective part fixed and you, not the manufacturer, had to pay for the work. Well, that’s the situation with artificial knees and hips.

Nearly 20 percent of the hip replacements done each year and 10 percent of the knee replacements are revisions, often done because the original device was defective. Those follow-up surgeries tend to require longer hospital stays than the initial procedures, pose additional risks, and have a higher price tag, too. Yet their costs are passed onto consumers or their insurance companies, including Medicare.

That’s one of the reasons Consumers Union, the policy arm of Consumer Reports, says manufacturers of hip and knee implants should give patients warranties, guaranteeing to replace defective devices at no cost. That, they say, is not only fairer to patients, but might encourage companies to make their devices safer and more durable.

“While patients may be told by their surgeon how long a device can be expected to last, they rarely get a guarantee in writing since most hip and knee implants do not come with a warranty,” said Lisa McGiffert, director of Consumers Union’s Safe Patient Project.

The SafePatientProject recently gathered information from the Food and Drug Administration on hip and knee implant recalls over the past 10 years, and found that all major manufacturers had recalled a product or line of products. And some of those recalls involved products that posed real risks.

See our surgery Ratings for hip and knee replacement as well as our advice on smarter hip and knee repair. Our hospital Ratings offer detailed information on more than 4,000 hospitals nationwide. 

For example, since 2003 about 750,000 Americans received metal-on-metal hips, which were supposed to last longer than devices made with ceramic and plastic. Not only were such hips more likely to fail, but also some patients experienced debilitating symptoms from metal debris that flakes off the device over time, including heart damage and neurological problems.

Knee implants have not failed as often or as dangerously, but the Safe Patient analysis found that hundreds of knee-implant components have been recalled since 2003, often because they were shipped with the wrong part, a wrong size part, a missing part, or a part built for the left side etched as a right, or vice versa.

As our earlier report on dangerous medical devices found, most hip and knee implants are allowed on the market without being reviewed for safety and effectiveness by the FDA. Instead, under current law, the companies simply have to demonstrate that the devices are “substantially equivalent” to a product already being sold. Since most new hip and knee implants are similar to ones already on the market, manufacturers can gain approval through the FDA’s fast track 510(k) clearance process without having to prove the device is safe and effective.

“Medical device companies claim that current law provides adequate protection for patients and that their implants are dependable and safe,” said McGiffert. “If that’s the case, they should have no objection to offering warranties to back up those claims. Patients and taxpayers shouldn’t be on the hook for the cost of replacing devices when they fail.”

The Safe Patient has urged the makers of hip and knee implants, including Biomet, Inc., DePuy Synthes, Smith & Nephew, Stryker Corporation, Wright Medical Technology, Inc., and Zimmer Holdings Inc., to provide a 20-year warranty that:

covers the full cost of the revision surgery, including the device itself, the surgeon and hospital costs, and patient out-of-pocket costs;

establishes a clear system for patients to use, including a toll-free phone line and a registration number to track the claims process, with physicians charging the device company, not the patient; and

does not eliminate the patient’s right to sue if he or she uses a warranty.

 Read more: http://www.folemon-law-says-consumer-reports/#ixzz2eWAG8ba3

In addition, you can contact 
Patrick.Conway@cms.hhs.gov (Chief Medical Officer) 
shari.ling@cms.hhs.gov (Deputy Chief Medical Director) 
Lead purchasing decision-makers in the U.S. who need to know from each of you that implanted medical devices are poorly vetted globally, they harm people permanently, the harm is preventable and patients are not given informed consent.

Is there proven value in high cost hip/knee implants?

Breaking the chain

Hospitals set supply cost-cutting targets, push physicians to change behavior

By Jaimy Lee  Modern Healthcare     FiDA highlight added

Posted: August 17, 2013 - 12:01 am ET

Tags: Hospitals, Purchasing, Special Feature, Specialty Hospitals, Supply Chain, Systems, Top Stories

Patients with a new cardiac pacemaker have an advantage over patients who have received standard pacemakers: they can undergo MRI scans as a part of their care without the risk of adverse events.

But the new device costs hospitals $1,300 to $3,000 more than a traditional pacemaker and could cut into a hospital's margin because Medicare and other insurers pay the same rate for implanting MRI-compatible pacemakers as they pay for the standard pacemakers. From a clinical perspective, physicians are put in the position of having to predict which patients are likely to need an MRI and should receive the new pacemaker.

It's one of many supply-chain decisions hospital administrators have to make where they must weigh the benefits of a new technology—such as the fact that the new pacemaker doesn't improve immediate outcomes for the patient but may have additional benefits in the long term—against its higher costs.

These executives face similarly difficult decisions to slash millions of dollars in supply expenses each year. In the case of the MRI-compatible pacemaker, one executive says his system likely will pay more for the new pacemaker when appropriate and seek offsetting cost reductions elsewhere in the supply chain.

“It's one of those things where to make the quality of life better for our patients, we're going to incur new costs,” says William Mosser, vice president of materials management at Franciscan Missionaries of Our Lady Health System in Baton Rouge, La.

Facing declining revenue and reimbursement, hospital systems across the U.S. are making it a priority to sharply reduce spending on supplies including gloves, syringes and hip implants. Supplies typically make up hospitals' second-largest expense, after labor costs. Hospitals spent about $255 billion on supplies and nonlabor services in 2011.

Budget pressure has led to increased scrutiny of the costs, clinical outcomes and utilization of products. Many hospitals are setting cost-reduction targets, evaluating the effectiveness of their group purchasing organizations, and pushing for better data and analytics on products to persuade physicians to accept changes to the types of devices or supplies being purchased.

More than 60% of the hospital supply-chain executives who participated in Modern Healthcare's 2013 Survey of Executive Opinions on Purchasing said they were very satisfied or satisfied with their primary GPO. About 40% were somewhat satisfied or not satisfied. Meanwhile, 59% of respondents said their primary GPO was very effective or effective in controlling costs; the remaining 41% said their main GPO was somewhat effective or not effective.

Cost reduction, clinical integration

“Everyone that we deal with at the hospital level today is focused on cost reduction and clinical integration and managing patients to outcomes with a bent toward resource reduction,” says John Bardis, chairman, president and CEO of MedAssets, one of the nation's largest GPOs.

But many hospital executives say there are cultural and operational challenges that can slow these kinds of cost-cutting initiatives.

One major factor is that physicians often have relationships with particular medical device manufacturers or have used certain devices for a long time and are resistant to changing to other devices. Another is that the higher costs of new technologies touted as improving quality of care can set back savings efforts. And in many cases, there is a lack of validated clinical data that can definitively prove whether a particular product yields better results for patients.

“The biggest hurdle we have is there is not a consistent and large enough base of validated evidence,” Mosser says.

Like many other hospitals, Franciscan is undertaking an initiative to cut millions of dollars in annual supply expenses as it faces the prospect of significantly lower reimbursement rates in the coming years. The program, which it calls Healthy 2016, aims to cut $165 million in operating expenses, including $31 million in medical and surgical supplies and purchased services, over the next three years.

Related Content

Download the 2013 Modern Healthcare Survey of Executive Opinions on Purchasing charts.

Other hospital systems have implemented cost-cutting initiatives similar to the one at Franciscan. Over five years, Lahey Health, based in Burlington, Mass., plans to cut

$40 million out of the $300 million it spends each year on medical and surgical supplies. BJC HealthCare, a 12-hospital system based in St. Louis, plans to reduce its $850 million in annual supply spending by $54 million this year, and it's seeking to cut out an additional $150 million over the next three years.

“This is a primary focus across the system, from the CEO down,” says Nancy LeMaster, BJC's vice president of supply chain. “In the last three years, as the reimbursement pressures have been getting tighter and tighter, people have really started to see how this could impact us. We call (supply chain) a sustainable advantage rather than just a back-office function.”

Hospitals are undertaking a number of strategies, including standardizing the types of products clinicians use, optimizing appropriate utilization by physicians, nurses and other staff, and continuing to negotiate lower prices for supplies. Many but not all hospitals have value-analysis teams in place.

Focus on physician preference

A big area of focus is usually physician preference items, such as hip or knee implants as well as stents and other cardiac rhythm management devices. These are some of the costliest purchases hospitals make.

BJC is focused this year on reducing costs associated with spine implants. “This is an area of focus where the pricing does not appear correlated to the cost to manufacture and sell the product, but rather has historically been based on what the market would bear,” LeMaster says in an e-mail. “The market can no longer bear this level of pricing.”

The system's strategy focuses on first achieving market-competitive pricing with the spine vendors, and then taking on utilization management and possibly standardization.

Franciscan is supporting a clinical variation project led by chief medical officers at its five hospitals in Louisiana that seeks to better align the clinical protocols of spine surgeons. That could reduce the number of vendors of spine surgery products the system works with, from about 20 now.

“Spine surgeons across our health system do things differently,” Mosser says. “Some might overutilize. Some might underutilize. Some might use generic products, and others are using different types of techniques. Our chief medical officers are working down a path of aligning both the protocols and the practices from a clinical perspective that will allow us to minimize (the) number of those vendors.”

GPOs say their core business is still supply contracts, but the other services and technologies they offer to hospitals to help address a number of financial pressures are increasingly becoming of interest to their members.

“You've got to look at best demonstrated practices,” says Ed Jones, president and CEO of HealthTrust, a Brentwood, Tenn.-based GPO that is part of HCA's Parallon Business Solutions. “You've got to look at reducing clinical variability. You've got to look at streamlining your sourcing decisions.”

Nearly half of the hospital supply-chain executives who participated in Modern Healthcare's purchasing survey said they planned to increase their use of GPO contracts in 2013. Only 7.6% said they planned to decrease their use of GPO contracts.

“If a big system feels like their GPO can give them access to scale and aligns that scale to drive better value than they can do on their own, they will tend to work more with the GPO,” Jones says. “If the larger systems are in a position where their GPO is not as effective in that regard, they're probably going to do it on their own.”

Smaller health systems and hospitals are generally more inclined to work with GPOs and increase their spending with them to gain the scale and volume that they provide, Jones says. In other instances, contracts with higher commitment levels also are generating more interest because they often deliver better pricing, he adds.

Lahey Health says it plans to review its current GPO relationships with Novation, a GPO based in Irving, Texas, and MedAssets and then sign a contract in October with a single GPO that will handle at least $180 million of spending.

“It's a partner to help us meet our margin targets as we worry about declining reimbursements,” says Eric Berger, Lahey's vice president of supply chain. “We really need to look at expenses, so having a GPO partner will help us do that.”

Looking at the data

As hospitals dive deeper into the supply chain searching for ways to reduce spending, new areas of focus are emerging. Not only are some hospital systems bringing distribution in-house, but they are also hiring new talent, investing further in data and analytics tools, and some are even forming their own GPOs.

While many hospitals report that they have met cost-reduction targets ahead of schedule, the cost of high-priced implants remains a big barrier. Hospital and GPO executives bemoan that the implantables market has not become more like the markets for other commodities.

“These innovations in total knee and total hip have been around a long time but they've had a strong hold on high prices compared to the rest of the world, in large part because of physician relationships,” MedAssets' Bardis says.

On the other hand, teaching hospitals and physician-owned hospitals are more likely to continue to allow preference among physicians. “We will tend to give them what they want, regardless of what the cost is, in order for them to want to practice there,” says Bruce Kizzier, director of materials management at seven-bed Lincoln (Neb.) Surgical Hospital, a physician-owned hospital.

He believes his hospital has gotten the best prices, noting that the hospital's physicians have participated in meetings with vendors to ensure that the hospital was receiving competitive pricing.

“More organizations are having these conversations with surgeons,” says Dr. Peggy Naas, an orthopedic surgeon and vice president of physician strategies for VHA, the parent organization of Novation. “More surgeons, seeing the pressure to add value, are asking questions.”

Other supply-chain executives say that while hospitals have done a poor job in the past in educating their physicians about the costs of preference items and keeping supply costs under control, that's changing and doctors increasingly are facing up to the problem.

“They've seen the impact of the sequestration, the federal law changes and reimbursement drops have been very dramatic across the country for every system,” BJC's LeMaster says. “They're really seeing that if we don't get it out of supplies, then we've got to look at labor.”

Read more: Hospitals push docs to change behavior to meet cost-cutting targets | Modern Healthcare http://www.modernhealthcare.com/article/20130817/MAGAZINE/308179905#ixzz2cWhLwahv

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Proposed: National Drug and Device Safety Board

Profile of an FDA critic: Q&Awith patient safety advocate:  Dr. Robert Hauser

March 11, 2013 by Arezu Sarvestani  FiDA hightlight

Veteran cardiologist and patient safety advocate Dr. Robert Hauser tells MassDevice.com about his new vision for healthcare surveillance, his long struggle to spur change at the FDA and what FDA regulators can learn from aviation regulation.

Veteran cardiologist Dr. Robert Hauser is eager for change, even if he has to go straight to Capitol Hill himself to make it happen.

The patient safety advocate and vocal critic of the FDA announced at this year's American College of Cardiology conference that he's working on a proposal to fundamentally change the way federal regulators monitor medical devices and drugs once they hit the market.

He's looking to "recruit a couple people and go to Congress" with a proposal that would separate the FDA's approval functions from its surveillance functions, he told MassDevice.com here in San Francisco yesterday.

In an in-depth interview, Hauser, a prominent cardiologist from the Minneapolis Heart Institute, told us about his drive to protect patients from faulty devices, his disappointment with the FDA and what healthcare regulators can learn from their counterparts in aviation.

Inspiration and disappointment

Hauser's passion for healthcare safety was inspired in part by an experience he had in the mid-1970s, when a patient died when the pacemaker that he was dependent on short-circuited, he told us.

"A 40-year-old guy dropped dead on the doorstep of his home. His wife found him," Hauser said sadly. "We then found out that it was due to moisture getting into the electronics through a defect in the circuit that the manufacturer knew about."

At the time the FDA was considering what would become the Medical Device Amendments of 1976, which put into place the 3-tiered class system by which FDA assesses the potential risk and regulatory pathway for medical devices. Hauser "totally supported the amendment" at the time, he said, in part because of his experiences with faulty pacemakers. But in the intervening 40 years he's grown pessimistic about the FDA's ability to satisfy its duty to protect U.S. patients from potentially dangerous products.

He's made it something of a life goal to promote changes at the FDA, but is growing increasingly discouraged, he told us.

"I've done everything I can to encourage the FDA to change. Nothing changes."

Hauser has been instrumental in several discussions surrounding medical device risks and recalls, most recently in the January issue of the Journal of the American College of Cardiology, in which he warned physicians clamoring over Boston Scientific's (NYSE:BSX) "leadless" implantable defibrillator to curb their enthusiasm.

He was also at the center of an April 2012 scandal over St. Jude Medical's (NYSE:STJ) recalled Riata defibrillator leads, in which the medical device maker called for the retraction of a Hauser study attributing 22 deaths to failures in the Riata or Riata ST leads.

Hauser was also 1 of the physicians who helped uncover problems with Guidant Corp.'s pacemakers after a patient he was treating died. Boston Scientific, which acquired Guidant for about $26 billion in 2006, is still dealing with the legal fallout from those issues.

"I've done everything I can to encourage the FDA to change," Hauser told us. "Nothing changes."

His remaining alternative, as he sees it, is to change the fundamental structure of medical device and drug surveillance in the U.S.

Even as he prepares to advocate for a new regulatory agency to take some responsibility away from the FDA, Hauser is acutely aware of the hurdles that stand in his way, perhaps foremost among them "inertia" at the FDA.

"There's 1 chance in 100, but it's worth taking the chance," he said. "It's worth the effort, because maybe in the conversation something will happen that'll change things."

And the FDA under the Obama administration has not welcomed recommendations for change. When the Institute of Medicine recommended in 2011 that the federal watchdog agency completely scrub its 510(k) fast-track review of medical devices, the FDA quickly responded that it was "not bound to adopt IOM recommendations."

The agency has since signed, and the White House approved, new deals with the medical device industry that raise the fees companies pay for agency review in exchange for the FDA meeting performance goals and getting applications out the door more efficiently.

What's the hurry?

Medical device companies and lawmakers often chide the FDA for taking too long to get new, potentially life-saving products to the U.S. market. The agency frequently finds itself defending its timelines or promising to improve them.

The federal watchdog agency is regularly cited as the biggest hurdle delaying new products from reaching the market and industry advocates in Congress occasionally prod the FDA to speed the review process

"I don't think we really help people by making drugs or products available more rapidly."

Hauser fundamentally disagrees with those efforts, he told us, challenging the underlying assumption that faster is better.

"I don't think we really help people by making drugs or products available more rapidly," Hauser said. "There are occasional drugs and devices that really are game-changers, that deserve expedited study and review and approval. Many, many drugs and devices are incremental improvements – or they are in competition with other drugs or devices that are safe and effective.

"Thank God we've got pharma, thank God we've got the medical device companies. There have been revolutionary products, there will continue to be revolutionary products," he added. "But there's rarely great urgency to get something into the marketplace."

The healthcare industry thrives, Hauser said, by pushing out new products and marketing incremental differences, no matter how small, in order to get a leg up on the competition.

Part of that is sustained by what he called "loopholes" in the FDA's approval process, problems that Hauser said go beyond the scope of an independent monitoring authority.

The FDA's unintended loopholes

"There are other issues that need to be addressed, separate from a National Drug & Device Safety Board," Hauser told us. "We need to get rid of these loopholes that allow drugs or allow devices to get approved without adequate testing."

He named the FDA's premarket approval supplement system among the vulnerabilities in the agency's review that allow potentially dangerous products to reach patients.

"Supplements to the original PMA allow manufacturers to make changes to medical devices that presumably improve design, manufacturing or labeling," Hauser told an audience during a presentation at the ACC meeting on Saturday. "However, the PMA supplement has been employed – I should say abused – to introduce essentially new products that are significantly different than the original PMA devices.

"This is another pathway whereby high-risk Class III devices have been FDA-approved for widespread use without clinical trials or any human testing," he added.

A classic example of how that process may fail, Hauser said, involved medical device giant Medtronic (NYSE:MDT) and its Sprint Fidelis ICD lead. The Sprint Fidelis, which was approved as a supplement to the Transvene lead, was the cause of a high-profile, precedent-setting recall after it had already been implanted in some 268,000 patients.Medtronic pulled the Sprint Fidelis in 2007, when it was announced that they were prone to fracture – meaning they could either fail to deliver life-saving therapy or else send unneeded shocks.

The defective leads were implicated in more than 100 deaths, although Medtronic has said that only 13 fatalities listed the leads as a "possible or likely contributing factor."

Hauser further targeted the FDA's popular 510(k) medical device fast-track as an antiquated system that has outlived its usefulness. He agreed with a 2011 report released by the Institute of Medicine, the culmination of nearly 2 years and $1.3 million dollars, which recommended that the FDA scrub the 510(k) program completely.

The institute took issue with the foundation of the 510(k) program, that devices which are "substantially equivalent" to already-approved products (so-called "predicate devices") need not be subject to the more stringent pre-market approval process required for entirely new medical technologies.

The IOM report also found that 3 out of 4 devices recalled between 2005 and 2009 had been approved under 510(k) applications or had escaped review entirely.

The FDA's failure to respond to recalls

The FDA has the authority to mandate recalls and investigate medical devices and drugs after they have been cleared for the U.S. market, but it rarely does so, Hauser explained.

"It's a passive regulator," he told us. "It tends to wait for manufacturers to voluntarily recall devices rather than pro-actively compelling manufacturers to take their products of the market or even, perhaps, to stop distributing while the potential problem is investigated."

"How objective can a group be, inside the agency, when it's discussing, potentially, the performance of another group inside the agency?"

Part of the problem is that the FDA is responsible for both approving devices and as well as monitoring them for problems, creating a fundamental conflict of interest within the agency, as Hauser sees it.

"Right away, you have a conflict because the group that approved the drug is going to question the group that is now criticizing the drug," he said. "They're all in 1 agency, and I doubt that the lines of authority, responsibility, accountability are clear. How objective can a group be, inside the agency, when it's discussing, potentially, the performance of another group inside the agency?"

Hauser's solution is to separate those responsibilities and task a new healthcare regulatory organization with monitoring and investigating healthcare products after the FDA has cleared them for the U.S. market. Lucky for Hauser, a model exists that exemplifies the segregation of approval and monitoring: the U.S. government's regulatory oversight of the airline industry.

Learning from the FAA and the NTSB

The FAA and the National Transportation Safety Board are 2 sides of the same coin, regulating the aviation industry and monitoring it for issues, but the agencies are entirely separate. The NTSB has independent authority to investigate potential issues and reports only to Congress.

The pair of agencies were originally lumped into a single authoritative body that Congress later separated on the grounds that "no federal agency can properly perform investigatory functions unless it is totally separate and independent," Hauser highlighted in his Saturday ACC presentation.

The NTSB has no regulatory authority and can't induce airline companies to make changes or ground flights. It conducts investigations and makes recommendations, leaving it up to the FAA to take action.

That's precisely what Hauser prescribed for U.S. healthcare regulation.

"We need an independent organization to look at major adverse events associated with drugs and devices, separate from the FDA and which has no regulatory authority, whose only job is to investigate and then report their findings," Hauser said. "The other thing NTSB does that we need on the medical side is they then share what they've learned about an accident with all the stakeholders. That doesn't happen now with drugs and devices."

He proposed that the NTSB participate in post-market studies, watch registries from around the world and make the data completely transparent and available to the public at large.

Hauser's National Drug & Device Safety Board

Hauser aims to form the new healthcare regulatory agency by spinning out the FDA's post-market surveillance efforts into an independent body modeled after the NTSB in purpose and structure.

"There would be a chairman appointed by the president and 4 board members, all of whom would have 3-5 year terms," he told us. "The chairman would report to Congress, the board would report to Congress. They'd be an organization separate from any agency in the federal government, entirely independent."

The new bureau would include engineers, scientists, statisticians and administrators to help monitor healthcare products on the market and collaborate with registries around the world to create a global network and public database of medical device and drug information.

The database might confer an added benefit for medical device companies and drug makers, giving them access to a comprehensive database of adverse events to help them avoid similar problems in newer products, Hauser noted, but the boon to industry is incidental to Hauser's goal.

"It's the end user that we're really concerned about," he said. "I'm not interested in helping the companies, necessarily. I'm interested in making a safer device or drug for a patient."

Cardiologist's stand for betterdevice safety spans 40 years

by JAMES WALSH , Star Tribune Updated: April 28, 2012 FiDA highlight

St. Jude Medical Inc. isn't the only medical device manufacturer to chafe at Dr. Robert Hauser's scrutiny -- just the latest.

In 2005, the Minneapolis Heart Institute cardiologist blew the whistle on a defective defibrillator made by Guidant after it failed to revive a young patient. In 2007, Medtronic Inc. pulled its Sprint Fidelis lead off the market after a study by Hauser found that some of the wires, used to connect a defibrillator to the heart, failed. Aggrieved patients eventually won a $114 million settlement from the Fridley-based company.

Now, St. Jude and its recalled Riata defibrillator leads are facing questions after Hauser last month published an article in Heart Rhythm Journal tying the lead to at least 20 patient deaths. St. Jude has assailed Hauser's research as biased and flawed and asked for a retraction. Hauser and the editor of the online publication refused, saying they stand by the findings and that the work was peer-reviewed. The week after St. Jude made its request and disputed Hauser's findings, the Little Canada-based company's stock price fell 10 percent.

Hauser has made a career out of monitoring and sometimes challenging the medical device industry over the safety of its products. It's a role that has repeatedly brought him into conflict with the industry, several of whose biggest players are in Minnesota.

Ask Hauser to describe his role, and his answer is basic: "I am an advocate for patients."

Even his targets say they respect his work, even if they don't always agree with his findings.

Those who have worked with Hauser during his four decades of prodding device-makers and the U.S. Food and Drug Administration toward greater safety and accountability use other terms to describe him -- ethical, passionate, persistent.

"It's not anything against any company. He is out to find the truth to serve patients best," said Dr. William Katsiyiannis, director of clinical electrophysiology and vice chairman of cardiology at Abbott Northwestern Hospital's Minneapolis Heart Institute. "I think it takes quite a man to stand up for that and to keep your head down and do the right thing."

Years fighting

Hauser's passion for medical device safety began, he said, when he was a cardiology fellow in Chicago more than 40 years ago. He participated in a research project involving nuclear battery pacemakers with the help of funding from the National Institutes of Health.

"We were told, 'Go ahead and test them and write a favorable report,'" Hauser said. "All of them failed."

Hauser later started a program at Rush University Medical Center in Chicago to follow pacemaker recipients and a registry to keep track of how they're doing. In 1987, Hauser left Rush to join Cardiac Pacemakers Inc. and served as its president and CEO from 1988 to 1992 -- before it was acquired by Guidant. Guidant would later be purchased by Boston Scientific.

In 1992, Hauser joined the staff at the Minneapolis Heart Institute and used seed money to start an Internet-based device registry. He has continued his advocacy for patient safety and device accountability, conducting his own research and challenging a device establishment that he says sometimes puts profits ahead of prudence.

"It's not good business to put bad devices out there," he said.

Linda Callinan has worked with Hauser for 25 years, since starting a pacemaker follow-up program at the Minneapolis Heart Institute.

"He's got drive that is unbelievable," she said of the research that he often does on his own time.

Hauser, 72, doesn't wait for the FDA or device-makers to spot issues. Callinan said their program actively follows about 6,000 patients with pacemakers and defibrillators from a variety of manufacturers, alert for signs of problems.

Hauser acknowledges that devices aren't perfect -- and likely never will be. Still, he said, in a marketplace where manufacturers feel pressure to quickly develop devices to grab market share, the FDA has an obligation to remain vigilant. The agency should require more premarket testing of lifesaving devices and enact more stringent post-market surveillance of implanted devices, he said.

"You have to go out and look for problems," Hauser said. "If you wait for problems to come to you, it's too late."

Of course, he was saying the same thing back in 2005.

Going public

In March 2005, Joshua Oukrop, a 21-year-old college student from Grand Rapids, Minn., was on a spring break bicycling trip in Utah. He took a break from a ride, saying he was tired. He then collapsed to the ground and died.

Oukrop, who had a genetic heart disease, had a Guidant defibrillator. But the device short-circuited and failed to keep the young man alive.

Oukrop's doctors, Hauser and Barry Maron, later learned that Guidant had known that some devices short-circuited years before Oukrop collapsed. Guidant had changed its manufacturing processes to fix the problem.

But, after the company failed to disclose the problem to doctors and patients who still had the device, Hauser and Maron took their concerns to the media. Guidant eventually recalled the device.

Boston Scientific Corp., which acquired Guidant in 2006, paid $240 million in 2007 to settle lawsuits brought by patients. In 2011, the company pleaded guilty to federal charges, including making false statements to the FDA about the devices' safety, and paid a $296 million fine.

Oukrop's father credits Hauser and Maron for fighting for greater device oversight.

"If it hadn't have been for those two, it would have just blown over and nothing would have happened," Lee Oukrop said. "He has the courage of his convictions."

Sally Hauser knows all about her husband's persistence. More than 50 years ago, he saw her climb a hill at the University of Cincinnati and wanted to get to know her better. A year later, they eloped.

She also knows what kind of doctor he is.

"It's all about integrity," she said.

Fighting to get information into patients' hands about the devices in their bodies has been his passion -- even at the expense of friendships over the years. Not all doctors, many of whom are paid consultants to device-makers, have been willing to take the stands her husband has, she said.

"You lose friends. People are really funny," Sally Hauser said one day last week. "You know what the bottom line is? It's money."

Dr. Paul Friedman, a heart rhythm specialist at the Mayo Clinic in Rochester, has collaborated with Hauser on several studies.

"He has a passion for improving patient care and providing information to guide caregivers," Friedman said. "I think he has demonstrated that when you are committed to a goal, if you are persistent and consistent, I think with time you can lead to important changes."

Work continues

Hauser's most recent work has led to a public tussle with St. Jude Medical.

In December 2010, St. Jude discontinued selling its Riata lead after studies showed that the wires could work free from their outer insulation. Last December, St. Jude told doctors that the problem was more prevalent than previously thought. The FDA recalled the device.

In an article posted March 26, Hauser said he found least 20 deaths caused by high-voltage failures in the Riata leads.

St. Jude quickly went on the offensive, calling Hauser's report biased and inaccurate. It asked Heart Rhythm Journal Editor Douglas Zipes to retract the article. Zipes refused.

In recent weeks, St. Jude's rhetoric has softened a bit. St. Jude CEO Dan Starks said in a recent earnings conference call that "very sincerely, we have a lot of respect for Dr. Hauser's contributions over the years to raising awareness about medical device safety issues."

Starks said in a recent e-mail that he had not spoken to Hauser about his study, but "that my sense is that we have agreed to disagree."

He added that "St. Jude Medical shares Dr. Hauser's focus on patient safety and on getting as much accurate information as possible to physicians to help them make the best decisions for their patients."

Sally Hauser admitted that she and her husband are relying on that commitment to safety. Robert Hauser had a St. Jude heart valve implanted last May.

"He said to me: "Well, I guess I really have to trust them that it's a good valve,'" she said, smiling.

James Walsh • 612-673-7428