Medical device warranty: an antidote to industry entitlements? Congress is selling out!

The 21st Century Cures Act — Will It Take Us Back in Time?

Jerry Avorn, M.D., and Aaron S. Kesselheim, M.D., J.D., M.P.H.

June 3, 2015   (FiDA highlight)

In May 2015, the 21st Century Cures Act was introduced in the U.S. House of Representatives, with the goal of promoting the development and speeding the approval of new drugs and devices.1 Championed by the pharmaceutical, biotechnology, and device industries, the bill was approved unanimously (51 to 0) in committee and continues to be debated. If enacted into law, some of its provisions could have a profound effect on what is known about the safety and efficacy of medical products, as well as which ones become available for use.

Some aspects of the bill could indeed enhance the development of and access to new drugs. The legislation calls for annual increases in the stagnating budget for the National Institutes of Health (NIH) amounting to about 3% per year for 3 years when adjusted for inflation. It would also provide an additional $2 billion per year for 5 years to create an “NIH Innovation Fund.” Together, this support would help counteract the effects of sequestration and budget cuts that have reduced the purchasing power of the NIH to its lowest level in years. Given the crucial role that NIH-funded research plays in generating the findings on which so many new drugs are based,2 this boost would be a welcome development. Another useful provision could make deidentified data from NIH-funded clinical trials more available to researchers.

Other proposed changes could lead to less salutary outcomes for patients and the health care system. An underlying premise of the bill is the need to accelerate approval for new products, but this process is already quite efficient. A third of new drugs are currently approved on the basis of a single pivotal trial; the median size for all pivotal trials is just 760 patients. More than two thirds of new drugs are approved on the basis of studies lasting 6 months or less3 — a potential problem for medications designed to be taken for a lifetime. Once the Food and Drug Administration (FDA) starts its review, it approves new medications about as quickly as any regulatory agency in the world, evaluating nearly all new drug applications within 6 to 10 months, an impressive turnaround for such complex assessments.

Nonetheless, as introduced, the 21st Century Cures Act instructs the FDA to consider nontraditional study designs and methods of data analysis to further speed approvals. Adaptive trial designs and the use of Bayesian methods hold promise in some kinds of evaluations, particularly in oncology. However, more problematic proposals include encouraging the use of “shorter or smaller clinical trials” for devices and the request that the FDA develop criteria for relying on “evidence from clinical experience,” including “observational studies, registries, and therapeutic use” instead of randomized, controlled trials for approving new uses for existing drugs. Although such data can provide important information about drug utilization and safety once a medication is in use, there is considerable evidence that these approaches are not as rigorous or valid as randomized trials in assessing efficacy.

The bill would also encourage the FDA to rely more on biomarkers and other surrogate measures rather than actual clinical end points in assessing the efficacy of both drugs and devices. The FDA already uses surrogate end points in about half of new drug approvals.3 Some biomarkers are accurate predictors of disease risk and can be useful measures of the efficacy of a new drug (such as low-density lipoprotein cholesterol for statins). But though a drug's effect on a biomarker can make approval quicker and less costly, especially if the comparator is placebo, it may not always predict the drug's capacity to improve patient outcomes. Bevacizumab (Avastin) delayed tumor progression in advanced breast cancer but was shown not to benefit patients. Similarly, rosiglitazone (Avandia) lowered glycated hemoglobin levels in patients with diabetes even as it increased their risk of myocardial infarction. In 2013, patients began to receive a new drug for tuberculosis approved on the basis of a randomized trial relying on a surrogate measure of bacterial counts in the sputum — even though patients given the drug in that trial had a death rate four times that in the comparison group, mostly from tuberculosis.4 These provisions in the legislation would not immediately change FDA approval standards, but they would give the agency greater discretion, backed by congressional support, to approve drugs on the basis of less rigorous data.

The proposed legislation would make immediate changes with respect to new antibiotics and antifungals by enabling their approval without conventional clinical trials, if needed to treat a “serious or life-threatening infection” in patients with an “unmet medical need.” In place of proof that the antimicrobial actually decreases morbidity or mortality, the FDA would be empowered to accept nontraditional efficacy measures drawn from small studies as well as “preclinical, pharmacologic, or pathophysiologic evidence; nonclinical susceptibility and pharmacokinetic data, data from phase 2 clinical trials; and such other confirmatory evidence as the secretary [of health and human services] determines appropriate to approve the drug.” Antimicrobials approved in this manner would carry disclaimers on their labeling, but there is no evidence that such a precaution would restrict prescribing to only the most appropriate patients. If passed in its current form, the bill would also provide hospitals with a financial bonus for administering costly new but unproven antibiotics, which could encourage their more widespread use. The bill gives the secretary of health and human services the authority to expand this nontraditional approval pathway to other drug categories as well, if “the public health would benefit from expansion.”

The 21st Century Cures Act goes still further in altering the requirements for approving medical devices — an area long criticized for lack of rigor as compared with drug evaluations,5 though regulatory oversight has improved in recent years. As proposed, the new law would redefine the evidence on which high-risk devices can be approved to include case studies, registries, and articles in the medical literature, rather than more rigorous clinical trials. Another section would allow device makers to pay a third-party organization to determine whether the manufacturer can be relied on to assess the safety and effectiveness of changes it makes to its devices, in place of submitting an application to the FDA. Thus certified by the external company, a device maker would be authorized to continue to assess its own products on an ongoing basis.

Informed consent by patients in drug trials has traditionally been sacrosanct, with exceptions made only when consent is impossible to obtain or contrary to a patient's best interests. But another clause in the proposed law adds a new kind of exception: studies in which “the proposed clinical testing poses no more than minimal risk” — a major departure from current human subject protections. It is not clear who gets to determine whether a given trial of a new drug poses “minimal risk.”

Embedded in the language of the 21st Century Cures Act are some good ideas that could streamline the development and evaluation of new drugs and devices; its call for increased NIH funding may prove to be its most useful component. But political forces have also introduced other provisions that could lead to the approval of drugs and devices that are less safe or effective than existing criteria would permit.

Over the past 80 years, this country's regulatory approach has embraced steadily improving criteria for accurately assessing therapeutic efficacy and risk. Patients and physicians would not benefit from legislation that instead of catapulting us into the future, could actually bring back some of the problems we thought we had left behind in the 20th century.

http://www.nejm.org/doi/full/10.1056/NEJMp1506964?query=TOC&

Totally Fraudulent and Phony: Medical Device Industry demands for Tax Repeal

Senate Health Committee chair says medtech tax repeal is a"phony" issue | MassDevice.com On Call

October 25, 2013 by Arezu Sarvestani     FiDA highlight

MASSDEVICE ON CALL — Medical device tax repeal efforts have made friends across party lines and in both houses of Congress, but Senate Health Committee chairman Tom Harkin isn't one of them.

In harsh comments made yesterday Harkin characterized the debate over the medical device tax as a fabricated controversy, saying that the industry can afford to pay its share to help fund healthcare reform, Minnesota Public Radio reported.

"That medical device tax issue is one of the phoniest issues I have seen in my years here," Harkin said. "It is absolutely, totally fraudulent and phony. That small amount of tax won't hurt them one bit, and they make a lot of money on medical devices."

Harkin promised to fight any efforts to repeal the tax, MPR wrote. The sentiment is one long shared by the White House.

The Obama administration has on several occasions said that medical device tax repeal is a non-starter, maintaining that the levy represents the medtech industry's fair burden in helping to fund healthcare reforms that will bring them more customers. The so-called "windfall" rhetoric has been a staple of the battle over the medical device tax, with proponents of the tax arguing that medtech companies will offset much of their costs through their new customers and the industry insisting that the newly insured aren't the kind that end up needing medical devices.

The White House said for the 1st time this month that it would consider repeal of the levy, as long as lawmakers could come to terms on some means of making up for the lost revenue. The issue of a so-called "pay-for" to make up for the lost revenue the medical device tax is projected to generate has been a sticking point for many Democrats.

Medical device cartel would shut down the U.S. government over 2.3% tax? Yup!

The Myth of the Medical-Device Tax

The New York Times

OP-ED CONTRIBUTOR

By TOPHER SPIRO  FiDA highlights

Published: October 16, 2013

                                   

 

WASHINGTON — IN the last few days of negotiations in Congress, repeal of the Affordable Care Act’s tax on medical devices emerged as a key Republican demand. The medical-device industry waged an intense lobbying campaign — even garnering the support of many Democrats who favored the law — arguing that the tax would stifle innovation and increase health care costs.

This argument is doubly disingenuous. Not only can the medical-device industry easily afford the tax without compromising innovation, but the industry’s enormous profits are a result of anticompetitive practices that themselves drive up medical-device costs unnecessarily. The tax is a distraction from reforms to the industry that are urgently needed to lower health care costs.

The medical-device industry faces virtually no price competition. Because of confidentiality agreements that manufacturers require hospitals to sign, the prices of the devices are cloaked in secrecy. This lack of transparency impedes hospitals from sharing price information and thus knowing whether they are getting a good deal.

Even worse, manufacturers often maintain personal relationships (sometimes involving financial payments like consulting fees) with physicians who choose the medical devices that their hospitals purchase, creating a conflict of interest. Physicians often don’t even know the costs of the devices, and individual physicians often choose devices on their own, which weakens a hospital’s ability to bargain for volume discounts.

Such anticompetitive practices help generate a wide variation in the prices of medical devices — and contribute to higher prices in general. For example, the Government Accountability Office found that prices for cardiac implantable medical devices in the United States vary by several thousand dollars. And even the lowest-priced devices in the United States are expensive compared with those in other developed countries. According to the consulting firm McKinsey & Company, the United States spends about 50 percent more than expected on the top five medical devices, compared with Europe and Japan. McKinsey calculates that this amounts to $26 billion in excessive spending each year. Medicare, private health insurers and patients end up paying these inflated prices.

Excessive prices fuel enormous profits — profits that dwarf both the medical-device tax and the industry’s investments in research and development. Consider the device division of Johnson & Johnson, which in 2012 had an operating profit of $7.2 billion. By the company’s own estimate, the device tax would amount to at most $300 million, and its investment in research and development amounts to only $1.7 billion.

There are several ways policy makers could lower device costs. The first step would be to end the anticompetitive practices that prevent hospitals from getting the best deals. Senator Charles E. Grassley, Republican of Iowa, has sponsored legislation that would foster transparency by posting online price information for implantable medical devices.

In addition, instead of simply paying hospitals based in part on what they have spent on devices, Medicare should force manufacturers to compete for business based on a product’s price and quality.

Medicare should also pay hospitals a single lump sum for all of the associated costs of a given procedure (like a hip replacement). This approach, known as “bundling” the costs, would create incentives for hospitals to lower device costs. Savings should be shared with the physicians, so that their incentives are aligned with the hospital’s.

Bundling has been used successfully in pilot programs. Under Medicare’s Acute Care Episode Program — which bundled payments for cardiac and orthopedic procedures — physicians worked together to choose high-quality, cost-effective devices. Baptist Health System in Texas, which participated in the program, used clinical evidence to choose devices and negotiated lower prices for both Medicare and non-Medicare patients.

States could adopt similar payment reforms for private insurance and their Medicaid programs. In Arkansas, the Medicaid program and private payers — including Walmart — have collaborated to adopt bundled payments for several procedures, including hip and knee replacements.

To complement these efforts, the new Patient-Centered Outcomes Research Institute, a nongovernmental body created by the Affordable Care Act, should pay for research that compares the effectiveness of devices so physicians can make informed choices. (Three years into its existence, the institute has initiated few, if any, studies of medical devices.) Medicare or the Food and Drug Administration should also require the use of registries that track when devices fail.

Currently, medical-device manufacturers allocate only a sliver of profits to research and development and often focus on “tweaks” to existing devices, without providing any evidence that they are of better quality. Competitive pressures from public and private payers would provide incentives for the industry to become more innovative, producing technologies that actually lowered costs and offered truly advanced breakthroughs.

Instead of using its clout to lobby against the device tax — which helped foment opposition to the Affordable Care Act — the medical-device industry needs to share the responsibility of lowering costs for patients, businesses and taxpayers.

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Topher Spiro is the vice president for health policy at the Center for American Progress.

Device Industry self-inflicted injury-stop whining!

http://www.stthomas.edu/mc/nihp/20120627/default.html

BI-PARTISAN SELF-INTEREST TRUMPS OBAMACARE FINANCING

The ACA, a.k.a. Obamacare, expands insurance coverage to life-saving health care and medical technology to 32 million of some 50 million uninsured Americans. Every segment of the health care industry has agreed that the benefits of expanding coverage far outweigh the costs of some financial concessions they have made to achieve it, which is usually in the form of financial reimbursement changes. The exception is the medical device industry, which has fought making any concessions, and its congressional proponents who are currently engaged in repealing the one concession forced on them, an effective 1.5% profits tax for 10 years on companies with annual sales over $5 million. Democrats in Minn. such as Senators Klobuchar and Franken, and Congressman Tim Walz, oppose repeal of the law they voted for but favor gutting it of the revenue required to make it work. The StarTribune, which regularly publishes the self-serving opinions of the industry about how the FDA is driving U.S. jobs and innovation overseas, and only rarely digs deeply into the genuine health and safety issues associated with a local industry that some time ago passed from real medical innovation to iterative invention, editorializes here clearly on this bit of congressional double-speak.

Commentary from Dave Durenberger
Wednesday, June 27, 2012________________________

http://www.startribune.com/opinion/editorials/158245155.html

Jerry Holt, Star Tribune

Editorial: If device tax is lost, special interests win

•                June 9, 2012 - 6:00 PM

The Minnesota-led congressional charge to repeal a new tax on the medical-device industry that will help defray the cost of health care reform is another example of the outsized influence of special interests in Washington.

Instead of acceding to yet another demand by the device industry -- which has already had the tax halved, and recently won favorable regulatory reforms -- Congress needs to tell firms the hard truth.

Hospitals, drug companies and insurers have agreed to shoulder some health reform costs. The device industry isn't being singled out, especially when the 2010 Affordable Care Act will likely benefit its bottom line by expanding coverage to up to 33 million uninsured Americans. The proposed 2.3 percent device industry excise tax, which will raise about $2.9 billion a year when it kicks in next year, should not be repealed.

Minnesota Republican Rep. Erik Paulsen is a champion of a U.S. House bill that would repeal the tax. Minnesota's Democratic Sens. Amy Klobuchar and Al Franken also support repeal.

KLOBUCHAR'S VIEW"I congratulate Representative Paulsen on this vote. While the administration's statement that the president will veto this bill means that changes will likely need to be made, I will continue to pursue all options to get this done. I have long worked to get this tax reduced or eliminated, including a $20 billion reduction from the original proposed tax in 2010."-U.S. Sen. Amy Klobuchar

Paulsen, whose district is home to many device firms, has proposed offsetting the lost device industry tax revenue by recovering some subsidies given to individuals to help buy health insurance.

That proposal would result in needy people ponying up to cover the cost of special treatment given to a wealthy industry. Last week, the White House sensibly threatened to veto Paulsen's legislation, which passed the House on Thursday in a 270-146 vote. It's not clear when the Senate will take up the issue.

While the device industry trade organization is predictably predicting massive job losses if the tax is not repealed, independent analysts have cast serious doubt on research the industry commissioned to support its catastrophic claims.

A 2012 Bloomberg Government analysis said industry claims of up to 43,000 jobs lost are simply "not credible." The research "exaggerates the degree to which spending on health is affected by price increases" and ignores "positive effect of new demand [for devices] created by the law,'' according to Bloomberg analyst Christopher Flavelle.

There's further reason to be skeptical about the push for repeal. A Standard and Poor's industry report noted that the 2013 start date gives the industry time to adjust to the new tax. Because the tax can be used as an income tax deduction, the net increase is just 1.5 percent, the report found.

The tax is also structured so that it doesn't give companies an incentive to send jobs offshore. "The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt,'' wrote Paul Van de Water, an analyst with the Center on Budget and Policy Priorities.

The device industry faces many challenges -- many of them self-inflicted. High-profile recalls of flawed devices have given the industry a black eye. The Standard and Poor's report notes that the industry has produced "little in the way of new products that would be considered revolutionary.'' The tax will add to firms' challenges, but it certainly can't be blamed for all the industry's woes.

There's legitimate concern about the tax's effect on small- to medium-sized firms, which are developing products that aren't yet profitable. While some of the costs can be passed along to the device's end users -- patients, in other words -- these firms may be unduly burdened by the new tax, which is on revenue, not earnings.

Policymakers and the industry should have pushed for an exemption for these smaller firms instead of a total repeal -- this revamped option deserves consideration. It would minimize the loss of tax revenue, yet protect a vulnerable industry sector important in Minnesota and elsewhere. A trade group estimates that the 10 largest device firms will account for 86 percent of the new tax's revenue.

Unlike the new Medicare drug coverage passed under President George W. Bush, the Affordable Care Act at least attempted to provide new benefits without adding to the nation's debt. The amount of money generated by the device tax is a relatively small contribution to health reform's overall cost.

Still, it's helping to defray the cost. Given the nation's mounting long-term debt concerns, politicians need to find more ways to pay for promised benefits, not vote away one substantive way of doing so.

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