BB&T Staff Writer and Staff Reports

Healthcare reform and the globalization of the healthcare industry are the two topics that are constantly on healthcare executives' minds, according to a research study conducted by Harris Interactive (Rochester, New York) for United Parcel Service (UPS; Atlanta). UPS, which transports a great deal of medical devices and applications from vendors to companies released the results of its third annual “Pain in the (Supply) Chain survey of senior-level healthcare executives. The survey was designed to help identify the greatest pain points and future trends in the supply chains of med-tech companies.

“This is the third annual survey of its kind,“ John Menna, director of marketing, healthcare logistics at UPS, told BB&T. “With UPS being in the middle of the supply chain, we've had a lot of conversations with manufacturers and we thought it would be important to have a benchmark on how things are changing and how manufacturers are reacting to the changes.“

Part of those changes come from a strained economy and device makers contemplating how to penetrate an expanding global market with limited capital. “Right now 95% of the patient population is outside of the U.S.,“ Menna said. “Yet most of the companies serve patients in the U.S. Understanding that the future growth isn't going to be in the U.S., they're trying to get their products to those markets.“

According to the study, 22% more respondents reported concerns around this in 2010 vs. 2009 findings. Only 32% of this year's respondents claim success with accessing global markets. Country regulations are the largest barrier to global expansion, cited by 54% of respondents. While most companies are already participating in some activity abroad (selling, manufacturing, sourcing and/or clinical trials), 21% of healthcare companies surveyed don't participate in any of these activities outside the U.S.

The report goes on to list key challenges and issues these companies face in expanding to overseas markets, with two in five (40%) respondents in the report being “very“ or “extremely“ concerned about accessing global sectors. “UPS can help because we have operations in 200 countries around the world and we're expanding our healthcare distribution centers in Europe,“ Menna said. “We have a lot of expertise on moving and transporting healthcare products in and out of these markets.“

The report goes on to say that some companies already have a foothold in other countries adding that: Four in five companies in the healthcare industry (79%) currently do business with at least one country outside the U.S.

Respondents state most of their emerging market business is currently happening in China, India and Brazil. Argentina, China, India and Brazil are the top emerging markets companies will be expanding to in the next 18 months

Almost three-fourths (70%) of companies sell products outside the U.S., topping the list of global market activities, followed by 51% that manufacture and source outside the U.S. Of the respondents, 24% indicated they conduct clinical trials outside the U.S., and 21% of companies don't do any of these activities outside the U.S.

But perhaps the most overriding concern is that of increased FDA regulation and the pending changes in the med-tech sector that will come from the healthcare reform bill. Since the survey's inception, concerns from med-tech companies over future legislation and regulatory issues have been present and look to only increase in the future, the survey said.

“I think that we will continue to see concerns about healthcare regulation and healthcare reform,“ Menna said. Industry concern as to what the changes would be once healthcare reform measures were implemented also topped the list, according to the survey.

Most face a difficult conundrum thriving in a strained economy, with increased costs due to increased regulatory measures, Menna said. Regulatory challenges top the list of general business concerns for healthcare companies, with 58% reporting that they are “very“ or “extremely“ concerned with increasing regulations. More than half (54%) of companies report that keeping up with regulatory compliance laws is a challenge in serving global markets.

But despite those concerns Menna said that UPS has seen an increase in its healthcare business since last year and that the sector continues to move up.

“UPS has seen considerable growth,“ he said. “Even in a [slow] economy our healthcare business continues to grow.“

'National highway' for personalized medicine

Personalized medicine (PM) has only begun to creep into clinical practice, but FDA and the National Institutes of Health announced in June in a journal article that the two agencies will accelerate their efforts to foster advances in PM, an effort the leaders of the two agencies likened to the development of the interstate highway system during the administration of President Eisenhower.

In an editorial posted June 15 at the online version of the New England Journal of Medicine, NIH director Francis Collins, MD, and Margaret Hamburg, MD, explain that they “have a shared vision of . . . the scientific and regulatory structure needed“ to support the growth of PM. The editorial notes that both scientific and regulatory hurdles must be overcome in order to maximize the potential of gene-based medicine, and promise that they will “better define regulatory pathways for coordinated approval of co-developed diagnostics and therapeutics.“

The integrated pathway between development and regulatory approval is needed to foster private-sector interest in the genetic underpinnings of both common and unusual diseases, the editorial states, and the agency leaders propose a solution. This would consist of “NIH-supported centers where researchers can screen thousands of chemicals to find potential drug candidates as well as public-private partnerships to help move candidate compounds into commercial development.“

This effort would help industry hurdle the so-called valley of death, the pre-clinical development phase during which many candidates wash out. Part of the emphasis here is on programs already underway, the editorial reminds, including the program dubbed Therapeutics for Rare and Neglected Diseases,“ but tissue banking is important as well as a source of samples. Among the sources for these repositories will be the Framingham Heart Study and the National Children's Study.

For those in the diagnostics industry, the editorial mentions that the Critical Path Initiative is geared toward developing “better evaluation tools, such as biomarkers and new assays.“ On the other hand, the editorial states that unapproved gene tests are creeping into use, a trend the authors claim “undermines the approval process“ and “decreases the chances that physicians will adopt a new therapeutic-diagnostic approach.“

The editorial states further that some companies have recently “begun performing and broadly marketing laboratory-developed tests,“ almost certainly a reference to the targets of a recent batch of untitled letters from FDA to makers of gene tests that were offering specimen cups through various retail channels so consumers could obtain information about genetic predispositions. The authors assert that because clinical decisions are typically based on one gene test only, “getting the results right the first time is crucial.“ NIH is also said to be assembling “a voluntary genetic testing registry to address key information gaps“ in the public understanding of available gene tests.

Court rules Bilski patent not eligible

The Supreme Court of the United States finally issued a ruling last in June on the case of Bilski v. Kappos – a case that tested the limits of eligibility for business method patents – and the Court ruled that Bilski cannot obtain a patent for his business method for risk hedging. The more or less unanimous ruling makes a point of asserting that the machine-or-transformation test is far too restrictive to be useful in determining eligibility.

The 71-page ruling, for which Justice Anthony Kennedy served as the lead author, provides enough detail to justify the long time needed to issue a ruling. The Court heard the case early last November, and the nearly eight months that limped by as attorneys and inventors waited on the decision hinted that the court was forging a tight interpretation. Those who expected a narrow ruling were not disappointed.

The widespread interpretation seems to be that the decision has no effect on diagnostics or on software, both of which could have become an issue for makers of therapeutic and diagnostic devices had the court ruled more broadly. Malcolm Stewart, deputy solicitor general at the Department of Justice, informed the court during the hearing that the Department of Justice “recognize[s] that there are difficult problems out there in terms of patentability of software innovations and medical diagnostics,“ but he said DoJ was of the view that Bilski “would provide an unsuitable vehicle for resolving the hard questions“ about many other method patents “because the case doesn't involve computer software or medical diagnostic techniques.“

Stewart concluded that given the frame of reference of Bilski, “most of the hard questions [regarding software and diagnostics will] remain unresolved“ even after the decision is rendered.

The court rejected earlier lines of reasoning regarding the Bilski application, which was shot down by both the original examiner, an appeals board at the U.S. Patent and Trademark Office, and the Court of Appeals for the Federal Circuit (CAFC). Nonetheless, the opinion undermines part of the rationale applied by CAFC. The court states on page 3 that CAFC was erroneous in concluding that the Supreme Court “has endorsed the machine-or-transformation test as the exclusive test“ for patentability, noting that recent case law suggests otherwise, including Parker v. Flook, a 1978 case that is deemed one of three cases that have served as the standard for eligibility in recent decades.

The decision states further that section 35 USC section 101 does not permit an interpretation of the word “process“ that would exclude business methods, stating that the Court could establish no argument for using the word “method“ in a way that is inconsistent with common meaning. The decision notes also that the permissibility of the prior use defense further confirms the legitimacy of the method patent.

All the same, the court cut the legs out from under Bilski's application by asserting that the hedging of risk and the application of the notion of risk hedging to energy markets are “not patentable processes but attempts to patent abstract ideas.“

The reaction from Capitol Hill was immediate and not sympathetic to the court's views on the subject. In a June 28 statement, Sen. Pat Leahy (D-Vermont), chairman of the Senate Judiciary Committee, said the decision “unanimously affirmed the judgment of the Federal Circuit that the application for a patent on a business method should be rejected,“ but that the decision “needlessly left the door open for business method patents to issue in the future,“ which he said may “lead to more unnecessary litigation.“

Leahy noted that the Supreme Court has reviewed and decided several cases “since the debate over comprehensive patent reform began many years ago,“ and while the outcome in Bilski “is consistent with the goal of patent reform legislation pending in Congress,“ that decision “may not have advanced the law and created the stability and certainty that it could have.“ He closed the statement by observing that the judiciary is “constrained by the text of our outdated statutes, and it is time for Congress to act.“

Todd Dickinson, executive director of the American Intellectual Property Law Association (AIPLA; Arlington, Virginia), told BB&T that the members of AIPLA are “gratified“ at the outcome and that the machine or transformation test “should not be the only test“ for eligibility.

Dickinson made the case that “almost all software and many if not most business methods“ are still patentable unless “they become too abstract,“ which was one of the criticism of the Bilski application. Dickinson also said the decision confirms the notion that there is no need for a new test.

All the same, diagnostics are not necessarily utterly in the clear. “The one [case] that may come up in this area is the Prometheus case,“ Dickinson said. This case, which pits Prometheus Labs (San Diego) against Mayo Collaborative Services (Rochester, Minnesota), examines “the correlation application“ inherent to diagnostic tests. Prometheus v. Mayo “will be the next stop in terms of patentable subject matter review,“ Dickinson promised.

CAFC overturned a lower court ruling that decreed that Mayo did not infringe on Prometheus' patent for a device designed to tie drug dosage to detection of metabolites associated with an infused drug. The CAFC ruling lent support to the notion that the transformation requirement is met when the transformation is “of the human body following administration of a drug and the various chemical and physical changes of the drug's metabolites that enable their concentrations to be determined.“ Mayo is said to have appealed to the Supreme Court for a review, but the court has not yet announced whether it will grant Mayo a hearing.

“Another fascinating thing about this case is how long it took for them to decide,“ Dickinson remarked, but he also pointed out that the court tends to be careful when deciding on business cases that affect entities that have plowed substantial sums into the technology in question.

“The biggest place this will have an impact is at PTO,“ Dickinson said, stating that “how director Kappos and his staff interpret this opinion is the next significant question.“ On the other hand, he observed that PTO had already put out a guidance on reviews of method patents.

As for the views expressed by Sen. Leahy, Dickinson said, “I don't think this is necessarily something the legislature is going to take up“ because of the difficulty in crafting language that doesn't create more problems than it solves. A failed attempt to draft a method patent provision for the Senate patent reform bill might be a case of “pulling one thread and unraveling the whole thing,“ he said, promising, “the law of unintended consequences would come into play.“

Dickinson's final take on the decision is “this opinion is good for inventors and innovation, and that's what we should be looking out for.“

CMS eyes MRI for pacemakers, ICDs

The Centers for Medicare & Medicaid Services has undertaken a national coverage analysis for the use of magnetic resonance imaging (MRI) technology in patients with pacemakers and implantable cardioverter defibrillators, a move formally requested by Robert Russo, MD, of the Scripps Clinic (La Jolla, California). The announcement comes at an interesting time, given that FDA has yet to announce a formal decision regarding the application by Medtronic (Fridley, Minnesota) to expand the indication for the Revo pacemaker to indicate compatibility with MRIs.

Medtronic got the nod from the circulatory systems advisory committee for the proposed indication in March, but FDA has yet to announce whether it will go along with the panel's recommendation. The June 25 letter from Russo, addressed to Louis Jacques, MD, at the coverage and analysis group at CMS, notes that more than 2.8 million pacemakers and 690,000 ICDs were implanted between 1995 and 2005 and that these patients have at least a 50-50 chance of needing an MRI at some point after receiving the implant. He also argues that the MRI issue “will remain an enduring problem“ even when risk mitigation strategies are in place, but asserts also that recent studies suggest the procedure can be done safely so long as “the patients are properly monitored and the device is appropriately reprogrammed pre- and post-scan.“

Russo states that MRI is preferred to CT for a number of diseases, such as acute ischemic stroke and multiple sclerosis lesions, and requests that CMS allow reimbursement for patients who are enrolled in a study to determine the risks of MRI with implanted electrophysiology hardware, providing the sponsor of the trial has obtained an investigational device exemption. However, the amount of time needed to obtain an IDE might push the timeline for commencing with such a trial past the time when FDA decides on the expanded Revo indication. CMS indicates that it will accept comments until July 28 and that it expects to render a decision by Dec. 28.

Dan Tuden, senior VP for the Neocure Group (Newton, Massachusetts), told BB&T that CMS might be interested in more evidence than was generated by Medtronic in its pursuit of a change to the Revo label. “Medicare is trying to make a determination“ regarding reasonableness and necessity, “and there may be a question of levels of safety“ with MRI, he observed.

Tuden could not speculate on whether FDA has shared any of the data from the Medtronic application. “It seems often times that CMS has its own mandate to investigate things“ not from FDA's views “but from CMS's perspective on what is appropriate and what is not.“ All the same, he acknowledged that an IDE application won't just pop out of FDA. He projected that such an application would take “three to six months,“ but he noted, “you can never tell what level of evidence they want.“ He said this fact “makes it tough to make decisions about how to invest in gathering that evidence.“

The uncertainty can be well founded, Tuden said, referring to the carotid artery stenting issue. “Each time that data comes available, CMS says 'that's not quite enough'“ to justify coverage, he noted.

Regarding the urgency of the decision on MRIs for electrophysiology equipment, Tuden said, “you want to make a decision relatively quickly because there are a number of patients“ who need MRIs for a variety of conditions. “You want them to do this and not leave patients up in the air,“ he said.