BB&T Washington Writer and Staff Reports

With the Democrats taking the White House and making big gains in both the House and Senate, congressional oversight of medical product safety will shift from the FDA to industry, and device and drug makers should be prepared to be in the crosshairs, said John Manthei, global co-chair of the healthcare and life sciences practice at the Washington law firm Latham & Watkins.

"Congressional oversight is an intensely political process," Manthei said in a post-election call with reporters.

The current Democratic chairmen of the healthcare-focused congressional committees have done a "remarkable job" in highlighting the failures of FDA under the Bush administration, he said. "I don't think the Democratic congressional investigators are going to be anxious to pull up the Obama political appointees and subject them to the same level of criticism," he said.

Instead, Manthei said, the 111th Congress will be focused on making sure manufacturers are forthcoming with regulators about emerging safety data related to their products and that the industry is "playing its role within the fundamental integrity of the FDA regulatory process."

Gone are the days of the "five-year comfort zone" of major FDA reform, which over the past two decades has been tied to the passage of bills reauthorizing drug and device user fee programs, said Manthei, majority counsel to the House Energy and Commerce Committee from 1998 to 2000.

He predicted that bills affecting FDA and medical product makers will now come to the floor more rapidly, being passed yearly rather than waiting to be attached to a larger piece of reform legislation, such as the Prescription Drug User Fee Act, which has come up for renewal every five years since 1992.

Therefore, Manthei said, the medical product industry is going to need to be more engaged with the legislative process and "watch it closer than they have in the past."

Legislation creating a regulatory pathway for the FDA to approve follow-on biologics, also called biosimilars, is going to be "front and center" on Congress' agenda early next year, Manthei surmised.

He said he also expects lawmakers to take action fairly quickly on re-importation bills – legislation that would allow drugs produced by U.S. manufacturers that are shipped and sold in Canada and Europe to be re-imported by U.S. patients into this country – given that President-elect Barack Obama (D-Illinois) has shown support for the legislation in the senate.

Additional funding for the FDA also will be a top priority for the Democrats in 2009, he said.

Manthei said it is "too early" to know who will be placed in the FDA commissioner's job, and said he is unaware of anyone specifically on Obama's list for consideration. He noted that Susan Alpert, senior vice president and chief regulatory officer for Medtronic (Minneapolis) and a former high-ranking official in the agency's Center for Devices and Radiological Health, has been mentioned in certain circles as a potential contender.

However, Manthei emphasized that as far as he knows, Alpert is not on any definite list and no one has emerged as an early candidate for the FDA chief's job.

He noted that Sen. Edward Kennedy (D-Massachusetts), chairman of the Senate Health, Education, Labor and Pensions (HELP) Committee, has indicated that he did not want anyone from the drug or device industries to fill that slot.

"It will be interesting if that selection criteria will still hold," Manthei told reporters. "That obviously is going to eliminate a number of potentially very qualified applicants."

Advisors iffy on giving CMS more authority

Last month's meeting of the Medicare Payment Advisory Commission (MedPAC) included a session titled "Medicare's statutory authority to support delivery system reform." While there were voices that favored beefing up the agency's statutory authority to push reform along, there were also those that expressed misgivings on how such authority might work in practice.

Whether the commission will come to a consensus on this question remains to be seen, but recent activity on Capitol Hill – including the scrapping of the DME competitive bidding program – suggests that such a recommendation might fall on deaf ears.

Still, as the commission's chairman, Glenn Hackbarth said, the current model suggests big problems in the offing where the sustainability of Medicare is concerned.

MedPAC staffer Nancy Ray said in her presentation that the impetus behind this discussion was that "the pace of delivery system reform and improved efficiency is slow at best," and noted that CMS often does not have statutory authority to implement some of the commission's past recommendations for reform.

Some have argued for more flexibility for CMS, Ray said, adding that among the pilot programs CMS would need statutory changes in order to scale up are pay for performance (P4P), prior authorization of a number of procedures – which was discussed in the previous MedPAC session with regard to imaging under Part B – and competitive bidding.

Ray referred to the recent court decision involving the dual-drug nebulizer treatment DuoNeb in which the U.S. District Court for the District of Columbia overruled an attempt by CMS to use a lower-cost treatment. The author of the district court decision, Judge Henry Kennedy, also ruled late last year that CMS could not collect Part D overpayments to beneficiaries totaling roughly $50 million. "The take-away message is that Medicare's statutory authority ... is not clear and that this court ruling may affect Medicare's authority to carry out such policies in the future," Ray said.

DME competitive bidding, Ray said, "has not been shown to cause access problems," and the latest demonstration project – which is at least the second such project that showed that bidding would reduce costs without imposing undue burdens on beneficiaries – "resulted in 26% savings" for both taxpayer and beneficiary. Among the lessons learned from the latest DME bidding episode is that "CMS needs explicit authority" to put such programs into place, but "the influence of suppliers impacted Medicare's ability" to deploy the program by means of lobbying on Capitol Hill.

Bill Scanlon, MD, an independent consultant and MedPAC member, said, "The core issue is the awesome power of government and the need to have some protection from that power." He cited courts and congressional recourse as examples of that power. "All of them are important," he said, but suggested that panelists put themselves in the position of members of an industry that "could be devastated" by government actions.

Scanlon also said that some of the tasks put before CMS are "an impossible job, given the statutory constraints," but cited CMS's use of contracts to perform some of its cost constraint work as part of the problem. He also said CMS's resources must be bolstered if only to build confidence in the affected industries that the agency's actions will be well thought out.

Commission member John Bertko of the Rand Institute (Santa Monica, California) remarked that "the need for CMS to be a better value purchaser is just overwhelming," adding that "its really time for" CMS to be able to implement reforms.

More regulation could stifle innovation

Last year a government probe into consulting contracts with surgeons ended up costing Zimmer Holdings (Warsaw, Indiana), along with three other device companies, a hefty chunk of change. Now, policymakers are considering an increase in the oversight of physicians' relationships with device firms, but new research from Duke University's (Durham, North Carolina) Fuqua School of Business suggests that greater regulation could stifle the development of new devices.

Duke professors Aaron Chatterji, Kira Fabrizio, Will Mitchell and Kevin Schulman used physician data from the American Medical Association Physician Masterfile and patent listings from the National Bureau of Economic Research to determine the extent to which physicians are inventors of medical devices used in patient care and the relative importance of their inventions. The team's findings appear in the November issue of Health Affairs.

The group found that physicians were listed as the inventors of nearly 20% of the 20,000 medical devices patented in the U.S. between 1990 and 1996, and that 60% of physician-inventors work in private practice, not an academic medical setting. "This is clear, quantitative evidence that doctors are a driving force behind a significant portion of the new medical devices developed each year," Mitchell said.

The Duke team also investigated the importance of patents held by physicians relative to other patents. To quantify importance, the researchers counted the number of later patents that cited physicians' patents (indicating that the later technology was somehow influenced by the original invention). The team also considered the range of technological areas influenced by the original patents.

Physician patents received an average of 15.2 citations per patent, compared with 12.7 for other patents, and were also cited in a wider range of other patents, the researchers noted.

"Researchers have estimated that each citation represents $1 million in value for the patent-holding firm," Chatterji said. "Therefore, the number of citations received by physician patents is a significant indicator of the potential value of physician-invented products."

One argument for physician involvement in device development relates to physicians' role in the innovation process. "Doctors who are closest to patient needs frequently have the best ideas regarding how to solve clinical problems and know the most about needs for product modifications and new products," Fabrizio said.

OIG work plan for 2009 published

The Office of Inspector General at the Department of Health and Human Services has published its work plan for 2009, and the agenda is an ambitious one.

Among the items OIG will scrutinize next year is the perennial problem child, durable medical equipment and prosthetics, orthotics and supplies, known as DMEPOS or DME. According to the OIS publication, its recent work, including interviews with home health patients, indicated that there were "unnecessary DME being ordered for beneficiaries."

OIG also intends to "review the appropriateness of Medicare Part B payments to DME suppliers of power mobility devices, hospital beds and accessories, oxygen concentrators and enteral/parenteral nutrition." This pursuit is fueled by DME paid for by CMS that was "not ordered by physicians, not delivered to beneficiaries, or not needed by beneficiaries."

OIG states in the October work plan, which runs to 115 pages, that it will investigate reimbursement for continuous positive airway pressure devices that are prescribed for obstructive sleep apnea, partly over concerns that the devices are not used.

The work plan also indicates an interest in price comparisons for negative wound pressure therapy pumps, an interest triggered by the fact that "between 2001 and 2006, Medicare payment for the pump rose 692%."

It will come as no surprise to hospitals that OIG intends to scrutinize "payments made to hospitals for new services and technologies" by determining "whether hospitals have submitted claims in accordance with the criteria." OIG says it will "also review CMS's calculation of the payments" for such services.

The medical device industry also is under the watchful eye of OIG because the office has stated it intends to "review FDA's oversight of medical device post-marketing surveillance studies."

Unique patient ID said key to savings

The promises of healthcare savings from electronic health records – EHRs in the parlance of healthcare – sometimes seem as commonplace as dashed hopes of lottery-based retirement, but that does not seem to blunt the interest of think tanks such as the Rand Corporation (Santa Monica, California). Rand recently published a report on the impact of a unique identification number for each patient on the cost of healthcare and according to Rand's calculations, the use of such a number coupled with the appropriate healthcare information technology (HIT) infrastructure could mean savings of as much as $77 billion a year.

According to the statement Rand published along with the study, creating a unique patient ID number for everyone in the U.S. "would facilitate a reduction in medical errors, simplify the use of electronic medical records, increase overall efficiency and help protect patient privacy."

The effort would not be cheap, the Rand statement asserts. Such a system "could cost as much as $11 billion," but the projected returns are formidable. The Rand statement also points out that "federal legislation passed more than a decade ago supported the creation of a unique patient identifier system, but privacy and security concerns have stalled efforts to put the proposal into use."

Richard Hillestad, PhD, the study's lead author and a senior researcher at Rand, states that the alternative "is to rely on a system that produces too many errors and puts patients' privacy at risk."

Most systems make use of statistical matching to draw up records, according to Rand. In this scenario, the software searches for data such as name, birth date and so on to retrieve a patient's record, with part or all of the patient's Social Security number often part of the search data. The Rand statement claims that statistical matching "returns incomplete medical records about 8% of the time and exposes patients to privacy risks because a large amount of personal information is exposed to computer systems during a search." A unique patient ID number would eliminate such searches.

Given the population of the U.S., such a system using only numeric characters would have to employ at least nine digits. Whether patients would carry that information on a plastic card akin to a debit or credit card is a detail that has yet to be worked out.

Lawsuits seen as drag on investment

Is the legal environment in the U.S. an impediment to investment? A statement from the Department of Commerce makes that case, at least in terms of foreign direct investment (FDI) in U.S. business.

According to the Oct. 29 statement, the U.S. economy "benefited from $238 billion in FDI in 2007," which employed more than five million Americans. On the other hand, the full Commerce Department report states, "frivolous and junk lawsuits cost our economy about $240 billion a year." The report also cites a number of studies that collectively make the case that that the U.S. "is increasingly seen from abroad as a nation where lawsuits are too commonplace."

The report said that tort costs have risen from 0.62% of gross domestic product in 1950 to 1.87% today, which is pegged at "triple that of France and the United Kingdom, and at least double that of Germany, Japan and Switzerland." The U.S. legal system is seen abroad as a highly developed system, but fear of litigation "is among the top issues listed by senior executives who manage internationally owned U.S. businesses."

The problem of perception tends to run to well-known but atypical outcomes. The report states that while the $2.9 million awarded in connection with the "hot coffee" lawsuit against a McDonald's restaurant was reduced to $640,000, "the awareness that unreasonable and extreme verdicts are possible has had a negative impact on businesses."