Michael Barbella01.15.14
Thirteen is perhaps the most reviled number in Western society. Long associated with bad luck, the digit has been known to elicit illogical behavior in ordinarily rational, intelligent and fearless individuals. Nobel Prize winner and United Kingdom Prime Minister Winston Churchill—considered one of the 20th century’s greatest wartime leaders—avoided Row 13 in theaters and airplanes. Christopher Columbus so feared the number that he deliberately changed the date of his arrival to the New World from Oct. 13 to Oct. 12, 1492, to avoid the stigma of such an evil omen, according to Italian scholars.
Some societies, however, associate 13 with good fortune. In prehistoric Israel, for instance, 13 was a sanctified number; it also represented regeneration for pre-Columbian Mexicans and was the doorway to eternal life for ancient Egyptians (they believed life has 13 stages, the last of which is death).
Few in the medical device industry would consider the past 12 months lucky, though. The controversial 2.3 percent device tax, venture capital funding drought, pricing pressures and never-ending regulatory rigmarole that impacted manufacturers throughout the year may have inadvertently reinforced their distrust of the number.
To better assess the past year in medtech and determine its general course in 2014, Medical Product Outsourcing spoke with Stephen J. Ubl, president and CEO of the Washington, D.C.-based Advanced Medical Technology Association (AdvaMed). He lauded his organization's progress on long-standing industry issues in 2013, and predicted another battle with lawmakers this year over the 2.3 percent medical device tax. His full conversation with MPO follows:
Medical Product Outsourcing: How would you characterize the past year (2013) in medtech?
Stephen J. Ubl: From the association’s point of view, looking back on 2013, I’m struck by all the positive progress that was made on some long-standing industry issues. Putting aside the device tax for a moment, these are discreet issues that typically fly below most people’s radar but are very important to certain segments of the medical technology community. For example, getting CMS [Centers for Medicare & Medicaid Services] to recognize and begin to address charge compression, a technical calculation that inappropriately reduced Medicare payment for many device-related procedures. Or HHS’ [Health and Human Services] Office of the Inspector General issuing a Special Fraud Alert and subsequent report that highlights the inherent conflict-of-interest risks posed by physician-owned distributors.
These are incredibly complex issues that take enormous amounts of time and resources just to convince policymakers that there is a problem, let alone take steps to resolve them. A more high-profile example would be the FDA’s [U.S. Food and Drug Administration's] final rule establishing a unique device identification (UDI) system. This again was the result of several years’ interaction with the agency, and we believe the final rule includes many industry-proposed recommendations – such as no direct marking of implantables – that will help maximize the usefulness and value of the potential UDI system as a postmarket tool.
It was also the year we made great strides in moving forward with our Strategic Plan. First, we are expanding our advocacy reach into key emerging markets. In China, we hired an executive director for our office. In India, we hired a strategic consultant and public relations firm to help us improve understanding of the value of medical technology. And in Brazil, we are working in partnership with the alliance of local trade associations to push for appropriate regulatory and reimbursement regulations and strengthening of the compliance culture. Second, we have really stepped up our research activities, generating the kind of data you need today to support any policy position. I would just like to highlight two of those studies: One which demonstrated prices for key categories of implantables have fallen significantly in recent years, and the second that shows medical devices are not the cause of wide variations among hospitals in the amounts they charge for similar procedures. Both these studies clearly refute those who falsely claim medical technology is a driver of health care costs. The third part of our Strategic Plan involves bolstering our member engagement activities, and [in 2013] we had record numbers of our CEOs and company employees engaged in our advocacy efforts, whether through Capitol Hill fly-ins, facility visits or signing up for our Life Changing Innovation campaign.
Finally, for me one of the true highlights of 2013 was during our annual conference where we awarded our first-ever AdvaMed Lifetime Achievement Award to John Brown, chairman emeritus of Stryker Corporation and former AdvaMed Board chairman. John is the embodiment of what is best in this industry in terms of compassion for patients, entrepreneurship and innovation, and it was a very special moment honoring him like that.
MPO: What was the single biggest issue facing the industry in 2013?
Ubl: The medical device tax was a priority area of focus, especially late in the year. I am proud of the association’s and the industry’s work pushing forward and of the progress we made in drawing national attention to this issue. This is an effort that has taken place on many fronts: educating members of Congress; partnering with state biotech associations, patient and physician groups and other stakeholders; engaging our members at every level of their organizations; making our case in the media; advertising. We have been using every advocacy tool at our disposal to call attention to the need to repeal the tax, and the results show. For the first time, a strong bipartisan majority of senators voted to repeal the tax last spring. Repeal bills in both the House and Senate had solid bipartisan support with co-sponsors being added throughout the year. And as everyone knows, repeal of the device tax was a top-tier issue during the budget discussions in early October. The House passed repeal language in bipartisan fashion as part of its continuing resolution. (The second time a bipartisan House majority has voted for repeal). And addressing the tax was a key provision in proposed bipartisan budget compromises in both chambers. We are heartened by the strong and growing bipartisan support for repeal that we saw in both the House and Senate, and many members of Congress have committed to keep repeal of the tax front and center as debate on fiscal issues moves forward. AdvaMed and the industry are committed to full repeal of this tax, and we are going to continue to work to achieve that goal.
MPO: Please discuss some of the other issues impacting the medtech industry in 2013. How did they each impact the sector?
Ubl: Other big areas that impacted the industry were implementation of the FDA user fee agreement and payment delivery reforms.
With regard to the new user fee agreement, it’s really too early to say whether the agreement is working. However, early indications on the limited quantitative goals we’ve seen are trending positive. We believe that early and frequent company interactions with FDA are occurring but that it’s too early to tell if they are leading to quicker approvals.
I want to commend the CDRH [Center for Devices and Radiological Health] leadership for their efforts so far. They’ve given every indication that they are serious about meeting the performance goals they committed to under the user fee agreements and collaborating with industry to make this process work. One example of this collaborative spirit can be found in agency’s decision in mid-2013 on 510(k) modifications: the agency was responsive to concerns we raised in a white paper we submitted to them and elected to make targeted modifications to their 1997 guidance 510(k) modifications guidance – rather than developing a completely new approach. Sometimes it’s hard to move big bureaucracy and certainly substantive issues remain, but we’re optimistic.
On the payment front, we continue to monitor the implementation of new reimbursement initiatives such as accountable care organizations (ACOs) and bundling. I want to be clear that thedevice industry supports these initiatives because they have the potential to improve the efficiency and quality of health care, and we believe medical technology can play a significant role in achieving these ends.
ACOs and bundling programs do, however, create incentives that could have the inadvertent effect of slowing medical progress and denying patients access to the most appropriate treatment for their condition. So we are committed to working to ensure safeguards are in place to protect patient and physician choice, and to preserve innovation. So to avoid stinting on care and a reduction in quality, we believe there should be a time-limited adjustment to financial and quality targets for breakthrough technology and early adoption of treatments. This minor modification can be done without any negative impact on the underlying goals of cost containment and quality improvement.
Speaking broadly, these new payment mechanisms definitely present opportunities for companies that can demonstrate their technologies will reduce costs across episodes of care, more effectively manage chronic illnesses or increase efficiency. Quality standards that are part of ACO and value-based purchasing programs could also drive diffusion of new technologies. In addition, there will be a greater focus on preventive care and treating individual patient needs.
Issues relating to regulation and reimbursement of diagnostics is also a key area of focus for the association, through our AdvaMedDx division. AdvaMedDx continues significant advocacy efforts to promote a risk-based approach to improve the regulatory process for diagnostics and to modernize the Clinical Laboratory Fee Schedule so that it recognizes the full contribution of modern diagnostics to health care quality and outcomes. AdvaMedDx is also engaged in educational efforts to inform consumers about the role of diagnostics in health care.
MPO: What specific issues will confront the industry in 2014? Why?
Ubl: Well, it goes without saying that the device tax repeal will again be our number one priority. We will also continue to move forward with our Strategic Plan, increasing our efforts in emerging markets, research and membership engagement.
In addition, we will continue our efforts to push back against polices that limit patient access to medical technology. For example, cuts in Medicare payments for imaging services like MRIs, which have been slashed more than 60 percent in recent years. Similarly, the Clinical Lab Fee Schedule has had zero or negative updates in 15 of the last 23 years and does not adequately value cutting-edge molecular diagnostics. And competitive bidding programs have led to drastic cuts for durable medical equipment and could force a significant portion of DME [durable medical equipment] suppliers to go out of business.
However, the biggest issue to confront industry next year may well be the implementation of physician payment disclosure or “Sunshine” legislation. Overall, we supported the final version of physician payment disclosure included in the Affordable Care Act because it provides a clear, comprehensive national program of reporting and disclosure. AdvaMed’s Code of Ethics is quite rigorous in its definitions of proper and improper, and we support appropriate disclosure of relationships between medical technology companies and physicians.
It is important to remember that medical device companies are unique in that they must rely on physician experience and feedback to develop better treatments for patients. Additionally, because the effectiveness of a device often depends on a physician’s skill in using it, it is essential that physicians receive education and training.
That is why it is crucial the information regarding physician payments should be disclosed in a form that makes the context of the payment clear, so that people can understand the payment’s purpose and appropriateness. The final rule allows for companies to provide this important context for each payment, but we will continue to closely monitor the systems CMS will put in place to ensure this context can be provided in a meaningful way.
Make no mistake - implementation will be a complex and expensive process for companies, so we were glad CMS’s final Sunshine regulation provided adequate time for our member companies to put in place the business systems necessary to ensure they are able to fully comply.
Some societies, however, associate 13 with good fortune. In prehistoric Israel, for instance, 13 was a sanctified number; it also represented regeneration for pre-Columbian Mexicans and was the doorway to eternal life for ancient Egyptians (they believed life has 13 stages, the last of which is death).
Few in the medical device industry would consider the past 12 months lucky, though. The controversial 2.3 percent device tax, venture capital funding drought, pricing pressures and never-ending regulatory rigmarole that impacted manufacturers throughout the year may have inadvertently reinforced their distrust of the number.
To better assess the past year in medtech and determine its general course in 2014, Medical Product Outsourcing spoke with Stephen J. Ubl, president and CEO of the Washington, D.C.-based Advanced Medical Technology Association (AdvaMed). He lauded his organization's progress on long-standing industry issues in 2013, and predicted another battle with lawmakers this year over the 2.3 percent medical device tax. His full conversation with MPO follows:
Medical Product Outsourcing: How would you characterize the past year (2013) in medtech?
Stephen J. Ubl: From the association’s point of view, looking back on 2013, I’m struck by all the positive progress that was made on some long-standing industry issues. Putting aside the device tax for a moment, these are discreet issues that typically fly below most people’s radar but are very important to certain segments of the medical technology community. For example, getting CMS [Centers for Medicare & Medicaid Services] to recognize and begin to address charge compression, a technical calculation that inappropriately reduced Medicare payment for many device-related procedures. Or HHS’ [Health and Human Services] Office of the Inspector General issuing a Special Fraud Alert and subsequent report that highlights the inherent conflict-of-interest risks posed by physician-owned distributors.
These are incredibly complex issues that take enormous amounts of time and resources just to convince policymakers that there is a problem, let alone take steps to resolve them. A more high-profile example would be the FDA’s [U.S. Food and Drug Administration's] final rule establishing a unique device identification (UDI) system. This again was the result of several years’ interaction with the agency, and we believe the final rule includes many industry-proposed recommendations – such as no direct marking of implantables – that will help maximize the usefulness and value of the potential UDI system as a postmarket tool.
It was also the year we made great strides in moving forward with our Strategic Plan. First, we are expanding our advocacy reach into key emerging markets. In China, we hired an executive director for our office. In India, we hired a strategic consultant and public relations firm to help us improve understanding of the value of medical technology. And in Brazil, we are working in partnership with the alliance of local trade associations to push for appropriate regulatory and reimbursement regulations and strengthening of the compliance culture. Second, we have really stepped up our research activities, generating the kind of data you need today to support any policy position. I would just like to highlight two of those studies: One which demonstrated prices for key categories of implantables have fallen significantly in recent years, and the second that shows medical devices are not the cause of wide variations among hospitals in the amounts they charge for similar procedures. Both these studies clearly refute those who falsely claim medical technology is a driver of health care costs. The third part of our Strategic Plan involves bolstering our member engagement activities, and [in 2013] we had record numbers of our CEOs and company employees engaged in our advocacy efforts, whether through Capitol Hill fly-ins, facility visits or signing up for our Life Changing Innovation campaign.
Finally, for me one of the true highlights of 2013 was during our annual conference where we awarded our first-ever AdvaMed Lifetime Achievement Award to John Brown, chairman emeritus of Stryker Corporation and former AdvaMed Board chairman. John is the embodiment of what is best in this industry in terms of compassion for patients, entrepreneurship and innovation, and it was a very special moment honoring him like that.
MPO: What was the single biggest issue facing the industry in 2013?
Ubl: The medical device tax was a priority area of focus, especially late in the year. I am proud of the association’s and the industry’s work pushing forward and of the progress we made in drawing national attention to this issue. This is an effort that has taken place on many fronts: educating members of Congress; partnering with state biotech associations, patient and physician groups and other stakeholders; engaging our members at every level of their organizations; making our case in the media; advertising. We have been using every advocacy tool at our disposal to call attention to the need to repeal the tax, and the results show. For the first time, a strong bipartisan majority of senators voted to repeal the tax last spring. Repeal bills in both the House and Senate had solid bipartisan support with co-sponsors being added throughout the year. And as everyone knows, repeal of the device tax was a top-tier issue during the budget discussions in early October. The House passed repeal language in bipartisan fashion as part of its continuing resolution. (The second time a bipartisan House majority has voted for repeal). And addressing the tax was a key provision in proposed bipartisan budget compromises in both chambers. We are heartened by the strong and growing bipartisan support for repeal that we saw in both the House and Senate, and many members of Congress have committed to keep repeal of the tax front and center as debate on fiscal issues moves forward. AdvaMed and the industry are committed to full repeal of this tax, and we are going to continue to work to achieve that goal.
MPO: Please discuss some of the other issues impacting the medtech industry in 2013. How did they each impact the sector?
Ubl: Other big areas that impacted the industry were implementation of the FDA user fee agreement and payment delivery reforms.
With regard to the new user fee agreement, it’s really too early to say whether the agreement is working. However, early indications on the limited quantitative goals we’ve seen are trending positive. We believe that early and frequent company interactions with FDA are occurring but that it’s too early to tell if they are leading to quicker approvals.
I want to commend the CDRH [Center for Devices and Radiological Health] leadership for their efforts so far. They’ve given every indication that they are serious about meeting the performance goals they committed to under the user fee agreements and collaborating with industry to make this process work. One example of this collaborative spirit can be found in agency’s decision in mid-2013 on 510(k) modifications: the agency was responsive to concerns we raised in a white paper we submitted to them and elected to make targeted modifications to their 1997 guidance 510(k) modifications guidance – rather than developing a completely new approach. Sometimes it’s hard to move big bureaucracy and certainly substantive issues remain, but we’re optimistic.
On the payment front, we continue to monitor the implementation of new reimbursement initiatives such as accountable care organizations (ACOs) and bundling. I want to be clear that thedevice industry supports these initiatives because they have the potential to improve the efficiency and quality of health care, and we believe medical technology can play a significant role in achieving these ends.
ACOs and bundling programs do, however, create incentives that could have the inadvertent effect of slowing medical progress and denying patients access to the most appropriate treatment for their condition. So we are committed to working to ensure safeguards are in place to protect patient and physician choice, and to preserve innovation. So to avoid stinting on care and a reduction in quality, we believe there should be a time-limited adjustment to financial and quality targets for breakthrough technology and early adoption of treatments. This minor modification can be done without any negative impact on the underlying goals of cost containment and quality improvement.
Speaking broadly, these new payment mechanisms definitely present opportunities for companies that can demonstrate their technologies will reduce costs across episodes of care, more effectively manage chronic illnesses or increase efficiency. Quality standards that are part of ACO and value-based purchasing programs could also drive diffusion of new technologies. In addition, there will be a greater focus on preventive care and treating individual patient needs.
Issues relating to regulation and reimbursement of diagnostics is also a key area of focus for the association, through our AdvaMedDx division. AdvaMedDx continues significant advocacy efforts to promote a risk-based approach to improve the regulatory process for diagnostics and to modernize the Clinical Laboratory Fee Schedule so that it recognizes the full contribution of modern diagnostics to health care quality and outcomes. AdvaMedDx is also engaged in educational efforts to inform consumers about the role of diagnostics in health care.
MPO: What specific issues will confront the industry in 2014? Why?
Ubl: Well, it goes without saying that the device tax repeal will again be our number one priority. We will also continue to move forward with our Strategic Plan, increasing our efforts in emerging markets, research and membership engagement.
In addition, we will continue our efforts to push back against polices that limit patient access to medical technology. For example, cuts in Medicare payments for imaging services like MRIs, which have been slashed more than 60 percent in recent years. Similarly, the Clinical Lab Fee Schedule has had zero or negative updates in 15 of the last 23 years and does not adequately value cutting-edge molecular diagnostics. And competitive bidding programs have led to drastic cuts for durable medical equipment and could force a significant portion of DME [durable medical equipment] suppliers to go out of business.
However, the biggest issue to confront industry next year may well be the implementation of physician payment disclosure or “Sunshine” legislation. Overall, we supported the final version of physician payment disclosure included in the Affordable Care Act because it provides a clear, comprehensive national program of reporting and disclosure. AdvaMed’s Code of Ethics is quite rigorous in its definitions of proper and improper, and we support appropriate disclosure of relationships between medical technology companies and physicians.
It is important to remember that medical device companies are unique in that they must rely on physician experience and feedback to develop better treatments for patients. Additionally, because the effectiveness of a device often depends on a physician’s skill in using it, it is essential that physicians receive education and training.
That is why it is crucial the information regarding physician payments should be disclosed in a form that makes the context of the payment clear, so that people can understand the payment’s purpose and appropriateness. The final rule allows for companies to provide this important context for each payment, but we will continue to closely monitor the systems CMS will put in place to ensure this context can be provided in a meaningful way.
Make no mistake - implementation will be a complex and expensive process for companies, so we were glad CMS’s final Sunshine regulation provided adequate time for our member companies to put in place the business systems necessary to ensure they are able to fully comply.