—Robert Silverberg, ‘‘Breckenridge and the Continuum’’ (1973)
There’s no easy way to end a time loop.
The choices are limited mostly to death (accidental or suicide), murder, self-improvement or spiritual transcendence, and none of the methods are entirely foolproof. Consider, for instance, the plight of Myron Castleman, a New York City executive repeating the same hour of his life in Richard A. Lupoff’s 1973 short story, “12:01 PM.” Castleman’s time loop starts—as the narrative’s name suggests—at 12:01 p.m. and mysteriously resets itself every 60 minutes to the title time. Castleman apparently is the only person on Earth aware of the loop, and he’s powerless to stop it.
During one of his many do-overs, Castleman learns of a possible explanation for his predicament—a “disfiguration of time” that causes the universe to snap backward like a rubber band and perpetually repeat the same hour. Faced with an eternity of monotony, Castleman seeks advice from the time anomaly’s founding physicist but suffers a fatal heart attack before locating him. Death, however, provides no respite, as Castleman is resurrected at 12:01 p.m. and forced to repeat the hour ad nauseum.
Immortality also curses the misanthropic cynic in the 1993 film “Groundhog Day.” Desperate to escape the ennui of a snowy holiday time loop in folksy Punxsutawney, Pa., meteorologist Phil Connors (played by Bill Murray) kills himself at least half a dozen times—often in gruesome ways—but his efforts are fruitless: He always recovers and repeats the cycle, starting with a 6 a.m. wake-up call from Sonny & Cher.
“I have been stabbed, shot, poisoned, frozen, hung, electrocuted and burned... and every morning I wake up without a scratch on me, not a dent in the fender...” Connors confesses to his news producer (Andie MacDowell). “I wake up every day, right in Punxsutawney, and it’s always Feb. 2, and there’s nothing I can do about it.”
Or so he thinks. Time, as Connors eventually discovers, can be simultaneously multidimensional and maddeningly repetitive, yet fraught with possibilities. Although they are trite and implausible, loops do give their victims the opportunity to control history, and consequently, their fate. Once Connors realizes he can repeat, manipulate or change “current” events to achieve his destiny, he undergoes a transformation that leads to moral redemption, ultimately breaking the cycle.
The medical device industry underwent a similar transformation over the last 12 months to attempt an escape from a stubborn loop that kept it locked in battle with the U.S. Food and Drug Administration (FDA) and limited its growth in recent years. Like Connors, medtech leaders used the redundancy of their existence to chart a course for the future, finally tackling some of the challenges responsible for the rewind.
Yet the industry is not totally free of its Groundhog Day-like loop. It remains trapped in an endless spiral of pricing pressures, shrinking reimbursement rates, quality control matters and device tax repeal efforts—issues that likely will keep the sector stuck in reverse through 2015 and beyond. To change course (and permanently lose the loop), the industry must build upon the progress it made this past year to control its own fate—namely, shedding its adversarial relationship with the FDA and evolving to meet the demands of a rapidly changing market.
“I’m cautiously optimistic that the industry is moving forward. There are programs in place now that did not exist in 2013. It’s almost as if last year was the recognition of the problems—those in the industry may have been seeing them and talking about them but there wasn’t any momentum or any driver to work towards fixing them,” said Vicki Anastasi, senior vice president of medical devices for ICON plc, a global provider of outsourced development services to the medical device, pharmaceutical and biotechnology industries. “The FDA, with the help of the MDIC [Medical Device Innovation Consortium] and CMS [Centers for Medicare & Medicaid Services] have identified what the issues are and they have programs in place to resolve those issues. We’re in the very early stages of working to resolve them but we are moving forward. Last year we recognized what the issues were but the acknowledgement of them by all parties involved is important and that happened this year. We haven’t resolved these issues yet but we are certainly in a better position to do so because we have identified and addressed them, and we have senior level people from the industry, patient advocacy groups, industry groups and government all working together toward the same goal. I haven’t seen that in a long time.”
Indeed, the FDA and medtech industry appear to have a more collaborative relationship these days, as they now are partnering to resolve the issues that formerly divided them. This newfound synergy is a stark turnaround from the antagonistic, accusatory affiliation that emerged after the Great Recession, when the pair could only agree on their affinity to disagree. During a 2011 conference, for example, Center for Devices and Radiological Health (CDRH) Director Jeffrey Shuren, M.D., admitted his agency’s relationship with device makers involved “a lot of finger-pointing.” Medical Device Manufacturers Association President/CEO Mark Leahey agreed, remarking at the same conference:“...unfortunately, there have been instances in the past couple of years where the FDA is being more confrontational with industry than collaborative.”
Not any more. The conflict and finger-pointing that once defined medtech’s rocky relations with the FDA has been replaced by a spirit of teamwork and a willingness to work through its differences for the greater good of patients. The pair’s improved relationship clearly was evident at AdvaMed 2014: The Medtech Conference (held in October), where panelists and session participants praised the agency for its efforts to streamline the device approval process, reduce regulatory red tape, better train its staff, and jump-start U.S. product launches. “The FDA climate has dramatically improved,” Edwards Lifesciences CEO Mike Mussallem said during a CEOs Unplugged session on the state of the medtech ecosystem. “If we go back just a few years ago, it seemed that we were at loggerheads on a pretty regular basis. I think the FDA has become more sensitized in making sure that Americans actually get to benefit from some of the most innovative technologies.”
The FDA is proving its commitment to industry with a laundry list of initiatives and guidances designed to restore American leadership in medtech innovation by reducing both time to market and the overall cost of conducting business. One of its top priorities is clinical trial reform—an effort almost certainly prompted by the rising tide of “overseas-first” product approvals and poor U.S. study enrollment. Industry statistics indicate 15 percent of all clinical trial sites never enroll a single patient, while more than half the sites under-enroll participants and 45 percent fail altogether to meet recruitment targets. The CDRH is attempting to improve both participation levels and the overall process by working with the MDIC to simplify trial design. The non-profit group’s multi-faceted rehabilitation plan involves increasing early feasibility studies, overhauling the data collection process, sharing resources, developing a common platform to streamline studies, and possibly establishing patient data registries.
The CDRH further contributed to the clinical trial reform process this year with guidances on gender-specific data evaluation and investigational device exemption (IDE) applications. The former dossier outlines FDA expectations for gender-specific patient enlistment, data analysis, and reporting, while the latter details the information required for live case presentations during IDE studies (i.e., justification for and total number of anticipated live case presentations; a copy of subjects’ informed consent; discussion of the methods used to minimize risk; and ways the live case data will support device approval or clearance).
“If we can reduce the time and cost involved in assessing medical technologies, then we can make it easier getting these technologies to the U.S.,” Shuren said on the final day of the Advanced Medical Technologies Association’s (AdvaMed) annual meeting. “High-risk and lower high-risk devices don’t always come to the U.S. first for various reasons—clinical trial complexity, economics and regulatory challenges. If there is great [medical] technology out there, why not have it come to our patients first?”
Industry leaders, naturally, share Shuren’s logic, but they repeatedly have argued that U.S. taxes and an inefficient, unpredictable product review process appreciably discourage American market debuts.
“FDA premarket review timeliness—both in terms of approval to initiate a trial and approve products—has deteriorated significantly in recent years. While the latest user fee agreement and other reforms at FDA are improving the process, we believe the agency still has a long way to go,” AdvaMed President/CEO Stephen J. Ubl told Medical Product Outsourcing. “The U.S. tax code also is increasingly uncompetitive. For example, the effective corporate tax rate in Ireland is 14 percent compared to 31 percent in the U.S. This disparity is exacerbated by the medical device tax, which adds 30 percent to the aggregate tax bill of American companies. This is an issue we have been concerned about for several years, as we’ve seen manufacturers, especially startups, increasingly turn to Europe for their initial product launches.
“FDA reform is a big issue, because if we do see significant improvements in the agency’s clinical trial and product approval processes, that would send a powerful signal to investors and innovators alike that the U.S. is the place to do business,” Ubl continued. “And to his credit, CDRH Director Shuren has publicly stated that it’s a goal of the agency to create a regulatory environment in the United States where companies want to launch their products here first. We are hopeful that progress can continue to be made.”
FDA certainly made strides this year to create a more appealing regulatory environment for medtech manufacturers: Besides revisiting its panel review process, the agency provided customer service training to CDRH staff, began working on a new benefit risk policy and reduced the number of pre-market approvals (PMA) issued with deficiency letters. In addition, the PMA backlog has been halved, and the de novo classification process has reduced review times from an average of more than 700 days earlier in the decade to the current average of 166 days.
The agency also scored its first Parallel Review program success in August, jointly approving with CMS a non-invasive colorectal screening test from Madison, Wis.-based Exact Sciences Corporation that can detect potentially cancerous growths through DNA sampling. Created in 2011 and extended last year, the Parallel Review initiative allows companies to concurrently pursue regulatory and reimbursement product approval, hypothetically reducing the gap between FDA approval and a reimbursement decision. The program allows the final part of the FDA process to run conjointly with the CMS process, cutting up to six months from the time of study initiation to coverage.
A handful of novel technologies were allowed access to undergo simultaneous FDA and CMS review but Exact Sciences was the only company to reach the finish line. Medicare offered to cover the company’s testing once every three years for Medicare patients aged 50-85 who display no symptoms but nonetheless are at “average” risk of developing colorectal cancer.
Skeptics claim the Parallel Review pathway is nothing more than a clone of existing expedited review initiatives—namely, meeting early with CMS during the product development process to introduce a device and clinical trial design; seeking CMS input on data requirements for future coverage determination; building reimbursement-driven data capture into clinical trials; and voluntarily authorizing data sharing between FDA and CMS—but regulatory officials insist those efforts have failed to produce synchronous approvals.
“This is the first time in history that FDA has approved a technology and CMS has proposed national coverage on the same day,” Patrick Conway, chief medical officer and deputy administrator for innovation and quality at CMS, noted in a statement.
Obviously, many more same-day victories are needed before the FDA or CMS can declare their collaborative initiative a success. Authorities, however, are hoping to improve their winning percentage by using the Exact Sciences review as a study guide. “...we will apply what we have learned to improve the efficiency of the medical device approval pathway for devices that address an important public health need,” said Nancy Stade, deputy director for policy at CDRH.
It’s a Small(er) World, After All
That pathway will likely be less congested, though. A wave of blockbuster acquisitions swept through the industry this year, as medtech firms grappled with tougher purchasing decisions from tightfisted hospitals and physicians groups. Industry analysts claim the megadeals are an outgrowth of hospital and payer consolidation, a trend driven mostly by vendor/supplier streamlining, value-based reimbursement models, and overall operating efficiency improvements.
But the mergers also reflect a key long-term growth strategy among companies that no longer can rely strictly on pricing to differentiate themselves from competitors. By partnering, large device manufacturers gain the necessary heft to improve their contracting capabilities with Herculean hospital systems and group purchasing organizations.
“If your traditional way of competing is changing, you’re going to have to think of different ways of differentiating yourself or you’ll only be able to compete on price,” said Glen Giovannetti, global life-sciences leader for multinational professional services firm EY. “Companies want to create scale to be more valuable to customers. A broader array of products will allow them to bundle products and give better discounts. This isn’t a one-year story or a two-year story. This is the new reality.”
That new reality (or fresh time loop) intensified this year, with half a dozen companies succumbing to the charms of scale through $75.5 billion in total deals. Smith and Nephew plc kicked off the matchmaking merriment in February with its $1.7 billion purchase of ArthroCare Corp., a move that gives it access to the fast-growing sports medicine devices market. Zimmer Holdings Inc. made headlines in April by announcing its $13.4 billion commitment to Biomet Inc., while Medtronic Inc. joined the cavalcade of corporate inversions in June with its $43 billion bid for Dublin, Ireland-headquartered Covidien plc. Becton Dickinson & Co. came late to the party, offering up $12.2 billion for CareFusion Corp. in early October.
Medtronic’s proposal to its Irish tax darling helped fuel a political firestorm in Washington and spark a national discussion on the pros and cons of inversion deals, which enable companies to reincorporate to foreign countries with lower tax rates. The uproar eventually prompted the U.S. Treasury Department to draft new regulations diluting the financial benefits of such agreements.
Steris Corporation’s $1.9 billion purchase of United Kingdom-based Synergy Health and Tornier NV’s $3.3 billion takeover of Memphis, Tenn., bone implant manufacturer Wright Medical Group Inc. are inversion deals as well (Tornier is headquartered in The Netherlands), but neither garnered much controversy, mostly because the new U.S. Treasury rules don’t affect them. Steris’ new tax structure and shareholder ownership are within legal limits, and analysts say Tornier’s deal with Wright Medical falls outside of the U.S. Treasury’s current limitations.
“Consolidation has been a topic of conversation this year and continues to be a catalyst for the evolution of the medical device industry, as well as in other areas of healthcare, such as hospitals,” Edwards Lifesciences’ Mussallem said. “Many medtech companies are focused on diversification, lower-priced devices, and emerging markets, and are looking to acquire in order to get there.”
Companies are equally as focused on market leadership, though, and thus may be teaming up to attain (medtech) world dominance. Case in point: Zimmer’s pending play for Biomet (the deal is under review by U.S. and European regulators) could vault it past Stryker Corp. for the orthopedics first runner-up crown, a report from United Kingdom-based market intelligence firm Evaluate Ltd. infers. The 23-page analysis forecasts Zimmer to capture a 20.8 percent total market share in 2020.
Similarly, the Medtronic-Covidien marriage—once completed early next year—could topple New Brunswick, N.J.-based Johnson & Johnson from its market-ruling perch with a 7 percent share and estimated combined sales of $35.9 billion in 2020, the Evaluate report concludes. JNJ, consequently, will slip to No. 2 with a 6.4 percent share and $32.8 billion in global revenue.
The corporate reshuffle, however, is not expected to impact the industry’s treatment sector hierarchy: Evaluate’s analysis projects in-vitro diagnostics to remain the leading sector, generating $71.6 billion in sales (a 6.1 percent compound annual growth rate), and Roche capturing 17 percent of the 2020 market. The overall pecking order will stand, with the cardiology sector generating the second-highest sales total ($57.3 billion), diagnostic imaging placing third ($47 billion in sales) and orthopedics coming in fourth at $46 billion. Neurology, the smallest of the 15 markets ranked in the report, will post the best growth (7.1 percent CAGR) over the next six years, while general hospital and healthcare—the 13th-largest market—will experience the lowest growth (4 percent CAGR).
“The majority of growth in the industry will be coming from in-vitro diagnostics,” report author and EvaluateMedTech product manager Ian Strickland noted. “If you break down that market, the fastest-growing segments will come from molecular diagnostics—looking at DNA and RNA, as well as diagnostic tests. There are a lot of new technologies coming through allowing companies to invent various tests and the like, but the growth is also coupled with personalized medicine. This is particularly the case in the field of cancer, where companies are not trying to develop a drug that will treat all patients for breast or colorectal cancer, for example.
They’re picking out people with a specific mutation and developing a product made specifically to treat that mutation, with fewer side effects. The personalized approach really is where the future growth will be coming from in the in-vitro diagnostic sector.”
(Editor’s note: For more on the in-vitro diagnostics sector, see this issue’s feature on page 46.)
The personalized approach also could fuel future growth in orthopedics, where manufacturers are designing implant jigs, tools and artificial joints to match individual patient anatomies. mhealth could experience a major surge as well, considering Google and Apple Inc.’s respective investments in the burgeoning field (the two rivals partnered last year in a biotech company tasked with extending human life).
“We have seen a lot of progress in the area of personalized devices this year. There have been a number of announcements in that area, especially in the orthopedic sector, where the process creating personalized implants starts with patient imaging. Based on that imaging, a number of companies are manufacturing implants specifically for that patient,” said Daniel R. Matlis, president of Yardley, Pa.-based Axendia, an analyst and strategic advisory firm focused on the life-science and healthcare markets.
“Personalization is now coming to fruition and we expect to see increased interest and development in this area in the near future.
Medical device apps will continue to be an area of opportunity as well, but right now, it’s a bit of gray area. The FDA is basing its regulation of medical apps on ‘Product Labeling’ and ‘Intended Use.’ For example, the iPhone 6 has a health app built into it, but Apple is not ‘labeling’ or marketing it as a medical device. However, there are companies building medical device apps specifically for mobile devices like iPhone and iPad. For example, AliveCor markets an app you can use for ECG [electrocardiography]. In that case, AliveCor sought and received FDA clearance to detect serious heart conditions in an ECG on a mobile device since the complete package is intended as medical device. The line in the sand on which apps and mobile devices are considered medical devices will continue to shift as the technology and regulatory framework continue to evolve.”
2014 Instant Replay?
Certainly, mhealth and personalized devices are likely to play increasingly important roles next year as the medtech industry responds to the demands of a rapidly changing market. Issues such as device cybersecurity, clinical trial reform, commoditization and outsourcing are expected to figure prominently into the 2015 storyline, too, though these matters might very well be overshadowed by repeat performances from shy venture capitalists, stingy health insurers, foreign-faithful firms, merciless device tax assassins, and of course, regulatory reformists.
The latter group could be the most influential faction in 2015, as it continues to advocate for improvements to the FDA’s product approval process. Regulatory reform, the group contends, is the only way to keep U.S. companies from unveiling their products overseas first.
“While MDUFA [Medical Device User Fee Agreement] has been implemented for two years now, we have been hearing anecdotally that there has been better communications from the FDA to innovators as they seek clearance or approval of their technologies,” said Leahey. “At the same time, there continues to be concerns that cutting-edge devices developed in the United States are available to patients outside of the U.S. first. In order for the United States to continue leading the world in this industry, it is essential that FDA and innovators strive to improve the regulatory environment.”
Improvement, however, can take many forms. As industry leaders wait for sweeping regulatory changes from the FDA, other observers are celebrating the small victories associated with true reform.
“The fact that there are programs in place is an improvement from last year. When you talk about health, once you’re diagnosed, once you know what the issue is and you have a plan to treat the diagnosis, one would say you have a plan to get better. And like any treatment of any issue, the goal is to get better, not to get worse,” ICON’s Anastasi said. “We identified the issues and we defined the programs by which we will attempt to solve these issues. As long as we continue to incorporate healthcare economics, pricing, reimbursement and regulatory all in the same conversation and keep them on the same playing field, we’re moving in the right direction to have the United States be the market entry point for innovative products.”
And perhaps finally escaping the loop.