Michael Barbella, Managing Editor11.01.23
The world finally woke from its long, dreadful nightmare this year.
Forty months after declaring the SARS-CoV-2 virus a global threat, WHO’s director-general officially ended the COVID-19 public health emergency on May 11. “For more than a year, the pandemic has been on a downward trend…” Tedros Adhanom Ghebreyesus stated at a media briefing in Geneva. “This trend has allowed most countries to return to life as we knew it before COVID-19. It is therefore with great hope that I declare COVID-19 over as a global health emergency.”
Free at last.
Free with a caveat, actually: Although the global health emergency is over, the pandemic itself is still public threat, Adhanom Ghebreyesus warned, virulent enough to claim a life every three minutes and savvy enough to evade extinction via perpetual mutations.
So the pandemic continues. And, as history has repeatedly proven, it probably will continue for quite some time. Pandemics seldom have clean conclusions; their endings tend to be ragged and messy—similar to life itself. Some return repeatedly before fading (the Black Death reappeared more than 40 times over 400 years), while others never completely go away.
COVID-19 will likely become one of those everlasting nuisances, lurking in the shadows to disrupt life every once in a while. The world now has to adjust to its new normal.
It won’t be easy. “As we have seen time and time again throughout human history,” a Time commentary reminded readers, “pandemics do not end—they echo.”
Better get used to the reverberation.
That is the advice Helena Holma is offering to startups and rookie entrepreneurs intimidated by the new Medical Device Regulation (MDR). “If you are a startup within healthtech—embrace the regulations,” Holma wrote in an early January blog. “There is no way around them and even if they may seem discouraging, remember they are for a good cause—to ensure patient safety and privacy. If you are well familiar with the regulations and include them in your business strategy, it will give you a competitive advantage.”
Perhaps, but MDR compliance is actually more of a necessity these days as Europe transitions to its long-awaited, much-debated, widely-hated medical device certification rules. Implemented in May 2017, European lawmakers drafted the MDR to update the continent’s archaic Medical Device Directive and harmonize the regulatory review and product approval process across all EU member states.
Although the medtech industry lauded the modernized rules—hopeful they would foster more patient-oriented innovation and better support the specific needs of small and medium-sized enterprises—manufacturers took issue with the MDR’s final compliance deadline, contending the three-year window was “unrealistic” and would lead to widespread device shortages. Calls for a deadline extension intensified as the May 26, 2020, due date approached, though the industry received an unexpected (but nevertheless welcome) one-year reprieve courtesy of COVID-19.
Since then, a growing chorus of industry groups and medtech firms have clamored for an extension to the MDR’s May 26, 2024, re-certification deadline, citing massive Notified Body backlogs and protracted reauthorization waits. As of March (2023), those waits averaged anywhere from six to 23 months (for QMS+product certification applications), while authorization requests nearly doubled, going from 6,188 in April 2022 to 11,418 in March 2023, European Commission survey data indicate.
And while certifications more than doubled in that time (1,069 to 2,951), more than 17,000 certifications were still set to expire next May (as of October 2022), including certificates under both the Medical Devices Directive (MDD) and Active Implantable Medical Devices Directive, according to survey results.
Faced with such a staggering certification logjam, the European Commission in January proposed new MDR deadlines, staggering final compliance dates through 2028 based on device risk classification. The proposal also allows products marketed under the MDD to remain, under certain conditions.
Approved by the European Parliament and Council over the winter, the new deadlines extend transition timelines to May 26, 2026, for Class III custom-made implantable devices; Dec. 31, 2027, for higher-risk (mostly) Class III devices and some Class IIb implantables; and Dec. 31, 2028, for medium-risk devices, including Class II products.
“Our rules on medical devices will always prioritise patient safety and support for innovation. A combination of factors has left healthcare systems across the EU facing a risk of shortages of life-saving medical devices for patients,” EU Health and Food Safety Commissioner Stella Kyriakides said in prepared remarks. “...we propose a revised regulatory timeline to provide certainty to industry in order to continue producing essential medical devices, reducing any short-term risk of shortages, and safeguarding access for patients most in need. Member States and notified bodies should work with industry to ensure transition to the new rules provided for by the Medical Devices Regulation, without further delay.”
Sound advice, certainly, but not so sound (or realistic) of a game plan.
Clearly, the deadline extensions give medtech manufacturers and Notified Bodies more time to complete conformity assessments. But the extensions alone will not guarantee regulatory compliance because they fail to resolve the MDR’s other challenges.
Perhaps the most vexing issue that remains unsolved is the inadequate Notified Body (NB) capacity. Thirty-nine NBs currently are authorized to process MDR and IVDR (In Vitro Diagnostic Medical Device Regulation) certification requests but applicants contend that total is insufficient to handle the backlog in a timely manner. NBs, however, claim such criticism is unjustified, noting they have invested in additional staff, training, and infrastructure to manage the caseload increase.
“...notified bodies have invested extensive time and resources to expand their capacity. They have hired a considerable number of additional staff members,” the European Association of Medical Devices Notified Bodies (TEAM-NB) argued in an early August (2023) whitepaper. “Furthermore, notified bodies have actively engaged in training their existing and new personnel to ensure they possess the necessary knowledge and competence to carry out conformity assessments and certifications under the MDR. They have also enhanced their internal processes, expertise, and infrastructure to align with the new regulatory framework.”
Besides defending its capacity improvement efforts, TEAM-NB outlined a strategy in the whitepaper for further easing Notified Bodies’ workloads and expediting MDR certifications. The group suggests:
Indeed, administrative coordination is crucial for MDR’s successful implementation, but it’s only one facet of the many reforms European trade groups claim is needed to prevent treatment delays amid the new rules’ transition. MedTech Europe is calling for “comprehensive” changes to the MDR and IVDR framework to ensure both current and future medical advancements reach European patients and health systems.
In an open letter to Kyriakides, MedTech Europe said the continent’s new device and diagnostics rules have not achieved their intended objectives because their structures are “unpredictable, complex, slow, and costly.”
“It is apparent there are structural issues in the regulatory framework which cannot be solved simply through its implementation,” read the Sept. 14 letter, signed by 34 national trade groups. “Reaching the objectives of the IVDR and MDR in full will require comprehensive change to improve efficiency, support innovation, and strengthen governance...”
In the letter, the trade groups propose changing the CE marking system under the MDR to make it more efficient and reduce the administrative burden. They also recommend creating an “innovation principle” that quickly connects the latest medical technologies to European patients and health systems through dedicated, fast-track assessment pathways and early dialogues with developers. The groups’ final suggestion is establishment of a single, dedicated structure to oversee the regulatory system, including NB designation and oversight.
“Only together can we deliver on the original goals of the IVDR and MDR to develop an effective and fit-for-purpose regulatory system for the benefit of European patients, health systems, and society,” the letter concluded.
Bureaucracy be damned.
Read more: bit.ly/3F3kiCP
Click the graphic to gain insights from MPO's Editorial Advisory Board on what they saw as must significant in 2023 and what they will be watching in 2024.
Darwell doesn’t venture out much these days.
COPD (chronic obstructive pulmonary disease) and other respiratory conditions keep him mostly confined to his home, where the air is safe to breathe. “I don’t really even come outside,” the South Memphis, Tenn., resident told WHBQ-TV (Memphis) this past spring. “I stay in the house most of the time. I worry about the pollutants in the air.”
Darwell has good reason to fret: He lives near a 45,000-square-foot sterilization plant that uses ethlyene oxide (EtO) to disinfect medical devices. The colorless, faintly sweet-smelling gas has been used for more than half a century to avert implant- and hospital-related infections, but the longstanding practice garnered new scrutiny after the U.S. Environmental Protection Agency (EPA) deemed EtO a human carcinogen in 2016.
That label has since sparked a firestorm of controversy over the gas’s long-term health hazards, pitting community activists against medtech executives in a protracted public health versus public safety tug of war. Concerns about EtO’s penchant for altering genes and changing chromosomes has consistently been met with disdain from an industry that depends on the gas to sterilize devices (pacemakers, catheters, ventilators, heart valves) ineligible for steam cleaning.
“EtO sterilization is crucial for preventing infection in patients. The process is used to sterilize half, or 20 billion, of all medical devices in the United States each year,” Khatereh Calleja, vice president of Technology and Regulatory Affairs at AdvaMed, wrote in comments to the EPA this past spring. “...it is the only effective, viable sterilization method for many medical devices. Medical device sterilization is a tiny fraction of commercial uses of EtO, representing only half of 1 percent of all commercial EtO use. But the risk of a public health threat is real if we are constrained in our ability to serve patients with the safe, effective, sterile medical technology...It is critically important that EPA recognize the importance of EtO in our healthcare system, and for individual patients.”
The EPA, however, must balance that importance with its namesake duty to protect human health and the environment. Accordingly, the agency proposed stricter new EtO emissions rules in April to help reduce lifetime cancer risks amongst commercial sterilization plant workers and host community residents. Specifically, the agency wants all 86 U.S. sterilization facilities to cut EtO emissions by 80% annually; continually monitor air pollution (and report data biannually); and reduce EtO sterilization cycle volume to a maximum 500 milligrams/liter of air. The updated standards also would require sterilization plants to conduct real-time monitoring to ensure their pollution control efforts keep indoor EtO levels below 10 parts per billion; levels above that threshold would necessitate protective equipment for workers.
“EPA’s number one priority is protecting people’s health and safety, and we are committed to taking decisive action that’s informed by the best available science,” EPA Administrator Michael S. Regan stated upon announcing the rules. “These proposals build on EPA’s outreach to communities across the nation and reflects close coordination among key federal partners. Together they would significantly reduce worker and community exposure to harmful levels of ethylene oxide.”
The EPA worked with several other agencies to draft the proposed rules, including the U.S. Food and Drug Administration (FDA), U.S. Centers for Disease Control and Prevention’s Agency for Toxic Substances and Disease Registry, and the Occupational Safety and Health Administration. The proposals are well-aligned with the Biden Administration’s Cancer Moonshot initiative and its efforts to secure environmental justice and safeguard public health in the nation’s at-risk communities (where a majority of medical sterilization plants are located).
“A lot of people feel like they put these [plants] in areas where there are mostly African Americans and people of color,” South Memphis resident Tanesha Bates declared to WHBQ, “knowing that it will cause dangerous things to happen to us.”
Dangerous and potentially deadly things: Lifetime cancer risks range from 1 in 36 to 1 in 10 for sterilization plant workers, and 1 in 25 to 1 in 12 for healthcare (hospital) sterilization operatives, EPA data indicate. An estimated 100 in 1 million people living or working near sterilization facilities—like Bates, Darwell, and breast cancer survivor Dolly M. Cross—are at risk of developing the disease, the agency claims, though the Texas Commission on Environmental Quality disputes such statistics. “EtO has not been conclusively demonstrated to cause cancer in people,” the Commission contends.
Regardless of disputed proof, the EPA is giving sterilization facilities 18 months to comply with its proposed new rules, once they are finalized (the agency is under court order to do so by March 1, 2024). Predictably, medtech industry groups are balking at the timeline and warning of “grave” supply chain consequences.
“We understand EPA’s interest in moving more quickly than usual on these priorities; however, these proposed standards are highly technical and require in-depth analyses and research on the part of organizations that utilize EtO for sterilization. They likely will require significant financial, time and resource commitments,” American Hospital Association Executive Vice President Stacey Hughes told Regan in a June 27 letter. “We are concerned that the proposed 18-month timeline is too aggressive and could result in significant disruption to the supply chain leading to decreased sterilization capacity and supply availability across the country. With device sterilization capabilities already at or near capacity across the country, we strongly encourage the agency to consider employing its traditional three-year implementation timeline to the standards if made final. This will allow these facilities more time to come into compliance prior to enforcement in an effort to help prevent the closure, temporary or permanent, of any of these facilities.”
AdvaMed supports a four-year timeline with the “ability to make case-by-case exceptions in special circumstances.” Attempting to meet the EPA’s 18-month compliance deadline could lead to the simultaneous shutdown/suspension of all U.S. sterilization facilities, the organization argues.
Thankfully, there’s an escape hatch: The FDA announced a pilot program in April to help companies adopt new ways of sterilizing approved, single-use medical devices. The voluntary program is open to in-house and contract sterilization providers that want to move a gamma radiation process to a different site; switch from gamma radiation or EtO to X-ray or electron beam radiation; or use a lower dose of gamma radiation.
Sterilization providers accepted into the program (two of the nine available slots have gone to STERIS and Andersen Sterilizers) must submit a Master File when making changes. Once the Master File is accepted into the pilot program, the pre-market approval (PMA) holder may reference the document in a post-approval report to describe the sterilization changes, thereby freeing manufacturers from submitting PMA supplements for the changes.
“FDA recognizes the need to facilitate more timely changes to alternative sterilization methods, processes, or sites among sterilization providers who use gamma radiation or EO to support sterilization supply chain resiliency,” FDA Associate Policy Commissioner Lauren K. Roth wrote in a 12-page document outlining the program. “By helping industry advance alternatives for gamma radiation and EO sterilization of medical devices, the Radiation Pilot Program seeks to help ensure patient access to safe medical devices and, through evaluation of data from pilot participants, provide insights into future regulatory approaches that may help address potential device shortages related to sterilization site, method, or process shifts, and facilitate supply chain resiliency.”
Finally, a long overdue cleaning.
Read more: bit.ly/48Sug7N
The banana whey breakfasts, black suit-dresses, and maternity wear are nowhere to be found, either.
Also gone? The bucket hats and mom jeans.
Meet Elizabeth Holmes 3.0, proud Brazos Valley resident and newfound enthusiast of all things khaki. The former founder/CEO of failed blood testing startup Theranos reinvented herself yet again this year, shedding her image as “Liz,” the gentle, somewhat reserved doting mother of two (itself a departure from the cold, calculating con artist persona) for that of inmate No. 24965-111 at Federal Prison Camp, Bryan.
Holmes assumed her new role on May 30, the first day of the 135-month jail term she received late last year for defrauding her company’s investors. The one-time billionaire tried her damnedness to avoid prison, appealing her conviction over alleged trial-related mistakes, misconduct, and jury bias, and requesting to remain free while the appeal unfolded. When that bid failed, Holmes contested her prison sentence start date but deliberately waited until the day before her scheduled surrender (April 27) to file an appeal—a trick she learned from her former lover and Theranos henchman Ramesh “Sunny” Balwani, who used the legal maneuver to delay the start of his 155-month prison term by five weeks.
Co-conspirators to the very end.
Unsuccessful co-conspirators, at that—the pair’s crafty delay tactic gave them only a few more weeks of freedom upon its rejection by an appeals court: Balwani surrendered on April 20 and Holmes arrived in Bryan after Memorial Day.
Balwani’s attorney, however, is not giving up on his client. “We will continue to fight for him,” Seattle trial lawyer Jeffrey B. Coopersmith told CNN, “because we do not believe he received a fair trial.”
A 13-week trial last year resulted in Balwani’s conviction on 10 counts of federal wire fraud and two counts of conspiracy to commit wire fraud for deceiving patients and Theranos investors about the company’s flawed blood testing technology. Holmes’ separate four-month trial yielded fraud and conspiracy convictions as well as a profusion of regret about past decisions.
“ I am devastated by my failings,” she told U.S. District Court Judge Edward J. Davila at her sentencing. “Every day for the past years I have felt deep pain for what people went through because I failed them. I regret my failings with every cell of my body.”
Fortunately, Holmes has a shot at redemption. About two weeks before she reported to prison, Davila ordered her and Balwani to pay $452 million in restitution to victims of their crimes, including $40 million to Walgreens, $14.5 million to Safeway, and $125 million to Rupert Murdoch, a Theranos investor. Naturally, Holmes balked at the order, claiming she cannot afford such expensive penance in her post-prison life, even when broken down into a $250 monthly payment plan (prosecutors’ suggestion). “I have to work the rest of my life to try to pay for it,” she told New York Times reporter Amy Chozick in May.
Maybe she can get a head start with her prison job as a factory line food packer—it pays up to 12 cents an hour.
At that rate, she’ll have enough saved up for her first 11 post-incarceration restitution payments—assuming, of course, she serves her entire prison term.
But that seems highly unlikely. About 40 or so days after starting her Camp Bryan residency, the Federal Bureau of Prisons posted a projected release date for Holmes that is nearly two years earlier than expected. If it’s accurate and remains unchanged, Holmes could be freed on Dec. 29, 2032.
Happy New Year to “Liz.”
Or will it be Elizabeth (again) by then? Not the calm, unemotional, taciturn tech mogul, obviously, but an entirely new character inspired by her imprisonment. Remorseful Lizzie perhaps?
Probably not—that would require compassion.
Regardless of her supposed new identity, the projected release date is most likely the earliest Holmes can expect to be freed, as federal law requires her to serve 85% of her term, even if prison administrators reduce her sentence for good conduct (quite possible, given Holmes’s delicate flower persona she debuted in the Times profile).
Good conduct actually is the probable source of Holmes’s potential earlier release date.
The camp where Liz is spending the next decade or so houses mostly white-collar and non-violent federal female inmates who can earn good conduct time (GCT) to reduce their total incarceration period, according to CNN. A Bureau of Prisons spokesperson told the cable news channel that qualified inmates can earn up to 54 days of GCT for each year of their court-imposed sentence. Prisoners can earn GCT various ways during their stay, including participation in various Camp Bryan programs.
Earning good conduct time also means following basic prison rules like no intimacy with spouses (a brief kiss, embrace, or handshake is allowed only upon arrival and departure) and no internet access (radios, MP3 players, watches are allowed, purchased through the prison’s commissary), Bureau of Prison rules indicate.
Moreover, Holmes is allowed only 300 minutes (five hours) per month to speak to loved ones by phone, and can only receive visitors on weekends. Any music she listens to must be “non-explicit” and her television viewing time is limited to designated hours at the prison staff’s discretion, according to NPR. Her choices for recreational activities are beading, knitting, ceramics, paper art, fimo, crocheting, quilling, and plastic canvas.
Maybe Holmes will emerge from prison as Liz the artist.
“Holmes may never have perfected Theranos’s blood-testing technology but she was always brilliant at branding,” Guardian columnist Arwa Mahdawi wrote in an opinion piece this past May.
“Before everything fell apart, the press ate her image up. Now that her previous incarnation has failed, it’s fascinating to watch Holmes pivot. One imagines that Holmes hopes her transformation into Liz will improve her image and perhaps shorten her prison sentence. So will it? Will the right people buy her metamorphosis?”
That will depend on whether those people have fallen for it once (or twice) before.
Read more: bit.ly/3ZXC7fZ
Nowhere in plain sight, anyway. By some estimates, the end could be 2,548 days away, give or take a handful of 24-hour periods.
That final day—sometime in late September 2030—can’t come soon enough for Royal Philips, as it could mark the end of one of the largest and most disruptive product recalls in more than a decade.
Philips has been struggling for 30 months (913 days, give or take a few) to right the wrongs inflicted on sleep apnea sufferers by its faulty CPAP, BiPAP, and mechanical ventilator devices. The Dutch multinational conglomerate initiated the recall on April 26, 2021, upon learning the interior sound abatement foam in its DreamStation product line could possibly break off and enter users’ airways, causing skin, eye, or respiratory tract irritation as well as internal organ damage.
Over the next 17 months, the recall—eventually deemed Class I by the U.S. Food and Drug Administration (FDA)—grew to encompass 5.5 million ventilators, including Philips’ V60 and V60 Plus machines (an oxygen flow safety mechanism problem); the Trilogy Evo ventilator and Evo muffler assembly repair kits (sound abatement foam); the Respironics V60, V60 Plus, and V680 devices (internal electrical circuit issue); CPAP and BiPAP therapy masks with magnetic headgear (potential negative interactions with implantable metal devices); and 386 BiPAP ventilators for possible plastic contamination.
Among the early casualties of Philips’ recall—besides patients—was former CEO Frans van Houten, who spent nearly a dozen years at the helm and orchestrated the firm’s lighting and consumer electronics business divestitures. “If you have three recalls in 10 years, it’s too much. His [van Houten’s] position had become untenable,” InsingerGilissen analyst Jos Versteeg told Reuters last summer, referring to a 2017 defibrillator recall and 2014 medical scanner problems. “This situation is not really under control...”
van Houten’s successor vowed to bring the recall under control, but that pledge soon proved difficult to fulfill. In the first few months of Roy Jakobs’ rule, Philips recalled certain reworked Trilogy 100/200 and Garbin Plus ventilators, as well as some reworked DreamStation devices. In addition, the number of medical device reports filed with the FDA between April 21, 2021, and March 31, 2023, swelled to 105,000, with 385 reported deaths.
Although Philips made considerable progress this past spring in replacing all the machines it pulled from the market—producing 98% of the devices and repair kits in question and shipping surrogate products to 2.83 million affected users—its road to recall redemption remains long and arduous. Besides lingering consent decree negotiations with the U.S. Department of Justice, the company faces an investigation by French bureaucrats, thousands of personal injury/medical monitoring claims, and a massive class-action lawsuit.
Earlier this fall, the company negotiated a $479 million settlement over one set of complaints in the class-action suit, agreeing to pay those who purchased, leased or rented its recalled machines $55-$1,552 per device (depending on the model) and an additional $100 for every machine returned, according to court filings cited by the Washington Post. Philips did not admit any liability, wrongdoing, or fault as part of the settlement.
The payout covers only economic loss claims submitted through the class action; it does not include personal injury and/or wrongful death claims, or medical monitoring requests. Payments—funded through a €575 million kitty set aside for such purposes—could begin next quarter, though the timetable is still subject to change.
Another setback along Philips’ atonement path arrived earlier this fall amid serious accusations about its past knowledge of the faulty breathing machines. An investigation by ProPublica and The Pittsburgh Post-Gazette claimed company executives were aware of the CPAP and BiPAP devices’ disintegrating foam for 11 years before recalling the products.
The media partners based their conclusions by analyzing tens of thousands of reports that showed the company withheld more than 3,700 complaints over 11 years from the FDA and only launched a formal investigation in 2019. “...as the complaints continued to pile up in company files, Philips waged aggressive global marketing campaigns to sell more machines, including new models fitted with the hazardous foam,” the Sept. 27 ProPublica-Post-Gazette article stated. “The devices went to infants, the elderly and at least 700,000 veterans. Philips didn’t stop even after the company learned the foam was breaking down in its ventilators in Japan and had to be replaced—and after tests in the United States revealed the material released chemicals at dangerous levels.
Among them: formaldehyde, a compound used in fertilizer, dyes and glues that has been tied to respiratory problems and certain cancers.”
Philips, naturally, denied the charges. Last December, the company released results from tests on its recalled DreamStation sleep therapy devices that showed exposure to certain emissions is “unlikely to result in appreciable harm to health in patients.”
“Philips had previously responded to ProPublica and the Pittsburgh Post-Gazette in the U.S., and NRC in the Netherlands. The articles do not present new facts and we do not agree with the characterizations made in these articles,” a formal company statement read. “Philips’ priority is patient safety and quality. We understand how important Philips Respironics’ sleep therapy devices and ventilators are to patients that use them. Philips regrets any distress and concern for patients, their families and care providers in this matter, and deeply apologizes for this. Philips acted to protect patient safety by initiating and executing a voluntary recall notification/field safety notice of significant scale.”
Maybe so, but it came too late, patients and former Philips employees contended in the ProPublica-Post Gazette investigation. The article specifically named van Houten and Jakobs as main culprits in the cover-up, contending the former touted “very positive” customer responses to its breathing machines in 2020, and the latter acknowledging (in May 2023) complaints about the devices in 2015. The investigation also noted that Jakobs headed the division responsible for producing sleep apnea machines and ventilators as problems with the foam worsened.
“I truly believe those folks knew about it all along,” a former regulatory supervisor at Philips told ProPublica-Post-Gazette reporters. “They tried to keep it pinned down as much as possible.”
Neither van Houten nor Jakobs commented on the story.
“They knew about it, did nothing about it and then started working on a fix,” Brett Stassi, a kidney cancer patient who is suing Philips, griped to ProPublica-Post-Gazette investigators. “People matter. You only get one chance to do it right.”
Unfortunately, Philips may have already missed that chance.
Read more: bit.ly/3rXMcxa
Among the more notable lines from the five-act comedy—besides the title—are “Love all, trust a few, do wrong to none...” “No legacy is so rich as honesty,” and “Good alone is good without a name, vileness is so.”
There’s another line, however, that’s far less prominent but nevertheless applicable to 21st century living: “...Oft expectation fails and most oft there; Where most it promises, and oft it hits; Where hope is coldest and despair most fits.”
Translation? Great expectations beget great disappointments.
All too true.
Consider, for example, the past year in medtech M&A. Analysts expected deal volume and value to bounce back significantly in 2023 after falling sharply last year from 2021’s exceptionally high levels. That logic was based on the strong balance sheets diagnostics companies built from COVID-19 testing and vaccine revenue as well as “opportunistic equity and debt raises” resulting from low interest rates, MM+M (Medical Marketing and Media) reported.
“With this backdrop in mind, the conditions appear ripe for a return to historical M&A activity in 2023 and 2024 despite elevated interest rates as large-cap names in LST [life science tools] and Dx seek to deploy their cash balance or lever themselves for the appropriate asset (public or private),” predicted an SVB Securities report published earlier this year. Also contributing to SVB’s dealmaking optimism was the life sciences industry’s limited ability to raise capital and falling multiples, MM+M noted.
Great Expectations.
But those falling multiples, capital-raising difficulties, and huge cash balances failed to restore medtech merger and acquisition activity to its former glory. In H1 2023, venture financing suffered its worst showing in eight years and public exits stopped altogether, pushing transaction dollars and tallies toward historic lows.
Great Disappointment.
While deal volume was strong through June 30 (42 total), overall M&A value was down significantly from last year and exponentially from 2021, data from several industry sources show. Buyers poured $13.1 billion into agreements during the first six months of 2023—a paltry start compared to the previous two years’ totals ($64.8 billion in 2022, $80.5 billion in 2021).
Analysts and M&A advisors attribute this year’s leaner deal value total to the lack of megamergers—i.e., the blockbuster marriages between juggernauts like Medtronic and Covidien, Zimmer Holdings and Biomet, Abbott and St. Jude Medical, BD and C.R. Bard, and Johnson & Johnson and Abiomed, among others.
“There’s not as many of the megadeals that have taken place—the larger strategics combining. There’s some of that going on, like Globus just combined with NuVasive but they were smaller companies comparatively, if you think about some of the previous years where Becton Dickinson bought out Bard and Medtronic bought out Covidien,” Dave Sheppard, managing director and COO of M&A advisory firm MedWorld Advisors, noted in a Sept. 27 webinar. “The value of deals may be less but the actual volume of deals is continuing to be very strong. They are very focused strategic deals and very opportunistic for private equity as well.”
While lingering inflation, rising interest rates, and recession fears certainly unnerved buyers this year, regulatory concerns and integration issues likely were greater obstacles to sizable acquisitions. Companies initiating megadeals will often divest parts of the business that no longer strategically fit into the combined entity’s future growth strategy, M&A advisors note.
Cases in point: Baxter International and BD each have conducted major acquisitions in recent years, and both divested part of their respective businesses in 2023. Baxter sold its biopharma solutions business in May for $4.25 billion to two private equity firms to reduce its $16 billion debt load, part of which it assumed in acquiring Hillrom two years ago for $12.7 billion (a portion of that transaction was funded by debt).
BD, meanwhile, sold its surgical instrumentation platform in June to STERIS for $540 million to simplify its product portfolio and manufacturing network.
Baxter’s divestiture was the largest deal (value-wise) to occur in the first half of 2023. Others included Coloplast’s $1.3 billion purchase of Kerecis; Resonetics’ $900 million purchase of Memry Corp. and SAES Smart Materials from Italy-based parent company SAES Getters S.p.A.; Abbott’s $890 million buyout of Cardiovascular Systems Inc.; and Medtronic’s $738 million bid for EOFlow.
“We’ve seen some quite large deals,” Medword Advisors President Florence Joffroy Black explained in the webinar, “but the focus right now is on quality mid-market deals and strategic acquisitions rather than the big multi-billion-dollar deals that we’ve seen in the past.”
There were plenty of those mid-market deals and strategic acquisitions this year: Olympus bolstered its GI product lineup with the $370 million addition of Korean gastrointestinal metallic stent maker Taewoong Medical; ResMed expanded its sleep management software portfolio (and further encroached on Philips’ dwindling market share) with its purchase of Somnoware; Merit Medical chased dialysis and biopsy market share with its $100 million offer for AngioDynamics’ catheter portfolio and biopsy system; and Varian (a Siemens Healthineers company) expanded its advanced oncology solutions offerings with its pickup of Aspekt Solutions.
“Mid-market deals are in more demand than ever,” Joffroy-Black said. “It’s definitely the sweet spot for M&A without a doubt.”
And the path to sweeter profits, for sure.
Read more: bit.ly/3tAR4bO
Forty months after declaring the SARS-CoV-2 virus a global threat, WHO’s director-general officially ended the COVID-19 public health emergency on May 11. “For more than a year, the pandemic has been on a downward trend…” Tedros Adhanom Ghebreyesus stated at a media briefing in Geneva. “This trend has allowed most countries to return to life as we knew it before COVID-19. It is therefore with great hope that I declare COVID-19 over as a global health emergency.”
Free at last.
Free with a caveat, actually: Although the global health emergency is over, the pandemic itself is still public threat, Adhanom Ghebreyesus warned, virulent enough to claim a life every three minutes and savvy enough to evade extinction via perpetual mutations.
So the pandemic continues. And, as history has repeatedly proven, it probably will continue for quite some time. Pandemics seldom have clean conclusions; their endings tend to be ragged and messy—similar to life itself. Some return repeatedly before fading (the Black Death reappeared more than 40 times over 400 years), while others never completely go away.
COVID-19 will likely become one of those everlasting nuisances, lurking in the shadows to disrupt life every once in a while. The world now has to adjust to its new normal.
It won’t be easy. “As we have seen time and time again throughout human history,” a Time commentary reminded readers, “pandemics do not end—they echo.”
Better get used to the reverberation.
MDR’s Maddening Merry-Go-Round
Keep Cool About the Rule.That is the advice Helena Holma is offering to startups and rookie entrepreneurs intimidated by the new Medical Device Regulation (MDR). “If you are a startup within healthtech—embrace the regulations,” Holma wrote in an early January blog. “There is no way around them and even if they may seem discouraging, remember they are for a good cause—to ensure patient safety and privacy. If you are well familiar with the regulations and include them in your business strategy, it will give you a competitive advantage.”
Perhaps, but MDR compliance is actually more of a necessity these days as Europe transitions to its long-awaited, much-debated, widely-hated medical device certification rules. Implemented in May 2017, European lawmakers drafted the MDR to update the continent’s archaic Medical Device Directive and harmonize the regulatory review and product approval process across all EU member states.
Although the medtech industry lauded the modernized rules—hopeful they would foster more patient-oriented innovation and better support the specific needs of small and medium-sized enterprises—manufacturers took issue with the MDR’s final compliance deadline, contending the three-year window was “unrealistic” and would lead to widespread device shortages. Calls for a deadline extension intensified as the May 26, 2020, due date approached, though the industry received an unexpected (but nevertheless welcome) one-year reprieve courtesy of COVID-19.
Since then, a growing chorus of industry groups and medtech firms have clamored for an extension to the MDR’s May 26, 2024, re-certification deadline, citing massive Notified Body backlogs and protracted reauthorization waits. As of March (2023), those waits averaged anywhere from six to 23 months (for QMS+product certification applications), while authorization requests nearly doubled, going from 6,188 in April 2022 to 11,418 in March 2023, European Commission survey data indicate.
And while certifications more than doubled in that time (1,069 to 2,951), more than 17,000 certifications were still set to expire next May (as of October 2022), including certificates under both the Medical Devices Directive (MDD) and Active Implantable Medical Devices Directive, according to survey results.
Faced with such a staggering certification logjam, the European Commission in January proposed new MDR deadlines, staggering final compliance dates through 2028 based on device risk classification. The proposal also allows products marketed under the MDD to remain, under certain conditions.
Approved by the European Parliament and Council over the winter, the new deadlines extend transition timelines to May 26, 2026, for Class III custom-made implantable devices; Dec. 31, 2027, for higher-risk (mostly) Class III devices and some Class IIb implantables; and Dec. 31, 2028, for medium-risk devices, including Class II products.
“Our rules on medical devices will always prioritise patient safety and support for innovation. A combination of factors has left healthcare systems across the EU facing a risk of shortages of life-saving medical devices for patients,” EU Health and Food Safety Commissioner Stella Kyriakides said in prepared remarks. “...we propose a revised regulatory timeline to provide certainty to industry in order to continue producing essential medical devices, reducing any short-term risk of shortages, and safeguarding access for patients most in need. Member States and notified bodies should work with industry to ensure transition to the new rules provided for by the Medical Devices Regulation, without further delay.”
Sound advice, certainly, but not so sound (or realistic) of a game plan.
Clearly, the deadline extensions give medtech manufacturers and Notified Bodies more time to complete conformity assessments. But the extensions alone will not guarantee regulatory compliance because they fail to resolve the MDR’s other challenges.
Perhaps the most vexing issue that remains unsolved is the inadequate Notified Body (NB) capacity. Thirty-nine NBs currently are authorized to process MDR and IVDR (In Vitro Diagnostic Medical Device Regulation) certification requests but applicants contend that total is insufficient to handle the backlog in a timely manner. NBs, however, claim such criticism is unjustified, noting they have invested in additional staff, training, and infrastructure to manage the caseload increase.
“...notified bodies have invested extensive time and resources to expand their capacity. They have hired a considerable number of additional staff members,” the European Association of Medical Devices Notified Bodies (TEAM-NB) argued in an early August (2023) whitepaper. “Furthermore, notified bodies have actively engaged in training their existing and new personnel to ensure they possess the necessary knowledge and competence to carry out conformity assessments and certifications under the MDR. They have also enhanced their internal processes, expertise, and infrastructure to align with the new regulatory framework.”
Besides defending its capacity improvement efforts, TEAM-NB outlined a strategy in the whitepaper for further easing Notified Bodies’ workloads and expediting MDR certifications. The group suggests:
- Making better use of hybrid audits, and combining audits under the directives and regulations for legacy products;
- Abandoning technical documentation sampling for MDR devices;
- Promptly adding designation codes to NBs;
- Improving dialogue between regulators and stakeholders;
- Reducing NB designation timelines;
- Developing alternative competency demonstration methods;
- Harmonizing procedures and enhancing predictability; and
- Increasing complete (and timely) MDR applications.
Indeed, administrative coordination is crucial for MDR’s successful implementation, but it’s only one facet of the many reforms European trade groups claim is needed to prevent treatment delays amid the new rules’ transition. MedTech Europe is calling for “comprehensive” changes to the MDR and IVDR framework to ensure both current and future medical advancements reach European patients and health systems.
In an open letter to Kyriakides, MedTech Europe said the continent’s new device and diagnostics rules have not achieved their intended objectives because their structures are “unpredictable, complex, slow, and costly.”
“It is apparent there are structural issues in the regulatory framework which cannot be solved simply through its implementation,” read the Sept. 14 letter, signed by 34 national trade groups. “Reaching the objectives of the IVDR and MDR in full will require comprehensive change to improve efficiency, support innovation, and strengthen governance...”
In the letter, the trade groups propose changing the CE marking system under the MDR to make it more efficient and reduce the administrative burden. They also recommend creating an “innovation principle” that quickly connects the latest medical technologies to European patients and health systems through dedicated, fast-track assessment pathways and early dialogues with developers. The groups’ final suggestion is establishment of a single, dedicated structure to oversee the regulatory system, including NB designation and oversight.
“Only together can we deliver on the original goals of the IVDR and MDR to develop an effective and fit-for-purpose regulatory system for the benefit of European patients, health systems, and society,” the letter concluded.
Bureaucracy be damned.
Read more: bit.ly/3F3kiCP
Click the graphic to gain insights from MPO's Editorial Advisory Board on what they saw as must significant in 2023 and what they will be watching in 2024.
A Clean Start?
Darwell doesn’t venture out much these days.COPD (chronic obstructive pulmonary disease) and other respiratory conditions keep him mostly confined to his home, where the air is safe to breathe. “I don’t really even come outside,” the South Memphis, Tenn., resident told WHBQ-TV (Memphis) this past spring. “I stay in the house most of the time. I worry about the pollutants in the air.”
Darwell has good reason to fret: He lives near a 45,000-square-foot sterilization plant that uses ethlyene oxide (EtO) to disinfect medical devices. The colorless, faintly sweet-smelling gas has been used for more than half a century to avert implant- and hospital-related infections, but the longstanding practice garnered new scrutiny after the U.S. Environmental Protection Agency (EPA) deemed EtO a human carcinogen in 2016.
That label has since sparked a firestorm of controversy over the gas’s long-term health hazards, pitting community activists against medtech executives in a protracted public health versus public safety tug of war. Concerns about EtO’s penchant for altering genes and changing chromosomes has consistently been met with disdain from an industry that depends on the gas to sterilize devices (pacemakers, catheters, ventilators, heart valves) ineligible for steam cleaning.
“EtO sterilization is crucial for preventing infection in patients. The process is used to sterilize half, or 20 billion, of all medical devices in the United States each year,” Khatereh Calleja, vice president of Technology and Regulatory Affairs at AdvaMed, wrote in comments to the EPA this past spring. “...it is the only effective, viable sterilization method for many medical devices. Medical device sterilization is a tiny fraction of commercial uses of EtO, representing only half of 1 percent of all commercial EtO use. But the risk of a public health threat is real if we are constrained in our ability to serve patients with the safe, effective, sterile medical technology...It is critically important that EPA recognize the importance of EtO in our healthcare system, and for individual patients.”
The EPA, however, must balance that importance with its namesake duty to protect human health and the environment. Accordingly, the agency proposed stricter new EtO emissions rules in April to help reduce lifetime cancer risks amongst commercial sterilization plant workers and host community residents. Specifically, the agency wants all 86 U.S. sterilization facilities to cut EtO emissions by 80% annually; continually monitor air pollution (and report data biannually); and reduce EtO sterilization cycle volume to a maximum 500 milligrams/liter of air. The updated standards also would require sterilization plants to conduct real-time monitoring to ensure their pollution control efforts keep indoor EtO levels below 10 parts per billion; levels above that threshold would necessitate protective equipment for workers.
“EPA’s number one priority is protecting people’s health and safety, and we are committed to taking decisive action that’s informed by the best available science,” EPA Administrator Michael S. Regan stated upon announcing the rules. “These proposals build on EPA’s outreach to communities across the nation and reflects close coordination among key federal partners. Together they would significantly reduce worker and community exposure to harmful levels of ethylene oxide.”
The EPA worked with several other agencies to draft the proposed rules, including the U.S. Food and Drug Administration (FDA), U.S. Centers for Disease Control and Prevention’s Agency for Toxic Substances and Disease Registry, and the Occupational Safety and Health Administration. The proposals are well-aligned with the Biden Administration’s Cancer Moonshot initiative and its efforts to secure environmental justice and safeguard public health in the nation’s at-risk communities (where a majority of medical sterilization plants are located).
“A lot of people feel like they put these [plants] in areas where there are mostly African Americans and people of color,” South Memphis resident Tanesha Bates declared to WHBQ, “knowing that it will cause dangerous things to happen to us.”
Dangerous and potentially deadly things: Lifetime cancer risks range from 1 in 36 to 1 in 10 for sterilization plant workers, and 1 in 25 to 1 in 12 for healthcare (hospital) sterilization operatives, EPA data indicate. An estimated 100 in 1 million people living or working near sterilization facilities—like Bates, Darwell, and breast cancer survivor Dolly M. Cross—are at risk of developing the disease, the agency claims, though the Texas Commission on Environmental Quality disputes such statistics. “EtO has not been conclusively demonstrated to cause cancer in people,” the Commission contends.
Regardless of disputed proof, the EPA is giving sterilization facilities 18 months to comply with its proposed new rules, once they are finalized (the agency is under court order to do so by March 1, 2024). Predictably, medtech industry groups are balking at the timeline and warning of “grave” supply chain consequences.
“We understand EPA’s interest in moving more quickly than usual on these priorities; however, these proposed standards are highly technical and require in-depth analyses and research on the part of organizations that utilize EtO for sterilization. They likely will require significant financial, time and resource commitments,” American Hospital Association Executive Vice President Stacey Hughes told Regan in a June 27 letter. “We are concerned that the proposed 18-month timeline is too aggressive and could result in significant disruption to the supply chain leading to decreased sterilization capacity and supply availability across the country. With device sterilization capabilities already at or near capacity across the country, we strongly encourage the agency to consider employing its traditional three-year implementation timeline to the standards if made final. This will allow these facilities more time to come into compliance prior to enforcement in an effort to help prevent the closure, temporary or permanent, of any of these facilities.”
AdvaMed supports a four-year timeline with the “ability to make case-by-case exceptions in special circumstances.” Attempting to meet the EPA’s 18-month compliance deadline could lead to the simultaneous shutdown/suspension of all U.S. sterilization facilities, the organization argues.
Thankfully, there’s an escape hatch: The FDA announced a pilot program in April to help companies adopt new ways of sterilizing approved, single-use medical devices. The voluntary program is open to in-house and contract sterilization providers that want to move a gamma radiation process to a different site; switch from gamma radiation or EtO to X-ray or electron beam radiation; or use a lower dose of gamma radiation.
Sterilization providers accepted into the program (two of the nine available slots have gone to STERIS and Andersen Sterilizers) must submit a Master File when making changes. Once the Master File is accepted into the pilot program, the pre-market approval (PMA) holder may reference the document in a post-approval report to describe the sterilization changes, thereby freeing manufacturers from submitting PMA supplements for the changes.
“FDA recognizes the need to facilitate more timely changes to alternative sterilization methods, processes, or sites among sterilization providers who use gamma radiation or EO to support sterilization supply chain resiliency,” FDA Associate Policy Commissioner Lauren K. Roth wrote in a 12-page document outlining the program. “By helping industry advance alternatives for gamma radiation and EO sterilization of medical devices, the Radiation Pilot Program seeks to help ensure patient access to safe medical devices and, through evaluation of data from pilot participants, provide insights into future regulatory approaches that may help address potential device shortages related to sterilization site, method, or process shifts, and facilitate supply chain resiliency.”
Finally, a long overdue cleaning.
Read more: bit.ly/48Sug7N
Home Sweet(?) Holmes
The black turtlenecks are history (regrets to Issey Miyake), as are the ill-fitting slacks, Kabuki red lipstick, and falsified baritone of her now iconic alter ego.The banana whey breakfasts, black suit-dresses, and maternity wear are nowhere to be found, either.
Also gone? The bucket hats and mom jeans.
Meet Elizabeth Holmes 3.0, proud Brazos Valley resident and newfound enthusiast of all things khaki. The former founder/CEO of failed blood testing startup Theranos reinvented herself yet again this year, shedding her image as “Liz,” the gentle, somewhat reserved doting mother of two (itself a departure from the cold, calculating con artist persona) for that of inmate No. 24965-111 at Federal Prison Camp, Bryan.
Holmes assumed her new role on May 30, the first day of the 135-month jail term she received late last year for defrauding her company’s investors. The one-time billionaire tried her damnedness to avoid prison, appealing her conviction over alleged trial-related mistakes, misconduct, and jury bias, and requesting to remain free while the appeal unfolded. When that bid failed, Holmes contested her prison sentence start date but deliberately waited until the day before her scheduled surrender (April 27) to file an appeal—a trick she learned from her former lover and Theranos henchman Ramesh “Sunny” Balwani, who used the legal maneuver to delay the start of his 155-month prison term by five weeks.
Co-conspirators to the very end.
Unsuccessful co-conspirators, at that—the pair’s crafty delay tactic gave them only a few more weeks of freedom upon its rejection by an appeals court: Balwani surrendered on April 20 and Holmes arrived in Bryan after Memorial Day.
Balwani’s attorney, however, is not giving up on his client. “We will continue to fight for him,” Seattle trial lawyer Jeffrey B. Coopersmith told CNN, “because we do not believe he received a fair trial.”
A 13-week trial last year resulted in Balwani’s conviction on 10 counts of federal wire fraud and two counts of conspiracy to commit wire fraud for deceiving patients and Theranos investors about the company’s flawed blood testing technology. Holmes’ separate four-month trial yielded fraud and conspiracy convictions as well as a profusion of regret about past decisions.
“ I am devastated by my failings,” she told U.S. District Court Judge Edward J. Davila at her sentencing. “Every day for the past years I have felt deep pain for what people went through because I failed them. I regret my failings with every cell of my body.”
Fortunately, Holmes has a shot at redemption. About two weeks before she reported to prison, Davila ordered her and Balwani to pay $452 million in restitution to victims of their crimes, including $40 million to Walgreens, $14.5 million to Safeway, and $125 million to Rupert Murdoch, a Theranos investor. Naturally, Holmes balked at the order, claiming she cannot afford such expensive penance in her post-prison life, even when broken down into a $250 monthly payment plan (prosecutors’ suggestion). “I have to work the rest of my life to try to pay for it,” she told New York Times reporter Amy Chozick in May.
Maybe she can get a head start with her prison job as a factory line food packer—it pays up to 12 cents an hour.
At that rate, she’ll have enough saved up for her first 11 post-incarceration restitution payments—assuming, of course, she serves her entire prison term.
But that seems highly unlikely. About 40 or so days after starting her Camp Bryan residency, the Federal Bureau of Prisons posted a projected release date for Holmes that is nearly two years earlier than expected. If it’s accurate and remains unchanged, Holmes could be freed on Dec. 29, 2032.
Happy New Year to “Liz.”
Or will it be Elizabeth (again) by then? Not the calm, unemotional, taciturn tech mogul, obviously, but an entirely new character inspired by her imprisonment. Remorseful Lizzie perhaps?
Probably not—that would require compassion.
Regardless of her supposed new identity, the projected release date is most likely the earliest Holmes can expect to be freed, as federal law requires her to serve 85% of her term, even if prison administrators reduce her sentence for good conduct (quite possible, given Holmes’s delicate flower persona she debuted in the Times profile).
Good conduct actually is the probable source of Holmes’s potential earlier release date.
The camp where Liz is spending the next decade or so houses mostly white-collar and non-violent federal female inmates who can earn good conduct time (GCT) to reduce their total incarceration period, according to CNN. A Bureau of Prisons spokesperson told the cable news channel that qualified inmates can earn up to 54 days of GCT for each year of their court-imposed sentence. Prisoners can earn GCT various ways during their stay, including participation in various Camp Bryan programs.
Earning good conduct time also means following basic prison rules like no intimacy with spouses (a brief kiss, embrace, or handshake is allowed only upon arrival and departure) and no internet access (radios, MP3 players, watches are allowed, purchased through the prison’s commissary), Bureau of Prison rules indicate.
Moreover, Holmes is allowed only 300 minutes (five hours) per month to speak to loved ones by phone, and can only receive visitors on weekends. Any music she listens to must be “non-explicit” and her television viewing time is limited to designated hours at the prison staff’s discretion, according to NPR. Her choices for recreational activities are beading, knitting, ceramics, paper art, fimo, crocheting, quilling, and plastic canvas.
Maybe Holmes will emerge from prison as Liz the artist.
“Holmes may never have perfected Theranos’s blood-testing technology but she was always brilliant at branding,” Guardian columnist Arwa Mahdawi wrote in an opinion piece this past May.
“Before everything fell apart, the press ate her image up. Now that her previous incarnation has failed, it’s fascinating to watch Holmes pivot. One imagines that Holmes hopes her transformation into Liz will improve her image and perhaps shorten her prison sentence. So will it? Will the right people buy her metamorphosis?”
That will depend on whether those people have fallen for it once (or twice) before.
Read more: bit.ly/3ZXC7fZ
Breathing No Easier
Nine hundred nineteen days and counting. And the end is still nowhere in sight.Nowhere in plain sight, anyway. By some estimates, the end could be 2,548 days away, give or take a handful of 24-hour periods.
That final day—sometime in late September 2030—can’t come soon enough for Royal Philips, as it could mark the end of one of the largest and most disruptive product recalls in more than a decade.
Philips has been struggling for 30 months (913 days, give or take a few) to right the wrongs inflicted on sleep apnea sufferers by its faulty CPAP, BiPAP, and mechanical ventilator devices. The Dutch multinational conglomerate initiated the recall on April 26, 2021, upon learning the interior sound abatement foam in its DreamStation product line could possibly break off and enter users’ airways, causing skin, eye, or respiratory tract irritation as well as internal organ damage.
Over the next 17 months, the recall—eventually deemed Class I by the U.S. Food and Drug Administration (FDA)—grew to encompass 5.5 million ventilators, including Philips’ V60 and V60 Plus machines (an oxygen flow safety mechanism problem); the Trilogy Evo ventilator and Evo muffler assembly repair kits (sound abatement foam); the Respironics V60, V60 Plus, and V680 devices (internal electrical circuit issue); CPAP and BiPAP therapy masks with magnetic headgear (potential negative interactions with implantable metal devices); and 386 BiPAP ventilators for possible plastic contamination.
Among the early casualties of Philips’ recall—besides patients—was former CEO Frans van Houten, who spent nearly a dozen years at the helm and orchestrated the firm’s lighting and consumer electronics business divestitures. “If you have three recalls in 10 years, it’s too much. His [van Houten’s] position had become untenable,” InsingerGilissen analyst Jos Versteeg told Reuters last summer, referring to a 2017 defibrillator recall and 2014 medical scanner problems. “This situation is not really under control...”
van Houten’s successor vowed to bring the recall under control, but that pledge soon proved difficult to fulfill. In the first few months of Roy Jakobs’ rule, Philips recalled certain reworked Trilogy 100/200 and Garbin Plus ventilators, as well as some reworked DreamStation devices. In addition, the number of medical device reports filed with the FDA between April 21, 2021, and March 31, 2023, swelled to 105,000, with 385 reported deaths.
Although Philips made considerable progress this past spring in replacing all the machines it pulled from the market—producing 98% of the devices and repair kits in question and shipping surrogate products to 2.83 million affected users—its road to recall redemption remains long and arduous. Besides lingering consent decree negotiations with the U.S. Department of Justice, the company faces an investigation by French bureaucrats, thousands of personal injury/medical monitoring claims, and a massive class-action lawsuit.
Earlier this fall, the company negotiated a $479 million settlement over one set of complaints in the class-action suit, agreeing to pay those who purchased, leased or rented its recalled machines $55-$1,552 per device (depending on the model) and an additional $100 for every machine returned, according to court filings cited by the Washington Post. Philips did not admit any liability, wrongdoing, or fault as part of the settlement.
The payout covers only economic loss claims submitted through the class action; it does not include personal injury and/or wrongful death claims, or medical monitoring requests. Payments—funded through a €575 million kitty set aside for such purposes—could begin next quarter, though the timetable is still subject to change.
Another setback along Philips’ atonement path arrived earlier this fall amid serious accusations about its past knowledge of the faulty breathing machines. An investigation by ProPublica and The Pittsburgh Post-Gazette claimed company executives were aware of the CPAP and BiPAP devices’ disintegrating foam for 11 years before recalling the products.
The media partners based their conclusions by analyzing tens of thousands of reports that showed the company withheld more than 3,700 complaints over 11 years from the FDA and only launched a formal investigation in 2019. “...as the complaints continued to pile up in company files, Philips waged aggressive global marketing campaigns to sell more machines, including new models fitted with the hazardous foam,” the Sept. 27 ProPublica-Post-Gazette article stated. “The devices went to infants, the elderly and at least 700,000 veterans. Philips didn’t stop even after the company learned the foam was breaking down in its ventilators in Japan and had to be replaced—and after tests in the United States revealed the material released chemicals at dangerous levels.
Among them: formaldehyde, a compound used in fertilizer, dyes and glues that has been tied to respiratory problems and certain cancers.”
Philips, naturally, denied the charges. Last December, the company released results from tests on its recalled DreamStation sleep therapy devices that showed exposure to certain emissions is “unlikely to result in appreciable harm to health in patients.”
“Philips had previously responded to ProPublica and the Pittsburgh Post-Gazette in the U.S., and NRC in the Netherlands. The articles do not present new facts and we do not agree with the characterizations made in these articles,” a formal company statement read. “Philips’ priority is patient safety and quality. We understand how important Philips Respironics’ sleep therapy devices and ventilators are to patients that use them. Philips regrets any distress and concern for patients, their families and care providers in this matter, and deeply apologizes for this. Philips acted to protect patient safety by initiating and executing a voluntary recall notification/field safety notice of significant scale.”
Maybe so, but it came too late, patients and former Philips employees contended in the ProPublica-Post Gazette investigation. The article specifically named van Houten and Jakobs as main culprits in the cover-up, contending the former touted “very positive” customer responses to its breathing machines in 2020, and the latter acknowledging (in May 2023) complaints about the devices in 2015. The investigation also noted that Jakobs headed the division responsible for producing sleep apnea machines and ventilators as problems with the foam worsened.
“I truly believe those folks knew about it all along,” a former regulatory supervisor at Philips told ProPublica-Post-Gazette reporters. “They tried to keep it pinned down as much as possible.”
Neither van Houten nor Jakobs commented on the story.
“They knew about it, did nothing about it and then started working on a fix,” Brett Stassi, a kidney cancer patient who is suing Philips, griped to ProPublica-Post-Gazette investigators. “People matter. You only get one chance to do it right.”
Unfortunately, Philips may have already missed that chance.
Read more: bit.ly/3rXMcxa
Mega-M&A MIA
It may not be the most favored or famous Shakespeare play (reputedly unpopular even in the Bard’s day), but “All’s Well That Ends Well” certainly is rife with familiar quotes.Among the more notable lines from the five-act comedy—besides the title—are “Love all, trust a few, do wrong to none...” “No legacy is so rich as honesty,” and “Good alone is good without a name, vileness is so.”
There’s another line, however, that’s far less prominent but nevertheless applicable to 21st century living: “...Oft expectation fails and most oft there; Where most it promises, and oft it hits; Where hope is coldest and despair most fits.”
Translation? Great expectations beget great disappointments.
All too true.
Consider, for example, the past year in medtech M&A. Analysts expected deal volume and value to bounce back significantly in 2023 after falling sharply last year from 2021’s exceptionally high levels. That logic was based on the strong balance sheets diagnostics companies built from COVID-19 testing and vaccine revenue as well as “opportunistic equity and debt raises” resulting from low interest rates, MM+M (Medical Marketing and Media) reported.
“With this backdrop in mind, the conditions appear ripe for a return to historical M&A activity in 2023 and 2024 despite elevated interest rates as large-cap names in LST [life science tools] and Dx seek to deploy their cash balance or lever themselves for the appropriate asset (public or private),” predicted an SVB Securities report published earlier this year. Also contributing to SVB’s dealmaking optimism was the life sciences industry’s limited ability to raise capital and falling multiples, MM+M noted.
Great Expectations.
But those falling multiples, capital-raising difficulties, and huge cash balances failed to restore medtech merger and acquisition activity to its former glory. In H1 2023, venture financing suffered its worst showing in eight years and public exits stopped altogether, pushing transaction dollars and tallies toward historic lows.
Great Disappointment.
While deal volume was strong through June 30 (42 total), overall M&A value was down significantly from last year and exponentially from 2021, data from several industry sources show. Buyers poured $13.1 billion into agreements during the first six months of 2023—a paltry start compared to the previous two years’ totals ($64.8 billion in 2022, $80.5 billion in 2021).
Analysts and M&A advisors attribute this year’s leaner deal value total to the lack of megamergers—i.e., the blockbuster marriages between juggernauts like Medtronic and Covidien, Zimmer Holdings and Biomet, Abbott and St. Jude Medical, BD and C.R. Bard, and Johnson & Johnson and Abiomed, among others.
“There’s not as many of the megadeals that have taken place—the larger strategics combining. There’s some of that going on, like Globus just combined with NuVasive but they were smaller companies comparatively, if you think about some of the previous years where Becton Dickinson bought out Bard and Medtronic bought out Covidien,” Dave Sheppard, managing director and COO of M&A advisory firm MedWorld Advisors, noted in a Sept. 27 webinar. “The value of deals may be less but the actual volume of deals is continuing to be very strong. They are very focused strategic deals and very opportunistic for private equity as well.”
While lingering inflation, rising interest rates, and recession fears certainly unnerved buyers this year, regulatory concerns and integration issues likely were greater obstacles to sizable acquisitions. Companies initiating megadeals will often divest parts of the business that no longer strategically fit into the combined entity’s future growth strategy, M&A advisors note.
Cases in point: Baxter International and BD each have conducted major acquisitions in recent years, and both divested part of their respective businesses in 2023. Baxter sold its biopharma solutions business in May for $4.25 billion to two private equity firms to reduce its $16 billion debt load, part of which it assumed in acquiring Hillrom two years ago for $12.7 billion (a portion of that transaction was funded by debt).
BD, meanwhile, sold its surgical instrumentation platform in June to STERIS for $540 million to simplify its product portfolio and manufacturing network.
Baxter’s divestiture was the largest deal (value-wise) to occur in the first half of 2023. Others included Coloplast’s $1.3 billion purchase of Kerecis; Resonetics’ $900 million purchase of Memry Corp. and SAES Smart Materials from Italy-based parent company SAES Getters S.p.A.; Abbott’s $890 million buyout of Cardiovascular Systems Inc.; and Medtronic’s $738 million bid for EOFlow.
“We’ve seen some quite large deals,” Medword Advisors President Florence Joffroy Black explained in the webinar, “but the focus right now is on quality mid-market deals and strategic acquisitions rather than the big multi-billion-dollar deals that we’ve seen in the past.”
There were plenty of those mid-market deals and strategic acquisitions this year: Olympus bolstered its GI product lineup with the $370 million addition of Korean gastrointestinal metallic stent maker Taewoong Medical; ResMed expanded its sleep management software portfolio (and further encroached on Philips’ dwindling market share) with its purchase of Somnoware; Merit Medical chased dialysis and biopsy market share with its $100 million offer for AngioDynamics’ catheter portfolio and biopsy system; and Varian (a Siemens Healthineers company) expanded its advanced oncology solutions offerings with its pickup of Aspekt Solutions.
“Mid-market deals are in more demand than ever,” Joffroy-Black said. “It’s definitely the sweet spot for M&A without a doubt.”
And the path to sweeter profits, for sure.
Read more: bit.ly/3tAR4bO
