Showing all posts written by David Dremann
The New York Times recently reported that 179 patients at the UCLA Ronald Reagan Medical Center were exposed to a potentially deadly “superbug” between October of 2014 and January of 2015. As of February 18, the infection of seven patients was confirmed. UCLA issued a press release in which it stated that the infection was a “contributing factor” in the death of two of those patients.
National news, including the NYT, Washington Post, and Chicago Tribune, rapidly mobilized to report on the deadly “superbug” — “Carbapenem-Resistant Enterobacteriaceae” (CRE). The CDC states that “some CRE bacteria have become resistant to most available antibiotics. Infections with these germs are very difficult to treat, and can be deadly—one report cites they can contribute to death in up to 50% of patients who become infected.”
It quickly became apparent that the infections were due to the use of infected (reusable) duodenoscopes manufactured by Olympus for use in endoscopic retrograde cholangiopancreatography. According to the the LA Times and Chicago Tribune, while such scopes are used in about 500,000 patients annually, they are increasingly being linked to an ever-rising death-count (including, for example, an outbreak 6 years ago in Florida that killed 15).
The LA Times reports that the FDA has been aware for more than two years that the design of Olympus’ scope may be so flawed that “it cannot be properly cleaned.” CNN reports, however, that the problem may have been known for much longer. CNN quoted the president of the American Gastroenterological Association, Dr. John Allen, as claiming that “[t]his problem has been known since at least 1987.” In response, the FDA has stated that, for most patients, the benefits of the procedure using the duodenoscope “far outweigh the risks of possible infection.”
The recent CRE outbreak has sparked a lively debate over the liability of the device manufacturers for such allegedly flawed designs. That debate has recently found a new forum as two suits have been filed against Olympus in California State Court.
The first suit, the LA Times reports, was filed by 18-year-old Aaron Young who was exposed to infected scopes in October and January. Reuters reports that Mr. Young alleges negligence and fraud because the cleaning protocols for the complex device were not updated following a recent redesign. Bloomberg reports that the complaint names Olympus and three members of its endoscopy team as defendants.
The LA Times reports that the second suit was filed by the family of now-deceased 48-year-old Antonia Torres Cerda and alleges wrongful death as well as products liability, negligence, and fraud in selling and promoting a “defective scope.” The complaint names Olympus and several members of its Endoscopy sales group as defendants.
Peter Kaufman, of Panish Shea & Boyle, the attorney representing both Young and Cerda’s family, has been quoted as saying that he expects to file four to six more cases in the next week, three of which will be wrongful death suits.
On August 29, 2014, the FDA issued 233 Class I medical device recalls for products manufactured by Customed. According to its website, Puerto Rico-based Customed is a medical supplies leader and distributes a wide range of products to many hospitals and thousands of doctors’ offices, hospices, laboratories, radiology centers, pharmacies and other healthcare facilities.
According to the FDA’s website, Customed voluntarily recalled the 233 devices due to packaging flaws. The devices recalled include various medical and surgical packs (e.g., laparotomy pack, femoral pack, labor & delivery pack, open heart tray pack, etc.), all having sterile packaging. The device supplier stated in a recent press release that the sterile convenience surgical packs were found to have potential defects in packaging adhesion that could result in a loss of product sterility and subsequent patient infection. The Regulatory Affairs Professionals Society (RAPS) estimates the number of affected units to be several hundred thousand. As of August 21, 2014, no serious injuries or deaths were reported.
According to the FDA’s website, medical device recalls remove a product from the market and may be conducted on a company’s own initiative, by FDA request, or by FDA order under statutory authority (21 CFR § 810.1 et seq.). To reflect varying severity of risk presented by different devices being recalled, FDA recalls are categorized as Class I, Class II, or Class III. Those classes are defined as follows:
Class I recall: a situation in which there is a reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death.
Class II recall: a situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote.
Class III recall: a situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.
RAPS reports that, aside from a few statistical outliers, the overwhelming majority of all FDA medical device recalls are either Class II or Class III recalls (reflecting “lesser (and non-deadly)” safety risks). In fact, since 2004, Class I, Class II, and Class III recalls comprised 6%, 86%, and 7% of total recalls, respectively. While the FDA typically recalls 13-75 devices daily, RAPS reports that there have historically been relatively few major device recalls despite an overall upswing in the number of recall events since 2012.
According to RAPS, the Customed device recall represents the single largest FDA recall to date, regardless of class, and is more than 9 times larger than the second largest Class I recall (which occurred on March 5, 2014).
On June 6, 2014, Wright Medical Technology, Inc. (“WMT”) filed first and second petitions with the Patent Trial and Appeal Board requesting inter partes review of both U.S. Patent No. 6,440,138 (“the ‘138 Patent”) to Reiley et al., and U.S. Patent No. 6,863,672 (“the ‘672 Patent”) to Reiley et al. According to the ‘672 Patent’s New Application Transmittal at page 9, the ‘672 Patent is a divisional of the ‘138 Patent.
According to the U.S. Patent and Trademark Office assignment database, the ‘138 and ‘672 Patents were previously assigned to Kyphon Inc., which was acquired by Medtronic in 2007 for $3.9 billion. The database also includes a recorded assignment, executed on April 25, 2013, from Medtronic, Inc., Kyphon SARL, and Warsaw Orthopedic, Inc. to Orthophoenix, LLC. Orthophoenix’s signatory was Erich Spangenberg (listed as the CEO). Spangenberg is also the owner and founder of IPNav, according to IPNav’s website. IPNav describes itself as a patent monetization firm.
The ‘138 Patent is entitled “Structures and Methods for Creating Cavities in Interior Body Regions.” According to the ‘138 Patent, it relates to tools that carry structures that are deployed inside bone and, when manipulated, cut cancellous bone to form a cavity. Figure 1 of the ‘138 Patent, described as a side view of a rotatable tool having a loop structure capable of forming a cavity in tissue, with the loop structure deployed beyond the associated catheter tube, is shown below left:
The ‘672 Patent is also entitled “Structures and Methods for Creating Cavities in Interior Body Regions.” According to the ‘672 Patent, it relates to tools that carry structures that are deployed inside bone and, when manipulated, cut cancellous bone to form a cavity. Figure 27 of the ‘672 Patent, described as a side view of a vertebra with the tool deployed to cut cancellous bone by moving the blade structure in a linear path to form a cavity, is shown below right:
The petition regarding the ‘138 Patent relies on a single prior art reference: U.S. Patent No. 5,015,255 to Kuslich, which the petition alleges was not before the Examiner during prosecution of the ‘138 patent. The petition seeks review of Claims 1-26 (all claims) of the ‘672 Patent and requests cancellation of each Claim. By contrast, the petition regarding the ‘672 Patent relies on two separate prior art references: U.S. Patent No. 5,439,464 to Shapiro and U.S. Patent No. 6,371,968 to Kogasaka et al. The petition alleges that neither prior art reference was before the Examiner during prosecution of the ‘672 Patent. The petition seeks review of Claims 1-12 (all claims) of the ‘138 Patent and requests cancellation of each Claim.
The petitions disclose that Orthophoenix has sued WMT in the U.S. District Court for the District of Delaware. Orthophoenix, LLC v. Wright Medical Tech., Inc., Civil Action No. 13-10007-LPS (D. Del.). Orthophoenix filed its complaint on June 5, 2013 alleging direct and indirect patent infringement of both the ‘138 and ‘672 Patents (the “Patents in Suit”) by WMT.
According to the South Florida Business Journal and Opko press release, Miami Florida-based Opko Health, Inc. has entered into a definitive agreement to acquire Israeli medical device company Inspiro Medical Ltd. The terms of the acquisition are undisclosed, but will likely be released in future SEC filings.
Inspiro Medical Ltd. describes itself as a medical device company dedicated to the development of a global inhalation platform designed to deliver both small molecules such as corticosteroids or beta agonists; and macromolecules such as antibodies or vaccines.
Inspiro Medical’s flagship product is a dry powder inhaler, the Inspiromatic. According to Inspiro Medical’s website, the Inspiromatic offers three significant improvements over other inhalers: first, the Inspiromatic works with extremely low inhalation flow rates; second, real-time feedback interface guides the patient and assures proper inhalation technique (namely, a green or red flashing light to indicate proper inhalation and a beeper after the dose has been delivered); and third, an integrated data logger stores patient use data for easy access and transmission by electronic devices, such as smart phones (particularly useful for assessing patient compliance).
Opko Health, Inc. describes itself as a multi-national pharmaceutical and diagnostics company (having 96.5M in 2013 revenues, according to its Mar. 3, 2014 filed 10K) that aims to establish industry-leading positions in large and rapidly growing medical markets by leveraging its discovery, development, and commercialization expertise and its novel and proprietary technologies.
Nimrok Kaufmann, CEO and Co-Founder of Inspiro Medical Ltd. stated:
We are extremely proud of Inspiro’s success in bringing our smart Inspiromatic™ respiratory drug-delivery device to market. With Inspiro now a part of OPKO, we will be able to help more people faster. Inspiro joining OPKO is a big win for the shareholders of both Inspiro and OPKO, as well as good news for our patients and physicians.
The cost of medical devices is something few seem to know. A recent study published in Health Affairs found that few orthopedic surgeons are aware of the costs of the devices they implant.
Bloomberg Businessweek reports that over 80% of the orthopedic surgeons surveyed estimated device costs deviating from the actual cost by 2 to 5000%. Bloomberg notes that at least one explanation for the surgeons’ incorrect estimates is that many hospitals negotiate confidential supply contracts which prevent broad disclosure of device prices. This phenomenon could also be partially explained by the high-stakes, lower volume nature of orthopedic surgery and associated implants.
Despite (or perhaps due to) surgeons’ inattention to device cost, there can be a dramatic price disparity between what hospitals perceive as equivalent devices. For example, the Journalgazette reports that the hardware for a total knee replacement can vary from approximately $1,800 to $12,000. Bloomburg reports that some surgeons pick the device they want, sometimes with little regard to price.
Because hospitals are sometimes reimbursed via lump sum, variable costs (such as hardware) can significantly impact the hospital’s bottom line. Therefore, a surgeon’s ability to pick devices without consideration of cost may soon be discouraged or limited. According to Bloomberg, while there may be factors weighing in favor of more expensive medical devices, including patient outcome, some hospitals are consolidating their device contracts and streamlining their supply chains to cut device costs.
In the future, medical device manufacturers may increasingly need to justify higher prices for what hospitals perceive as being equivalent products. Patient outcome will likely remain the most important metric for device success; consequently, the ability to prove superior patient outcome may justify a higher price. However, given the widely varying costs for devices having imperceptible performance differences and hospitals’ need to remain profitable, it is likely that competitive bidding will become increasingly common in the future.