Medical Device Company Pleads Guilty to Dealing in Non-FDA Approved Devices
The United States Department of Justice announced that medical device company Affordable Healthcare Solutions, LLC has pleaded guilty to charges related to unapproved prescription hyaluronic acid medical devices, as reported by a press release dated September 28, 2021. The devices are “intended for the treatment of pain in osteoarthritis of the knee that must be injected by a doctor or other qualified health care professional.” The company was sentenced for “Receiving Adulterated Devices in Interstate Commerce and Delivery for Pay with Intent to Defraud or Mislead, in violation of 21 U.S.C. §§ 331(c) and 333(a)(2).”
21 U.S.C. § 331(c) prohibits “[t]he receipt in interstate commerce of any food, drug, device, tobacco product, or cosmetic that is adulterated or misbranded, and the delivery or proffered delivery thereof for pay or otherwise.” According to the facts admitted during the plea, special agents with the United States Food and Drug Administration (FDA) located and seized foreign-market Supartz, Euflexxa, Synvisc, Synvisc-One, and Orthovisc that were adulterated for lacking FDA approval for distribution and use in the United States.
According to the press release, a review of the devices seized from Affordable Healthcare Care Solutions confirmed various differences between the outer box and carton labels, patient information brochures, and instructions for use between the FDA-approved labeling for Supartz, Orthovisc, Synvisc, Synvisc-One, and Euflexxa versus the labeling included with the unapproved versions being distributed by Affordable Healthcare Solutions. While discussing the seizure, Special Agent in Charge, Justin C. Fielder, emphasized that the “FDA regulates the manufacturing and distribution of medical devices to help ensure the safety of American patients.”
As a result of the plea agreement, Affordable Healthcare Solutions pleaded guilty to a felony, was fined, and was ordered to forfeit $837,000 worth of devices seized by the special agents. Juan Antonio Gonzalez, Acting United States Attorney for the Southern District of Florida, announced the felony guilty plea and stated:
Medical device suppliers whose greed leads them to disregard FDA protocols and approval processes put the public in danger. . . . These are serious crimes and, in our district, companies that put profit over patient safety will be held accountable.
Garmin and ActiGraph Collaborate to Explore Health and Activity Monitoring Solutions on Wearable Devices
Garmin International, Inc. recently announced a collaboration with ActiGraph to create health and activity monitoring solutions for academic research, clinical trials, and remote patient monitoring. The collaboration will combine Garmin wearables with ActiGraph‘s CentrePoint data analytics platform to achieve these goals.
Travis Johnson, Garmin Health global product lead, stated that “[c]ombining the sensor data from Garmin wearables with the data capture and analytical expertise of the ActiGraph platform creates a powerful solution for many different patient monitoring applications.”
ActiGraph chief technology officer Jeremy Wyatt expressed similar praise for ActiGraph’s new partner, stating that “Garmin wearables produce high resolution, accurate data streams that are ideal for scientific analysis and can provide additional, novel endpoints to the ActiGraph software platform.”
Garmin International, Inc. is a subsidiary of Garmin Ltd. Garmin is known for developing a variety of products, such as handheld GPS devices and wearable fitness trackers. On the other hand, ActiGraph offers a variety of activity monitors and also software platforms to analyze data collected by such monitors.
Both Garmin and ActiGraph acknowledge the growing importance of wearable devices as potential health and medical tools. By partnering with ActiGraph, Garmin has indicated its interest in the future development of wearable devices with medical applications. Likewise, the partnership allows ActiGraph to utilize Garmin’s experience in developing wearable devices to apply and hone its data monitoring and management systems.
BrainsWay Deep TMS System Receives FDA Clearance for OCD Treatment
Israel-based BrainsWay recently announced the de novo FDA clearance of its Deep Transcranial Magnetic Stimulation (TMS) system for treatment of obsessive compulsive disorder (OCD).
According to the press release, the BrainsWay Deep TMS system was previously cleared for treatment-resistant major depressive disorder in 2013, and this month’s de novo clearance is the second indication granted for the device, and marks the first clearance of a non-invasive device for treatment of OCD. The BrainsWay press release further notes that the Deep TMS system’s H7-coil targets the anterior cingulate cortex, which is known to play a role in the pathophysiology of OCD. BrainsWay stated that Deep TMS treatment, which uses changing magnetic fields to stimulate nerve cells in the brain, is non-invasive and has been shown to be safe and well-tolerated by patients.
BrainsWay plans to offer its OCD treatment both in new installations and as an upgrade to its existing systems. Addressing the broad future applicability of the Deep TMS system, BrainsWay president and CEO Yaacov Michlin said:
This clearance further establishes Deep TMS as a platform technology that will provide treatments for additional psychiatric indications, subject to successful completion of our currently ongoing multi center studies and regulatory approvals.
MedyMatch Intracranial Hemorrhage Detection Software Receives Expedited FDA Review
Tel Aviv-based MedyMatch Technology recently announced it has received Expedited Access Pathway (EAP) designation from the FDA for its intracranial hemorrahage (ICH) detection software medical device.
According to Gene Saragnese, Chairman & CEO of MedyMatch, the platform is a “first-in-class hemorrhage detection tool.” The MedyMatch device utilizes artificial intelligence and deep learning technologies to analyze non-contrast head CT images for signs of ICH. Further implementations of the MedyMatch deep vision platform include diagnosis and monitoring of acute and chronic diseases based on concurrent analysis of imaging data and other patient data. Vice President of Clinical, Regulatory, and Quality Affairs, Dr. Joshua Schulman, said:
This designation is a recognition of both the need for new assessment tools for intracranial hemorrhage and an affirmation of MedyMatch’s technical approach to assisting clinicians to need to make time-sensitive yet accurate decisions in emergency settings.
The EAP Program, intended to speed approval of certain medical devices, generally includes priority review, more interactive review, and senior management involvement. EAP designation can be awarded for devices that address unmet needs for treatment or diagnosis of life-threatening or irreversibly debilitating conditions. It is said to be expected that EAP designated devices will be transitioned to the new Breakthrough Devices program established under the 21st Century Cures Act of 2016.
FDA Announces Plans for Alternative Clearance Pathway
The U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb recently announced that the agency plans to publish a draft guidance outlining a voluntary alternative pathway for new, moderate-risk devices for use in patient care.
According to Commissioner Gottlieb, the FDA regulatory processes for medical devices have remained relatively unchanged for over 40 years. Under a commonly used clearance pathway, device manufacturers are required to submit a Premarket Notification, known as a 510(k). The 510(k) constitutes a premarketing submission demonstrating substantial equivalence of a new device to a similar, legally marketed “predicate” device. The FDA explains that the submission allows the FDA to determine whether the device is as safe and effective as an equivalent device already placed into one of the three FDA classification categories.
However, Commissioner Gottlieb believes that “there are an increasing number of cases where this basic framework isn’t well-suited to reflect the innovation that we see today in certain technologies, and how we must evaluate those technologies.” Similarly, he states that the current 510(k) requirements fail “to realize the full potential of the FDA’s consensus standards program, which was established through the Food and Drug Administration Modernization Act of 1997, and will be refined and expanded as a result of provisions in the 21st Century Cures Act of 2016.” To address these shortcomings, the FDA plans to offer an alternative pathway for demonstrating substantial equivalence in a 510(k) submission.
Under the new pathway, Commissioner Gottlieb states that manufacturers could obtain clearance without direct comparison testing to a predicate device. Instead, substantial equivalence could be established by meeting objective safety and performance criteria, including FDA-recognized standards, FDA-developed guidance documents, or a combination of the two. The pathway would only be available for pre-specified categories of mature devices – those for which safety and performance criteria that meet or exceed the performance of existing, legally marketed devices can be identified.
Commissioner Gottlieb believes that this alternative pathway:
[H]olds tremendous promise to further streamline device review for sponsors and FDA and allow new innovations to get to patients more quickly; to allow more advanced technologies to be efficiently incorporated into new devices; and to foster greater confidence in the FDA’s ability to efficiently evaluate safety and benefits of technologies cleared under this pathway – all while maintaining the same gold standard that we apply to existing review processes.
The FDA will release its draft guidance on the new 510(K) pathway in the first quarter of 2018.
First-Ever De Novo Clearance by FDA’s Orthopedic Branch
According to IlluminOss Medical, Inc.’s recent press release, the company has successfully obtained the first-ever de novo clearance from the FDA’s Orthopedic Branch for its minimally invasive bone stabilizaion system (the “IlluminOss System”). According to the FDA, the de novo clearance is reserved for new, novel devices whose type has not been previously classified.
IlluminOss, a privately held commercial-stage medical device company based in East Providence, Rhode Island, describes itself as being involved in the development and commercialization of minimally invasive fracture fixation techniques. The company explains that the newly-approved IlluminOss Bone Stabilization System is used for the treatment of impending and actual pathological fractures of the humerus, radius, and ulna resulting from metastatic bone disease.
Traditional bone stabilization procedures utilizing invasive techniques and intramedullary rods can risk causing extensive soft tissue damage and reduced patient mobility. Moreover, the metal plates and rods may increase patients’ risk of cortical porosis, delayed bridging, and refractures upon removal. Regarding its IlluminOss System, IlluminOss states:
The IlluminOss System was developed with an aim to provide improved patient experiences and outcomes when treating pathologic fractures. There is a critical need to make less invasive orthopedic fracture repair options available to an aging and underserved market segment.
In contrast to traditional fixation techniques, the IlluminOss explains that its System uses a small-diameter PET balloon and visible light fiber, each of which may be threaded through a 4.5 mm pathway into the medullary canal through a small incision in the patient’s skin. Once inserted, the PET balloon is filled with a photoactive liquid monomer, causing the balloon to expand and conform to the specific shape of the patient’s bone. With the liquid-filled balloon in place, the photoactive monomer is polymerized utilizing the visible light fiber, resulting in a hardened implant which conforms to the patient’s specific bone structure within 90 seconds. The hardened implant stabilizes the fracture by providing both longitudinal and rotational stability across the length of the implant.
The IlluminOss System has been available internationally since 2010. IlluminOss reports success in international markets: surgeons have reported smaller incisions, shorter procedure times, and a faster return to the patient’s daily living activities. Reduced complication rates, and shorter hospital stays have also been observed.
With marketing clearance in hand, IlluminOss plans to initiate U.S. commercialization efforts in the second quarter of 2018.
Report Finds European Union’s Assessment of High-Risk Medical Devices of Low Quality
A report appearing in the December 2017 issue of Value in Health, (a journal of the International Society for Pharmacoeconomics and Outcomes Research) concluded that assessments of high-risk medical devices in the European Union were of low quality – based on evidence from studies that were methodologically inadequate.
The authors of the report reviewed 1,376 health technology assessment reports (“HTAs”) of high-risk medical devices (“MDs”) that were filed between 2010 and 2015. Of the 93 that were eligible for analysis, the researchers rated each of these studies on the following criteria:
- Evidence base
- Was the evidence in the HTA based on submissions by the manufacturer, data identified by an independent source, or both?
- Type of evidence
- Was the evidence in the HTA based on “direct” (e.g. head-to-head trials) or “indirect” evidence?
- Direct evidence from well-conducted randomized controlled trials were seen as providing the most valid estimates regarding the effectiveness of competing health care interventions.
- Level of evidence
- Further considerations of scientific evidence
- What were the total number of studies considered in each HTA report?
The report ultimately found that while almost all assessments considered “based their evaluation on direct evidence from independent systematic literature searches, good-quality data were scarce.” The report further stated that “our findings illustrate that even if systematic reviews and RCTs [randomized controlled trials] were available for assessment, most of these studies showed an unclear or high RoB [risk of bias] according to the specific tools used in their reports.”
The report ultimately concluded that:
In the EU countries, MDs are essentially regulated in the same way they have been since the 1990s. This means that high-risk MDs can enter the market and be used in humans without the requirement of evidence from robust clinical studies. As a consequence, scientific evidence prior to market approval of high-risk MDs is often based only on evidence from studies that were methodologically inadequate.
In summary, the report proposed that “additional changes are necessary, specifically with regard to the marketing authorization process of MDs, with stricter quality requirements based on methodologically robust trials, possibly in combination with other evidence sources.”
Digital Currencies and Blockchain in the Medical Arena
Recently, digital currencies, such as bitcoin, have greatly increased in popularity. Some of this popularity may be attributed to digital currencies’ many purported advantages over traditional currencies, such as that blockchain technology allows for a distributed and cryptographically secure ledger without the use of traditional banking institutions. Newer and more advanced digital currencies have recently been introduced with the added advantage of smart contracts, which are said to be self-executing contractual clauses that may be programmed into a digital currency transaction. As such, many new digital currencies have been appearing with individuals investing in Initial Coin Offerings (ICOs), which are somewhat akin to the Initial Public Offerings (IPOs) of a traditional corporation.
Even more recently, a few companies have begun to make use of digital currencies and blockchain technology in the medical arena. Many have found blockchain technology uniquely suited to secure patient records, and have found that the smart contracts of digital currencies may allow individuals greater control of their medical data. Below is a summary of a few fields of medicine and companies within those fields in which digital currencies and blockchain are already being developed.
Medical Records and Health Data
According to The Merkle, Bowhead Health is the first medical device company using their AHT digital currency tokens with smart contracts to create a new medical data market. The company plans to allow individuals with Bowhead’s digital currency to control the dissemination of their medical data, and also to compensate those individuals if and when they choose to share with research institutions. Bowhead’s AHT tokens are said to allow 70% of research fees to be distributed to users with the other 30% going to token holders.
According to Blockchain News, Medicalchain is a UK-based company using blockchain technology to allow patients to securely store and send their medical records to their healthcare professionals. Medicalchain is said to allow patients to have a centralized medical record accessible from anywhere in the world, and allow individuals the ability to control medical institutions’ access to their records.
The Medical Society of Delaware has partnered with the company Medscient, and they are using blockchain technology to create a proof-of-concept platform to allow insurers and medical care providers to access patient records, according to The Cointelegraph. The article further states that this partnership was made possible when the state of Delaware became the first state to pass a law allowing the use of blockchain technology in business for stock trading and record-keeping.
Medical Licenses
The Illinois Blockchain Initiative has partnered with Hashed Health to create a pilot program to streamline the process of issuing and tracking medical licenses, according to The Cointelegraph. The goal of this partnership is said to give patients and healthcare providers a transparent license registry system that uses smart contracts to automatically update information.
Medicine and Artificial Intelligence (AI)
According to news sources, Doc.ai is a collaboration between developers from the universities of Stanford and Cambridge, and is said to be creating a platform built on blockchain technology and using AI to create a resource to answer patient’s specific questions regarding their personal health records and their physician’s analysis.
Medical Device Compared to ‘Star Trek Tricorder’ Presented at AACC
Basil Leaf Technologies recently presented their DxtER device at the 69th AACC Annual Scientific Meeting & Clinical Lab Expo in San Diego. The DxtER device has been compared to the Star Trek medical Tricorder, winning first place in the Qualcomm Tricorder Xprize competition, a global contest inspired by the popular science fiction series.
According to Basil Leaf Technologies, the DxtER device weighs less than five pounds and is designed to enable consumers to monitor five real-time health vital signs and diagnose 34 diseases using artificial intelligence. Basil Leaf Technologies reports that the DxtER device is currently undergoing clinical trials for FDA approval.
According to AACC CEO, Janet B. Kreizman, “DxtER is the first consumer-friendly mobile health device to combine vital sign monitoring with an extensive diagnostic testing menu, and it could lead to a huge leap forward in patient care.” While the DxtER device may not be available in the immediate future, Dr. Gene Friedman, assistant professor of biomedical engineering at Johns Hopkins University School of Medicine, estimates that “in the next 10 to 20 years it’s going to be a big revolution in personal healthcare.”
FDA to Create New Digital Health Unit
The FDA has announced that it will create a new unit responsible for overseeing digital health products. According to Bakul Patel, the Associate Center Director for Digital Health at FDA, the agency is working to define “what clinical validation looks like for software,” and will consider creating new premarket approval or clearance procedures for digital health products.
As Patel stated in an interview with Wired, the new unit will aim to keep up with emerging technology that uses artificial intelligence and machine learning to diagnose and treat patients. Patel noted that this kind of technology creates new and difficult challenges for regulators, who must figure out how to ensure that patients remain safe while keeping up with the increasing complexity and tighter release schedules that these new kinds of software bring.
“We’ve been trying to translate the current regulation paradigm for digital . . . [b]ut what we have today and what we’re going to have tomorrow are not really translatable. We need to take the blinders off, start with a clean sheet of paper.” –Bakul Patel, Associate Center Director for Digital Health, FDA
Wired reports that Patel is working to develop new models for testing and approving digital health products. Patel told Wired that “the idea is to get safe products to market faster, by having people compete on excellence rather than compliance.” One way the FDA might do this is by providing faster review with lower scrutiny for manufacturers with a long track record of safety and compliance.
According to FierceHealthcare that the new digital health unit will be part of the FDA’s Center for Devices and Radiological Health. While the new unit won’t be officially open until October, hiring of key staff is underway. Wired notes that the unit will be funded by the Medical Device User Fee program.
Philips Buys RespirTech for Undisclosed Amount
Dutch conglomerate Philips recently announced that it will purchase Respiratory Technologies Inc. (RespirTech). According to its website, RespirTech describes itself as a St. Paul, Minnesota-based provider of inCourage vests, which help fight respiratory disease. According to a news release, the terms of the deal were not disclosed.
RespirTech’s website states that the inCourage vest uses high-frequency chest compression to help loosen and move mucus through the lungs. According to RespirTech’s website, the inCourage technology was developed by Pediatric Pulmonologist Warren Warwick, M.D., and Leland Hansen, MPH, in the early 1990’s to provide more effective secretion clearance for University of Minnesota cystic fibrosis patients.
According to Philips’ website, the conglomerate has primary divisions in the areas of healthcare, lighting, and home electronics. Philips’ 2016 annual report states that sales in its HealthTech portfolio increased 4% and topped $19 billion. In contrast, news sources state that RespirTech was founded in 2004 and reportedly had nearly $37 million in revenue in 2015.
Regarding the acquisition, John Frank, Philips’ business leader for sleep and respiratory care, said in a news release:
With this transaction, we will broaden our portfolio with a proven therapy to enable patients with chronic respiratory disorders manage their condition and receive the care they need in the home.
According to Philips’ CEO, Franz van Houten, Philips has transformed itself over the last five years into a differentiated global health tech leader. Mr. van Houten stated that the markets Philips’ serve have attractive growth and attractive profitability. According to news sources, GE Healthcare, Siemens Healthineers, and Toshiba Medical Systems are other conglomerate divisions competing with Philips in the healthcare space.
As one analyst notes, the Twin Cities have produced a number of competing companies that make vests for treating lung conditions, including New Prauge-based ElectroMed Inc., and St. Paul-based Hill-Rom.
Former Lutonix VP Pleads Guilty to Trade Secret Theft
On May 9, 2017, according to court records, Christopher Barry, former Vice President of R&D at Lutonix Inc., pled guilty to stealing Lutonix’s trade secrets in the form of several confidential electronic files. According to the Plea Agreement, the allegedly stolen files relate to Lutonix’s proprietary design and manufacture of drug coated balloons, in particular the Lutonix 035 DCB. The Plea Agreement stated that sales for the Lutonix 035 DCB, depicted below, exceeded $50 million in 2015.
The factual background provided in the Plea Agreement reports that, following his departure from Lutonix, Barry took a position as CEO of Urotronic, a medical device startup developing its own drug-coated balloon. According to the Plea Agreement, Barry disclosed the contents of the purportedly stolen files to others at Urotronic. However, according to news articles, following entry of Barry’s guilty plea, Urotronic denied that Barry had any involvement in the development of the Urotronic technology.
WannaCry Malware and Medical Device Security
The WannaCry virus has infected and frozen computers in many industries around the world. According to a news source report, the virus has extorted doctors and hospital administrators for the keys to unlock and regain access to their systems in order to treat patients. The Telegraph reports that in the United Kingdom alone, up to 40 hospital trusts were hit by the WannaCry ransomware virus, which resulted in a wave of cancelled appointments and a general state of disarray. Recently, the BBC has stated that at least 16 of these hospitals are still facing issues. With the widespread damage associated with the WannaCry virus, many experts have advocated that the medical device industry should be on alert, now more than ever, regarding the cyber security of their medical devices.
Although the issues associated with medical device security have recently been discussed, some industry professionals believe there does not seem to be an adequate solution to the problem of device security. Tressa Springman, the CIO of LifeBridge Health, explains:
“There’s a lot of talk in healthcare about device security. Discussions about what we’re comfortable pushing as endpoint security and what we’re unable to do – because certainly, we don’t want to create any harm to patients. Many of these devices and the vendors who manage them, it’s very hard to go direct on patching and adding security.”
While medical devices are generally tested extensively for safety, some cybersecurity experts have observed the same cannot necessarily be said for security. Brian NeSmith, co-founder and CEO of cyber security company Arctic Wolf Networks, has stated:
“Medical devices, similar to many other IoT devices, were not designed with rigorous security in mind and are more vulnerable to being hacked. They also do not fall under normal security operations procedures since they are used as needed by the medical practitioners and not deployed and maintained by the IT department.”
Security experts are emphasizing the importance of security patches. Optimistically, Richard Staynings, the principal cybersecurity healthcare leader at Cisco’s Security unit, believes:
“This is going to cause a paradigm shift, at least for patching.”
Novocure Announces Optune™ Wearable Device Improves Glioblastoma Survival Rates
Novocure recently announced final results from a phase III EF-14 clinical trial of its Optune device for treatment of newly diagnosed glioblastoma (GBM).
According to Novocure’s press release, the final results of the EF-14 clinical trial indicated a two-year survival rate of 43% for patients treated with the Optune device in addition to conventional temozolomide (TMZ) chemotherapy, versus a two-year survival rate of 30% for patients treated with TMZ alone. Novocure also reported that the addition of the Optune device to the standard TMZ treatment resulted in a five-year survival rate increase from 5% to 13% and a median overall survival extension from 15 months to 21 months. The press release noted that these results were seen across all patient subgroups, including young versus elderly patients, patients with methylated versus unmethylated MGMT promoter and patients who underwent any extent of tumor resection.
EF-14 Principal Investigator Roger Stupp, M.D., stated:
Now, we see a meaningful improvement in survival at two years and beyond. With the combination of Optune and temozolomide, one out of seven patients is living longer than five years.
Optune is advertised as being a wearable device that uses transducer arrays adhered to the scalp to deliver tumor treating fields (TTFields), a form of alternating electric field therapy, to inhibit division of GBM cells. According to Novocure, Optune has been FDA approved for treatment of newly diagnosed GBM since 2015, and for treatment of recurrent GBM since 2011. According to Novocure CEO Asaf Danziger, the “efficacy shown in EF-14 for GBM gives us hope that TTFields used in combination with other cancer treatments may increase survival without significantly increasing side effects for a variety of solid tumors.” Dr. Stupp added that TTFields “may well be suited for combination with conventional treatments for many other cancer types.”
Voxello Receives FDA 510(k) Clearance for the Noddle Communication Device
Voxello recently announced FDA 510(k) clearance of its noddle™ device, following submission of its application in October 2016. According to the press release, the noddle gives patients who are unable to speak a way to communicate through voluntary gestures. Voxello touts the noddle as allowing patient access to nurse call systems, environmental controls, communication apps, and speech generating devices with a touch or a click of the tongue.
Coralville, Iowa-based Voxello was founded in 2013 through the Iowa Medical Innovations Group (IMIG) at the University of Iowa. IMIG is an interdisciplinary program that includes students from the Colleges of Medicine, Business, Law, and Engineering. The noddle student team consisted of Vince Hahn, Zihan Zhu, Blake Martinson, and Ben Berkowitz, with Richard Hurtig serving as professor mentor.
Commenting on the 510(k) clearance, Voxello CEO Rives Bird said:
At Voxello, our mission is to provide an effective and universal means to overcome communication barriers faced by hospitalized and long-term care patients. Today 3.9 million hospitalized patients each year are unable to communicate through traditional means, which results in an estimated three billion dollars in preventable adverse events. The FDA clearance of the noddle brings us one step closer to offering a solution for this urgent, unmet need.
The following video is provided on Voxello’s website:
Matthew A. Howard, Chair and DEO, Dept. of Neurology, University of Iowa Healthcare System, commented on his experience with the device:
The technology incorporated in the Voxello noddle has been extremely helpful in enabling us to provide the best possible care for neurosurgery patients with severe neurological injuries.
Additionally, Voxello recently closed a Series A round of financing: on February 20, 2017, the Kansas City-based Mid-America Angels investment group announced that it invested $287,000 into Voxello.
Outsourcing of Services in the Medical Device Industry
As the medical device market continues to grow, the medical device industry has strived to reduce costs through outsourcing. An industry report has found that the global medical device outsourcing market was valued at $33.2 billion in 2016, and is projected to continue to grow. The medical device industry is outsourcing not only the manufacturing of medical devices, but also associated services, such as regulatory consulting and contract manufacturing, to medical device service providers. Medical device manufacturers and outsourced medical device service providers should be conscious of the regulatory and legal ramifications of the delocalization associated with the outsourcing that is increasingly common in today’s global market.
While outsourcing has traditionally been linked to manufacturing, outsourcing of services has become a major growth engine in the medical device industry. Outsourced services include regulatory consulting, product design and development, testing and sterilization, implementation, upgrades, maintenance, and manufacturing contracts. Regulatory consulting, which in 2015 already commanded over 50% of the outsourcing market for services, is particularly expected to grow. Regulatory consulting includes services directed to compliance with national agencies that approve and continually monitor the safety of medical devices, including the F.D.A. in the United States and the E.F.S.A. in Europe. In addition, contract manufacturing is reported to be the fasted growing service in the medical device industry and is projected to grow at a compound annual growth rate of over 11.5% through 2025.
There are several benefits associated with medical device outsourcing. According to an MDDI article, outsourcing can help original equipment manufacturers (OEMs) accelerate time to market for a new product, and speed up return on investment. Furthermore, the article states outsourcing can provide specialized knowledge, expertise, and facilities without the significant resources required to acquire such expertise in house. Moreover, outsourcing can leverage the pre-existing large supply chain of the contractor.
However, outsourcing also carries potential risks. The issues associated with outsourcing so many aspects of services uniquely associated with the medical device industry may not be as well known or well understood as the issues presented by outsourcing manufacturing. According to another MDDI article, these issues may include an increased risk of civil lawsuits from consumers of medical devices. This is especially true as medical devices become increasingly digital, and cybersecurity vulnerabilities are found. The medical device industry may also face increased regulatory scrutiny from national agencies as more regulatory compliance is outsourced to consulting services. Consequently, the medical device industry and medical device legal community will increasingly face new challenges from a world in which more and more industry services are outsourced.
FDA Planning Board Emphasizes Use of Data Sharing in Medical Device Monitoring
The FDA‘s planned National Evaluation System for Health Technology (NEST) will focus on new forms of clinical data, data sharing, and advanced analytics as the keys to optimizing the medical device ecosystem, says a new report issued by the NEST Planning Board. The Planning Board was convened by the FDA and the Duke-Margolis Center for Health Policy in order to outline the initial priorities for NEST.
The FDA plans for NEST to be the national evaluation system for medical devices and is aiming to evaluate evidence from the entire life-cycle of medical device products in order to more effectively monitor medical device safety and efficacy.
In July, FDA Commissioner Dr. Robert Califf and Dr. Jeffrey Shuren, director of the FDA’s Center for Devices & Radiological Health (CDRH) stated that this system for evaluating health technology:
could quickly identify problematic devices, accurately and transparently characterize and disseminate information about device performance in clinical practice, and efficiently generate data to support premarket clearance or approval of new devices and new uses of currently marketed devices.
The Planning Board’s report explains that new standards for sharing medical data between multiple entities will be the focus of a planned NEST Coordinating Center. The proposed Coordinating Center will work to develop a network of experts which will aid NEST in collecting and evaluation clinical data, as well as data received directly from patients. According to the report, the Coordinating Center will foster the development of a NEST clearinghouse of analytical tools, methods, and standards for using linked real-world data collected through clinical and administrative workflows as well as from patients themselves to evaluate devices.
Increase in Funding to Med Device Startups
Despite a drop in the second quarter of 2016, medical device funding is expected to finish stronger this year than in 2015. CB Insights has released a report on the funding and deal activity within the medical device industry since 2012. CB Insights reports that “after hitting a 4-year high of $1.5 billion in the second quarter of 2014, funding to medical device startups has sobered considerably.” Funding in 2014 was elevated by a $172 million Series G round secured by California based Proteus Digital Health. Overall, the medical device industry is on track for a modest increase in deals and dollars to private companies in 2016, after seeing a decline in both in 2015.
As of August 8, 2016, funding and deal activity have reached $2.1 billion and over 288 deals. At the current rate, total year funding would reach $3.5 billion and total year deal count would reach 476 deals. The funding has been bolstered by $75 million in Series C funding secured by California based Acutus Medical in March 2016 and recent funds raised by Minneapolis based CVRx, $93 million in August 2016.
The first and second quarters of 2016 are among 5 of the last 10 quarters to have 120+ deals. Funding in the first quarter of 2016 managed to break $1 billion, a feat that didn’t occur in 2015. However, the second quarter’s slip to $757 million saw the first sub $800 million quarter since the first quarter of 2015.
The deal and dollar share by stage for 2016 looks to be similar to those for the last four years with early-stage deals, including Seed/Angel and Series A, making up 29% of total deal share to-date. The top three “Most Active Early-Stage Medical Device Investors” are reported as Germany based High Tech Gruenderfonds, Memphis based ZeroTo510, and Philadelphia based Ben Franklin Technology Partners. Interestingly, “Other” funding rounds have been trending up and currently represent the largest share of deals at 42%. “Other” includes corporate minority rounds, VCs, and convertible notes. The top medical device investor overall is reported as New Enterprise Associates with Versant Ventures a close second.
CB Insights reports the top most well-funded medical device startup as Theranos, securing $400 million in total funding. Theranos was recently sanctioned by the U.S. Centers for Medicare & Medicaid Services (CMS) and banned from receiving Medicare and Medicaid payments.
Each of the top five has raised upwards of $250 million. However, the funding figures exclude debt rounds and lines of credit.
The Brexit Effect on Medical Devices
The medical device industry has been struck by a wave of uncertainty in the wake of the United Kingdom’s (UK) historic vote to leave the European Union (EU). Until the breakup becomes official, British legislation should remain fully aligned with European rules and CE marked products should be able to move freely across the Channel. The UK remains a member of the EU until the UK invokes Article 50 of the Lisbon Treaty, followed by a two year time-frame for negotiations regarding conditions of the exit and future relationships, with the possibility of an expanded time-frame of 5 or even 10 years. The UK’s National Standards Body, known as British Standards Institutions (BSI), released a statement stating:
For now, it’s business as usual and most importantly, we we would like to assure you that BSI will continue to provide EU market access as we have done since the inception of the three EU Medical Device Directives.
The UK has EU Medical Directives transposed into national law. So even as the UK leaves the EU, these laws will remain in place unless the UK government decides to change them. The timing of the exit could affect the UK implementation of the new EU Medical Devices Regulation (MDR) and In Vitro Diagnostic Devices Regulation (IVDR), which address pre-market conformity with requirements, post-market oversight, and traceability of devices throughout the supply chain, among other things. The EU could potentially approve the MDR and IVDR by September 2016 with enforcement beginning in 2020.
At present, medical devices can be marketed throughout the European Economic Area (EEA) once they have a CE Mark issued by any Notified Body. A CE Mark indicates that the product meets the requirements of the applicable European Commission (EC) Directives. The future of UK based Notified Bodies is unclear, but in its statement, BSI expressed confidence that it will continue to be recognized as a Notified Body for Medical Devices after UK’s exit from the EU.
Another point of uncertainty involves Authorized Representatives, also known as EC Reps, which are legal representatives that provide access to the European market to non-EU manufacturers. The future of UK based Authorized Representatives is up in the air, but Sinead Keogh, Director of the Irish Medical Devices Association (IMDA) sees the possibility that UK based Authorized Representatives may not be eligible to represent manufacturers within the EU forcing companies to establish Authorized Representatives within another EU state.
Ronald Boumans of Emergo Group sees four options for the UK upon the UK’s exit from the EU:
- Become part of the EEA or European Free Trade Association (EFTA) similar to Norway, Iceland, and Liechtenstein. The free movement of goods will remain under the CE Marking of the applicable categories of products and Notified Bodies and Authorized Representatives can keep working from the UK.
- Set up a mutual recognition agreement (MRA) similar to ones the EU has with Australia, New Zealand, and Switzerland. Depending on the agreed upon conditions, this option may allow for Notified Bodies and Authorized Representatives to continue operating from within the UK.
FDA Issues Draft Guidance on Dissemination of Patient-Specific Information from Devices
On June 10, 2016, the U.S. Food and Drug Administration (FDA) issued a draft guidance advising manufacturers on appropriate and responsible dissemination of patient-specific information from medical devices.
The draft guidance defines patient-specific information as “any information unique to an individual patient or unique to that patient’s treatment or diagnosis that, consistent with the intended use of a medical device, may be recorded, stored, processed, retrieved, and/or derived from that medical device.” According to the guideline, patient-specific information include recorded patient data, device usage/output statistics (e.g., pulse oximetry data, heart electrical activity, and rhythms as monitored by a pacemaker), healthcare provider inputs, incidence of alarms, and/or records of device malfunctions or failures. Patients may contact their healthcare providers or manufacturers to obtain access to patient-specific information.
According to the draft guideline, manufacturers may share patient-specific information with a patient at the patient’s request without obtaining additional premarket review. The Health Insurance Portability and Accountability Act (HIPAA) and the associated HIPAA Privacy Rule intend to prevent manufacturers from sharing individually identifiable health information with covered entities (e.g., health plans, healthcare clearinghouses, and healthcare providers that electronically transmit health information) without the patient’s consent. However, the draft guideline opines that HIPAA and the HIPAA Privacy Rule are not intended to prevent a medical device manufacturer from sharing patient-specific information with the affected patient.
1. Considerations When Sharing Patient-Specific Information
In the draft guideline, FDA recommends that device manufacturers should take certain considerations into account when sharing patient-specific information. These considerations relate to the content of information provided, the context in which patient information from medical devices should be understood, and the need for access to additional, follow-up information from the manufacturer or a healthcare provider.
- Content
FDA recommends that a manufacturer take appropriate measures 1) to ensure that the information provided is interpretable and useful to the patient and 2) to prevent the disclosure of confusing or unclear information that could be misinterpreted. For example, the manufacturer may provide supplementary instructions, materials, or references to aid patient understanding. Patient-specific information provided to patients should be comprehensive and contemporary.
- Context
When providing patient-specific information to the affected patient, it may be appropriate for the device manufacturer to include relevant context in order to avoid circumstances where this information may be misinterpreted, thus leading to incorrect or invalid conclusions. Informing patients about how parameters were measured and recorded by the medical device is a good example of providing relevant context.
- Access to follow-up information
Manufacturers should consider what, if any, information they should include about whom to contact for follow-up information. The FDA recommends, at a minimum, that such manufacturers advise patients to contact their healthcare providers if the patients have any questions about their patient-specific information. Moreover, FDA suggests that manufacturers provide their contact information to answer questions from patients about the device at issue.
Comments and suggestions for the draft guideline are open for 60 days from its publication.
2. Implications on the Medical Device Industry
FDA opined in its draft guidance that device manufacturers’ disclosure of patient-specific information with the affected patient would be subject neither to additional premarket review by FDA nor to the HIPPA and the associated Privacy Rule.
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