Thomas Novelli, Medical Device Manufacturers Association - Speaker at the marcus evans Medical Device Manufacturing Summit June 2012, held in Las Vegas, NV delivered his presentation entitled Washington Update: Changes at the FDA and Health Reform Implementation

1. Thomas C. Novelli
Vice President, Government Affairs
Medical Device Manufacturers Association

2. National trade association focused on
regulatory, legislative and legal issues for
medical device companies
Based in Washington, DC
Over 300 member companies

3. Health Care Reform
◦ Medical Device Excise Tax
◦ Physician Payment Sunshine
◦ Other issues
Supreme Court Decision on Health Reform
◦ Scenario Analysis
FDA Reform in 2012

4. How did we get here?
Goals of health care reform
◦ Increase and extend h l h insurance coverage
d d health
◦ Improve efficiencies throughout health care system
◦ Reduce costs

5. Industry Top 5 Concerns (Initial)
1. Transparency/sunshine requirements
2. Comparative effectiveness research
3. Medicare commission/cost-control
4. Payment Reforms
5. D
Downward pricing pressure
d i i

6. Industry Top 5 Concerns (Current)
1. Device tax
2. Device tax
3. Device tax
4. Device tax
5. D
Device t
i tax

7. Takes effect January 1, 2013
Based on total revenue, not profitability
No accommodations for small businesses
Certain exemptions from tax exist
(eyeglasses, contact lenses, hearings and
products sold at retail
retail*
IRS began rulemaking process
◦ Began in February, final regulations expected in Fall
◦ Having difficulty determining how tax will be
assessed

8. Efforts to repeal have gained significant
momentum
House of Representatives overwhelmingly
voted for repeal
◦ Bipartisan support for repeal (all Republicans and
37 Democrats voted for repeal
p
Senate outlook not as positive
President indicated veto threat
Future could rest of Supreme Court outcome

9. Requires disclosure of manufacturer payments
made to physicians, teaching hospitals
d h i i hi h i l
(consulting fees, training, etc)
CMS indicated difficulty in structuring
regulations, essentially delayed implementation
until 2013
Payment threshold: $10 per payment or $100
aggregate in a calendar year
Delayed disclosure until FDA clearance/approval
or 4 years after payment made
Future could rest of Supreme Court outcome

10. Independent Payment Advisory Board
Comparative Effectiveness Research
Accountable Care Organizations
Payment Reform/Payment Bundling
f ll h ld
Future of all these could rest on Supreme
Court Outcome

11. Court examining a few central issues
◦ Constitutionality of the individual mandate
Can Congress mandate individuals to purchase a product (in
this case health insurance)?
If mandate question is not constitutional, can the rest of the
health reform law be “severed” from the individual mandate?
Or d
O does the entire law need to b thrown out?
h i l d be h ?
Court heard arguments in March, 2012
Decision will be announced TOMORROW

12. Law is upheld •Nothing changes
Mandate is •Device related provisions remain
repealed but rest •Non-insured individuals will not be compelled to
purchase insurance
of law remains
Entire law is •Device related provisions no longer in effect*
•Likely action by Congress to pass popular provisions in
repealed the law (pre-existing conditions, young adults insurance)

13. Industry has experienced considerable delays in
product approvals in the past 3-5 years
3 5
Uncertainty, unpredictability and lack of
y, p y
reasonableness has pervaded
More US based companies have launched
overseas before US (if at all)
Venture capitalists have pulled away dramatically
from investment in medical technology
◦ Cite FDA as primary reason
p y

14. Extensive Survey by Stanford University
FDA Negatively impacted >75% of companies
◦ 50% h d review staff/branch chief changes
0% had ff b h h f h
◦ >30% stated appropriate FDA staff not present at
meetings
g
◦ >90% stated FDA has become more risk-adverse
◦ >80% stated FDA has difficulty dealing with novel
technologies and/or indications

15. General Background
Congress first gave FDA authority to collect user
fees for medical devices in 2002
◦ Intent was to provide resources to supplement
congressional appropriations
Current authority expires September 30, 2012
Under MDUFA II, FDA has failed to meet a
number of goals
Since MDUFA II, FDA’s budget for device review
has increased from $120M to $292M
Recent decline in FDA performance (FDA data)
◦ Average 510(K) application clearance time increased 51%
◦ Average total time to approve a PMA application has
doubled (234 days in 2000 to 464 days in 2008)
( y y )

16. Resources
$595 million over 5 years
◦ MDUFA I - $142 over 5 years
◦ MDUFA II - $287 million over 5 years
Bulk of increase generated from lifting fee
exemptions on annual registrations
Adjusted annually for actual inflation with 4%
cap in any year
Addition of 240 full-time employees for FDA

17. Process Improvements
Scientific and regulatory review capacity
should increase
Enhanced training f FDA reviewers
E h d i i for i
Pre-submissions: More structure and clarity
will be provided to the process (including
establishment of meeting minutes)
Submission acceptance criteria: FDA will
update list of objective requirements for
applicant companies

18. Process Improvements (con’t)
Guidance document development: improvement
G id d d l i
of developing, tracking, updating, reviewing
guidance
Patient safety and risk-tolerance: requires FDA to
meet with patient groups to understand tolerance
for risk
Mandatory substantive interactions for all
submissions
No submission left behind: plan for reaching
decisions on submissions that do not meet goals
FDA will also look at “total time”

19. FDA Accountability Measures
Clear, meaningful metrics
Cl i f l i
Quarterly and annual reporting
◦ Updated on p g
p progress towards p
performance g
goals
◦ Additional information
Average number of review cycles
Non-substantially equivalent rates
Withdrawal rates
Non-approvable rates
Annual performance report to Congress
p p g
Independent evaluation of FDA’s management of
the review process

21. Reauthorizes user-fees
Includes important FDA reforms
◦ Requires enhanced scientific rationale for major
decisions
◦ Eliminates profit prohibition for Humanitarian
Device Exemption products
◦ De Novo reform: companies can seek direct review
by determining non-substantial equivalence
◦ Provides specific dates to begin Unique Device
Identification
◦ Directs FDA to improve recall system

22. Next legislative battles will likely focus on the
cost of medical care, regardless of health care
t f di l dl f h lth
reform’s future
◦ Why does a hip replacement p
y p p procedure cost 4-5
more than in other countries?
More pressure to prove why your product is
better than existing standard of care
◦ The era of the “me-too” product is over
◦ Companies/products without significant and
compelling evidence will likely not receive
reimbursement
Evidence, evidence, evidence

23. Thomas C. Novelli
Vice President, Government Affairs
Medical Device Manufacturers Association
tnovelli@medicaldevices.org
t lli@ di ld i