A Journal for Industry Executives

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By Daniel R. Matlis

On February 25th, I had the opportunity to have breakfast with Dave Johnson, CEO of ConvaTec Inc. at “CEO Unplugged,” a speaker series produced by Pennsylvania Bio , in partnership with AdvaMed. “CEO Unplugged” events provide a unique opportunity to interact and network with Medical Device industry executives, entrepreneurs and investors.

ConvaTec is a leading developer, manufacturer & marketer of innovative medical technologies. The company focuses on 4 key areas: Ostomy Care, Wound Therapeutics, Continence & Critical Care and Infusion Devices. ConvaTec employs over 7,000 people worldwide and had revenues of $1.6 Billion in 2010. The company’s strong global footprint includes a sales presence in over 90 countries and 12 manufacturing plants and 22 distribution centers in 9 countries.

During his “CEO Unplugged” session, Mr. Johnson discussed the challenging environment the Medical Technology industry is facing today. As a result of these business and regulatory challenges “I sleep like a baby - I wake up every 2 hours and cry,” he said.

So what keeps Dave Johnson up at night?

• The need to manage sustainable growth:
  • Striking the proper balance between the seven developed economies versus emerging markets
  • Managing increasing price pressures and changing reimbursement strategies
  •  Navigating the macro economic impact of sovereign debt and investment
•  The tightening regulatory environment:
  • Bringing Medical Devices to market takes longer and is more costly than ever before. The focus on 510K reform has added uncertainty for industry and investors.
  • Accessing innovative medical technologies has become more difficult
  • Complying with the Foreign Corrupt Practices Act (FCPA) can be challenging in a global environment. What one government may consider a common place expediting fee could be construed as a bribe by another.
• Navigating Health Care Reform in the U.S. and Globally:
  • Working to minimize the impact of the device tax
  • Setting up systems to support competitive bidding

Mr. Johnson had good advice for those attending the session. “Don’t become a victim of these changes; instead take advantage of the opportunity,” said Johnson. “Change your business model from selling products to providing integrated solutions that improve care,” he added.

Mr. Caroll Neubauer, Chairman and CEO of B. Braun of America and B. Braun Medical Inc.  will be the guest at the next “CEO Unplugged” event scheduled for April 1, 2011.

I hope to see you there to hear Mr. Neubauer’s insights on such topics as:

• Current state of the medical technology industry
• Global and domestic marketing issues
• Strategic growth and business development

For more information and to register to attend the next “CEO Unplugged” event visit: http://www.pennsylvaniabio.org/content/ceo-unplugged-hot-topics-medical-technology-0

Last week, I joined over thirty-thousand Healthcare Information Technology (IT) professionals in Orlando for HIMSS11 . The conference brings together key stakeholders in the Healthcare IT ecosystem to collaborate and devise innovative approaches on the use of IT and management systems for the betterment of healthcare.

The catchphrase at HIMSS11 was, “Meaningful Use”.

This is not surprising given the financial incentives offered to hospitals and providers for the implementation of the “Meaningful Use” of Healthcare IT products by the American Recovery and Reinvestment Act (ARRA). “Meaningful Use” is a key driving force behind current Healthcare IT spending. According to the 22nd Annual HIMSS Leadership Survey, two-thirds of respondents reported that their organization is making additional IT investments to position themselves to qualify for the incentives associated with achieving “Meaningful Use.”

What about the Other Game Changer?

To my surprise, most HIMSS11 participants were unaware of a Game-Changing regulation affecting Healthcare providers. On February 15, 2011, FDA announced the Medical Device Data Systems (MDDS) Final Rule. The Rule classifies most Healthcare IT Infrastructure as a Class 1 Medical Devices.

Rick Gentry, Director of Healthcare Solutions at Ruckus Wireless, was part of a small minority in-the-know. According to Rick, “the FDA’s final rule to reclassify Medical Device Data systems provides clarity for device manufacturers and healthcare providers to develop plans to address the development and deployment for the myriad of new products. Ultimately, this should improve the efficiency, quality and safety of care delivery.”

FDA defines MDDS as a device (including off-the-shelf or custom hardware or software products used alone or in combination) intended to provide one or more of the following uses, without controlling or altering the functions or parameters of any connected medical devices:

(i) The electronic transfer of medical device data;
(ii) The electronic storage of medical device data;
(iii) The electronic conversion of medical device data from one format to another format in accordance with a preset specification; or
(iv) The electronic display of medical device data.

MDDS may include software, electronic or electrical hardware such as a physical communications medium (including wireless hardware), modems, interfaces, and a communications protocol.

Siemens was poised to address the MDDS Final Rule. According to a company statement “Siemens is well prepared for compliance with the final MDDS rule. The company has prepared its solutions and processes to meet the FDA requirements and to ensure that data stored, transferred or displayed on our systems remain reliable. Our processes are controlled and certified according to international quality standards for medical device manufacturers and are intended to provide the level of assurance of safety and effectiveness that is expected for a medical device and by our customers.”

Does The MDDS Rule Have Teeth?

Many at HIMSS11 shrugged off the impact of the MDDS regulation citing their experience with HIPAA requirements which have not resulted in significant fines.

FDA will utilize the same policies it uses to enforce Pharmaceutical and Medical Device requirements in the regulation of MDDS manufacturers. These include Form FDA 483 “Inspectional Observations,” warning letters, and other established mechanisms.

Non-compliance with FDA Regulations can lead to:

• Injunction
• Condemnation and seizure
• Court-ordered injunction
• Civil money penalties
• Criminal Prosecution

In 2009, FDA’s enforcement actions resulted in record penalties, when the Justice Department announced a $2.3 Billion settlement for what it called the “largest health care fraud settlement in its history.”   That qualifies as teeth.

MDDS Enforcement Plan:

Manufacturers of Medical Device Data Systems must comply with FDA’s published requirements according to the following schedule:

•  The MDDS rule becomes effective April 18, 2011.
• MDDS manufacturers must register and list their device(s) with FDA by May 16, 2011 (90 days after the publication of the rule in the Federal Register)
• Manufacturers must establish and implement an FDA compliant Quality System within 12 months of the Rule’s effective date
• MDDS manufacturers must implement a Medical Device Reporting (MDR) system for their devices no later than April 18, 2012.

So before you procure another Healthcare IT infrastructure component, make sure the manufacturer is ready to comply with MDDS requirements. Otherwise, FDA may consider you, the Hospital, a Class 1 Medical Device Manufacturer.