February 2017 www.namdrc.org VOLUME 27 No. 2

The 21st Century Cures Impact on Medical Device Innovation

As noted in last month’s Watchline, The 21st Century Cures Bill made substantial changes to the FDA process for approving and assigning a category to new and improved medical devices. NAMDRC has an interest in policies that affect the availability of devices for patients requiring respiratory support including ventila-tory support devices and interfaces, advanced oxygen delivery systems, and disease monitoring systems. It has been a concern of NAMDRC, in meetings with the Food and Drug Administration (FDA) as well as the Centers for Medicare and Medicaid (CMS), that individuals in decision making positions often do not grasp the intricacies of pulmonary physiology or the sophistication of some of the newer technologies. For example, the existing FDA standards for mechanical ventilators were established in 1995. The increased focus on patient safety in the last decade has led to substantial improvements in ventilator technology. In 2010 NAMDRC leadership met with the Director of the Center for Devices and Radiological Health of the FDA and his staff to discuss evolving technology of home ventilators. The FDA was asked to develop a new set of standards consistent with the advances in technology, however, they continue to adhere to the 20 year old guidance.

Federal Barriers to Innovation Federal barriers to innovation have become major themes in an industry changing as rapidly as healthcare in the United States. Technology diffusion in healthcare is a complex, non-linear and dynamic process often influenced by government regulations which may serve to accelerate or block adoption. Whether created by large or small firms, medical technologies are characterized by a rapid innovation cycle. The typical medical device is replaced by an improved version every 18-24 months. In recent years the breadth and depth of regulatory requirements have been increas-ing driving longer cycle times and higher development costs. At the core of the problem have been delays and inconsistencies in FDA review, uncertainties about coverage and payment by CMS and a noncompetitive U.S. tax system.

WASHINGTON WATCHLINE

PHYSICIAN ADVOCACY FOR EXCELLENCE IN THE DELIVERY OF PULMONARY, CRITICAL CARE AND SLEEP MEDICINE

The WASHINGTON WATCHLINE is pub-lished monthly and provides timely information to NAMDRC members on pending legislative and regulatory issues that impact directly on the practice of pulmonary medicine. NAMDRC’s primary mission is to improve access to quality care for patients with respiratory disease by removing regulatory and legislative barriers to appropriate treatment.

INSIDE THIS ISSUE: About NAMDRC………..….…….…6 Membership Benefits…...…………..6 NAMDRC Application......................7 NAMDRC Leadership……...............4 Product and Technology News…....5 NAMDRC 40th Annual Meeting and Educational Conference will be held:

March 23 – 25, 2017 The Meritage Resort

Napa Valley, CA

NAMDRC 8618 Westwood Center Drive, Suite 210 Vienna, VA 22182-2273 Phone: 703-752-4359 Fax: 703-752-4360 Email: ExecOffice@namdrc.org “NAMDRC will directly affect your practice more than any other organiza-tion to which you belong.”

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Over the past three decades, research and development of advanced medical devices has often been funded by venture capital. Venture capital investment, especially investment in start-up firms, has plummeted as a result of current administrative and tax policies. Venture investment in medical technology declined by 42 percent between 2007 and 2013. In 2007, 98 companies re-ceived $576 million in early-stage venture capital funding. In 2013 there was the lowest level of early-stage funding activity for medical device companies with only 44 new companies receiving a total of $163 million in funding. As medical devices become increasingly sophisticated, and less well understood by regulators, many developers are looking to international markets to launch products, where barriers to entry are less stringent. Among other factors, the decisions to introduce new products abroad have been influenced by the higher cost and time involved in conducting clinical trials in the U.S.; delays and inconsisten-cies in FDA review; and, increasingly, uncertainties about coverage and payment. The difference between innovation in Europe and the United States is measurable. In 2007, recognizing the in-creasingly important role medical devices play in the support of patients with incurable respiratory diseases, the World Health Organization launched the Priority Medical Devices project to deter-mine whether available medical devices were meeting the needs of health-care providers and pa-tients. The efforts of this group to address and correct barriers to diffusion of new products have simplified and streamlined the process in Europe and made that market more attractive to United States based companies who have been transferring research and development overseas.

The Food And Drug Administration The 21st Century Cures Bill directly addresses several FDA issues. At its core, the bill places sig-nificant responsibility on The Secretary of Health and Human Services (HHS Secretary) to insure that the statutory requirements are met. For example, since 1997, the FDA statute has required reviewers to use the “least burdensome” means to assure that the statutory standard of safety and effectiveness is met. This common sense requirement is designed to minimize the cost and time involved in bringing new treatments to patients while maintaining FDA’s high standards for safety and efficacy. However, application of this standard by FDA staff has been inconsistent. The legislation makes the HHS Secretary responsible to ensure that FDA employees are trained in and apply the “least burdensome appropriate means” concept in their review of medical devices: The Secretary shall— ensure that each employee of the Food and Drug Administration who is in-volved in the review of premarket submissions, including supervisors, receives training regarding the meaning and implementation of the least burdensome requirements. Not later than 18 months after the date of enactment of the 21st Century Cures Act, the ombuds-man for any organizational unit of the Food and Drug Administration responsible for the pre-market review of devices shall— ‘‘(A) conduct an audit of the training described in paragraph (1)(A), including the effectiveness of such training in implementing the least burdensome require-ments; ‘‘(B) include in such audit interviews of persons who are representatives of the device in-dustry regarding their experiences in the device premarket review process, including with respect to the application of least burdensome concepts to premarket review and decision making. The time spent in convening FDA advisory committees is adding significantly to delays in decision-making on product applications. In addition, advisory committees sometimes suffer from a lack of committee members with appropriate expertise, inconsistencies in procedures, and an inability for sponsors to participate appropriately to correct misinformation. The concerns of the NAMDRC leadership regarding committee expertise appears to have been recognized by members of Con-gress. The legislation addresses this concern in regards to the FDA:

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When a device is specifically the subject of review by a classification panel, the Secretary shall ensure that adequate expertise is represented on the classification panel to assess— the disease or condition which the device is intended to cure, treat, mitigate, prevent, or diagnose; and the technology of the device; and provide an opportunity for the person whose device is spe-cifically the subject of panel review to provide recommendations on the expertise needed among the voting members of the panel. The term ‘adequate expertise’ means that the membership of the classification panel includes— two or more voting members, with a specialty or other expertise clinically relevant to the device under review; and at least one voting member who is knowledgeable about the technology of the device. The Secretary shall provide an annual opportunity for patients, representatives of patients, and sponsors of medical device submissions to provide recommendations for individuals with appropri-ate expertise to fill voting member positions on classification panels.’

The Centers for Medicare and Medicaid The most serious obstacle now facing manufacturers is not gaining FDA approval, but securing a positive reimbursement decision by Medicare. While the previous focus was almost exclusively on the FDA, start-up companies are reporting that one of the first questions that investors now ask is about the prospects for coverage and payment. It has become increasingly difficult for new technologies to gain a favorable coverage decision from Medicare. A recent study found that in the ten years between 2002 and 2012, technologies being considered for national coverage were twenty times less likely to be successful than in the prior decade. When coverage was granted, it was more limited than the FDA approved indications in 40 percent of the cases. While all HCPCS coding decisions are the responsibility of the central Medicare office, the vast majority of coverage policy is actually determined on a local level by the Medicare Contractor Medical Directors (MAC) and the Durable Medical Equipment Medicare Contractor Directors (DME MAC). These Medical Directors, when considering coverage issues, have the power to assign new devices to established code categories which may or may not be appropriate to the device. As-signment to the wrong category, with inappropriate reimbursement, can impede the entrance into the marketplace for a new device. Moreover, CMS is allowing contractors to coordinate their deci-sions, effectively transforming a local coverage determination into national policy. Medicare is by far the largest third-party payer and, because of its size and influence, private payers will usually adopt the same or similar coverage, coding and payment policies. Within the current system, a single durable medical equipment medical director can make a decision on a category and code for a new device that can prevent that device from entering the marketplace. NAMDRC leadership has firsthand experience in barriers to innovation in the medical device field encountered at CMS. We believe that the technology of today’s devices has become sufficiently sophisticated that it is difficult for a single administrative individual to render an appropriate deci-sion on the benefit to the Medicare population. In meetings with CMS staff, and with Contractor Medical Directors, NAMDRC participants have been left with the impression that current adminis-trators have difficulty understanding both the evolving sophistication in clinical medicine and the pulmonary physiology involved in newer support techniques. Fear that approval of a new device would lead to a rapid increase in expenditures has paralyzed the bureaucrats in CMS administration. Not only has this prevented the introduction of technologi-cally advanced devices into a marketplace where the physician and patient can judge the benefit

on an individual basis but, the unintended consequence, has been a rapid increase in billings for existing expensive devices when approval of newer technology at a lower cost would have saved CMS money. Ignoring the scientific evidence and assigning new technology to cate-gories with no reimbursement has a chilling effect on medical re-search and development of therapeutic devices in the United States.

The 21st Century Cures Act and CMS While Congress has recognized the need for improving expertise in FDA deliberations, this has not carried over to CMS. The 21st Century Cures Act simply requires the HHS Secretary to establish a pharma-ceutical and technology ombudsman within the Centers for Medicare & Medicaid Services. The legislation does not specify whether this is a single individual or a group nor does it specify the expertise re-quired. The ombudsman is expected to respond to “complaints, griev-ances, and requests that are from entities that manufacture pharma-ceutical, biotechnology, medical device, or diagnostic products that are covered or for which coverage is being sought.” While the legisla-tion requires the Secretary of HHS to monitor the activities of the FDA and report back to Congress, there is no such requirement for CMS. The existing Medicare Evidence Development & Coverage Advisory Committee was established in 1998 to supplement CMS' internal ex-pertise and to allow deliberation of "state of the art" technology and science. It is promoted as a forum in which developers of new tech-nology can present data to try and correct an unfavorable decision by a contractor medical director. While this committee is supposed to be independent, the agenda and membership is set by CMS central of-fice. The committee may be composed of up to 100 experts in clinical and administrative medicine, biologic and physical sciences, public health administration, patient advocacy, health care data and infor-mation management and analysis, health care economics, and medi-cal ethics, however, CMS staff selects “no more than 15 members with knowledge specific to the topic in question to serve on the panel.” NAMDRC members have testified before this Committee and have found the central office unwilling to alter positions taken by contractor medical directors.

Opportunities for NAMDRC The intent of Congress expressed in the FDA portions of the 21st Century Cures Bill and the Congressional focus on Personalized Medicine, introduced in President Obama’s 2014 State of the Union Address, establish a platform to advocate for changes in the coverage and coding activities at CMS. Calling upon the expertise of its mem-bership, NAMDRC has a significant role to play in educating policy makers on the impact new or improved technology can make in the care of our patients. The NAMDRC Annual Meeting, which will take place in late March, will give the membership an opportunity to discuss these issues with device industry leadership.

2016-2017 Officers & Board of Directors

OFFICERS Timothy A. Morris, MD President Charles W. Atwood, MD President-Elect James P. Lamberti, MD Secretary/Treasurer Dennis E. Doherty, MD Past President

Board of Directors Robert J. Albin, MD Albee Budnitz, MD Kent L. Christopher, MD Peter C. Gay, MD Thomas B. Hazlehurst, MD Theodore S. Ingrassia, III, MD Peter S. Marshall, MD, MPH Steve G. Peters, MD Valerie A. Schneider, MD Thomas M. Siler, MD

PRESIDENT’S COUNCIL George G. Burton, MD John Lore, MD Louis W. Burgher, MD, Ph.D. Alan L. Plummer, MD E. Neil Schachter, MD Joel M. Seidman, MD Frederick A. Oldenburg, Jr., MD Paul A. Selecky, MD Neil R. MacIntyre, MD Steven M. Zimmet, MD Joseph W. Sokolowski, MD Peter C. Gay, MD Steve G. Peters, MD Lynn T. Tanoue, MD Dennis E. Doherty, MD

Executive Director Phillip Porte

Associate Executive Director/ Legislative Affairs Sarah Walter

Associate Executive Director Karen Lui, RN, MS

Director Member Services Vickie A. Parshall

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PRODUCT AND TECHNOLOGY NEWS! NAMDRC is providing this space to our benefactors and patrons who provide us with infor-

mation about new products and innovations related to pulmonary medicine. NAMDRC reserves

the right to edit this copy as appropriate.

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NAMDRC Membership Benefits AT A GLANCE...

Monthly publication of the Washington Watchline, providing timely information for practicing physicians;

Publication of Current Controversies focusing on one specific Pulmonary/Critical Care Issue in each publication;

Regulatory updates;

Discounted Annual Meeting registration fees;

The Executive Office Staff as a resource on a wide range of clinical and management issues; and

The knowledge that NAMDRC is an advocate for you and your profession.

https://www.namdrc.org/content/issue-advocacy

One of NAMDRC’s primary reasons for existence is to provide both clinicians and patients with the most up-to-date information regarding pulmonary medicine. Bookmark this page! The complexity of our nation’s health care system in general, and Medicare in particular, create a true chal-lenge for physicians and their office staffs. One of NAMDRC’s key strengths is to offer assistance on a myri-ad of coding, coverage and payment issues. In fact, NAMDRC members indicate that their #1 reason for belonging to and continuing membership in the Association is its voice before regulatory agencies and legislators. That effective voice is translated into providing members with timely information, identifying important Federal Register announcements, perti-nent statements and notices by the Centers for Medicare and Medicaid Services, the Durable Medical Equipment Regional Carriers, and local medical review policies.

ABOUT NAMDRC:

Established over three decades ago, the National Association for Medical Direction of Respiratory Care

(NAMDRC) is a national organization of physicians whose mission is to educate its members and address

regulatory, legislative and payment issues that relate to the delivery of healthcare to patients with respirato-

ry disorders.

NAMDRC members, all physicians, work in close to 2,000 hospitals nationwide, primarily in respiratory

care departments and critical/intensive care units. They also have responsibilities for sleep labs,

management of blood gas laboratories, pulmonary rehabilitation services, and other respiratory related

services.

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