Medical Device Link.

Originally Published MX May/June 2001

Governmental & Legal Affairs

Over the next four years, industry progress could depend on those occupying Washington's seats of power.

Stephen J. Northrup

After the most bizarre election season in recent American history, Washington has returned to some semblance of normalcy. The new presidential administration is trying to make its mark on public policy and define the terms of the coming debates, while the new Congress is attempting to balance competing factions, some of which want to see the new president's agenda become law and some of which plan to fight that agenda.

Like most interest groups, the medical device industry is trying to determine what to expect from the Bush administration and the 107th Congress. Even though the White House and Congress are now both controlled by the Republican Party, many pundits have speculated that the narrowness of the margins in the House and Senate, combined with the closeness of the presidential election, will inevitably lead to legislative gridlock. The same pundits suggest that those in the medical device industry would be wise to temper their expectations in this cloudy political climate.

However, many industry experts disagree with this assessment. Instead, they believe that the prospects for achieving the public-policy objectives of the medical device industry have never been brighter. To understand why, say these experts, we must first look back at some of industry's darkest days.

Success Breeds Success

For the most part, the decade of the 1990s was a grim time for medical device manufacturers. Relations between FDA and industry were strained, and manufacturers found themselves beset at every turn by regulatory obstacles and delays. In turn, medical device manufacturers lobbied for relief, which was finally delivered in the form of the FDA Modernization Act of 1997 (FDAMA).

Inspired by this success, a newly mobilized industry has begun to turn its attention to other issues of concern to medical device manufacturers. Through trade associations such as the Medical Device Manufacturers Association (MDMA), industry has lobbied effectively to remove the barriers between Medicare beneficiaries and the latest advances in medical technology. In 1999 and 2000, these efforts resulted in passage of measures designed to refine and improve the Medicare program.

Industry has not been shy in telling its story, but such policy improvements have been made easier by the greater receptivity of Congress to hearing the views of industry constituents. Today, because of the many manufacturers who have taken time to explain their position to their congressmen and congresswomen, lawmakers on both sides of the political aisle have a greater understanding of the role that medical technology plays in promoting public wellness.

Recent legislation to begin reform of FDA's regulatory process and Medicare's technology coverage and payment systems is the most visible result of this understanding, but there are others. For instance, this year's first hearing on Medicare modernization held by the health-related subcommittees of the House Energy and Commerce Committee focused on the reimbursement problems and delays faced by physicians trying to serve Medicare beneficiaries with the latest advances in medical technology.

In short, many lawmakers and other government officials have lately come to recognize that a healthy medical technology industry is in the public's best interest. And this broad-based recognition—so different from the conditions that existed in previous years—explains why many experts are confident that the medical device industry can achieve its policy objectives even in a political environment that seems destined for gridlock. Keeping this background information in mind, this article discusses some of the policy initiatives that medical device manufacturers expect to undertake in the coming months, and the key people who are likely to influence the outcome of those initiatives.

Policy Objectives

Pushing aside the notions of timidity and legislative gridlock, some experts are convinced that industry should be bold in setting its public-policy goals for this year. Since improving the public health through advances in medical technology should not be a partisan issue, they reason, industry initiatives along those lines are less susceptible than other proposals to stalling out in the face of partisan congressional squabbling. For its part, MDMA has undertaken to advance the following major policy objectives during the 107th Congress.

Regulatory Improvements. The regulatory climate for medical device manufacturers has improved dramatically in recent years. The two elements that have had the greatest impact on this change are FDAMA and the ongoing efforts of FDA's Center for Devices and Radiological Health (CDRH) to reengineer its own processes.

Despite such improvements, however, many in industry believe that the process of improving and enhancing CDRH's review of device submissions should be continuous. In the coming months, representatives of the medical device industry expect to be working with both Congress and CDRH to expand ongoing programs and develop reasonable new policy initiatives that will keep the process of regulatory modernization moving forward.

Industry associations will also be working with the Bush administration to identify candidates for the post of FDA commissioner. Since the tone of the agency is set by its leadership, selection of the next FDA commissioner is a decision of critical importance at this point in the agency's history. Desirable characteristics for the new commissioner include a demonstrated ability to weigh risks and benefits and act appropriately on those findings, an understanding of the challenges that medical device entrepreneurs face in bringing new products to market, and an appreciation of the need for government regulators to act predictably and consistently.

HCFA and Medicare. Industry has a similar interest in seeing that predictability and consistency inform the policies of the Health Care Financing Administration (HCFA; Baltimore), which oversees the Medicare program. Many in industry have argued that HCFA's rules and regulations need to be updated to reflect the agency's responsibility to enable Medicare beneficiaries to access the benefits of valuable new technologies as quickly as possible.

Such industry representatives have already been extremely active in working with Congress to reduce the time lag between FDA clearance or approval of a product and Medicare decisions for coverage and payment. In the coming months, industry is likely to become even more active in this area, in part by focusing the attention of lawmakers on the flaws in Medicare's system for making coding, coverage, and payment decisions for new and improved medical devices.

Opening Healthcare Markets. In addition to the regulatory barriers they face in the United States and around the world, medical technology entrepreneurs are now also faced with a healthcare purchasing marketplace that is dominated by a handful of group purchasing organizations (GPOs). Although group buying can be efficient and procompetitive, many in industry believe that the way GPOs conduct group buying in the healthcare marketplace limits competition and innovation.

When medtech entrepreneurs are denied fair access to the healthcare marketplace, patients can be deprived of the latest advances in medical care. To resolve such issues, MDMA continues to call upon Congress, the Justice Department, and the Federal Trade Commission to investigate the anticompetitive business practices of healthcare GPOs.

Administration Figures

President Bush has listed five primary objectives for his first months in office—tax relief, military readiness, education reform, Social Security reform, and Medicare reform. As governor of Texas, Bush employed the strategy of setting major goals such as these and maintaining his administration's focus on achieving them. He also surrounded himself with loyal aides who shared his philosophy of governing, and he brought many of those close advisers with him to Washington.

However, the two officials who will have the most say in the Bush administration's plans to reform HCFA and the Medicare program are not long-time Texas colleagues. Secretary of Health and Human Services (HHS) Tommy G. Thompson and HCFA Administrator Thomas A. Scully also have very different backgrounds in public policy.

Thompson is the former governor of Wisconsin and is best known for his innovative approach to social services, particularly his far-reaching and controversial efforts to reform his state's welfare and Medicaid programs. Both allies and adversaries have described Thompson as conservative but pragmatic. As secretary of HHS, he now runs an agency that employs nearly the same number of employees as the state of Wisconsin, but whose budget is 20 times larger. Thompson's views on medical technology are not well known. However, he is a major supporter of biotechnology, having worked extensively to lure biotech companies to Wisconsin during his 14 years as governor.

Tom Scully, who will work under Thompson as HCFA administrator, is no newcomer to Washington. Scully has worked in and around Washington for more than 20 years. During George Bush Sr.'s administration, Scully worked in the White House Office of Management and Budget and as deputy assistant to the president, advising him on health policy issues. For the last six years, Scully has been president and chief executive officer of the Federation of American Hospitals, a trade association representing the nation's 1700 privately owned community hospitals and health systems.

Scully's extensive experience in health policy should serve him well as administrator of HCFA, an agency with more than 4000 employees and a budget approaching $300 billion. His background in the nation's for-profit hospital industry ensures that he will be aware of the concerns of hospitals regarding Medicare rules and regulations. His relationships with key lawmakers are also undoubtedly attractive to the Bush administration. Scully will be expected to help sell Capitol Hill on the president's Medicare reform plan, which will most likely be based on legislation developed by Senators Bill Frist (R–TN) and John B. Breaux (D–LA). This legislation itself was inspired by the work of the National Bipartisan Committee on the Future of Medicare. (For additional information on this topic, visit http://www.medicare-commission.com.)

A Republican Senate

Over on Capitol Hill, the well-publicized 50-50 split in the Senate still leaves Republicans in control of the upper chamber of Congress. As a result, many of the key lawmakers with whom the medical device industry is familiar are still in the same places. The Senate Committee on Health, Education, Labor, and Pensions, which oversees FDA, is again chaired by Senator Jim M. Jeffords (R–VT). Senator Edward M. Kennedy (D–MA) has returned as ranking minority member on the committee. Heart- and lung-transplant surgeon Bill Frist has also returned to serve as chairman of the Subcommittee on Public Health, with Senator Kennedy acting as the subcommittee's ranking minority member. The most prominent new addition to the committee's roster is Senator Hillary Rodham Clinton (D–NY), the former first lady, which ensures that committee hearings will receive additional coverage on cable television.

The Senate Finance Committee, on the other hand, features a new chairman and ranking minority member. The new chairman of the committee is Senator Charles E. Grassley (R–IA), who formerly chaired the Senate Special Committee on Aging. Grassley brings to the committee a wealth of experience with Medicare and a particular focus on ferreting out fraud and abuse in the healthcare system. In his new and broader role as Finance Committee chairman, Grassley has targeted Medicare modernization as one of the key health initiatives that the committee will undertake in 2001. Both Grassley and Senator Max Baucus (D–MT), the committee's new ranking minority member, have urged the president to move ahead immediately on Medicare prescription-drug coverage before moving on to broader Medicare reform.

For his part, the president wants to tie prescription-drug coverage and Medicare reform together, as he believes that a comprehensive overhaul of Medicare is the only way to preserve the program. The Bush administration believes that decoupling prescription-drug coverage from comprehensive reform would remove a powerful incentive for lawmakers to act on the thorny issues involved in revamping the Medicare program.

A House Turned Over

In the House of Representatives, the six-year term limit for committee chairmen that Republicans imposed upon themselves after retaking the lower chamber of Congress in 1994 has resulted in turnover at the top of every House committee. Nevertheless, some of the new committee chairmen should be quite familiar to the medical device industry.

For instance, the new chairman of the House Committee on Ways and Means, Representative William M. Thomas (R–CA), is well known to the healthcare sector through his former service as chairman of the Subcommittee on Health. In that position, Thomas played a leading role in nearly all of the health legislation that passed the House over the past six years, including the Balanced Budget Act of 1997 and the two so-called Medicare giveback bills of the last two years.

Thomas has traditionally been responsive to the concerns of the medical device industry about delays in Medicare coverage of and payment for advances in medical technology. However, he has already tried to dampen expectations of a third round of givebacks to healthcare providers.

Replacing Thomas as chairperson of the Subcommittee on Health is Representative Nancy L. Johnson (R–CT), who has also been active on health issues during her long tenure in Congress. Representatives Charlie Rangel (D–NY) and Pete Stark (D–CA) have returned as ranking minority members of the committee and subcommittee, respectively. Representative Stark has been one of the few vocal defenders of HCFA, arguing that an overabundance of congressional mandates and a lack of sufficient resources with which to implement them are the causes of many of HCFA's problems.

The House Committee on Energy and Commerce, which oversees FDA and shares jurisdiction over Medicare with the Committee on Ways and Means, also has a new chairman, Representative Billy Tauzin (R–LA). Tauzin, along with Health Subcommittee Chairman Michael Bilirakis (R–FL) and Oversight and Investigations Subcommittee Chairman Jim Greenwood (R–PA), have already outlined the committee's intention to review HCFA's major programs, policies, and operations in order to "eliminate onerous bureaucracy and modernize HCFA's infrastructure."

In addition, Representative Greenwood's subcommittee will likely exercise its oversight of FDA by reviewing the agency's implementation of FDAMA. Contained within that legislation was a five-year reauthorization of the Prescription Drug User Fee Act (PDUFA), which will expire in 2002. FDA will certainly want PDUFA to be reauthorized again in 2002, and this will provide the medical device industry with an opportunity to prepare FDA to meet the demands of the future, which include the ability to regulate medical products that continue to increase in significance and complexity as our medical knowledge grows.

Conclusion

There is still much to be done in Washington to ensure that public policies support and do not impede the important work that medical technology manufacturers are doing to improve healthcare. While the current political environment might appear to be intractable, medical device manufacturers should remember that those with common interests will do best to band together to press their cases with their elected officials. Industry associations are doing exactly that, with the involvement and support of the companies that they represent.

By working together to educate and inform government representatives about industry's policy initiatives, medical device manufacturers can ensure that the patients they serve will benefit from what they are doing—regardless of who comes or goes in the nation's capital.