Originally Published MX March/April 2003
BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT
Manufacturers and ReprocessorsThe device user fee act imposes new rules on both OEMs and reprocessors—and leaves a lot of details to be worked out.
Jeffrey L. Wendt
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Issues related to medical device reprocessing were settled somewhat when the Medical Device User Fee and Modernization Act of 2002 became law last autumn.1 Aspects of the legislation had been discussed and debated within the medical technology industry for years. The discussion will continue. The final law, though groundbreaking, leaves device industry leaders wondering about obligations imposed by the act on reprocessors and still seeking complete resolution of intellectual property issues surrounding patents and trademarks.
FDA has published a very good summary of the user fee act on its Web site.2 Of the law's three significant provisions, all of which are covered at the FDA site, the one establishing new regulatory requirements for reprocessed single-use devices is the focus here. The aim of this article is to suggest the importance to original equipment manufacturers (OEMs) and device reprocessors of understanding the law's implications and using it to avoid the sort of conflicts that historically have been detrimental to the business plans of companies on both sides of the device divide.
Refurbishment and Remanufacture
U.S. patent law provides reasonably understandable rules regarding the difference between permissible repair and impermissible reconstruction of a manufactured product. Absent an agreement to the contrary at the time of a product's purchase, the patent owner exhausts all rights in that particular copy of the device.3The laws of the United States allow a purchaser of a patented device to repair and replace its worn or broken parts. However, replacement actions that amount to a second creation of the patented device are not permissible and are considered patent infringement.4
Repair and Reconstruction of Medical Devices. In the medical device industry, questions tend to arise when the purchaser of a patented medical device—a hospital, for example—seeks to have the device repaired or refurbished by a service contractor. The courts recognized early on that if the patent owner or product seller somehow attached notice to the device to the effect that it was licensed to use once only, then a suit for patent infringement could be maintained against those who refurbished the device for reuse.5
A recent medical device case involved the user of a patented device for applying compressive pressure to a patient's limbs replacing its pressure sleeve, after each use, with another sleeve purchased from the defendant in the case.6 The replacement was found to constitute permissible repair, even though the pressure sleeve theoretically could be used for three years or more before it wore out. The reasoning was that an element of a patented device is effectively spent when its continued use is neither practical nor feasible; it applied in this case because reuse of the pressure sleeve would not be feasible owing to risk of cross-contamination between patients. The patent claims covered a complete device for supplying compressive pressure, whereas the sleeve was only one element of the device.
Both refurbishers and OEMs, for purposes of legal self-protection and solidification of their core business practice, should operate bearing the distinctions between the following situations involving patented devices clearly in mind.
- The entire patented device is spent, and reconstruction is necessary to make it usable again, where usable in a medical device context connotes safe and effective.
- A spent part of the device is replaced.
- A part not spent is replaced to enable the device to perform a different function.
The first situation would constitute an infringing reconstruction. The second is a permissible repair, no matter how critical the part is to the patented device and no matter how costly or difficult replacement may be, as long as the spent part is not separately patented. The third situation, which does not arise often, is considered akin to repair and thus is permissible.
Trademarks and Unfair Trade Practices. Medical device OEMs may have a tough time pursuing allegedly infringing refurbishers in the future. Unless a spent patented device is found to be completely recreated, a claim of patent infringement is likely to be defeated. And if the expense of obtaining and maintaining patents keeps medtech OEMs from implementing an aggressive patenting policy, protection will be even more difficult to assure.
The Karl Storz endoscope case renewed the interest of manufacturers and reprocessors in the area of trademark and unfair-competition law.7,8 Surgical Technologies Inc. was repairing broken rigid endoscopes made by Karl Storz Endoscopy–America Inc. that the company received directly from hospitals and doctors, and was taking payment. (Surgi-Tech was one of more than 50 independent surgical instrument repair companies in operation.) About 20% of the time, the refurbisher performed a complete rebuild, replacing everything but a main block that bore Karl Storz trademarks. Since the devices had to be sterile, no other source indicators were apparent to the end-users—surgeons—who were complaining to Storz when they received faulty endoscopes. Storz sued Surgi-Tech on trademark infringement grounds.
The federal appeals court found that Karl Storz had a valid complaint, stating that the law recognizes a circumstance called postpurchase confusion. The problem was that the surgeons thought the refurbished endoscopes had been purchased directly from Karl Storz.
Patent and trademark laws are available to OEMs and refurbishers alike. However, competent counsel is necessary to ensure compliance.
Requirements for Device Reprocessors
Before the new law was enacted, the regulatory requirements applicable to manufacturers of refurbished single-use devices (the reprocessors, or remanufacturers) basically depended on the class of the reprocessed device (see sidebar). Reprocessors of Class I and Class II single-use devices needed to have a 510(k) clearance unless the device was exempt from that requirement. Those remanufacturing Class III devices were required to obtain premarket approval (PMA).
The device user fee act changes things. Reprocessors of some exempt devices will no longer be exempt from the 510(k) submission requirements themselves; rather, they will need to submit 510(k)s that include validation data. Validation data will also be required from many reprocessors of single-use devices that are currently the subject of cleared 510(k)s. Finally, reprocessors of Class III devices will have to submit a premarket report, which is a new type of premarket application.
Though the requirements of the law place new obligations on reprocessors, they also provide an opportunity to promote the company brand.
510(k)s. By April 26, 2003, FDA is obligated to review the types of critical and semicritical reprocessed single-use devices that are currently exempt from 510(k), to determine which of these exemptions will be terminated, and then to publish a Federal Register notice listing these devices (see sidebar). All 510(k) submissions for devices on the nonexempt list must include validation data, and must be filed within 15 months of publication of the list. Reprocessed single-use devices not included on either the critical or the semicritical device list may continue to be marketed without submission of a 510(k).
Validation Data. Validation data will be expected from reprocessors of single-use devices that FDA decides require such data. These data comprise quantitative information pertinent to cleaning and sterilization of the device, as well as functional performance measurements that show that the reprocessed device "will remain substantially equivalent . . . after the maximum number of times the device is reprocessed as intended" by the person who submits the 510(k).
FDA must publish a list of reprocessed single-use devices in the Federal Register and update it as necessary. Because a 510(k) for one of these devices must be submitted after its appearance on the list, and must include validation data, it is important for managers of the reprocessing company to maintain awareness of the list. They need to have competent counsel check the Federal Register regularly.
Other Submission Requirements. Marketing of a device that already has a cleared 510(k) must cease if validation data for it have not been submitted. The validation data must be submitted within nine months of the date the device appeared on the FDA list of devices for which validation data are required.
Effective October 26, 2002, premarket reports are required for Class III reprocessed single-use devices. PMA applications were previously required for these devices.
Device Labeling Requirements. Any reprocessed single-use device introduced into interstate commerce after January 25, 2004, must use the following new labeling rubric: "Reprocessed device for single use. Reprocessed by [name of remanufacturer]." This wording must appear "prominently and conspicuously" on the device itself.
FDA says that this provision will enable patients and healthcare professionals to know more readily when the device they are using has been reprocessed. Obviously it will add expense to the reprocessing cycle. But what is advantageous to the end-user can also hold advantage for the reprocessor. The more-prominent labeling affords an opportunity for the remanufacturer to strengthen house and product trademarks if the quality of the reprocessed device meets or exceeds that of the original.
The impact on OEMs is uncertain because the act leaves a lot of room for interpretation. Is the reprocessor required to place the new notice below the OEM's trademark or trade name? What size of lettering should be used for the notice, and what size in proportion to the device itself or to other wording on the device? Will the notice be so prominent and conspicuous that it draws attention away from the OEM's marks? Questions such as these will have to be analyzed by executives of the OEM in consultation with experienced and competent counsel in order to avoid potentially costly litigation.
The Premarket Report. The device user fee act creates a new category of premarket submission, the premarket report. A premarket report must be submitted for a Class III reprocessed single-use device that previously required a PMA.
Section 302 (c)(2)(A) of the device user fee act, amending Section 515(c)(2)(A) of the Federal Food, Drug, and Cosmetic Act, specifies the required contents of a premarket report. As these relate to patent and trademark concerns, they include the device name (both the trade, or proprietary, name and the common name) and proposed labeling and advertising that should be sufficient to describe the device and its intended use, and provide directions for use. "Full reports of all information, published or known to or which should be reasonably known to the applicant, concerning investigations which have been made to show whether or not the device is safe or effective" also are required, as are "any additional data and information . . . that the Secretary determines is necessary to determine whether there is reasonable assurance of safety and effectiveness for the reprocessed device." The report must additionally contain validation data demonstrating that a reasonable assurance of device safety and effectiveness will remain after the device is reprocessed the maximum number of times intended.
Clearly, the act's requirement that reprocessors of Class III devices submit premarket reports provides a benefit for original device manufacturers. Meeting the regulation will ensure production of a safe and efficacious device, and any activity that leads to higher-quality products in the field consequently will enhance the goodwill associated with the original device's trademarks. Some reprocessors, on the other hand, will no doubt find the new laws and regulations too burdensome to allow continued prosperity.
Relation to Standing Court Rulings
It is useful to look at the requirements of the device user fee act by the light of the 1992 Mallinckrodt court case.9
The Landmark Case. The patented product UltraVent, manufactured by Mallinckrodt Inc. (Hazelwood, MO), was a device for delivering radioactive or therapeutic material in aerosol form to the lungs of a pulmonary patient. Radioactive material was inhaled primarily for diagnostic image scanning, and therapeutic agents were administered to patients suffering from various lung diseases. Mallinckrodt sold the device to hospitals as a unitary kit consisting of a nebulizer to generate the mist of active material and a manifold to direct the flow of oxygen or air mixed with the material, along with a filter, tubing, a mouthpiece, and a nose clip. The device was a closed system through which the patient inhaled and exhaled the atomized radioactive material or drug. It fit into a lead-shielded container provided by Mallinckrodt to minimize exposure to radiation and facilitate safe disposal after use.
The administration device was marked with patent numbers and bore the trademarks Mallinckrodt and UltraVent and the inscription "Single Use Only." The accompanying package insert advised "For Single Patient Use Only" and instructed that the entire contaminated apparatus be disposed in accordance with procedures for the disposal of biohazardous waste. The hospital was told to seal the used apparatus in the radiation-shield container for proper disposal. However, the hospitals whose activities led to the lawsuit did not dispose of the UltraVent or limit it to a single use.
Instead, the hospitals shipped the used manifold/nebulizer assemblies to Medipart Inc. Medipart, in turn, packaged the assemblies and sent them to Radiation Sterilizers Inc., which exposed the packages to at least 2.5 Mrd of gamma radiation and returned them to Medipart. Medipart employees checked each assembly for damage and leaks, then placed it in a plastic bag along with a new filter, tubing, mouthpiece, and nose clip. This reconditioned unit, as Medipart called it, finally was sent back to the hospital of origin. Neither Radiation Sterilizers nor Medipart tested reconditioned units for any residual biological activity or radioactivity. The assemblies still bore the inscription "Single Use Only" and the Mallinckrodt trademarks.
In finding for Mallinckrodt, the federal appeals court held that the lower court was wrong in maintaining that the restriction on use was, as a matter of law, unenforceable under patent statutes. Furthermore, if sale of the UltraVent device was determined to be accompanied by a valid restriction to single-patient use, then the so-called reconditioned units, even if they were only repaired rather than recreated, were an infringement of the patents.
New Codification. The device user fee act reflects the appeals court findings in several ways.
First, it supports Mallinckrodt by its definition of reprocessed, in which it is specified that it makes no difference what the remanufacturing party calls the unit (see sidebar). With regard to a single-use device, recycled and reconditioned are equivalent to reprocessed.
The reconditioned device at issue in Mallinckrodt still carried the original manufacturer's trademarks and the single-use inscription but apparently no indication that it did not come directly from Mallinckrodt. The new law specifically addresses the labeling of reprocessed units by the reprocessor so as to remove this ambiguity.
The original Mallinckrodt device was packaged with instructions on how to dispose of it, but neither the reconditioner nor the sterilizer tested the reprocessed units for safety and efficacy. The law, as cited in full earlier, calls for reprocessors to supply reports of all reasonably knowable information relating to investigations conducted to show whether or not the device is safe and effective, as well as any additional information deemed necessary to determine whether the safety and effectiveness of the reprocessed device can be reasonably assured.
Finally, in any situation similar to that involved in Mallinckrodt, validation data that are now required should demonstrate that a reasonable assurance of safety and effectiveness will remain after the maximum number of times the device is reprocessed as intended.
The more-or-less-well-defined stipulations in the section of the device user fee act pertaining to reprocessed single-use devices give OEMs and reprocessors a good context for resolving potential conflict as part of their original business plans rather than later, in a courtroom setting. These requirements, along with lessons provided by the relevant legal cases, illuminate several steps that the parties can take to avoid antagonism. Conclusion
The Medical Device User Fee and Modernization Act of 2002 seems to be a step in the right direction, a stride toward the elimination of a certain class of messy situations. Unfortunately, many issues remain to be sorted out, including the specifics of the labeling requirements and the amount of data required. Perhaps resolution of these issues was intended to be left to the development of the law through the courts. Perhaps as well, it was hoped that private parties—original device manufacturers and reprocessors of their products—would be able to work out reasonable solutions themselves. The potential is certainly there.
As indicated by its name, the act calls for user fees for premarket reviews. These will introduce a new dynamic, conceivably inducing parties to work together to pool resources and, again, avoid conflicts in open court. But that is a subject for another article. References
1. Medical Device User Fee and Modernization Act of 2002, Pub. L. 107-250 (October 26, 2002).
2. "Summary of the Medical Device User Fee and Modernization Act of 2002," [on-line] (Rockville, MD: FDA, Center for Devices and Radiological Health, 7 November 2002 [cited 12 February 2003]); available from Internet: http://www.fda.gov/cdrh/mdufma/mdufmasummary.html.
3. Keeler v. Standard Folding Bed Co., 157 U.S. 659 (1895).
4. Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961).
5. American Cotton-Tie Co. v. Simmons, 106 U.S. 89 (1882).
6. Kendall Co. v. Progressive Medical Technolog Inc., 38 USPQ 2d 1917 (Fed. Cir. 1996).
7. Karl Storz Endoscopy–America v. Surgical Technologies Inc., 62 USPQ 2d 1273 (CA 9 2002).
8. JD Covelman, "Refurbishers, Beware," MX: Business Strategies for Medical Technology Executives (July/August 2002): 62–64.
9. Mallinckrodt Inc. v. Medipart Inc., 976 F. 2d 700 (Fed. Cir. 1992). Jeffrey L. Wendt is a technology and patent attorney with Winstead, Sechrest & Minick (The Woodlands, TX).
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