Medical Device Link.

Originally Published MX May/June 2003

BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

For medtech manufacturers, developing the coming generation of combination products will require a focus on business planning.

Ken Sumner

Any technology-based company is always searching for product innovations worth developing. That search can be especially arduous for medical device companies. However, one recent breakthrough in innovation has captured considerable attention and opened lucrative opportunities for device firms.

This breakthrough is the combination product, so called because it comprises two different types of regulated product components, generally either a drug and a device or a biologic and a device. While the idea of combining drugs and devices (and, less frequently, biologics and devices) is not new—prefilled syringes and metered-dose inhalers have been around for years—in the past most such products were developed by drug companies seeking to deliver their drug in novel ways. Now, device companies are energetically exploring means to integrate pharmaceuticals into their products.

One possibility is to improve the performance of a currently marketed implantable or patient-contact device through the addition of a drug or biologic. By coating an implantable device with an antibiotic, for example, it might be possible to reduce the infection rate associated with the device.

A familiar drug-device combination of this sort is the highly publicized drug-eluting coronary stent. This product was developed to address a fundamental concern regarding the opening of coronary arteries by means of balloon angioplasty. Ever since this technique became widespread 20 years ago, the incidence of reclosure of the artery (termed restenosis) within six months of treatment has been recognized as a major complication. Problems occurred in 30–50% of patients until the introduction of metal stents by Johnson & Johnson Co. (in 1992) and Cook Inc. (in 1993) reduced the incidence to 15–35%.

In order to reduce the frequency of restenosis further, medical researchers devised a number of innovative solutions, including the temporary placement of radioactive particles into the coronary vessel (brachytherapy) and the coating of a drug onto the stent to reduce cell proliferation. Brachytherapy worked reasonably well.¹ But recent clinical studies involving different drug-eluting stents have yielded dramatic results that indicate the great potential benefit of this combination approach. In one study, in-stent restenosis dropped from 35% to 3.2% at 8 months postprocedure.²

The drug-eluting stent is a model case, except that circumstances relating to both its remarkable effectiveness and its marketability may not easily be replicated by other drug-device combinations. First, because bare-metal stents had a 20–35% restenosis rate that had to be reduced, the value proposition of the drug-eluting version was convincing. The results of preapproval clinical trials were outstanding, as mentioned. And the interventional cardiologists who would have been interested in using such products are a class of physicians who tend to be early adopters of new technology.

The companies that developed the drug-eluting stent wisely made outcomes research data part of their marketing plan, underscoring the comparative economic value of the product. They then cemented their success by formulating a strategy to ensure reimbursement at suitable levels before the product was even approved.

That product may have represented a special situation. Or its history may contain lessons for other companies with other combination products. This article looks at three business issues a company considering developing a combination product must take into account if it is to be successful in the complicated endeavor. These are categorized as organizational considerations, specifically, the challenge of dovetailing the operationally discordant enterprises of drug company management and device company management; due diligence in undertaking a joint venture; and regulatory matters.

Organizational Considerations

The organizational structures of device and drug companies are dissimilar in many of the ways their products are (see Table I). Device companies focus on engineering solutions to medical problems. Finding these solutions requires expertise in engineering and materials disciplines and concentration on the physiological characteristics of local environments like the heart, knee, or lungs. By contrast, drug development is based on biochemistry, pharmacology, and other natural sciences, and depends on how biological materials interact at the cellular or intracellular level. The molecular nature of drug agents makes their distribution through the body systemic. Product developers in this field must take the whole person into account rather than just a particular body part.

These differences in the nature and purpose of device and drug products translate into different educational requirements for personnel, disparate product development infrastructures, premarket testing regimens varying in type and scope, and divergent rationales and strategies for clinical testing.

Originally, many combination products resulted from an in-house drug company effort to create a vehicle for administering a pharmaceutical. Roughly concurrent development of drug and device under one roof allowed corporate executives to hire and train R&D and engineering staff members concurrently and to integrate them in one relatively easily managed organization. But circumstances are quite different when the device and drug components are developed separately by two companies in joint enterprise.

In effect, a new manufacturing entity needs to be formed in order to ensure a smooth path of development for the hybrid product. Managers of the cooperating companies, as they organize the enterprise for developing the combination product, must begin by accounting for the staffing, operational, and strategic differences between device and drug development and manufacturing.

Careful planning for this integrated activity includes the selection of executive project administrators who together must decide immediately whether to develop the combination product under the quality system regulation applicable to device development or the current good manufacturing practices regulations that govern drug development.^{3, 4} FDA may likely accept either course if provided with justification. Additional key personnel to be chosen include experienced project managers from each company who can work compatibly in preparing an integrated product development plan that includes designing and synchronizing manufacturing processes and all the subsystems that accompany them.

Because the enterprise is essentially a start-up, the joint planning must be completed directly. Identifying the requirements of every development stage, from design through shipping of the finished product, is necessary to enable all the expenses of the enterprise to be estimated.

Due Diligence

Most device company managers have arrived at their positions after completing successively more responsible assignments at one or more device firms. Few can be expected to have worked for drug companies as well. Although they may have some exposure to pharmaceutical industry issues, these executives likely have no experience in carefully evaluating drug product–related development, manufacturing, regulatory, and other questions that might be critically important to the joint development project. The same can be presumed true for pharmaceutical company executives with respect to device development. Thus, selection of a suitable partner with which to develop the combination product requires an emphasis on due diligence of the type customarily given to merger and acquisition activities.

This puts pressure on device company leaders not only to select drug and device product components suitable for meeting the clinical need, but also to find a cooperative management partner. In choosing the drug component of a combination product, the device company should be aware that the more familiar with a drug FDA is, the fewer hurdles the product will face in its progress toward regulatory approval. Selection of a partner supplying an already approved drug will mean that FDA probably has already reviewed a significant number of studies related to its intended use.

Numerous other considerations will determine the nature of the relationship between the parties involved in joint development of a combination product. Business and financial questions needing to be decided include the following.

• How the enterprise will be funded.
• Who owns the intellectual property.
• Whether those working on the combination product will continue to be employees of their present company or will be part of a newly formed enterprise.
• In which partner's facility the product will be developed, if not in a new facility.
• Which company's sales force—if not both—will sell the combination product.
• How the companies will share the profits from the sale of the combination product.
• What mechanism will be used to determine whether a second-generation product is needed and what that product should be.
• How to answer such complex management questions as whether the value proposition justifying development of the product today will still be applicable when the product is ready for sale.

Trust between the partners is also important, needless to say. The drug-testing program conducted by the drug company independently of the drug/device combination development work will probably not be critically reviewed by the device company, whose managers will lack that competence. This suggests that device company leaders must place a high level of trust in the integrity of their drug company counterparts and in the competence of their staff.

All of the business issues surrounding a joint venture, such as ownership of the intellectual property, staffing authorizations, quality system procedures, and the like, must be negotiated prior to consummation of the relationship. These contractual arrangements have to be sufficiently farsighted to enable dealing with practical issues as they arise, because the venture is likely to have a sole-source supplier configuration.

Regulatory Issues

The emergence of combination products can be observed in the development of FDA regulations related to such products.^5,6 Both Congress and FDA have long been aware that these products were percolating in the research laboratories of device companies. Indeed, combination products were referenced in the Safe Medical Devices Act of 1990 after a period of ad hoc regulation (see sidebar). In this legislation, Congress ordered that FDA's jurisdictional assignments should be determined by the "primary mode of action of the combination product." Thus, if a combination product's primary mode of action is that of a drug, the Center for Drug Evaluation and Research (CDER) has primary jurisdiction for regulatory reviews. Likewise, if the primary mode of action is that of a device, the Center for Devices and Radiological Health (CDRH) has primary jurisdiction, and if that of a biologic, the Center for Biologics Evaluation and Research (CBER).⁷

In 1991, CDRH, CDER, and CBER published intercenter agreements that provide guidance to industry about how FDA would decide jurisdictional leadership for many types of combination products and that include a list of examples.⁸ The FDA Modernization Act of 1997 further rationalized this area of regulation by creating a mechanism to enable companies to request that FDA classify a product under development.⁹

Superficially, the regulatory issues surrounding combination products had been adequately addressed at this point. However, the development of innovative combinations not recognized by the intercenter agreements, along with the increased visibility that attention-getting drug-eluting stents brought to the combination product genre, led Congress to act again. It passed the Medical Device User Fee and Modernization Act of 2002, one section of which required the establishment, within the Office of the Commissioner, of the Office of Combination Products. The intent is to "ensure the prompt assignment of combination products to agency centers, timely and effective premarket reviews, and effective postmarket regulation."¹⁰ Creation of the office in December 2002 signals the prominence of and expectations for combination products in the future of medical therapy.

The key thing for medtech executives to understand is that two jurisdictional FDA regulating centers will be involved in the approval process for any combination product—a regulating center and a consulting one. Each center uses its own terminology and has distinct data expectations, standards of proof, and quality practices requirements. Thus, company executives may have to become actively involved in building relationships with the pertinent centers.

This activity should begin at the request for designation (RFD) stage. The RFD process solicits from FDA a formal jurisdictional decision regarding a combination product of a type not covered in the guidance provided by the intercenter agreements and for which, therefore, there is doubt about which center would have primary jurisdiction.¹¹ In the formal RFD submission, the manufacturer (sponsor) has an opportunity to justify its preference for lead center, citing, among other things, the quality systems to be used and the postmarket programs with which the combination product would comply (see sidebar).

Combination product manufacturers should remain engaged throughout the review process. It is prudent to monitor the comments and suggestions of FDA personnel in all the centers involved, in order to be certain that they agree and to minimize the chances of new issues being raised at the last minute that could lead to additional requirements being imposed on the company.

Medtech companies trying to get combination products approved can expect to have difficulty getting all questions and concerns addressed clearly and readily by the reviewing centers. FDA uncertainty about process and leadership traceable to the inadequacy of the intercenter agreements and the creation of a new administrative office could result in advice to the industry being tentative.

Until January of this year, FDA's combination products program was administered by the Office of the Ombudsman. That office set policy and made sure that new jurisdictional decisions were communicated to the regulated community. Now, the Office of Combination Products created by the device user fee act sets policy and assigns an FDA center to have primary jurisdiction for review of a combination product, while the ombudsman's office determines whether the product is in fact a combination product.¹² Thus, companies may now need to deal with two FDA offices to get essential regulatory information.

To further complicate matters, the Office of Combination Products held a public meeting in November 2002 to get input regarding, among other items, such topics as the guiding scientific and policy principles FDA should use in revising the intercenter agreements, and the factors the agency should consider in determining the primary mode of action of a combination product.¹³

Considering that such fundamental questions are being reevaluated, companies with combination products should be prepared to deal patiently with FDA. Things should improve as the Office of Combination Products becomes organized and procedures and decision-making processes are institutionalized.

Conclusion

Combination products will bring new and exciting benefits to both diagnostic and therapeutic medicine. The regulatory pathway is being prepared to allow FDA to act more quickly in reviewing such products. Potential developers of combination products nevertheless must take a hard look at the value proposition and other business aspects of the endeavor. The expected return has to justify considerable investment in personnel and operating system changes that the venture is likely to entail.

References

1. MB Leon et al., "Localized Intracoronary Gamma-Radiation Therapy to Inhibit the Recurrence of Restenosis after Stenting," New England Journal of Medicine 344, no. 4 (2001): 250–256.

2. Circulatory System Devices Panel Meeting, October 22, 2002 [transcript on-line] (Rockville, MD: FDA, Center for Devices and Radiological Health, 2002 [cited 14 April 2003]); available at Internet: http://www.fda.gov/ohrms/dockets/ac/02/transcripts/3905t1.pdf.

3. Code of Federal Regulations, 21 CFR 820.

4. Code of Federal Regulations, 21 CFR 211.

5. Code of Federal Regulations, 21 CFR 3.

6. BS Sall, P Lassoff, and B Babbitt, "Getting Started with a Combination Product: Part I," Medical Device & Diagnostic Industry 25, no. 3 (2003): 54–65.

7. Federal Food, Drug, and Cosmetic Act, 21 USC 353(g) (1990).

8. Intercenter Agreements [on-line] (Rockville, MD: FDA, Office of the Ombudsman, 1991 [cited 3 April 2003]); available from Internet: http://www.fda.gov/oc/combination.

9. FDA Modernization Act of 1997, Pub. L. 105-115, sec. 416.

10. Medical Device User Fee and Modernization Act of 2002, Pub. L. 107-250, sec. 204; available from Internet: http://www.fda.gov/cdrh/mdufma/mdufma2002.html.

11. Code of Federal Regulations, 21 CFR 3.7.

12. Assignment of Combination Products [on-line] (Rockville, MD: FDA, Office of Combination Products, 2003 [cited 2 April 2003]); available from Internet: http://www.fda.gov/oc/combination.

13. Public Hearing on FDA Regulation of Combination Products [transcript on-line] (Rockville, MD: FDA, 2002 [cited 2 April 2003]); available from Internet: http://www.fda.gov/oc/combination/transcript112502.html.

Ken Sumner, PhD, is vice president of the medical devices practice at The Weinberg Group Inc. (Washington, DC).

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