Medical Device Link.

Originally Published MX September/October 2004

GOVERNMENTAL & LEGAL AFFAIRS

The activities of medical device firms in Washington, DC, encompass a whole lot more than just lobbying.

Moderated by Steve Halasey

Healthcare provision in the United States is largely a federalized industry. Its epicenter is the seat of national government, Washington, DC. There, policy is made through healthcare-related and specifically medical technology–related legislation and via the regulatory and reimbursement decisions of federal agencies that oversee aspects of healthcare delivery ranging from new product introduction to payment for services.

Also located in and around the district are trade and professional associations that advocate for various interest groups within the healthcare sector, including medical technology. And, in recent years, to supplement the efforts of the associations in influencing policymaking at the federal level, more and more individual medical device companies have been opening Washington offices to facilitate their own lobbying efforts. Access to Congress and the education of its members in matters of importance to the medtech community have never been more critical than they are today.

The policy advocacy practiced by device firms' representatives in Washington cannot be dismissed as mere lobbying, however, given the rapid pace of innovation in both medical technologies and the means of delivering healthcare services. To be able to keep up with such dizzying advances and their potential significance for maintaining a high standard of health in the U.S. population, decisionmakers on the floor of Congress and in staff rooms need to be informed more than persuaded.

MX spoke with three medtech company policy representatives who are actively making the industry's case with elected leaders in Washington. What they do, how they do it, how their work supports or is different from that of the associations, and what they perceive as the leading healthcare policy challenges of the future are among the topics that were covered.

MX: Medical device companies have only recently had offices in Washington, DC. How long has each of your offices been in existence?

Tom Connaughton: Cook has actually had an office there just a little over a year. I had represented them as a lawyer in private practice for 15 or 16 years prior to that, but only in the last year has the company had a full-time office.

Randel Richner: Boston Scientific started its office in July of 2001, so it has now been about three years.

Daniel Waldmann: I noticed that there was a Johnson & Johnson office in Washington going back to the early 1990s at least, probably the early 1980s if not even earlier than that. It goes back way before my time.

Connaughton: The major pharmaceutical companies have been there for a while.

Was there a trigger, or a series of events, that has led medical device companies to set up these offices now?

Richner: Speaking for Boston Scientific, we became so acutely aware of, and involved in, the issues related to Medicare that it was necessary to have a Washington presence beyond simply using our associations and lobbying resources. Ours is a highly regulated environment. It has been a huge plus for us, in terms of resources and time, to have someone based in Washington, because of the exposure it gives us and because of our need to spend so much time there with Congress and with the agencies. Also, our activity with trade associations has increased so dramatically that we need to staff that in a new fashion.

Connaughton: It seems to me that it has gone in stages. Back in the late 1980s or so, when I started getting involved in it, a great majority of the companies were relying on the trade association. Of course, J&J was always there in one form or another. Medtronic at that point did have a full-time representative, and Guidant had a full-time representative in the capital soon thereafter. But not too many device companies were doing things in Washington full-time. Cook hired my law firm, and then I got to working on things. And Boston Scientific had lobbyists and then an office. It is one of those things that have grown as everybody has recognized the importance of government to this industry.

Waldmann: I started my career in 1994 and saw then a big growth in companies being involved. It primarily went back to the problems at FDA and the buildup to passage of the FDA Modernization Act of 1997 (FDAMA). That was really the first trigger. That was when the major device companies—as Tom said, Medtronic and Guidant—came into Washington.

Before that, I think it mainly involved the companies for which medical devices were only a part of their business. I believe GE had a person dedicated to medical devices in their office. 3M had somebody, too, but most of these were not stand-alone government affairs operations in Washington. That phenomenon grew a lot later owing to a couple of things. One is FDAMA, which really started it. And, as Randel said, the growing importance of reimbursement.

In addition, there was the increasing influence and scope of work over at AdvaMed, where it has now gotten to the point that even companies that are not maintaining a full-time Washington office have someone who is dedicating the vast majority of their time to staffing the AdvaMed effort. We are seeing a lot more companies with a person in Washington to take part in trade association activities.

What is the scope of each of your offices? How much time do you spend, or does your office spend, working with FDA as opposed to working with the Centers for Medicare and Medicaid Services (CMS)?

Richner: Boston Scientific is the model of a healthcare company that is growing rapidly because it functions, first and foremost, as a medical device company. So there is an emphasis on FDA and CMS as being critical to our business risks and opportunities. I think that is in the forefront of our strategy. However, we also recognize that we have international problems and issues. There is therefore an international side to our legislative agenda. And further, as we grow as a business, we face employer issues that are critical to functioning as a business in the United States. That gets us into corporate governance and tax and employer law and then, even further down the road, into state issues.

We are in sort of this adolescent phase right now, grappling with the question of how we manage all of that and develop the critical components of—sort of an oxymoron here—an efficient Washington office that would prioritize the top issues for us as a healthcare provider and a medical device company. And then we have to figure out how to also manage those issues related to corporate governance and tax law, employer law, international affairs, and so on.

It is a very difficult job given the size of our company. Because of that, we choose from a menu of approaches, including using several trade associations—the National Association of Manufacturers, AdvaMed, and a variety of others—in order to cover all the issues we are most concerned about. We also continue to use outside lobbyists and contractors for specific issues, but it is hard to balance all of that.

Waldmann: I think that it is always an issue of prioritization, no matter what size the company is. For us, our Washington office is actually part of a worldwide government affairs and policy organization that is represented on the J&J management committee. Within that, all the major regions of the world are covered. Of course, we work within Washington, and the issues that I work on for our medical device and diagnostics businesses tend to be Medicare and healthcare-delivery related. We also have people who are responsible for other issues within our pharmaceutical and biotechnology areas. We have people who work on FDA issues and others who work on nonhealthcare issues that are important to the company, such as tax and trade and liability reform.

Over the past few years, we have also been building a centralized policy organization structured so that it works with the various global regions more on the larger issues of trends in healthcare delivery. It is very much focused on the healthcare delivery side, and much broader than reimbursement, but is trying to work so that Johnson & Johnson can be an active contributor not only to industry advocacy but also to industrywide policy development initiatives. The aim is to stay ahead of the curve on healthcare delivery system trends around the world.

Richner: J&J certainly has an utterly different model from that of a company like Boston Scientific, given its size and scope. But then again, I have also had a lot of experiences recently speaking to other companies, even Fidelity and Wal-Mart, and have found that the size of your Washington staff does not necessarily correlate with the size of the company. It is a matter of how you slice and dice your effort, using associations and lobbyists as well as internal resources. It is difficult to figure it all out. I use the Public Affairs Council as another resource to help validate and test our models of the best way to handle all of the issues.

Waldmann: Getting back to CMS and FDA, I would say that we deal with them differently. The Washington office does not typically get involved directly with FDA on product-specific issues—and I think that this is probably true of most medical device companies—whereas, on the CMS side, the company is more likely to be directly involved with how CMS is addressing and making policies around specific new technology. I think that is probably just because the regulatory affairs function has been around for so long, and is so well developed, that it has never really been part of the focus of the Washington office. The people who work on FDA issues in Washington tend to be focused on the much more across-the-board issues like funding for the review program, user fees, and major legislative reform, and are not getting into product-specific issues.

Connaughton: I would agree with Dan on that analysis. With FDA it tends to be much more policy than specific items, and on CMS status he is exactly right. People in Washington do tend to get involved in discussing strategies for new technologies and reimbursement.

Cook is a different model from both Boston Scientific and J&J. We are small. I am in Washington and have an assistant who is a professional, but it is just the two of us. There are people in our company headquarters who are assigned to assist me and to be available; however, they have other responsibilities. I am also charged with trying to organize the company's international public policy, and people overseas have been assigned to work with us on developing that. Still, we are a relatively small model compared with J&J and Boston Scientific.

Educating Policymakers

All of you have alluded to legislation and congressional activities. Do you work closely with members of Congress and their staffs, or is legislative affairs outside of your area? Are you in fact registered lobbyists, or is the model different there?

Connaughton: I know that Dan and I are registered lobbyists. I do not know if Randel is or not.

Richner: Yes, I think that I had to register. That's required if you spend more than two hours with any member, or something like that. It is a really, really narrow focus. However, I think all of us work in one way or another with members of Congress and their staffs. All of us use our associations, too, whenever we can, or we use external lobbyists to supplement our own personal contact with different members.

Waldmann: Working directly with Capitol Hill is a very big part of my job in terms of priority, but it is not the biggest part of my job in terms of time. Working with members of Congress takes much more planning and development effort on the policy side than is expended actually sitting in their offices talking with them. We do spend a lot of time, as would any company that is interested in getting involved in government affairs, just in trying to cultivate relationships and establish an identity within the representatives' offices. I mean the offices both of representatives of districts where the company might have facilities and employees, and of members who are leaders in specific policy areas—people like Representative Bill Thomas (R–CA) and Senator Chuck Grassley (R–IA), who are leaders on the healthcare side.

Connaughton: I concur. A lot of my time is aimed at working with people on the Hill. Dan is quite correct in that you spend a lot more time preparing for meeting with folks than you do actually meeting with them. But we do try to provide information and be a useful resource for those members who have the responsibility of dealing with issues that affect medical technology. Again, that is one of my primary responsibilities as well as one of my top priorities.

Waldmann: It is a constant effort to try to ensure that you are maintaining a relationship with those people that is built not only on why Johnson & Johnson specifically might be important to them from a constituent relationship, or because we represent a company that would be affected seriously by certain policies, but also on how we can keep them informed. Congresspeople have very, very difficult jobs. They have so many issues to cover and nowhere near enough time to get themselves educated about these very complex issues to the extent necessary to make the tough decisions they have to make.

Our job is really to put in front of them the information that they need in order to make their decision. It is all about making sure that the information we give them is reliable, so that over time they are going to know that when they come to us because they have a question about something or how something will affect the medical device industry, we are going to give them a straightforward and honest answer about it.

There seem to be great differences in understanding and knowledge of the medical device industry among members' staffs. Some senior staffers are right on top of it and others cannot say what a 510(k) is.

Connaughton: That is our world.

Is that improving? If so, to what extent are your offices contributing to that?

Richner: What I have noticed in my short time on the Hill is the rapid turnover of congressional staff. These are very talented and exceptionally bright people, sometimes very young, who have no business experience whatsoever. So it really requires a tremendous amount of effort on our part to make sure that they are informed and understand medical devices, which can be very hard to do considering their often short tenure with the members.

I find that the greatest challenge of this whole job is working with such staff and making sure that they are informed and educated. Before we can articulate our position, they have to understand where we are coming from. They have to understand our business, and it is very hard to get them there. It is just part of our job to educate continually. There also is the occasional change in leadership and elections and all that kind of thing. Another element of the job is to keep up with who is sitting where and on which key committees, and how they are moving around.

Connaughton: I would emphasize that it varies from committee to committee. The staff on the key committees generally tend to be more educated than others. The staff from the districts and states where companies like our three have facilities tend to be better educated in medical device industry matters, but even within that group there is such turnover that it is a constant challenge to try to get new people up to speed.

Richner: And that is why I depend so heavily on paying an outside contractor essentially to help us maintain those relationships and the educational process. That is where an association can be hugely valuable. I really do depend on AdvaMed as being the group that educates members of Congress and their staff and explains to them the fundamental principles that are necessary to an understanding of our business. That, to me, is invaluable, and I will pay the large dues to the association in order to make sure that it is doing a lot of that work for us.

Waldmann: Businesspeople from outside the Beltway occasionally come to Washington on a fly-in. These are people involved in running their business in place on a daily basis and who therefore are not in Washington doing this job we do. It is very important for members of Congress and the staff and other policymakers to hear from them and be able to ask them questions, but the nature of a fly-in is such that participants meet with all kinds of members, many of whom none of us meet with on a regular basis.

The nature of policymaking in this day and age is this: There are so many complex issues that members gravitate toward those that match an interest. Perhaps they are from Minnesota and medical technology is very important to them, or they are on a committee that deals with healthcare so they see a lot of those issues coming through, or they have an interest in it for some other reason. Those are the members who you will find very knowledgeable, and their staff will be very knowledgeable. Others might have a very big interest in banking policy or finance, and the staff knowledge usually reflects the member's expertise in those areas. The member who is interested in banking policy will have extremely knowledgeable banking staff and probably not-as-knowledgeable healthcare staff. That is something that we have to deal with.

However, it is not really a problem, because on a daily basis we are working with the members and the staff who are the most interested and the most influential and the real decisionmakers on medical technology policy.

I do have to say that, as an industry, we have matured greatly over the past decade to a point where I think that all members of Congress across the board have a much better awareness of what the medical technology industry is than they did when I joined the industry in the early 1990s. That is really important, because they have to have some kind of frame of reference even if they are not getting into the nitty-gritty details of how various policies affect us.

Connaughton: I have just one little thing to add. In talking about the members that need to be educated, Dan is quite right: there are only a few that are really the policymakers, and most decisions affecting medical technology are made in committees. In fact, I have been following this for more than 20 years now, and I cannot remember a floor vote on a medical technology issue where the whole body got into it. Can you, Daniel?

Waldmann: I think that I would have to go back to, probably, FDAMA, and that was more related to the changes to FDA than it was a big medical device issue. But that is probably the biggest example of when we had a debate where there really was a need to cast a very wide net and do a lot of detailed education of nearly the whole Congress.

Connaughton: But even then there were not detailed amendments on the floor. As I recall, at that debate Senator Ted Kennedy (D–MA) had some real issues about one thing, and tied it up for debate, but it is rare for there to be a lot of amendments on a medical technology bill.

Establishing a Medtech Industry Identity

In dealing with regulatory agencies other than FDA, do you find that they sometimes lack an understanding of where the device industry is coming from, or of how to separate the device industry from the hospital provider side or from the pharmaceutical industry? Or does the medtech area have a strong identity?

Connaughton: To a lesser degree than in Congress, but in both, yes. But particularly on the Hill. It is the constant effort of our companies and the trade associations to try to explain to them how medical technology is much different from pharmaceuticals.

Richner: It always unnerves me when we are bundled with pharmaceuticals, because we have such uniquely different problems in some ways. Unfortunately, we get lumped with them sometimes and have to ride out the occasionally negative public perception of pharma. So it is only normal that members of Congress would do the same.

Also, what I think has been difficult for us is that, although manufacturers are not paid directly by the government or by Medicare, there is an assumption that we are. Then we get lumped with providers sometimes, too, incorrectly. There are a variety of problems in this regard, but it is much better now than it was.

I think that we have done a good job of differentiating ourselves on some of our own key issues. But once again, we are dependent on congressional staff being there and having the reference framework and the memory necessary for awareness of some of those issues in order to carry them through for us.

Waldmann: Speaking for a company that obviously is involved in all of the above-named, I think that the medical device industry has done a lot to establish its own identity. I think that Randel is right in saying that, because we are affected by the same programs, even distinct legislative proposals or other policy proposals intended to affect only the medical device industry often get mixed in with things pertinent to the pharmaceutical industry or the hospitals. That is just the nature of the beast—how policymaking works.

We have to work very hard to make sure that we have our own identity, but the whole healthcare industry is changing. Pharma certainly stands out on its own as still characterized by very large companies, all of whom are represented as Big Pharma. This is opposed to the medical device industry, where I think the part of the industry with representation in Washington, as well as AdvaMed and the Medical Device Manufacturers Association (MDMA) and other associations, has to keep a perspective that it is working on policies that will affect many, many smaller companies that are not sitting around the table working on the policy. That is something that has differentiated the device industry from the pharmaceutical industry in the past. Also, I think the growth of the biotechnology industry, which kind of straddles the fence between the two, has blurred the lines a little bit.

Richner: I am very concerned, actually, about next year as the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA) goes into full swing. I think there is going to be a real challenge then. It is just my intuition that, with budget neutrality issues and the tweaking of MMA next year, devices are going to be simply overpowered by the pharmaceutical cost issues, and we will be swept along with all the massive budget cuts. I do not know if there are going to be massive budget cuts, of course, but I do think that we are going to have to scrap it out next year in terms of saving the technology bucket of funds and making sure that we are not overpowered by the drug issue.

Connaughton: I think that your concerns are quite justified, Randel.

Waldmann: I would not say that it is only pharmaceuticals. We cannot look at it as prioritizing issues just among the products or industries that encompass the broader notion of medical technology; it also involves providers, the institutions, the hospitals, and the home healthcare industry.

Randel is right. The pie is not growing as fast as healthcare expenses can grow because of the rapid innovation all across the board, and that is creating a lot of pressure. The challenge is always going to be trying to ensure that policy decisions are made based upon what is right and not because of the political clout of some industries or making some industry the whipping boy.

Lobbying and the Moral Spectrum

From the layperson's perspective, the massive tarring of the pharmaceutical industry over the years may be justified. The lay press and the general citizenry assume that pharma companies are doing nothing more than lobbying for their own interests. How would you distinguish the kinds of activities that you are yourselves involved in most of the time?

Richner: It is such a shame, because I think that somehow along the way, with all the MMA debate, medtech was really tarnished as an industry within healthcare. You know, with the costs of healthcare spiraling up, people seem to forget about the value we have brought to society and to the general public. I think we in the device world have a wonderful story to tell of what less-invasive medicine does to reduce pain, improve the quality of life, and expedite care in new ways that are just game-changing for public health. But it has been blurred, unfortunately. I do not know the solution to this, and I think the situation is going to get worse before it gets better. Essentially, anything that is scarring the pharmaceutical industry hits us all. We are all challenged by that.

Medical devices have unique benefits to offer, and our industry has a wonderful story to tell about the value that we bring to life. We have to be stronger advocates in order to get that message out and be able to change the public perception. I think that some of the issues raised about pricing and research and development costs have not been handled well. We will face a challenge in moving innovation forward if we cannot continually get new sources of funds that we need to develop new technology and drugs. Somewhere and somehow, there has to be a change in public perception about this.

Waldmann: I am from Ohio, and I wonder if my parents there are proud to say that their son is a lobbyist in Washington. There is that perception in places like the Midwest that lobbying is the influence-peddling industry.

While I will not sit here and deny that there are people in our community in Washington whose specialty is in fact influence peddling, the real business of lobbying is much more what I said before: Policymakers have limited opportunity to go out and do the research on issues themselves. The ones that are worth their salt rely upon us to provide our best arguments for supporting the policy that we want to see for whatever reason our company may want that result. Then, they take that information and go to whoever the stakeholders might be on the other side of the issue and get their arguments. There have been times when I have been thrown into a room with those other stakeholders and it is almost like a little moot court exercise; it is an effort to get to the best result. I think that in most situations it is an effort to arrive at the best policy for our country. I can tell you that that is generally what my job is here.

That is how we approach lobbying up on the Hill or with the agencies, and that is how my counterparts in the J&J office who work on pharma issues approach it. People that I know who work on energy issues approach it that way, too. Because I think that when it comes right down to it, the most important thing at the end of the day is, are you advocating for a policy that is going to stand the test of time and lead to a positive outcome? If you do not have that, there are all kinds of things that happen in this town that benefit just one person or the other. But, by and large, the majority of people in Washington have come because they are committed to working for the country through government and trying to make the right decisions.

Connaughton: I think that Daniel is right. We have got to come up with an identification of good public policy and then convince those in Congress to make that policy, or else they are not going to do it. It is not who you know that is going to make the difference. Congresspeople in 99% of the cases truly are trying to do what is best for the country.

I am really lucky because I am working for a company that is privately held but has such a tradition of being public-spirited and trying to determine what good public policy is. That allows me to get into some things that would not be as important to other, public, companies—like promoting products to help kids and other things that do not necessarily bring any revenues. The company's tradition of getting in there and trying to improve things in our area makes priorities for me just as the bigger market issues do.

Richner: I think that most of us have a passionate belief in and care about our industry deeply. Given that, as we have gone in to congressional staff and members of Congress and shown them credible information and credible data, we have garnered respect among them in a way that is pretty compelling. I think that this will overcome all of the negativity in time. As Dan mentioned earlier, there are always those who are simply lobbying for lobbying's sake or influence peddling or whatever you want to call it. But in general, we are very committed to providing the most reliable and sensible data for developing policy, and that will hold weight over time.

Waldmann: Randel and I work very closely on policy development at AdvaMed, and I will add that when an idea is introduced at AdvaMed, we have a very, very strict vetting process. There is a lot of push-back. I think that we do a really good job of trying to see what the other side of an issue is. We don't decide to pursue something just because we think that it would be good for the medical technology industry. We discuss what we think its implications for healthcare delivery generally might be. We have a lot of extremely thoughtful people around the table who represent all sides of the political spectrum and all corners of the industry. I feel very good about that.

You can definitely tell which policies proposed by various industries around town probably did not go through that same level of vetting within the industry before they became the focus of an actual advocacy effort.

Reaching Smaller Companies

A lot of medtech companies do not belong to some of the major trade associations, though they may be members of regional associations. To what extent does a national industry association try to communicate with those companies, or imagine what would be good for them, when it meets to consider policies that it might push forward? How are the unaffiliated smaller companies taken into account?

Waldmann: I think that associations like MassMedic can tap into people who can provide feedback from a smaller-company perspective. Tom Sommer has been up there for 10 years now and has really built that organization. Boston Scientific has been a member of MDMA, and I used to do work with MDMA in the past. Through that, I had the opportunity to reach out to a lot of small companies. And a lot of consultants work with many small companies, so they are very much in tune.

The issue really becomes this: It takes a lot of resources, but also personal commitment and staff time, to be involved in the policy development process, and that is not the thing that a start-up company trying to bring its first product to market can afford to dedicate someone's time to doing.

That is a reality. But around this table we have people with a lot of experience working with smaller manufacturers who almost instinctively consider them. You just have to know that you are working on broader public policy issues and doing it as the medical device industry; you have to kind of wear that hat. We often say that so much of the innovation still comes out of the smaller manufacturers who are later acquired by, or license the technology to, one of the larger players, so we want to make sure that new policies continue to foster that natural development process that characterizes the medical device industry rather than hinder it. We all very much, and as part of our business, rely upon those entrepreneurs whose voice might not be heard in Washington, so we need to keep remembering what is in their interest, as well.

Connaughton: Cook has a history of being independent, so the company isn't a member of AdvaMed. One of our companies, Wilson Cook, in North Carolina, is a member of MDMA. And Cook is a member of the Indiana Medical Device Manufacturers Council, which is another of the regional organizations that are available.

But I sure do echo what Dan has just said, in view of the fact that this is an industry that has been dominated by small companies over the years. Really, that is where a lot of the creativity has come from. It is very important that we keep this creativity going, and I think all of us try to recognize that. It's one of the things we try to educate the Hill about, too. There are a lot of small companies that have an idea for a product—indeed, a very high percentage of premarket approvals comes out of one-product companies each year, and that needs to be fostered.

Richner: I try to do a lot myself, in terms of reaching out to small manufacturers, when I give a presentation or speech somewhere. I often invite them to call, and indicate that I will give them some advice regarding reimbursement consultants or whatever, if I can. I think that it is really critical that we continue to help as much as we can, because the therapy or technology platform issues are often similar to ours. We want to make sure that they have the right processes and opportunities in place to help them. It ultimately helps all of us in the industry to provide this type of guidance.

Other Healthcare Associations

What about associations that represent other parts of the healthcare sector, such as the American Medical Association, American Hospital Association, and so on? Sometimes they seem not to know or care about the medical technology area, resulting in proposals that would actually harm the device industry. To what extent do you work with them, counsel them, or try to convince them to do things or not do things?

Richner: There are a lot of ways to partner with other types of associations or government policymakers. If there is a disagreement about reimbursement policies, for instance, a way to deal with that is by working with the Medicare Payment Advisory Commission (MedPAC) to make sure that a viewpoint and fact base are understood. Working that way, sometimes it is possible to influence policy in those associations that may be contrary to your position. In addition, we spend quite a bit of time nurturing relationships with the associations that are therapeutically aligned with our technology, such as the American College of Cardiology. The physician societies, in particular, recognize the need to partner with manufacturers in the development of coding, for instance, and on reimbursement issues. That is a perfect sort of alliance.

Waldmann: Randel is exactly right. Again, it is relationships that you need to maintain here in Washington. Those relationships can sometimes enable you to partner with an association that is typically viewed as an opposing stakeholder on issues or proposals that the device industry is putting forth, or viewed as an organization of healthcare practitioners—anything other than a medical device industry association. Because if a device company is out there talking about the clinical benefit that a new technology provides, and is supported exclusively by device associations, people don't necessarily want to take the company's word for it.

Richner: The broader-based associations can be contrary, especially when it comes to Medicare funding. They may have a disincentive to negotiate or collaborate, and I do not think that you can ever change that. However, there are ways to get to know the individuals in those associations and work very closely with them. I also encourage AdvaMed and MDMA and others to be our voice and our advocate with those other associations. That can be another mechanism. There are a lot of different ways.

I do not think necessarily that the system is quite that broken, unless it is a specific issue where you are all fighting for the same funding. Generally, that is where things break down.

Waldmann: It is nice to have the physician societies out there talking about the importance of technology advancement. We often work to support their efforts. They frequently are working on policy proposals. I can point to a couple up on the Hill now: the Stop Stroke Act, a public-health stroke initiative that has been working its way through Congress; and legislation for a Medicare screening benefit for aortic aneurysms, which has been put together by the Vascular Surgery Society. While those might not be the things that are at the top of our priority list in Washington, we do whatever we can to provide support to those efforts in matters that are important to the proponents.

Key Policy Challenges

What are the key policy challenges now, in terms of things that will affect both your company in particular and the industry in general.

Richner: I think that MMA is going to be huge, as I mentioned. And I see some real opportunities and challenges in the near future involving reform of the payment systems for diagnostics. When we get into preventive healthcare and the issues of how we are going to pay for disease detection, there is going to have to be fundamental reform of the current methods and structure of paying for diagnostics. I think that AdvaMed is going to have to take up that challenge.

The next policy challenge is an old one that has been churned and discussed at length. That is the question of increasing the levels of evidence that are necessary for Medicare coverage decisions. That debate is going to continue to be relatively heated even though it has been going on for many, many years. But I still believe that, with the coming of MMA and the way that is going to be implemented, evidence is going to become a much hotter topic.

The last challenge I think of, and this is rather narrow again, would be related to implementation of the Medical Device User Fee and Modernization Act of 2002. The user-fee issue is going to take a front burner. The amounts of the user-fee increases are getting to be a little out of control, so there is going to have to be some reform of the user-fee act. That is another issue that is going to affect us.

Connaughton: Those are all very, very important issues. There is something else that is interesting to us at the moment, too, that is kind of a bigger-picture thing, and I do not know where it is going to go.

While Mark McClellan was FDA commissioner, he inspired something called the critical path initiative, which was basically concerned with how to turn discoveries going on in basic science into products and how to get those products to patients more quickly. That initiative was also picked up by the Department of Health and Human Services (HHS), which now has a task force on stimulating medical technology and is asking for comments and other input on the subject.

You never know on these things, but I do not think they should be ignored. This is an opportunity for us to weigh in with some thoughtful ideas on what could be done. I have been very impressed with Dr. McClellan. He is a very thoughtful guy who is looking at the big picture and is willing to do some bold thinking. His ideas present the industry with an opportunity. Whether this initiative will result in short-term legislation or major policy changes, who knows? But one would hope that it will lead to progress toward getting the discoveries that we are making in basic science—and never dreamed that we would make, a lot of them—through the product development and approval process and into the market more quickly. To accomplish that is also going to require reasonable reimbursement and coverage systems, as well as reasonable regulatory systems.

There has been some talk that CMS or FDA or both would weigh in with money to support that critical path initiative. Do you see that actually happening? Congress has a way of saying, "Yeah, that is a great idea. Go ahead and do that," and then not putting any money behind the encouragement.

Waldmann: Especially proposals that Dr. McClellan offers—including some of the things that he is working on in terms of information technology (IT) and the role it can play in changing how healthcare decisions are made and improving these decisions. Some major investments are definitely needed in those areas. Not much thought has been given about where the funding for these initiatives is going to come from, so we are not there yet. I think we are still in the idea phase. Once ideas start to emerge, then we will start dealing with the question of how to go about funding something that sounds like a legitimate and good proposal.

Connaughton: I agree completely. I think all progress on these things is incremental. To me, it is exciting that we are even at the idea stage about the application of information technologies.

At the MDMA annual meeting this June, McClellan said that FDA wanted more clinical evidence to support medical decisionmaking, but recognized it could not expect manufacturers to do new clinical trials or extend their existing clinical trials. But, he said, the agency already has lots of information, and if it would start working on how it can use that information to help manufacturers get clinical answers, then it could save everybody a lot of time.

If we use the information that we have, we can do so much. If I were investing bucks, I would sure invest it there. But I think it is going to take a while for the consensus to develop that indeed this is critical, not to mention how exactly to use that information. We could then start funding it incrementally. But we have got to start somewhere, and it is exciting that McClellan is bringing it to a head.

Richner: Whether this can get any traction could depend on the outcome of the November election. It will be important for the device industry to get the winner's vision in line with our technology and how it can be integrated with information technology, because these proposals could really improve efficiency and, ultimately, could reduce costs.

Connaughton: I am hopeful that whoever wins, they will pick up on this.

Waldmann: I think the two short-term issues that we are facing are FDA resources and user fees. Those of us who were around during the FDAMA debate know that user fees were being talked about back then. The issue revolved around FDA having to do more with what it had before resource shortcomings could be discussed. FDA stepped up to the plate, and there was substantial improvement in its regulatory processes after 1997. That brought about the opportunity to sit down and talk about the resource question, and to address the issue of user fees.

I think that we have big challenges as we deal with the appropriations trigger issues around user fees and begin negotiating the reauthorization of the user-fee act. It is critical that this program keep going, but it is also very important that industry's investment in FDA is appropriately utilized. Implementation of the original bill has been a difficult road, and user fees are definitely something that all of us are going to be spending a substantial amount of time on next year.

I agree with Randel that the evidence requirements for Medicare coverage decisions will be an important issue, but I don't think the issue ends there. It also involves a deliberate policy shift in favor of centralized decisionmaking, which is really being driven not so much by concerns about the evidentiary basis of decisions made by local Medicare contractors as by a cost-control mentality.

That is a major concern, because centralized decisionmaking and high, up-front evidentiary requirements run contrary to the nature of medical device innovation. Medical devices are much more like computers and other information technologies than they are like drugs. Once they enter the marketplace, it often takes several years for real evidence to coalesce and for medical consensus about appropriate use to develop. If CMS policy is going to move toward Medicare denying coverage for technologies until that evidence exists, that is going to be a critical issue for us. The policy that we would like to see is one in which Medicare is a partner in facilitating evidence development, working with the industry to ensure that evidence is developed to educate decisionmaking down the road, but realizing the evidence is just not going to be available up front.

So, my concern is that CMS is being driven by a cost-control mentality, rather than by an interest in getting evidence that would enable it to make the decisions that are the best for patients.

Richner: Issues related to the CMS coverage process are going to be absolutely critical to encouraging innovation. So we want to work very closely with CMS on coverage process implementation in order to encourage rapid innovation and quick coverage decisions.

Waldmann: I have one more challenge in mind, based on the change in the industry over the past 10 years. I have definitely seen a geometric progression of technological innovation. When I started in the industry, we were talking about educating congresspeople about where pacemakers come from and simple things like that. But this is an industry that is spreading out in many different directions.

There are information technologies that will give us information integrated throughout the healthcare system, if we want to realize Dr. McClellan's vision. We have computer-assisted surgical techniques. More interventional procedures than anyone could ever have imagined can now be performed in a minimally invasive way. Then there are the uses for electrical stimulation technology and deep-brain stimulation. And a big one is the things that might come out of the human genome project and gene mapping—for example, being able to develop increasingly sensitive diagnostic tests, leading us down pathways toward new therapies. All this innovation means that it is only going to be a bigger challenge to keep members of Congress and other policymakers and decisionmakers at CMS educated in a way that helps them to make the best decisions possible.

AdvaMed president Pam Bailey has worked very hard to generate funding for a foundation that will be able to do independent research on the kinds of policy issues that are raised by this explosion of medical technology. I think anyone would say that we are on the edge of another revolution in medical technology. And that could bring out many different policy questions and challenges that none of us could even speculate about right now.

IT and the Future of Medicine

Does the mandate of David Brailer as the new IT coordinator for HHS incorporate all of the areas that manufacturers think it should? For example, how does the department's focus on implementing a nationwide electronic health record relate to the decisionmaking algorithms and process management issues that you have suggested will be the foundation for personalized medicine?

Richner: That is the fundamental basis. In terms of any kind of research, that is where you want to start.

Connaughton: But the key is to do it right. As an industry, we need to make sure that we sensitize HHS staff to the types of ideas that we have been talking about and the great value that they can have as they develop. I know AdvaMed is working to provide a lot of pertinent material for Drs. McClellan and Brailer, and we at Cook are certainly going to be trying to do the same. I think it is really important that we make sure they understand the significance of this initiative.

Richner: Where we can be most helpful now is looking at best practices in the private-sector systems. I have been doing research using private databases for many, many years. The wealth and value of the information that can be gotten on epidemiology and disease management is just phenomenal—and can make an enormous difference in the efficiency of healthcare delivery. It is almost a no-brainer to track the significance of a new technology on length of stay, costs, and so forth, which is the beauty of electronic datakeeping. Using the model of a closed system like that of Kaiser Permanente, which has got it down to a fine science, can be incredibly valuable for instructing all the various government entities about how to move forward in managing their own systems.

I think that we want to continue to provide something of a policy background, making that link for them as policymakers and operationalizing it from a tactical standpoint—showing how this would be implemented. One set of obstacles that will have to be overcome rather quickly are the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The privacy and security regulations of that act frequently stand in the way of researchers whose intent is to evaluate and improve methods of care, so some accommodation for such research will have to be made.

Another issue stems from the increasing sophistication of the technologies themselves. Remote patient monitoring, for instance, is technologically feasible. But adopting such a practice would also require that we reform the mechanisms for third-party payments related to this technology. As we continue to become a virtual society, of course, medicine is going to be very engaged in that world. So it will be important that we anticipate and implement the structural changes in payment mechanisms that are going to be necessary to make adoption of those technologies possible.

Waldmann: We are talking about technologies that were not even imagined when HIPAA was enacted. I think the medical device industry did not play a large role in HIPAA because at that point the policy community was not really aware of the things that we are talking about now.

Information technologies certainly offer the potential for changing how care is delivered. But many existing policies that are inconsistent with those possibilities will therefore act as barriers to them. I think we are going to be turning over rocks for many years to come and discovering policies that were created for a different world.

In a current TV commercial, a girl dumps her boyfriend because he is "too analog." I think that is where our healthcare system is right now. We are very analog, but we're moving very quickly into the digital world. Some people, such as Dr. McClellan, have visions of how to make that transition. Now comes the hard work of trying to figure out how to replace the analog policies that stand in the way of our getting to a digital world.

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