SUD Reprocessing: Growth Amid Controversy

In spite of its widespread use and growing application in a variety of markets, the reprocessing of medical products designated as single-use devices (SUDs) continues to be a controversial subject. The objectivity of reports regarding the safety, efficacy, and cost savings of the practice is frequently compromised by the agenda of the organization behind the particular study. In general, medical device manufacturers have tended to resist third-party SUD reprocessing since it is seen as having an adverse impact on their sales. Hospitals tend to be supporters, since purchasing such devices lowers their operational costs.

Tucker: Legislating reprocessed devices.

And now a new wrinkle may be emerging. Massachusetts State Senator Susan Tucker (D–Andover) has introduced a bill that would require doctors, hospitals, and other healthcare providers to notify patients if any reprocessed devices will be used in the course of their treatment. Countering, hospitals and reprocessors say that such a requirement would drive up medical costs.

“I look at it as a consumer rights bill—it’s a patient-protection bill,” says Tucker.

MassMedic's Sommer: Safety concerns.

The bill has the support of the Massachusetts Medical Device Industry Council (MassMedic; Boston) a 300-member industry trade group. MassMedic president Thomas Sommer says that the organization’s members are “concerned about the safety and integrity of reprocessed SUDs, which are not designed for multiple use.”

Paul Wingle of the Massachusetts Hospital Association (Boston) takes an opposing view. “Medical device manufacturers are trying to use legislation to fend off competitive pressures from reprocessors, despite evidence that reprocessed devices are safe—and save precious health dollars,” he says.

SUD reprocessing has been going on for at least the past two decades. With U.S. hospitals spending $71 billion annually on SUDs, the typical 50% cost savings associated with reprocessed devices is very much in sync with the cost-containment initiatives of healthcare administrators across the country. Additionally, considering that hospitals generate two million tons of medical waste each year, proponents argue that reprocessing SUDs means that less waste ends up in local landfills.

Such reprocessing was once the near-exclusive undertaking of hospitals. But in 2000, an FDA move to beef-up the regulatory standards for reprocessing SUDs essentially forced hospitals out of that segment of the reprocessing business. Under then-instituted FDA guidelines, medical device reprocessors had to abide by regulatory standards, procedures, and reporting systems that were much the same as those applying to original equipment manufacturers, including detailed product documentation and 510(k) submissions. Since hospitals did not have the facilities or resources to meet the more-stringent SUD reprocessing regulations, they opted to outsource the work to third-party providers, which provided a significant boost to the reprocessing industry.

Dollar-value estimates vary widely, but by virtually every metric reprocessing of SUDs is a growth business. Many industry observers speculate that sales and market volume have doubled over the last several years.

The Association of Medical Device Reprocessors (AMDR; Washington, DC), an industry trade group whose members claim to handle 95% of all reprocessed SUDs, says that its mission is “to promote the proper reprocessing of medical devices labeled for single-use by ensuring the highest possible standards of regulatory and professional conduct to reduce the cost of healthcare while maintaining patient safety and care.” The association formerly had only three members: Alliance Medical Corp. (Phoenix, AZ), SterilMed Inc. (Minneapolis), and Vanguard Medical Concepts Inc. (Lakeland, FL). But as of August 29, it has only two.

Alliance Medical, a portfolio company of Viscogliosi Bros. LLC (VB; New York City), a closely-held venture capital, private equity, and merchant banking firm focused on developing and financing musculoskeletal and orthopedic technologies, has agreed to merge with Vanguard Medical Concepts. The merger is expected to close by the end of 2005.

Anthony Viscogliosi: Still convinced.

VB principal Anthony G. Viscogliosi commented that, “We were and are still convinced that the concept of reprocessing devices is destined to play a significant role in containing the cost of healthcare without in any way affecting the quality of delivery.”

AMDR says its members are in full compliance with FDA regulations, recognize that not every device is suitable for reprocessing, and are committed to comprehensive device traceability. Moreover, the association notes that its two member companies inspect every device individually, unlike manufacturers that typically inspect goods only on a product-sampling basis.

Hospitals represent the entire customer base for most device reprocessors, although some have formed strategic alliances with medical product manufacturers.

Another approach is the business model embraced by Millstone Medical Outsourcing LLC (Fall River, MA). Millstone has focused on the orthopedic market, including the spinal sector. The company works exclusively with manufacturers and acts as their authorized agent in collecting, inspecting, cleaning, repairing, testing, packaging, sterilizing, and recertifying single-use orthopedic devices such as knives, saw blades, and external fixation devices.

Millstone's Tillman: Forging a new model.

“Unlike third-party reprocessors, we have direct access to the manufacturer,” says Millstone president Shannon Tillman. “We have the drawings and engineering specifications on every device we reprocess, which eliminates any guesswork or reverse engineering. We know how the device is supposed to work and the conditions that would make it unsuitable for reprocessing.”

Millstone applies a similar approach to the “recycling” of orthopedic instruments—tools used during the surgical implantation of orthopedic devices that are essentially loaned to the surgeon. “Typically orthopedic manufacturers supply surgeons with a tool kit that can include more than 500 items and may be valued at more than $100,000. Manufacturers make no money on these tools—only on the device—and it is in their obvious economic interest to get them back, which often proves to be a major ordeal,” says Tillman.

Sensing a business opportunity, Millstone has established a comprehensive program for reclaiming and redeploying orthopedic tools, which includes a complete refurbishing and recertification process and the establishment of a password-protected Web-based inventory system specific to the tools required for each orthopedic manufacturer.

Tillman reports that his company has recycled more than 30,000 orthopedic instruments and saved orthopedics manufacturers more than $15 million in manufacturing costs.

Although the Massachusetts bill is in the very early stages of the legislative process, and will not come up again until October, medical device manufacturers, reprocessors, industry associations, medtech analysts, and other state legislatures across the country will no doubt be watching its progress. Whether the bill gains traction in Massachusetts—or beyond—it is likely to further fuel the continuing SUD debate.

Canon Communications LLC

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