Medical Device Link.

Leahey

Legislative efforts designed to increase transparency into payments made to doctors by medical device manufacturers are gaining momentum. Earlier this month, Representatives Peter DeFazio (D–OR) and Pete Stark (D–CA) introduced a companion bill to the Senate’s Physician Payments Sunshine Act. Both bills (HR 5605 and S 2029) would require drug and device manufacturers with at least $100 million in annual revenue to file quarterly reports listing all physician payments and gifts with a value of $25 or more.

Despite the industry criticism being used to fuel the legislation, industry associations AdvaMed (Washington, DC) and the Medical Device Manufacturers Association (MDMA; Washington, DC) have voiced support for the transparency objectives of the bill. However, both are recommending changes to the legislation that would decrease the burden of manufacturer compliance and increase the level of context in which information regarding physician payments is reported.

“One of the key improvements needed in the bill is to differentiate between remuneration provided for valid training and education purposes versus remuneration in the form of gifts or consulting arrangements,” says Mark Leahey, executive director of MDMA. “While the latter are more appropriate for disclosure, the former should be exempt. In addition, the $25 threshold should be increased significantly to lessen the reporting requirements and also permit appropriate and necessary feedback between companies and physicians to occur during the R&D phase.” [More]   

Early this month, the board of directors at ArthroCare Corp. (Austin, TX) announced that the company has decided to investigate financial and strategic alternatives that could enhance its shareholder value. Possible alternatives include everything from a recapitalization or stock repurchase to the sale of certain assets or a potential merger. The announcement comes on the tail of a tough few months for the company. Amid rumors of alleged inappropriate reimbursement practices, the company’s stock has taken a significant hit over the past four months. 

Baker

ArthroCare has been viewed as a potential acquisition candidate ever since the 2007 acquisition of Kyphon Inc. (Sunnyvale, CA) by Medtronic Inc. (Minneapolis), which represented a $4.2 billion consolidation in the spine market, says David Lebowitz, vice president of equity research for healthcare and medical devices at Sanders Morris Harris (Houston). “The company’s Coblation technology—which contributes a substantial portion of revenue across each of the businesses (sports medicine, ENT, and spine)—could be attractive to a variety of potential acquirers,” he says. “Coblation’s versatility would seem to make highly diversified medical device players the most likely candidates. These companies could easily expand the use of the technology beyond its current areas.”

Michael Baker, CEO of ArthroCare, says, “We remain confident in the strength and growth opportunities of our business, as reflected in our reported 2007 results and the guidance previously provided for 2008 in our recent earnings call, as well as the opportunities for near- and long-term value creation for our shareholders through execution of our business plan. Any decisions the board makes will be based upon what it believes will be best for enhancing shareholder value.” [More] 

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Industry Pushes for Standardization of Vendor Credentialing

Miller

Gaining access to hospital purchasing decision makers is becoming increasingly difficult for medical device manufacturers. Over the past year, medical device sales reps have seen a proliferation of requirements that providers are demanding vendors meet in order to call on them. In response, industry has begun exploring possible paths toward standardizing such requirements. For example, the vendor access work group of industry association AdvaMed (Washington, DC) is communicating with the Joint Commission on Accreditation of Healthcare Organizations (JCAHO)—an entity that has regulatory and credentialing authority over hospitals—to work for reasonable hospital vendor access policies and address the increasing amount of hospital vendor access fees, as well as the associated potential fraud and abuse issues.

In the meantime, many medical device sales executives continue to express frustration with the growth of hospital-based vendor access restrictions. Hospitals’ policies vary widely in scope, imposing an increasing burden and cost on device companies. “Each time we go into an institution, we don’t know what’s going to happen,” says Mark Miller, vice president of sales and marketing for Zonare Medical Systems Inc. (Mountain View, CA). “Sometimes we get tripped up by unexpected requirements, and our rep has to retreat. And a lot of times the reps don’t even go into the hospital, they just go somewhere else. And that’s not good for us.” [More]

The Endeavor stent system by Medtronic Inc. (Minneapolis)—the first drug-eluting stent to be approved by FDA since 2004—spent only three weeks on the U.S. market before being drawn into its first patent infringement lawsuit. In late February, Wyeth (Madison, NJ) and Cordis Corp. (Miami Lakes, FL), a Johnson & Johnson company, filed suit against Medtronic in the U.S. District Court for the District of New Jersey. The suit alleges that the zotarolimus-eluting Endeavor stent infringes three patents owned by Wyeth and licensed exclusively to Cordis.

The suit hardly comes as a surprise, as industry players in the drug-eluting stent field have been embroiled in a multitude of legal disputes ever since the product category first emerged in the marketplace half a dozen years ago. Read more about this recent development and other industry patent news in this month’s edition of “IP Watch.” [More]