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Leaving the U.S.

"Cut the Line": 1944 artwork by Thomas Hart Benton / Wikimedia

My medical entrepreneur friends are spending so much time outside the U.S. that this country, for them, has become a kind of bedroom community. They sleep here, but go to work in Europe, China or Latin America. They still pay taxes in the U.S., but their medical technologies are, increasingly, gone, baby, gone. Since just this past July, four companies have told me that they plan to stop their applications at the FDA and shift resources to clinical studies and product launches in the EU, China or Brazil. 

Here’s a verbatim email I received last week from one particularly well known and famous U.S. inventor:

We are bringing our technology to China, as we find that going through the FDA has become prohibitive cost wise. The unpredictability of getting ultimate approval has caused us and many other U.S. companies looking for alternatives in bringing their advances to patients.

At a surgeon meeting just eight weeks ago, one young implant entrepreneur stood up and said that it costs him $2 million and a few years to get into the European market while costing $70 million and seven years to get into the U.S. market. He told the group of about 100 surgeons and business people that he has decided to avoid the U.S. market.

The strength of free markets, of course, is that it allows the unfettered movement of capital, technology and people—even if it means leaving the U.S. Well, the free market is operating.

A couple decades ago, Rick Scott, then CEO of HCA could make a statement like, “The first words out of the mouth of U.S. tourists in Europe when they have a health problem is; ‘Get me to the United States’.” Most everyone would have agreed. 

South Korea’s Wooridul Hospital
Today, if a patient wants the latest technology, they go to Cologne, Germany’s stem cell hospital, or India’s Wockhardt hospital system or the United Kingdom’s Queens Medical Centre in Nottingham or South Korea’s Wooridul hospital in Seoul.

All four use technologies that are more advanced than those available in the United States. 

Because of the way the U.S. regulatory system is designed, U.S. companies have to seek predicates to pre-1976 devices in order to get indications for clearance under the 510(k) rules. The rest of the world has no such constraint. 

Because U.S. surgeons are presented with devices that have been cleared according to pre-1976 technologies, they often find themselves in the position of going "off-label" in order to deliver proper patient care. If their European or Korean or Brazilian colleagues have data showing the proper, legitimate and successful use of a device that is NEW and if the U.S. surgeon decides to follow where the data is leading, they are then risking litigation, censure from politicians and, potentially, from their own surgeon societies for such “unapproved” indications. 

Broken FDA

The classic example is InFuse. This recombinant bone morphogenic protein was approved for use in the U.S. with Medtronic’s LT spine cage in the lumbar spine using an anterior approach. Every time a surgeon uses Infuse in two levels, in a manner that is not with an LT Cage or is not in the lumbar region or with a posterior approach, he/she is going “off-label.” We estimate that upwards of 70% of InFuse use is off-label.   

Probably the poster child for what is wrong with the FDA/CMS system is the Menaflex story. Is the FDA really going to retract a 510(k) clearance—not because the product in question was unsafe or in any way failed to perform in the market place—but rather because their process is, to paraphrase the FDA, “broken”?   

ReGen Biologics/Menaflex
In 2004, after about a decade of conducting a clinical trial under the FDA’s PMA (premarket approval) guidelines, a New Jersey company named ReGen Biologics submitted the first module of a PMA application for a product called Menaflex. Menaflex is a collagen implant to treat partial menisectomies. In 2005, the company decided to switch from a PMA submission to a 510(k) approach. The company believed that a pre-1976 predicate device existed that was substantially similar to Menaflex and therefore, could form the basis for 510(k) clearance. The FDA, with the PMA data in hand, twice refused to grant clearance under the 510(k) approach saying that the device was not substantially equivalent to other legally marketed devices. 

Believing that its treatment by the FDA was capricious and, potentially, purposefully unfair, the company reached out to its congressional representatives. The Congressmen and Senator then signed and sent a letter urging FDA Commissioner von Eschenbach to review ReGen’s submission to ensure a “fair and equitable process.” 

The accusation on the table is that ReGen, by going to its congressional representatives, applied excessive pressure on the FDA. But ReGen argues that the letter, which was vetted by the Senate Ethics Committee before being sent to the FDA, was not a request to clear the product; rather it was a request for a fair process.

Finally, at no time during the entire process was the safety of Menaflex in question. Nor, as it turns out, was its efficacy in question. Instead, this technology, which has now been studied for more than 15 years, is at risk of being pulled from the U.S. market. Given this risk, what is ReGen doing? It is focusing its Menaflex sales effort in Europe.

Going to Europe

The EU model is very different from the U.S. model. The EU, surprisingly we guess, appears to be quite comfortable with private industry involvement, specifically, through the Notified Bodies process. The European FDA-like entities are referred to as "Competent Authorities" and they determined risk categories for devices—basically, low, middle, and high. The high-risk devices require clinical trials, which are governed like FDA trials. Lower-risk devices however, are farmed out for approval (or clearance) to private organizations that are responsible to the Competent Authorities. These private organizations are audited on a regular basis and are paid by the companies to do an evaluation of the product as well as make sure the company is in compliance with European regulations for manufacturers of medical products.

Compared to the fundamentally adversarial system in the U.S., this is a breath of fresh air. 

The European model of medical technology review has proven to be faster, less expensive and more receptive of physician input with regards to technology evaluation than the U.S. system. Who benefits? The patients for starters. EU patients get access to the latest medical innovation. U.S. patients who want access to the latest technology or biologics either go overseas or go without.

The situation may be worsening. Such common and critical surgical products as bone cements, interbody cages, vertebral body implants and similar technologies, which have no material design or composite changes from technology predicates and were cleared years ago, are now being asked by the FDA to submit to NEW supplemental studies or biomechanical testing.  

Routine 510(k) applications are now taking 6 to 18 months to complete and add cost burdens that routinely exceed $1, 000, 000 per device. 

Lumbar Disc Arthroplasty Example

Lumbar disc arthroplasty (LDA) is one of the most advanced technologies for spine care and it was approved in the U.S. a couple of years ago. Patients who suffer from severe spinal disability and receive disc arthroplasty have reported substantial, long-term benefits, including minimal disability.  

Four U.S. pivotal trials were completed to study LDA. Each showed similar patient outcomes, at an estimated cost of $200, 000, 000 and cumulatively, 20 years of patient experience. Here’s the kicker. While companies were spending such huge sums in the U.S. to approve the early generations of this new technology, European surgeons had progressed beyond these early versions and are now using fourth and fifth generation disc arthroplasty devices.

In fact, there are now 15 new lumbar disc technologies currently under development or study in Europe. If these were all in the U.S., it would require, we estimate, an increase in clinical study costs of at least $750, 000, 000, and require five to seven more cumulative years of experience for each of these technologies! Costs will likely be passed along to the consumer, with no meaningful gain to be realized by the clinical community.

The U.S. regulatory pathway today is more un-predictable and non-transparent than it was five years ago. Today’s FDA is a large and onerous tax on the U.S. medical system and, taking the migrating entrepreneurs and scientists at their word, is the most powerful reason they are moving their business and technologies to Asia and Europe.

How can this system be fixed? Here are three simple reforms that came from another good friend, Charles E. Schneider, Vice President of Reimbursement at the Musculoskeletal Clinical Regulatory Advisers, LLC in Washington, D.C.

  • First, the FDA must restructure its current 510(k) and PMA approval process to reduce cost and time to market. The European model which incorporates MORE clinician and manufacturer input is a great first step. The system must find a way to combine clinical study requirements so that they can meet both FDA and Medicare evidence needs.
  • Second, FDA staff must not treat industry or clinicians as the “enemy” and find ways to work more interactively with surgeon/scientists and the technology industry. Under the current system time is sincerely wasted because of recurring requests from FDA. The requests can clearly be more efficiently addressed by agency personnel with phone calls and, sad to say, a better understanding of technology and anatomy.
  • Third, FDA staff must be better trained. At a minimum, FDA staff should spend time in actual clinical practice. Reviewers who are just entering the review process almost always lack relevant clinical or technical experience and therefore the capacity to make informed decisions, or even ask the right questions! 

Brain Drain
Candidly, I suspect it will take the exodus of a fair number of the best and brightest of our medical entrepreneurs before change can occur. It’s called the Brain Drain and it refers to intellectual capital moving from one location to another. In this case, out of the U.S. and towards the EU, China and elsewhere. Companies, engineers and scientists are going to those markets that encourage medical technology innovation and advancement. Until the current FDA system can fix these issues, the U.S. appears to be destined to become the equivalent of a medical technology bedroom community to the world.


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