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September 2006
This month�s headlines
Got your number. Unique numbers for all medical devices is the Holy
Grail for some healthcare supply chain executives. But not all
manufacturers see it that way.
Something for everybody. Manufacturers who work closely with
specialty sales and marketing organizations will get some breakout time
of their own at the 2007 IMDA Annual Conference and Manufacturers Forum.
Materials managers weigh in on GPOs. Amid the criticism of group
purchasing organizations voiced over the past five or six years, one
voice has been largely missing � until now.
Unbundled. GPOs have faced some heat for bundling products in their
contracts. This summer, a major manufacturer of hospital and specialty
beds took a little of its own.
Delicate balance. Successful selling to clinical departments is a
three-legged stool: surgeon, materials manager, supplier.
Have it your way. Contract manufacturers are offering medical device
companies a crucial choice: Do they want their devices manufactured in
the United States or somewhere else?
Ten innovative products. BusinessWeek picks their Top 10 devices of
the year.
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Unique numbers for all medical devices is the Holy Grail for some
healthcare supply chain executives. The Food and Drug Administration has
stoked the flames by calling for public comments on how a universal
numbering system could reduce medical errors, facilitate device recalls
and improve medical-device adverse-event reporting. The comments will be
used to help the FDA determine what steps should be taken to implement
what it calls a unique device identifier (UDI) system for medical
devices.
"Much like the bar code rule for drugs and biological products, unique
identifiers for medical devices could have many potential benefits for
improving the quality of care for patients," says Daniel Schultz, M.D.,
director of the agency�s Center for Devices and Radiological Health.
During the comment period, FDA wants to learn about the feasibility,
utility, benefits and costs associated with developing and implementing
a UDI system. In addition, the agency wants to hear about automatic
identification technologies, such as bar code and radiofrequency, which
could be used with a UDI.
Enthusiastic support?
The level of support for such a universal numbering system
varies, depending on who you�re talking to. The FDA says that many
stakeholders recognize the value of a UDI in improving patient safety as
well as the purchase, distribution and use of medical devices.
But manufacturers aren�t so sure that the benefits of such a
system would outweigh the costs. �The biggest obstacle is the lack of a
clearly articulated, comprehensive description of what patient safety
benefits will flow from a mandatory UDI,� says Mark Brager, director of
communications for AdvaMed, the Advanced Medical Technology Association,
Washington, D.C. �The biggest technical obstacle is the lack of a
standard nomenclature and data structure for UDI, Brager told IMDA
Update.
On the other hand, the Health Industry Business
Communications Council, an industry standards-making group based in
Phoenix, Ariz., would support a mandate, provided it incorporated
existing number systems, either HIBCC�s Universal Product Number system
or GS1�s standards, says HIBCC President and CEO Robert Hankin. (GS1 is
the name for the former Uniform Code Council, developer of the Universal
Product Code, or UPC .) HIBCC�s UPN already accommodates most of the
data that the FDA is talking about, including lot, batch, serial number
and expiration date, says Hankin.
At the same time, HIBCC � which, at press time, was preparing
its comments to the FDA notice � acknowledges that a number system for
medical products would have to be cost-effective. Many manufacturers
already affix unique product numbers (often in the form of a bar code)
to cases and boxes of products, says Hankin. But affixing numbers to
unit-of-use packages is more expensive. �There�s no sense in spending 50
cents on a one-cent item to avoid [an incident] that is highly
improbable,� he says, referring to life-threatening medical errors. �The
FDA should be very thorough in issuing regulations to make sure they
don�t create more burden than benefit.�
To
read the FDA notice in the Federal Register, visit
http://www.fda.gov/OHRMS/DOCKETS/98fr/06-6870.htm. To submit
electronic comments, visit
www.fda.gov/dockets/ecomments . Written comments may be sent to:
Division of Dockets Management (HFA-305), Food and Drug Administration,
5630 Fishers Lane, Rm. 1061, Rockville, MD, 20852. Comments must be
received by Nov. 9 and include the docket number 2006N-0292.
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Manufacturers who work closely with specialty sales and marketing
organizations will get some breakout time of their own at the 2007 IMDA
Annual Conference and Manufacturers Forum, June 3-6, in Coeur d�Alene,
Idaho.
While specialty distributors convene for breakout sessions on
topics of importance to them, manufacturers will have the opportunity to
do the same, according to conference co-chairs Tom Birmingham of Bay
State Anesthesia and Bruce Brierley of Maxtec Inc. Topics for last
year�s sessions for IMDA members included �Beating a Path to Your
Customer�s Door,� �Beyond the Traditional Sales Call� and �Build and
Diversify Your Business.�
The decision to tailor breakout sessions specifically for
manufacturers will enhance the value of the Conference and Manufacturers
Forum for them, according to Birmingham and Brierley. In addition to
having the opportunity to explore business opportunities with new
specialty dealers and reps and to conduct sales meetings with existing
partners, manufacturers will be able to network with peers on how they
can build their businesses, they said.
Location, location,
location
The conference will be held at the Coeur d�Alene Golf & Spa
Resort, approximately 31 miles east of Spokane, Wash., and 100 miles
south of the Canadian border. The resort overlooks Lake Coeur d�Alene,
whose golf course is the home of the world�s only floating green (on the
14th hole).
IMDA members and manufacturers are encouraged to bring their
families. The resort is 20 miles away from the Silverwood Theme Park,
the Northwest�s largest amusement park. The resort can help attendees
rent (or take a tour) in an all-terrain vehicle, go fly fishing or
whitewater rafting, take a ride in a helicopter, go horseback riding, or
hike or mountain-bike through some beautiful country. For those whose
interests lie in the great indoors, there�s gambling (the closest casino
is the Coeur d�Alene Tribal Casino, 23 miles south of the resort),
antique shopping, and fine dining.
For more information, visit the resort�s website at
www.cdaresort.com. And stay tuned to IMDA Update for more
information on the program content.
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Amid the criticism of group purchasing organizations voiced
over the past five or six years, one voice has been largely missing �
that of the hospital materials and purchasing managers who use their
contracts. At least, that was the opinion of Lawton Burns, Ph.D.,
director of the Wharton Center for Health Management and Economics at
the University of Pennsylvania, and author of the 2002 book The
Health Care Value Chain: Producers, Purchasers and Providers
Approximately four years ago, while participating in a panel
discussion regarding GPOs, Burns heard two health system materials
executives on the panel talking amongst themselves. �They were saying,
�What�s the big deal? If we want stuff, we get it; the GPO doesn�t tell
us what to buy,�� Burns recalls. �There was a big disconnect between
what [GPO detractors] were saying and what hospitals were saying.� It
was at that point that he decided to find out how hospitals really felt
about their GPOs.
After searching for a suitable database of materials
managers, he asked seven GPOs � Amerinet, Broadlane, Consorta,
HealthTrust Purchasing Group, MedAssets, Novation and Premier � for
their membership lists. With a seed grant from Owens & Minor and a large
grant from the National Science Foundation (which had underwritten
Burns�s healthcare value chain book), he proceeded to survey hospitals
about their perception of the value that GPOs bring them. The survey was
initiated in November 2005 and concluded in April.
Burns says that the details of the survey will be published
in the journal
Health Affairs. That said, he reports that the majority of hospital
respondents believe that GPOs provide �demonstrable cost savings,�
primarily through lower pricing. In addition, the majority take issue
with the statement �GPOs have hindered your access to information about
innovative products or manufacturers.�
�I�ve talked to heads of materials management, and I�ve read
a lot of their statements,� says Burns. �In my opinion, the problems
small firms face is not the GPO, but the fact that they don�t have a big
enough sales force and can�t get in front of the clinician.�
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GPOs have faced some heat for bundling products in their contracts. This
summer, a major manufacturer of hospital and specialty beds took a
little of its own.
In June, Batesville, Ind.-based Hillenbrand Industries and
its Hill-Rom Inc. and Hill-Rom Company subsidiaries paid plaintiffs a
total of $337.5 million to settle antitrust class-action litigation
brought against it two years earlier by Spartanburg (South Carolina)
Regional Healthcare System.
In the suit, filed in the United States District Court for
the District of South Carolina, Spartanburg Regional alleged that
beginning in 1990, Hill-Rom engaged in anti-competitive actions by
offering discounts on its standard beds and in-room products to
customers who also agreed to rent Hill-Rom or SSI specialty beds. The
hospital system alleged that Hill-Rom attempted to monopolize the market
for specialty beds by using its market power in standard beds and
in-room products.
Spartanburg charged
that as a result of the bundling, Hill-Rom�s customers paid higher
prices for the company�s products than they would have in the absence of
the bundling agreements. The providers alleged that had Hill-Rom not
engaged in this conduct, its competitors would have gained greater
market share, ultimately resulting in lower overall market prices and
higher-quality products.
Hill-Rom proclaimed its innocence to the end. �As we have
said before, we believe the claims in this case are without merit, but
we also believe it is in our company's and customers' best interests to
put this matter behind us,� said Hillenbrand Industries and Hill-Rom
President and Chief Executive Officer Peter Soderberg. The company said
that its discounts were a legitimate means of competing and that they
benefited customers. That said, Hill-Rom said it had discontinued
bundling its standard and specialty beds in 2002. Terms of the
settlement call for it to refrain from bundling until at least 2009.
Although Spartanburg purchased Hill-Rom products through
Premier contracts, Premier was not involved in the lawsuit or
settlement.
Spartanburg Regional President and CEO Ingo Angermeier
reportedly was emboldened to file the class action suit by a September
2002 federal court decision ordering Hill-Rom to pay $173 million to
Kinetic Concepts of San Antonio, Texas. In that case, which KCI
originally filed in 1995, KCI charged Hill-Rom with using product
bundling for anticompetitive purposes.
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By Laura Thill
IMDA members know that most surgeons regard their
relationships with their vendors as valuable educational opportunities.
Surgeons rely on suppliers, especially specialty distributors and reps,
to introduce new technologies and demonstrate their proper usage.
Many materials managers resent these relationships, which,
they say, interfere with the orderly introduction of new technologies
into their facilities. But others have come to accept them, all the
while keeping an anxious eye on surgeon-supplier interactions.
At the same time, surgeons appear to be more sensitive than
ever to the need to balance their desire for new technology with the
hospital�s need to control costs.
�It�s nice to be able to offer your physicians a choice,�
says Don Millbauer, director of perioperative service at Seattle,
WA-based Harborview Medical Center. �As a teaching hospital, we have to
be flexible and provide our surgeons with [a variety of] experiences.�
Still, the facility cannot do that at the expense of its financial
well-being, he adds.
Successful model
�A successful model for achieving an amicable relationship
between the physician and the hospital must preserve the surgeon�s
ability to choose products that he or she is comfortable with, while
controlling costs for the hospital,� says Freddy A. Achecar, Jr., M.D.,
an orthopedic surgeon affiliated with the Wellstar Health System, a
five-hospital system in the Atlanta, Ga., area.
�We surgeons are always looking at new products and
technologies to improve the outcomes of our surgical procedures,� he
says. Ultimately, medical costs will decrease as the clinical outcomes
associated with emerging technologies improve. �The only con, as I see
it, is when technology is rushed too quickly to the market without
adequate scientific evidence to validate its use.�
Indeed, the operating room is a resource-intensive
department, says Ed Robinson, system vice president, supply chain
services at OhioHealth, Columbus, Ohio. �The dollars under contract [in
the OR] are usually much more significant than most other departments,�
he says. �Savings opportunities of several hundred thousand dollars
annually are frequently identified and have much higher visibility
within the organization.�
Nature of the beast
The value of a healthy relationship between the surgeon and
the vendor should not be underestimated, says Robinson. �The best sales
reps are highly responsive, provide educational expertise and always
come through with products and instrumentation in a pinch.
�At OhioHealth, we want to utilize the expertise of sales
reps in an appropriate manner that complements our internal processes
and structure, but does not create a critical dependency,� he says.
�Most important, we must remain market competitive by ensuring [that we
receive] the best pricing for products and services.�
Cheryl Harelstad, vice president of supply chain management
at Minneapolis, Minn.-based Allina Hospitals and Clinics, accepts that
close relationships between physicians and suppliers are �the nature of
the beast.� Vendors can be informative and play an educational role, she
points out. Even so, materials managers are more comfortable if they can
coordinate vendor-physician interactions.
�From a patient-outcomes perspective, we want our doctors to
have access to the best devices,� says Harelstad. At the same time,
technology assessment must consider the needs of the hospital system.
�We want to ensure that all aspects of our business are involved,� she
says. �We look at new products in terms of quality, compliance,
inventory and training.�
Easier said than done
Few would dispute that the best results � from an economic
and patient care standpoint � occur when supply chain executives work
closely with their clinicians in the introduction of new technologies.
But many concede that actually doing so is easier said than done. A big
reason is that physicians simply don�t have enough time to get involved.
�As physicians [continue to] see dramatic reductions in
reimbursement, increased demands on their time and growth in patient and
procedure volumes, they must limit their involvement in meetings and
other hospital-based activities,� says John McGuire president and CEO of
Surgical Implant Services LLC, a Jacksonville, Fla.-based GPO that
establishes local physician-owned companies that work together to
standardize on surgical implants.
�Clinical review committees potentially can be very time
consuming, thus decreasing the ability for a busy surgeon to
participate,� Achecar adds.
Should surgeons be paid to participate in clinical review
committees? That depends. �Compensation for clinical review committee
participation should not lead to problems or ethical conflict for the
participating physicians, but it could lead to discontent [among those]
physicians not asked to participate,� says Achecar.
McGuire agrees. �Selection of certain physicians and the
exclusion of others would likely heighten conflicts and competitive
issues among staff members and further reduce compliance,� he says.
�To sustain participation [in technology committee meetings],
the physician must derive value from his or her involvement,� says
Robinson. �This includes providing input into product selection
decisions as well as the capital justification and acquisition process
for the related specialty.� Yet, the hours a physician dedicates to
contracting and supply chain initiatives are hours not spent with
patients, he continues. �I believe physicians should be compensated on a
fair market basis for such participation,� so long as payment policies
have been appropriately reviewed and approved by legal counsel.
Lessons learned
Some supply chain executives have grown to understand that
they need to be in frequent contact with surgeons and other clinicians
in order to generate the best results for both sides. �Doctors are
data-driven,� says Harelstad. �So we [administrators] must get our
information out there.�
�Physicians want a place to practice medicine that is safe,
efficient, user-friendly and provides a healing environment,� adds
Robinson. This means providing them with a greater say in how the
organization is run. �A contracting decision that saves money but
decreases physician satisfaction and makes it more difficult for a
physician to practice medicine is in clear conflict with our vision.�
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Contract manufacturers are offering medical device companies a crucial
choice: Do they want their devices manufactured in the United States or
somewhere else?
It�s part of a broader, cross-industry trend, according to a
recent article in The Wall Street Journal (�Made in USA? Now
Customers Get to Choose,� Aug. 9, 2006). Companies cited from the
medical arena include Pacific Plastics & Engineering, Soquel, Calif.;
United Plastics Group Inc., Oak Brook, Ill.; and the Tech Group division
of West Pharmaceutical Services Inc., Lionville, Pa.
Pacific Plastics & Engineering builds parts and finished
products for a variety of companies, ranging from start-ups to Boston
Scientific. The company reportedly quoted
Cannuflow Inc. two prices for the mold of the handle for the
Extravastat EntreVu, a fluid-drainage device that reduces swelling
during shoulder surgery: $23,500 for the made-in-the-USA mold, and
$14,500 for the made-in-Taiwan model. Another component � a complex tube
that manages the flow of fluids � will be made in the United States.
"The simpler stuff we did offshore; the stuff that needed
more talented tool making, we did locally," Ted Kucklick, chief
technology officer at Cannuflow, was quoted as saying. Added Kucklick,
any stigma associated with overseas production is rapidly disappearing.
�Nobody looks for a �Made in the USA� label anymore. With the customers
we have, the sensitivity is to price.�
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Some call it a growth spurt. Others call it incremental
improvement. Whatever the case, innovation in medical devices and
technologies is alive and well. In its Aug. 16, 2006, edition,
BusinessWeek highlighted 10 innovative medical products, some
designed for healthcare facilities, some for home use. They are
OmniPod insulin
management system
(Insulet).
The digitally controlled pod is filled with up to three days' worth of
insulin and then attached to the abdomen by its adhesive border. The pod
contains a small cannula that enters the skin and delivers the drug on
command at the press of a button.
Lighted ear curette
(Bionix
Development). For years, doctors have removed ear wax with the help
of a hot-water gun or a disposable swab. The Bionix curette adds an LED
diode to a plastic ear swab, allowing physicians to see inside the ear
canal.
Impact solar-powered
hearing-aid-battery recharger (Project
Impact). Hearing-aid batteries cost a lot and need frequent
replacement. This inexpensive charger could help solve the problem, says
the manufacturer.
Birmingham Hip resurfacing system (Smith
& Nephew). Coating the hip socket and femur with a high carbide
cobalt chrome conserves a patient's natural bone and is said to offer 98
percent more wear resistance than the metal-on-plastic-joint of
traditional replacements.
CereTom mobile computed
tomography scanner (NeuroLogica).
The scanner is said to be the first portable, lightweight (740 pounds),
low-cost ($250,000) CT scanner.
QuikClot Advance Sponge
(Z-Medica).
The sponge builds upon Z-Medica's wound-clotting crystals -- powder that
quickly stops bleeding by removing water from blood and allowing
platelets to accumulate. After soldiers who tested the powder in Iraq
reported difficulty handling the crystals in battleground conditions,
the company developed the sponge.
Somatom Senation 64 CT
scanner (Siemens
Medical Solutions). Said to be the world�s fastest CT scanner, the
Somatom can freeze a heart in motion. It also offers doctors
unprecedented clarity, says BusinessWeek. And because it works so
quickly, it exposes patients to fewer X-rays.
360� Fascia Closure Device
(SuturTek).
The
device is said to offer a safe, fast, and easy alternative to
hand-suturing. The stylus holds a single-use suture cartridge containing
a standard curved needle and thread. Physicians control the depth,
placement, and spacing of the stitches, and manipulate the needle with a
squeeze of the handle.
Implantable ventricular
assist device (Thoratec).
Introduced in 2003, the IVAD remains the only FDA-approved implantable
device that can provide cardiac left, right, or biventricular support,
says BusinessWeek. In addition to its use as a preoperative stand-in,
the device can serve as post-surgery aid to a heart or chamber as it
recovers from trauma.
LifePort
(Organ
Recovery Systems). Unlike the low-tech Igloo cooler, the LifePort is
said to support and monitor an organ throughout transport. The
manufacturer cites studies showing LifePort kidneys survive at least 17
hours longer than kidneys transported the standard way, doubling
viability time.
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