Seeing momentum toward repealing the ACA device tax

“We support the movement away from fee-for-service toward models that reward providers for quality rather than volume.”

Stephen Ubl became president and CEO in 2005 of the Advanced Medical Technology Association, a 270-member group representing manufacturers of medical devices, diagnostic products and medical information systems.

Ubl joined AdvaMed in 1998 as executive vice president of federal government relations. He previously served as vice president of legislation for the Federation of American Hospitals and worked as an aide to Sen. Chuck Grassley (R-Iowa). As a lobbyist, Ubl has led efforts to change the Food and Drug Administration product-review process and Medicare’s coverage and reimbursement of medical technologies. Modern Healthcare reporter Sabriya Rice recently spoke with Ubl about the potential impact of new payment models, as well as regulatory and tax issues, on the $110 billion device industry. This is an edited transcript.

Modern Healthcare: What are the safeguards AdvaMed believes are needed to protect innovation as the use of valuebased payment models grows?

Stephen Ubl: We support the movement away from feefor-service toward models that reward providers for quality rather than volume. We believe medical technology will be a key contributor to the success of those models, enabling providers to better manage patients with chronic conditions. But the metrics aimed at reducing costs are strong and the quality standards are pretty weak. If a provider is trying to keep their costs below a financial benchmark based on historical costs, there could be a disincentive for adopting a new technology that may increase costs in the short term but decrease cost in the long term.

So we have advocated for transitional mechanisms to create room for new technologies, not unlike new technology add-on payments in the hospital inpatient setting. The transitional mechanism might last for two to three years, after which that benchmark can be recalibrated to reflect the new technology. We want to make sure as these new treatment paradigms evolve that we don’t have unintended consequences, such as skimping on care.

MH: How are AdvaMed and its members working to address the concerns providers have about proving the value of new technology?

Ubl: One of the key takeaways from our recent conference in Chicago was the need to focus on efficient evidence. We heard from Food and Drug Administration Commissioner Dr. Peggy Hamburg about the FDA’s focus on improving regulatory science and forms of evidence such as computer simulation that could expedite the review process. We also heard from regulators and insurers about the potential of registries to help build the evidence base. Our industry understands the evidence bar is being raised, and the industry is up for that challenge. But the focus ought to be on smart regulation and efficient data collection.

MH: At the conference there was discussion about unique identifiers for medical devices. Some manufacturers say they need more time for rollout of UDIs, and others question if that will actually benefit the public. What’s AdvaMed’s position?

Ubl: We’ve long supported the establishment of the UDI system. There’s no question UDI will benefit the public. If it’s implemented appropriately, we think it can provide accurate and useful post-market surveillance.

This is a tremendous undertaking for our industry. There are over 1 million discrete (shelfkeeping units) in terms of device types that will be impacted by this new requirement. We worked with the FDA around issues where we believe the requirements initially proposed would have added significant cost and burden without a commensurate public-health benefit. It will take some time for our members and providers to incorporate UDIs into their workflow.

MH: What’s driving the concern that more products are launching outside than inside the U.S.?

Ubl: First, FDA approval delays have deteriorated significantly in recent years. It’s routinely the case now that

breakthrough technologies such as percutaneous heart valves have been available to European patients for several years before U.S. patients have access to the technology. That’s led to more companies initiating their clinical trials and seeking product approval in Europe first. And unfortunately, investments such as research and manufacturing have followed suit. In addition, venture capital investment is actually more readily available in Europe today than it is in the U.S.

Another factor is that the effective U.S. corporate tax rate is about 31%. In Ireland, it’s about 14%. This disparity is made worse by the imposition of the Affordable Care Act’s medical-device tax, which adds about 30% to the industry’s aggregate tax bill. ( Editor’s note: The device tax also applies to imported medical devices made by foreign-based manufacturers, and it does not apply to devices exported by U.S. manufacturers). Other countries look at the medical technology industry as a winner they cultivate. In the U.S., regulatory delays as well as the tax climate have pushed many companies offshore.

Finally, there is the reimbursement climate. Even if there is a positive coverage decision by Medicare, it is often narrower than the FDA indication.

On a more optimistic note, the FDA review process is improving both for initiating a trial as well as product approval. We’re very heartened by the 21st Century Cures Initiative. It’s a bipartisan effort aimed at streamlining the regulatory and reimbursement processes. We see great momentum around that legislation. We heard from a number of speakers on both sides of the aisle around the need to repeal the device tax, and there is continued momentum there. And there’s growing discussion around greater collaboration between manufacturers, providers and payers as well as between the FDA and the CMS to make the process more streamlined and effective.

MH: What’s your reaction to the recent study in JAMA that found that many devicemakers are not adhering to the FDA’s 510(k) requirements requiring public reporting of effectiveness data?

Ubl:

It’s important to clarify the difference between the summary of publicly available information related to a submission and the actual data that are submitted to the FDA in support of an application. Submissions can include hundreds of thousands of pages. There is an important distinction between the summary information today not always being provided and the actual information being provided in support of a submission.

Having said that, adherence is important. One of the new pieces of the user-fee legislation is the so-called refuse-toaccept process, a checklist the FDA uses to ensure that a submission is in order before the review clock begins. One of the new requirements is the filing of this publicly available summary information. That will be a valuable new tool to ensure adherence. We certainly believe that summary information should be provided.