‘Repealing the medical device tax is important for the industry’
“We think it is the right bill; it has the right elements and has the right financial structure.”
From user fees and the medical device tax to increased worries about cyberattacks, 2017 is shaping up to be a busy year for the medical device industry. Having just completed his two-year term as Advanced Medical Technology Association board chairman, Vincent Forlenza is bullish on the industry's ability to tackle these priority issues. As CEO of Becton, Dickinson and Co., Forlenza supports the current iteration of medical device user-fee amendments in front of Congress. He also said the industry will continue to push for repealing the Affordable Care Act’s medical device tax, either as part of full replacement bill or a standalone measure. Forlenza recently sat down with Modern Healthcare’s Adam Rubenfire to talk about his tenure as AdvaMed chair and how the industry can support customers in a changing healthcare environment. The following is an edited transcript.
Modern Healthcare: What were your biggest accomplishments as AdvaMed chairman?
Vincent Forlenza: We were able to accomplish a lot. First off, there was suspension of the medical device tax. I saw that in the context of an innovation system that was really stressed for a number of reasons. Second, I would point to the 21st Century Cures Act and working with Congress to get that passed. Third is expanding the membership, especially into the digital technology space. We all know that as the internet of things evolves, it is going to be an important element for the industry going forward. Those are a few, but let me add one more: negotiating the medical device userfee amendments and building on what we had done with the Food and Drug Administration in the previous deal. We’re anxious to get that passed through Congress.
MH: Speaking of the userfee amendments, the Trump administration has said it plans to raise the fees. What does that mean for your ability to innovate and the ability of startups to innovate?
Forlenza: The process to get to a new user-fee agreement, which is going before Congress, was a long one and was jointly put together with the FDA. We think that is the right bill; it has the right elements and the right financial structure. I was encouraged to hear that the Senate Health, Education, Labor and Pensions Committee wants to move forward. It’s good for the industry and it’s good for BD. There are a number of elements in there in terms of improvements of the process, some improvements in getting approvals. It is a pretty complete approach and, as I said, it builds upon a lot of things that we had done with the FDA and adds some new elements in terms of real-world evidence.
MH: Permanent repeal of the medical device tax has been a major priority for AdvaMed and devicemakers in general. If Congress is unable to replace the ACA, do you believe the industry will advocate for a separate bill repealing the tax?
Forlenza: Repealing the medical device tax is important for the industry. It’s important for patients and improving innovation. AdvaMed will stay focused on that and AdvaMed will
look for the appropriate vehicle with Congress to accomplish that goal. I can’t say exactly how that will play out, but as legislation moves through Congress there may be an appropriate vehicle, and I think we will be responsive to those opportunities. But we will remain focused on this. It’s very, very important.
MH: Cybersecurity is a major issue. The FDA in 2016 came out with some guidance on device security. How serious of a threat is device security, and what are you doing to address it?
Forlenza: It is a serious threat for our customers and for the industry. I’ve been chairman of the board of a hospital in northern New Jersey, and I have seen the evolution of the threat, and I’ve seen the customer base responding in increasing its efforts on security. I was very pleased to put this issue on the table to the AdvaMed board, and there was a lot of enthusiasm to create principles to make sure that we were aligning with what needs to be done and also to work with the FDA.
At BD, we build this issue into our product development process. We have to make sure that in every step of that process we’re taking this into account, and that is very rigorous. We are not just using our internal resources, but we will also use outside people to test our approaches. Once the product is on the market, we have to make sure that the manufacturing is secure, and that we support the customer with updates and making sure that there’s a very open and honest dialogue going back and forth. It has to be a timely dialogue, too, so that our customers are safe and our devices are safe. That’s forward-looking, and, of course then, we’re always looking backwards in terms of older products and what we can do to update them as well and make sure that they are safe.
MH: Ultimately, isn’t it up to your customers to secure their networks? You build in security, but it’s up to them. How do you deal with that and how do you ensure that everything’s safe?
Forlenza: If you went back maybe two years ago, there was less of a focus from our customers on this issue. But the events that transpired with ransomware incidents, customers are much more focused on network security. We have to make sure that as we interact with the customer, we understand where they’re going with their security plans, how our software can fit in with their plans, and make sure that these activities are seamless. The challenge is to continue to simplify what we do so that it’s easier for them to continuously upgrade and meet the challenge.
You build a 10-foot wall, and the other side builds an 11-foot ladder. So security is going to be a constant battle. And from the BD side, we’ve created a new governance system for products across the company so that we leverage that knowledge, and we drive those aspects of our program to as high level that we can.
MH: We’re seeing a lot of acquisitions in the laboratory space in hospitals, or hospitals are choosing to boost their in-house lab operations and bring everything in-house. Is that affecting your laboratory automation business and some of your other diagnosticre lated businesses?
Forlenza: Yes, it does, because what you’re really doing is a major revamp for the hospital as opposed to going and selling individual systems.
We have a tremendous lab automation system for infectious disease and the microbiology area. As our customers consolidate, that automation becomes more important for them.
Who you talk to becomes different because the C-suite gets involved in those decisions whereas they don’t on an individual instrument. Of course, all of that is tied together with software, going back to what we were just talking about, so the CIO is involved in that decision; of course, the head of the laboratory is as well. So, it’s a more complex sell, but it’s one that has a major financial return for the hospital.
MH: We’ve seen more interest in bundled-payments and capitated episodes of care. How do you feel BD fits into that value-based care situation and the conversation on how to bring down costs?
Forlenza: The strategy that we have as a company is to sell solutions. That means we can become a strategic partner for our customer base as they move toward value-based care and population-based health. To do that, they have to restructure their processes and we have to focus on enabling them to make those process changes. For instance, we’re helping them revamp and automate medication management across their entire delivery network. This goes from the pharmacy to compounding to getting the drugs up on the floor to the pumps to making sure that all of those systems are talking to one another and they interface with the EHR. We are trying to eliminate both mistakes from the medication management process, but also driving down cost and making it all efficient by avoiding such things as drug stock-outs. When we sell, it’s that whole value proposition.
“You build a 10-foot wall, and the other side builds an 11-foot ladder. So security is going to be a constant battle going forward.”