Venture Capitalists Complain of ‘Regulatory Challenges,’ FDA Responds

Writing in this month’s Fortune, Dan Primack is the latest to raise the alarm about indications that venture capital funding of life sciences startups is on the decline.  The decline in funding is cause for concern because venture capital-funded startups are, in the words of Tracy Lefteroff of PricewaterhouseCoopers, “where all the drugs are coming from[.]“  “[L]arge pharma[,]” Lefteroff explains, has “been extremely ineffective at developing pipeline drugs internally.”

While there are still “plenty of venture dollars … going into the [life sciences] sector,” Primack reports, they are going to mature companies.  Startups, on the other hand, “are having a much tougher go of it, with 17% fewer raising venture capital during the first three quarters of 2011 than during the same period in 2010.”  According to Primack, “a number of veteran VC firms are formally ending their pursuit of pharma startups.”

What explains the increasing reluctance to invest in the life sciences sector?  The venture capitalists blame “regulatory challenges,” primarily “the hostile FDA.”   Primack quotes Kate Mitchell, co-founder and Managing Director of Scale Venture Partners, a venture capital firm which recently announced that it will make no new healthcare investments, as follows: “It just takes a lot longer now to get approval than it used to, or to even know what the [Food & Drug Administration] is thinking.  One of our companies, Prestwick Pharmaceuticals, supposedly was put on a ‘fast track,’ but it still took another three years before receiving FDA approval.  It’s incredibly frustrating and means we need to invest more to keep the companies running.”

The Medical Innovation and Competitiveness (MedIC) Coalition, a group of “life science investors, innovators and entrepreneurs,” has been lobbying hard for the FDA to approve more drugs and devices more quickly, that is, without the careful review of efficacy and safety that it currently undertakes.  Specifically, they have prioritized “[r]ebalancing benefit-risk assessments in the drug and device approval processes to appropriately reflect the value of new therapies to patients in need” and “[e]xpanding the accelerated approval pathway into a progressive approval system for drugs, diagnostics and medical devices.”  MedIC also believes that the FDA’s conflict of interest policy threatens to “hinder[] patient access to new treatments.”  It argues for increased “utilization of non-government outside experts to facilitate and strengthen the FDA review and approval process,” presumably experts who would be barred from serving by the FDA’s current conflicts policy.

Not all of MedIC’s priorities are so extreme.  They have also called for more timely, consistent, and transparent decision-making at FDA, while acknowledging that to achieve these ends the agency must be “well resourced and endowed with state-of-the-art scientific tools, clinical input, processes and procedures.”  With this, even the most ardent consumer advocate can agree, and the FDA has recently acted to improve its decision-making in ways that do not risk sacrificing health and safety.  This is a promising development.  The results of a recent survey of venture capitalists suggests that increasing the predictability and speed of the FDA’s decision-making would have a higher impact on their willingness to invest in the life sciences sector than would “rebalancing” the agency’s weighing of safety and efficacy.

Secret Prices: Free Market Triumph or Tragedy?

Can a market work when buyers are kept in the dark about the prices they’ll pay? That’s an increasingly urgent question for fans of consumer directed health care. In vogue during the administration of Bush fils, CDHC is reemerging as Obamacare’s opponents seek a standard to rally around (other than “laissez mourir“). In theory, consumers could force doctors and hospitals to compete by shopping around for services. But when the rubber hits the road, informed consumption is easier said than done, as Josh Barro describes:

Recently, my employer switched to a high-deductible health insurance plan, which means I’m paying at the margin for most of my health care. As a result, I have become more aware of the true cost of the care I receive—and more aware of how difficult it is to figure out that cost. . . . if you ask doctors how much a service costs, they tend not to know. I once had an argument with my doctor, who did not want to give me a blood test for fear that my insurer would deny the claim for the expensive test. I later found out that this test costs all of $9.48 at my insurer’s negotiated rates, despite a list price of $169. When I got orthotics, my podiatrist told me they would cost nearly $600. But that was the list price; the actual insured price was less than $250. . . .

It doesn’t have to be this way. We could legally obligate hospitals and medical practices to disclose their full price lists—both the inflated list prices and the rates negotiated with each insurer that the practice accepts.

A commenter on Barro’s blog retorts:

I’m a little surprised to see a blogger at the [National Review Online] suggest that the government “require” price disclosure from private market participants. This goes well beyond the market interference that some other odious “mandates” require. Why don’t we mandate that everyone disclose exactly what they pay each employee? . . . If you have an HSA or High-deductible policy, I would suggest it’s incumbent on the insurance provider to help you figure it out. If consumers want it enough the system should respond, right? Why not switch to an HDP that is more transparent?

The problem, of course, is that lots of parties have to agree to provide transparency, and there is a great deal of inertia. If all the other insurers aren’t transparent, there’s little reason for one of them to try to distinguish itself if it already has a steady customer base. And when it stirs itself to do so, it will find a wall of resistance from providers, who say “why should we give all this information to you—no one else is demanding it?” (Moreover, the “prices” don’t really exist except on paper on a “chargemaster,” and they’re practically meaningless (except as opportunities to gouge the unlucky). The real price is the negotiated price, and that’s generated out of iterative interactions.) Moreover, many interventions involve multiple providers, as a reader of Andrew Sullivan’s blog explains:
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Does the Ban on Off-Label Promotion Bar On-Label Promotion?: The Case of Call Plans

As predicted, in the wake of the Supreme Court’s decision in Sorrell v. IMS Health pharmaceutical companies have raised First Amendment challenges to the ban on off-label promotion on a number of fronts.  Most recently, Par Pharmaceutical sued to invalidate the ban to the extent that it “criminalize[s] Par’s truthful and non-misleading speech to healthcare professionals concerning the FDA-approved use of its FDA-approved prescription drug.”  How is it that the ban on off-label promotion could be interpreted to bar the on-label promotion in which Par wishes to engage?  At the heart of Par’s dispute with the government are the “call plans” that pharmaceutical companies develop using the prescriber-specific prescription data at issue in Sorrell.

Call plans set forth which physicians pharmaceutical sales representatives should visit and how often.  In an article in the current issue of Next Generation Pharmaceutical magazine, Matthew Linkewich and Jay Margolis of IMS Health explain that a “properly conceived and configured … call plan directs reps to those physicians whose practice characteristics, constellation of prescribing behaviors and attitudes are conducive to supporting the brand goals.”  Because call plans embody “brand goals,” the government has focused on them as evidencing companies’ intent to engage in off-label promotion.

For example, in a December 15, 2010 press release announcing a $214.5 million settlement with Elan Corporation, the Department of Justice highlighted the fact that Elan’s “off-label marketing efforts” for its anti-epilepsy drug Zonegran “targeted non-epilepsy prescribers.”   A January 28, 2011 press release announcing the formal sentencing of Novartis in a case involving off-label promotion of its anti-epilepsy drug, Trileptal, similarly noted that the company “decided to market and promote Trileptal as a treatment for [two off-label indications, bipolar disease and neuropathic disease] and directed its sales force to visit doctors who would not normally prescribe Trileptal due to the nature of their practice.” Novartis’ plea agreement explains that while epilepsy is treated by epileptologists and neurologists, the company’s call plan included psychiatrists and pain doctors.

The corporate integrity agreement that Novartis entered into as part of the settlement of the Trileptal-related claims against it provides for independent review of “the bases upon which [health care providers] and [health care institutions] belonging to specified medical specialties are included in, or excluded from, the Call Plans based on, among other factors, expected utilization of Government Reimbursed Products for FDA-approved uses or non-FDA-approved uses[.]“  The corporate integrity agreement requires a similar review of the company’s sampling strategy and goes so far as to bar the company from delivering samples to health care providers identified by the company as “belong[ing] to a specialty group that is unlikely to prescribe” the sampled product on-label.

Currently, Par Pharmaceutical’s call plan for its appetite stimulant Megace, which is FDA-approved for the treatment of AIDS-related wasting, does not include oncology practices or long-term care facilities.  With the help of an outside consultant, Par determined that physicians in those settings “reasonably may encounter patients suffering from AIDS-related wasting, and thus may have occasion to prescribe [Megace] for its on-label use,” but all agree that they would be much more likely to prescribe the drug off-label to treat wasting in cancer and geriatric patients.  In the concluding paragraphs of Par’s complaint, it explains that the U.S. Attorney’s Office for the District of New Jersey, which is investigating the company’s marketing practices, has informed the company that before it promotes a drug for its on-label use to doctors who prescribe the drug off-label it must “confirm that there are presently a sufficient number of patients being treated for whom the drug could be prescribed on-label.”

As Par points out, the government has offered no guidance regarding the number of on-label patients that a doctor must treat before he or she can be included in a company’s call plan.  On the one hand, this is to be expected because the call plan is only one factor that the government considers in determining a company’s intent.  On the other hand, it leaves companies like Par without a clear course to follow and, after Sorrell, likely to sue.

Heartless and Alive

Paradigms are made to be broken– like hearts, artificial or otherwise. And some solutions seem so simple in retrospect, yet unthinkable prior. Incapable, at times, of seeing that which sits right in front of our eyes, we marvel when someone brings it to our attention: “Oh yes, of course!”

Two surgeons from Texas, Dr. Billy Cohn and Dr. Bud Frazier, of the Texas Heart Institute,  have hooked together what amounts to a tandem of centrifugal pumps–and have used it to replace the heart. No pulse, no rhythm, just pumping– a continuous flow. You can see the press conference here, along with an image of the pumps– installed.

NPR reports:

Cohn and Frazier did not start totally from scratch. They took two medical implants known as ventricular assist devices and hooked them together.

A ventricular assist device has a screwlike rotor of blades, which pushes the blood forward in a continuous flow.

Thousands of people have one of these implanted close to their hearts, including former Vice President Dick Cheney. By using two, the doctors replaced both the right and left ventricles — the entire heart.

Important conceptually to the beatless heart is the purpose, in the first place, of the beat. NPR notes:

the only reason blood must be pumped rhythmically instead of continuously is the heart tissue itself.

“The pulsatility of the flow is essential for the heart, because it can only get nourishment in between heartbeats,” Cohn says. “If you remove that from the system, none of the other organs seem to care much.”

They’ve implanted the device successfully in a number of animals and one human being– the human being a man named Craig Lewis, a 55-year-old who was dying from amyloidosis, a disease which causes abnormal protein buildup on the organs which ultimately causes the cessation of those organs.  Mr. Lewis’ heart was said to have been down to 12 hours of working time when it was replaced with the surgeons’ whirring pumps. It worked, though the amyloidosis afterwards fatally attacked his other organs.

NPR reports: “Craig Lewis lived for more than a month with the pulseless heart. He died in April, due to the underlying disease. His doctors say the pumps themselves worked flawlessly.”

And there it is, that which we have thought the quintessence of existence, the pulse, the rhythm of life, perhaps not essential– and perhaps that which attempts to recreate that rhythm is simply less efficient.

Doctor Cohn has what I think is a good grasp of the nature of his innovation– the sort of flash, recurrent through human history, which makes one question what else it is they thought they knew.

NPR notes:

Biomedical companies worldwide are still trying to perfect a pulsing artificial heart.

But Cohn says those companies are like the last buggy-whip manufacturers: fine-tuning a product that will soon become obsolete.

He is sympathetic to their efforts, though. He points out that the history of invention is full of dead ends.

“When man first tried to come up with machines that flew, he looked around and saw bats and birds and butterflies and mosquitoes,” Cohn says. “Everything had wings that flapped.”

But what works in nature is often not the only mechanical solution, or even the best one.

“When they saw that you could create wind, and that wind over a fixed wing was a great way to provide lift, then the whole field shifted,” Cohn says. “There are very few flying machines in modern times that have flapping wings. And I think this is the same intellectual leap in pumping blood or pumping fluids.”

…After the Horse Has Already Left the Barn: FDA Continues to Postpone Conflicts Review Until Studies Are Complete

On Tuesday, the Food and Drug Administration released a draft guidance on financial disclosure by clinical investigators, targeted at the investigators themselves, at drug and device companies and others who sponsor clinical trials, and at the agency staff who review the disclosures.  In the draft guidance, which updates an earlier one, the FDA briefly reviews the financial disclosure regulations, which have not changed, and then provides heavily revised and expanded answers to frequently asked questions.

The draft guidance is a response to a January 2009 report by the Department of Health and Human Services’ Office of the Inspector General (OIG) which recommended that the FDA (1) “ensure that sponsors submit complete financial information for all clinical investigators[,]” (2) “ensure that reviewers consistently review financial information and take action in response to disclosed financial interests[,]” and (3) “require that sponsors submit financial information for clinical investigators as part of the pretrial application process.”  The draft guidance addresses the first two recommendations but, unfortunately, FDA has still not taken action on the third.

The draft guidance responds to the OIG’s first recommendation in a number of ways, including in its response to the question “What does the FDA mean by due diligence?” which has grown from three sentences in the earlier guidance to four paragraphs in this one.  The draft guidance sets forth in detail what those applying for marketing approval must do to obtain financial information from every investigator who worked on every clinical trial submitted in support of the application.  For example, when an applicant is missing an investigator’s financial information because it cannot find him or her, it must try to locate the investigator by making at least two phone calls, sending at least two certified letters, and requesting new contact information from the investigator’s previous institutions.  From there, the search might progress to contacting professional associations and conducting internet searches.  The draft guidance’s recommendations, if followed, should drastically reduce the number of applications that rely on the due diligence exemption to excuse missing financial information.

With regard to the OIG’s second recommendation, the draft guidance adds and answers the following question: “What will FDA’s reviewers consider when evaluating the financial disclosure information?”  In its answer, the FDA explains that “outcome payments (that is, payment that is dependent on the outcome of the study) elicit the highest concern, followed by proprietary interests (such as patents, royalties, etc.); but these are rarely seen.”  More typical are equity interests and significant payments of other sorts, in which case the agency takes into consideration the amount and nature of the payment as well as other factors such as the total number of investigators and subjects in the study, whether and how the study is blinded, controlled, and randomized, and whether the study endpoints were objective or subjective.  While the agency elsewhere rejects the idea that the financial disclosure requirements be waived for “efficacy studies that include large numbers of investigators and multiple sites[,]” it would appear to agree that the likelihood of a single investigator biasing such a study’s results is low.

The FDA has not taken action on the OIG’s third recommendation, that investigators’ financial information be submitted to the agency as part of the investigational new drug applications (IND) and investigational device exemptions (IDE) applications that are filed before studies in humans are initiated.  The draft guidance does exhort sponsors to consult the FDA early and often to minimize potential bias.  The draft guidance explains that “[b]y collecting the information prior to the study start, the sponsor will be aware of any potential problems, can consult with the agency early on, and can take steps to minimize any possibility for bias.”

When sponsors do choose “to consult the FDA early”, the draft guidance provides that agency staff should “focus on the protection of research subjects and the minimization of bias from all sources.”  The suggestion that agency staff play a role in protecting research subjects is interesting.  It is not mentioned in the regulations or anywhere else in the draft guidance and it is only possible where sponsors voluntarily seek the FDA’s input.  By the time an applicant is required to turn over investigators’ financial information, as part of an application for marketing approval, the horse has left the barn.  The clinical trials are complete and it is too late to protect participant’s rights and interests.  Bias, by contrast, can sometimes be addressed retroactively.  The draft guidance notes that the FDA’s “[r]eviewers might … compare results from more than one investigator, re-analyze the data excluding the investigator’s results, analyz[e] the data in multiple ways, and/or determin[e] if results can be replicated over multiple studies.”  Even bias is better dealt with prospectively, though, not least because agency staff are aware of and sensitive to the expense associated with conducting clinical trials and are likely to be highly reluctant to disregard a trial’s results.

Because prospective review of investigators’ financial information would allow the FDA to “focus on the protection of research subjects and the minimization of bias” across the universe of studies, not just those in which the sponsor chooses “to consult the FDA early,” the financial disclosure regulations should be revised per the OIG’s recommendations to require that financial information be submitted as part of the pretrial application process.

Comments on the draft guidance are due by July 25, 2011.

The FDA’s Move to Combat Prescription Drug Abuse: Educating Patients and Physicians

The Food and Drug Administration (FDA) announced a new risk-reduction program this month to help curb abuse of prescription painkillers. The program, called the Risk Evaluation and Mitigation Strategy (REMS), is targeted at manufacturers of long-acting and extended-release opioids. It requires that these manufacturers develop new medication guides for patients and educational materials for prescribing physicians. Each company has 120 days to submit materials to the FDA for review.

According to the FDA, the focus of the REMS plan is to educate doctors about proper pain management and patient selection, and to improve patient awareness about how to use these drugs safely. The medication guides for patients should include consumer friendly language that explains safe use and disposal. The drugs targeted by the REMS plan include oxycodone, methadone and morphine.

As the plan stands now, physicians are not required to review the educational materials. To help generate interest, the FDA plans to offer continuing education credits for physicians who receive the education. The ultimate goal is to make this training mandatory through congressional approval that would link the training to licensing for physicians who prescribe controlled substances.

The FDA hopes that REMS education will cut down the misuse of prescription painkillers without restricting access. There are an estimated one million emergency room visits a year as a result of prescription drug abuse, and the FDA estimates that more than 33 million Americans misused opioids during 2007. That same year, deaths from drug overdose were second only to motor vehicle crashes among leading causes of unintentional injury death in the U.S.

Encouraging safe disposal of medications is key. Over half of all nonmedical painkiller users get their pills “from a friend or relative for free.” Doctors have also been found to prescribe more doses of painkillers than patients actually use, and patients don’t always dispose of unused medications properly.

What can you do to help combat prescription drug abuse? The Drug Enforcement Administration is sponsoring the second National Prescription Drug Take-Back Day this Saturday. You can find a collection site near you by clicking here. Last year, more than 121 tons of prescription drugs were collected at nearly 4,100 locations. It’s a good reason to extend that spring cleaning to your medicine cabinet!

FDA Recalls and Selective Analysis

Researchers at the National Research Center for Women & Families and the Cleveland Clinic published a controversial report in the Archives of Internal Medicine in February.   The research team, led by Diana Zuckerman, analyzed high-risk medical device recalls from 2005 to 2009.  The report concludes that “reform of the [510(k)] regulatory process is needed to ensure the safety of medical devices.”

510(k) Process: Cause for Concern?

Zuckerman’s team determined that of the 113 recalls from 2005 through 2009, eighty (71%) medical devices — or the vast majority of those recalled — passed through the 510(k) process.  Twenty-one (19%) medical devices had passed through the more rigorous premarket approval process and eight (7%) were exempted from review.

Consumer advocates and the study authors argue that the disproportionate number of medical devices recalled after being reviewed under the 510(k) process demonstrates the need to reform the review process.   But do these statistics demonstrate a flaw in the 510(k) process?

Advanced Medical Technology Association (AdvaMed), an industry lobbying group says no.  It calls the study flawed.  Why?  The vast majority of devices (~90%) are cleared through the 510(k) process.   Therefore, it would be expected that more recalls are for 510(k) cleared devices.  A 2010 AdvaMed report, analyzed the recall rates for the PMA approval and 510(k) clearance processes.  The report demonstrated that the overall recall rate was very low for both — less than 1% and that PMA approved devices were more likely to be recalled.

In fact, during the Zuckerman study period, 19,000 devices were cleared through the 510(k) process, making the overall recall rate for 510(k) cleared devices approximately 0.4%.

When NPR asked Zuckerman to compare her study with the AdvaMed study, she agreed that most devices had not been recalled. “But I’m taking the public health perspective. How many people have been harmed by these products? We know that 112.6 million devices have been recalled in the last five years. That’s a lot of products. We know thousands of people have died. And those are deaths that did not have to happen.”

But what about all the lives saved?  Mark Adelman, MD, of the NYU Langone Medical Center in New York City, counters, “While some lives have been lost by expedited approval, many lives have been saved by getting better devices to market quickly. How many lives have been saved by the 510(k) fast track?”  Public health advocates, like Zuckerman, would offer a more complete analysis if they took account of both the risks and the benefits in their evaluation of the FDA approval processes.

Misclassification and Proper Review Path?

What if the processes are adequate, but some devices get thrown in the wrong review bucket?  Physicians Rita Redberg and Sanket Dhruva of USC San Francisco wrote in the invited commentary that “Zuckerman and colleagues demonstrate the dangers to patient safety posed by these innumerable device misclassifications.”  The Zuckerman report focused on “high-risk” recalls, or “those that could cause serious health problems or death.”

The report states that “[o]f the recalled devices cleared for market through the 510(k) process, 12% were marketed for risky or life sustaining Class III indications, which are required by law to undergo a full PMA regulatory review.”  In an email to MedPage Today, study author Steven Nissen, MD, of the Cleveland Clinic, elaborated:

There should be NO recalls for ’serious injuries or death’ amongst 510(k) approved devices. The FDA is supposed to require a PMA for Class III devices, those used to sustain life or preserve health. If a PMA is required for devices used to support or sustain life, why were so many of the devices recalled for ’serious injury or death’ originally approved using 510(k)?

Unfortunately, Nissen conflates risk of injury with the life-sustaining capacity of the device.  Although the failure of a Class III device will more likely result in serious injury or death, medical devices in all three Classes may cause serious injury or death if improperly designed or manufactured.  But maybe there is something to this.

Strengthening 510(k) process

What about the steps the FDA has already taken to improve the process?  In late 2009, the FDA began a review of its 510(k) process.  Last August, 55 recommendations were issued by two working groups.  In January, the FDA announced the adoption of 25 changes to the 410(k) process to take place this year.

According to Dr. Jerry Avorn, a professor of medicine at Harvard Medical School in Boston, “The current FDA leadership has been trying to improve the carefulness of device review, and that is very good for patients. But those attempts have been met by self-serving complaints from the device industry that better review and surveillance will somehow stifle innovation, which is not the case.”  Avorn suggests that both industry innovation and consumer safety can be achieved.

Meanwhile, the Institute of Medicine is working on a comprehensive report, commissioned by the FDA, on what’s wrong with medical device regulation. That’s due later this year.

Discount Prescription Program Available To Some Locals

Listen up, Hoboken, Newark, and Orange residents.  There’s a new prescription discount program in town: Coast2Coast Rx Card.  Well, the program isn’t all that new to the area: Newark launched it last year and Hoboken launched it in January.  However, I didn’t learn about Coast2Coast Rx Card until I filled a prescription at my local CVS last month.  Since my prescription wasn’t covered by my health insurance (I always joke to the pharmacist that it kind of defeats the purpose of having health insurance, but I never get any laughs), I was bracing myself for the out-of-pocket cost.  So imagine my surprise when the pharmacist said that I owed $35 instead of $50.  When I pointed out the “mistake,” I was handed a Coast2Coast Rx Card.

While it isn’t a substitute for health insurance, the free Card does offer discounts on prescription drugs, laboratory tests, and imaging tests.  Specifically, the Card boasts such features as:

• 59,000+ participating pharmacies including all major chains and most independents
• Over 60,000 drugs included in formulary
• Save up to 65% on a brand name or generic drugs
• Overall annual savings range from 30% to 45%
• Card is good for an entire family
• Cardholder pays no fees for the card
• No paperwork to fill out — card is ready to use
• There are no health, age or income restrictions; everyone qualifies
• Card has no expiration date and can be used as often as needed
• Card can be used to fill pet prescriptions at participating pharmacies
• Card is primarily for uninsured although insureds can use the card if they have a high deductible
• Insureds can use the card if their drug isn’t covered by their insurance
• In some instances the card can be used during the Medicare Part D “donut hole.”
• Cardholder information is held confidential and is not used for any other purpose.
• The card includes 50%-80% discounts on lab and imaging tests

According to The Florida Times-Union, Financial Marketing Concepts, Inc. (FMC), a Florida-based company, issues the Card on behalf of WellDyneRx, a national pharmacy benefit management company.  In the past three years, FMC has secured agreements with 57 cities and counties in Alabama, Arizona, California, Florida, Illinois, Massachusetts, Mississippi, Missouri, New Jersey, New York, Ohio, Pennsylvania, Tennessee, and Texas (which may or may not look something like this.)  These agreements give FMC a small fee for each prescription filled through the program.  FMC in turn passes along a royalty to the city or county.

If you’re like me, you may already be in the habit of calling pharmacies and comparing the cost of prescriptions, regardless of whether or not your health insurance covers them — and it’s surprising how the cost can vary.  So if you live in Hoboken, Newark, or Orange, be sure to check out whether the Card gives you any discounts.  Can’t hurt.

After Makena: Could a Risk Corridors Approach Balance Incentives and Access?

The past few weeks have been worrying ones for expectant mothers who wanted a hormonal treatment designed to stop preterm births. As Rob Stein of the WaPo explains,

A form of progesterone known as 17P was used for years to reduce the risk of preterm birth. . . Because no companies marketed the drug, women obtained it cheaply from “compounding” pharmacies, which produced individual batches for them [at about $20 each]. Doctors and regulators had long worried about the purity and consistency of the drug and were pleased when KV won FDA’s imprimatur for a well-studied version, which the company is selling as Makena.

The list price for the drug, Makena, turned out to be a stunning $1,500 per dose. That’s for a drug that must be injected every week for about 20 weeks, meaning it will cost about $30,000 per at-risk pregnancy. . . . The approval of Makena gave the company seven years of exclusive rights, and KV immediately fired off letters to compounding pharmacies, warning that they could no longer sell their versions of drug.

A day after Stein’s article appeared, the FDA made it clear that it “does not intend to take enforcement action against pharmacies that compound” 17P, “in order to support access to this important drug, at this time and under this unique situation.”

This is a fascinating, and in some ways, troubling response to the accusations of price-gouging by KV. Compounding pharmacists had already averred that “many of [KV's] assertions that the compounding of an FDA approved product is prohibited are not supported by the legal citations it references.” Though the FDA’s letter preserves access to 17P for now, that access could be revoked at any time. As the FDA states on its website:

FDA understands that the manufacturer of Makena, KV Pharmaceuticals, has sent letters to pharmacists indicating that FDA will no longer exercise enforcement discretion with regard to compounded versions of Makena. This is not correct. In order to support access to this important drug, at this time and under this unique situation, FDA does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient unless the compounded products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products. As always, FDA may at any time revisit a decision to exercise enforcement discretion.

Moreover, the problem persists for at least one other drug, colchicine. As Arthur Allen explains at Slate,

The colchicine and [17P] stories have their roots in the FDA’s historically complex relationship with the drug industry. Since 1962, the agency has required that all new drugs be proven safe and efficacious before hitting the market. Many drugs marketed before 1962, however, remain on sale without having been formally approved by the FDA and are technically illegal. In 2006, the FDA launched the Unapproved Drugs Initiative, aimed at getting rid of as many of these drugs as possible. . . .

The FDA campaign has two approaches. In some cases, the agency simply warns companies to stop producing and shipping unlicensed drugs by a given date. In other cases the FDA warns a group of companies producing a particular class of drug, notifying them that it plans to crack down on their unapproved substances. The idea here is to give the companies an opportunity to submit their drugs to the rigorous testing required for FDA approval. This is what happened with . . . at least 86 newly approved drugs. The problem is that after submitting such drugs to expensive testing, drug makers typically jack up the prices, in a position to do so under congressional patent incentives aimed at producing innovative drug research. The FDA has no say in how a drug is priced.

As the Post notes, KV says it “is spending more than $200 million to develop the drug and conduct follow-up studies that the Food and Drug Administration demands.” Had it kept its pricing power, it was estimated that Makena would cost the US health care system $4 billion per year. Assuming that 3/4 of that would be revenue to Makena, and it lasted for the full 7 years of exclusivity, that would be a $21 billion return on a $0.2 billion investment. That seems excessive, especially given that KV didn’t develop the drug. On the other hand, if the Makena price were to be reduced one hundredfold, that’s a $0.21 billion return on a $0.2 billion investment. Unless we hit some serious deflation, that doesn’t cover the time value of the money invested in studies and development.

Are there any better models here? Stein’s story says that “experts said the FTC could sue KV if it concludes the company is illegally impairing competition,” but I don’t see the theory there. The FTC has lamented post-merger price hikes for life sustaining drugs (see FTC v. Lundbeck), but has precious little authority over price hikes here. Perhaps liberal constitutional law professors could fuse the “medical self-defense” theory of Eugene Volokh with the expansive Yoo/Vermeule/Posner theories of executive power, and find inherent executive authority here to save preemies? Probably not; the current Supreme Court is only receptive to creative con law from one side of the political spectrum.

Another idea is for legislation to create “risk corridors” for researchers who engage in the FDA’s Unapproved Drugs program, as CMS has for prescription drug insurance plans in Medicare Part D. As Kip Piper explains,

Using a system of risk corridors that compares actual incurred drug benefit costs to estimated costs submitted in bids, Medicare limits the profits and losses of Part D drug plans. Specifically, if a Medicare drug plan’s actual benefit costs exceed expected (bid) levels by a sufficient degree, the plan will receive an additional federal payment to cover a portion of the loss. However, if a drug plan’s actual spending falls sufficiently below projections, the plan must share some of the profit with the feds. Risk corridors apply to actual and expected drug benefits costs but exclude plan administrative costs and federal reinsurance payments.

Unfortunately, estimates of the value of testing unapproved drugs vary widely. The FDA’s director of the FDA’s Office of New Drugs and Labeling Compliance insists on the importance of these programs. But, looking specifically at colchicine, an Austin rheumatologist said “Doing one trial in patients and a few drug interaction studies doesn’t justify marketing exclusivity and a 50-fold increase in price.” As Allen puts it, we need “legislative remedies to improve the drug supply without costing the public an arm and a leg.”

In health care finance, the “cost-shift” hydraulic is a familiar model. When policymakers cut reimbursements for, say, Medicare or Medicaid, providers still have the same income target, and respond by raising prices for the privately insured. One scholar estimated that the privately insured pay over 120% of costs, while Medicare payments are between 95 and 99%. We might think of pharmaceutical patents as another manifestation of “cost-shifting,” from the future (which will enjoy drugs in the public domain) to the present (which must pay the monopolist’s price). Other forms of exclusivity can also lead to that type of cost-shift, as the Makena controversy makes clear. Perhaps the people most benefited by a regime of pharmacovigilance and evidence-based medicine should be asked to pay something for that new reassurance. But they shouldn’t be price gouged. A risk corridors approach might better balance patients’ interests in research on, and reasonable prices for, unapproved drugs.

Report Raises Questions About ‘Fast Track’ FDA Device Approvals

A report was published last month that seriously calls into question the effectiveness of the FDA’s regulation of medical devices. Authored by Diana Zuckerman Ph.D. et al., in the Archives of Internal Medicine, the report investigates the two-pronged process that governs medical device regulation under the FDA.

The first prong, known as the premarket approval (PMA) pathway, requires a device company to prove that its medical device is safe and effective. PMA applies to Class III devices which are defined by regulation to include those devices that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Class III devices include heart valves, pacemakers, and artificial hips.

The second (and less stringent) prong is what is known as the 510(k) pathway. As the FDA states:

A 510(k) is a premarket submission made to FDA to demonstrate that the device to be marketed is at least as safe and effective, that is, substantially equivalent, to a legally marketed device . . . A legally marketed device . . . is a device that was legally marketed prior to May 28, 1976 (preamendments device), for which a PMA is not required . . . or a device which has been found [substantially equivalent] through the 510(k) process.

The upshot is that as long as the device manufacturer can demonstrate that their device is “substantially equivalent” to a “predicate device” that has presumably passed the more stringent PMA process, they are subject to far less exacting standards. Most notable is the fact that these iterations of devices approved through the 510(k) pathway do not require specific evidence of clinical safety and effectiveness; they can bootstrap off of the predicate.

Zuckerman’s study examined the recalls of medical devices and whether those devices were approved under the PMA or 510(k) process. The authors found that:

There were 113 recalls from 2005 through 2009 that the FDA determined could cause serious health problems or death. Only 21 of the 113 devices had been approved through the PMA process (19%). Eighty were cleared through the 510(k) process (71%), and an additional 8 were exempt from any FDA regulation (7%). Cardiovascular devices comprised the largest recall category, with 35 of the high-risk recalls (31%); two-thirds were cleared by the 510(k) process (66%; n = 23). Fifty-one percent of the high-risk recalls were in 5 other device categories: general hospital, anesthesiology, clinical chemistry,neurology, or ophthalmology.

The authors conclude that:

Most medical devices recalled for life-threatening or very serious hazards were originally cleared for market using the less stringent 510(k) process or were considered so low risk that they were exempt from review (78%). These findings suggest that reform of the regulatory process is needed to ensure the safety of medical devices.

Not surprisingly, the medical device industry doesn’t  agree with Zuckerman’s findings. Stephen J. Ubl, the CEO of the Advanced Medical Technology Association, has pointed to “three recent studies [that] have all found that the 510(k) process has a remarkable safety record with extremely low recall rates–one study reported a rate of less than two-tenths of one percent.”

Aside from the issue of whether 510(k)-approved devices pose a greater risk of recall, health care professionals have underscored a more systemic problem relating to the paucity of evidence-based medicine supporting medical devices.  Orthopedic surgeon Dr. Andrew Pearle told ABC News in a recent report that,  ”[s]ince patients are exposed to new products through direct-to-patient marketing, they assume these products have been time-tested and well-established. But often there is little clinical data to support the marketing claims.”

The FDA believes there is enough of an issue to warrant a reevaluation of the 510(k) process. This past January the FDA announced that it will be revisiting the 510(k) process. A press release describes the key actions to include:

• Streamlining the “de novo” review process for certain innovative, lower-risk medical devices,
• Clarifying when clinical data should be submitted in a premarket submission, guidance that will increase the efficiency and transparency of the review process,
• Establishing a new Center Science Council of senior FDA experts to assure timely and consistent science-based decision making.

Meanwhile, individuals with recalled artificial hips manufactured by DePuy Orthopaedics are determining whether to undergo a new operation to replace the recalled equipment. Somewhat ironically, DePuy just unveiled a new line of artificial hips last month that also received approval through the fast-tracked 510(k) pathway.

Lawsuit Against Guidant for Making False Statements (Again)

As we reported a little while back, the Department of Justice obtained what FDA Commissioner Hamburg declared “the largest criminal penalty ever imposed on a device manufacturer for violating the Food, Drug and Cosmetic Act” against Boston Scientific subsidiary, Guidant LLC.

Following this record breaking performance, the Department of Justice filed suit against Guidant LLC on January 27, 2011.  Yes, that is correct — Guidant is once again subject to a federal claim resulting from false statements made regarding three models of its implantable cardioverter defibrillators that were recalled for short-circuiting failures.  This time, however, it is alleged that “Guidant knowingly caused the submission of false or fraudulent claims for implants of faulty… devices to the Medicare program” in violation of the False Claims Act.

John R. Marti, First Assistant U.S. Attorney for the District of Minnesota was quoted in the Department of Justice press release stating:

When companies like Guidant request and receive federal dollars for products they know to be defective, the United States is committed to aggressively seeking the recovery of those payments. That is especially true when the defective products endanger human lives. In today’s environment, it is essential that Medicare and other public health care programs be made whole to ensure their continued vitality for future generations.

Well that makes sense.  But why bring the False Claims Act claim separately from the claims for violations of the Food, Drug and Cosmetic Act (”FDCA”)?  The most obvious reason is as follows: the Department of Justice did not bring the False Claims Act claim against Guidant.  The United States joined a lawsuit filed by qui tam relator James Allen, a patient who allegedly received a defective device.

The complaint alleges that approximately 2,000 false claims were submitted to the Medicare program.  It also includes ten examples of individual false claims ranging from $20,201.14 to $ 46,130.20.  With treble damages and civil penalties of not less than $5,500 and up to $11,000 for each violation, the recovery could range anywhere from $132 million to $298 million.  The record-breaking $296 million in fines and forfeitures for violations of the FDCA standing alone looked formidable; coupled with this latest volley, it is staggering– a potential total minimum of $428 million, maximum  of just shy of $600 million.

According to Fox News, Boston Scientific “is disappointed that the federal government, after reaching a criminal resolution with Guidant LLC, has chosen to seek additional money in a civil lawsuit.  However, the company believes that the ultimate resolution of this matter should not have a significant financial impact.”

Res Ipsa Loquitur

Navigating Vaccine Policy in New Jersey

[Ed Note: This article was originally published in print and online by The Record, New Jersey's most awarded newspaper.]

NEW JERSEY’S immunization law attempts to strike a balance between protecting public health and the accommodation of religious observance. Children must be vaccinated as a condition of school attendance, but the requirement is waived if the vaccination “interferes with the free exercise of the pupil’s religious rights.”

Last summer, the Department of Health and Senior Services amended its regulations to simplify the process for obtaining this exemption. Several legislators, pointing to New Jersey’s drop in childhood immunization rates, have filed a resolution to force the withdrawal or amendment of this relaxed standard.

Emotions on this topic run high. New Jersey can, however, craft a policy that protects the public health while accommodating those who feel most passionately about avoiding childhood vaccinations.

Under such a policy, permissible exemptions could fall into three categories: medical exemptions for children with conditions, such as immune disorders, that render vaccinations inappropriate (the department estimates that about 0.2 percent of children fit this category last year); exemptions for those with genuine religious reasons to refuse vaccinations (the department estimates that about 0.8 percent of children fit this category last year), and exemptions for those who categorically oppose vaccines on non-religious principles. The first two categories combined amount to only 1 percent of children.

Fueling fears

It is, then, growth in the size of the final category that fuels fears that childhood immunizations could drop to levels threatening population health. The adoption of two practical steps can allay those fears.

First, some factual background. New Jersey’s immunization rates have been dropping. The department’s figures show that the rate of children under 3 with complete age-appropriate vaccinations has dropped from about 80.5 percent in 2007 to about 67.2 percent in 2009. The drop is significant, and may pose a threat to our “herd immunity” - the level of population vaccination necessary to block outbreaks of infectious diseases.

Public health officials recommend vaccine levels at least in the mid-80 percent to low-90 percent level to protect “herd immunity.” This is important stuff: children who are not immunized because they’re too young or medically compromised are at risk if overall rates drop to unsafe level.

Routine vaccinations are safe

Almost all medical and public health experts believe that routine vaccinations are safe and appropriate for almost all children. Even so, we can reach safe levels of childhood immunizations while respecting the strongly felt contrary views of vaccine deniers. Two steps are necessary.

1) Primary care focus. The American Academy of Family Physicians has encouraged primary care providers to remind parents of immunization schedules, provide accurate vaccine education and open their scheduling to encourage primary care visits.

Here in New Jersey, Summit Medical Group has reported that such programs raised its patients’ childhood immunization rates from 84 percent to 97 percent from 2008 to 2010. If primary care providers focus on the reminders, education and open scheduling that achieve such dramatic level of improvement, we’re mostly there.

Restricting exemptions

2) Tightened process for non-medical exemptions. This step is more controversial. Let’s be candid and admit that religious exemptions are sometimes employed by those with strong non-religious objections to vaccinations.

Further, let’s admit that it is uncomfortable for the state to pass judgment on the sincerity of claims of sincere religious belief. A 2001 study published in the American Journal of Public Health provides a way out of this conflict.

It found that non-medical vaccine exemptions can be minimized when states take minor steps as requiring parents to file annually, and at that time to receive accurate information on risks and benefits of immunizations. Such processes can tip the balance toward immunization for two groups of parents.

First, parents without strong objections but for whom doctors’ appointments for vaccinations were inconvenient may find that it is now easier on balance to comply with the law. Second, those confused by the controversy may have their fears addressed by public health information provided.

The article found that these simple steps can increase the level of immunization, while respecting the views of those parents with implacable objections to vaccinations. Objecting parents can simply accept the information, and file the annual reports.

These two steps could raise immunizations to safe levels without the need to force the hands of parents with strong religious or other principled objections. If, as the studies suggest, vehement objectors are relatively few, population health and personal beliefs can be accommodated.

Pharma Coupons: Enriching the Drug Companies

A recent New York Times article highlighted an increasing trend in pharmaceutical consumerism.  Many drug companies are providing copayment or coinsurance payment assistance.  These subsidies now exist “for about half of the top 100 brand-name drugs sold in this country,” according to health analyst Richard Evans of Sector & Sovereign Research.  Some patients receive copayment cards or coupons from their physicians while others find them on the internet.

So what’s the big deal?  Insurance companies use cost sharing to encourage patient selection of less-costly therapeutic options.  Pricing differences influence consumer choices; The American Journal of Managed Care reported in 2005 that most studies of cost sharing and prescription purchasing estimate that a 10% increase in price would decrease consumer use by 1-4%.  As NPR reported, “[t]he copay strategy worked so well that in 2003, more than half of all drugs picked up at pharmacies were generics.”

In mid-2006, pharmaceutical companies introduced coupons to reduce beneficiaries’ out-of-pocket costs for expensive drugs.  The “pharmaceutical subsidies” act as a counter-incentive, steering patients toward more expensive drugs–which wind up costing the consumer less– or zero–out-of-pocket.  As a result, the use of pharmaceutical copayment cards or coupons has tripled since their inception.

Financial Assistance or Greedy Marketing?

According to the NY Times, “[d]rug companies say the [copayment assistance] plans help some patients afford medicines that they otherwise could not.”  However, this seemingly altruistic explanation rings–shall we say– like something less than the entire truth.  For starters, these coupons are widely available on the internet and physicians who distribute the cards do not screen patients for financial need.  As the NYTimes reports,

Executives at Medicis, the company that sells Solodyn, have told investors that the co-payment card is used by an “overwhelming majority” of patients, and is largely responsible for doubling use of the drug, to 26,000 prescriptions a week.

That sounds like brilliant marketing, not need-based financial assistance.

Also, when we think of those who are most in need, we often think (rightly or wrongly) of the uninsured, the poor and the elderly — none of whom benefit from the pharmaceutical subsidy!  As the Amgen First Step Program website states, it is “a medical benefit co-pay coupon program to help commercially insured eligible patients with their deductible, co-insurance, and/or co-pay requirements” for listed drugs.  Excluded from the program are the uninsured or those in publicly funded health insurance plans.

It is unsurprising that the uninsured are excluded from participation.  According to Joshua Schimmer, a biotechnology analyst, “it seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly.”  For example, over the past five years, Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, while increasing copayment assistance to a maximum $1,200 a month.  In order for the pricing system to work, pharmaceutical companies rely on consumers to choose the subsidized drug and insurers to foot the increased bill.

It is likewise unsurprising that the publicly insured are excluded, but for a very different reason; to offer subsidies to Medicare or Medicaid patients would be illegal.  Under 42 U.S.C. § 1320a-7b (1),(2), the knowing and willful offer, payment, or receipt of any remuneration in return for the purchase of any good “for which payment may be made in whole or in part under a Federal health care program” is a felony punishable by up to $25,000 or five years imprisonment.  Illegal remuneration includes “waiver of coinsurance and deductible amounts (or any part thereof)…”  (§ 1320a-7a (i)(6)).

So What’s the Big Deal?

The pharmaceutical copay cards and coupons are a big problem.  First, they circumvent the cost sharing structures established by health insurance plans, raising systemic health costs.  As the NYTimes reported:

“The member is somewhat insulated from the cost of the prescription,” said Kevin Slavik, senior director of pharmacy at the Health Care Service Corporation, which runs Blue Cross and Blue Shield plans in Illinois and three other states. “In essence, it drives up the total cost of providing the prescription benefit.”

That increased cost is passed on to the privately insured in the form of increased premiums and to the public through increased taxes.  As Eileen Wood, vice president of the Capital District Physicians’ Health Plan, told NPR in 2009:

those coupons come with a consequence. If everyone started using coupons to get the more expensive drugs, “we’d have to raise premiums,” she says. “There’s no question about that.”

Furthermore, publicly funded plans must also pay the increased price of prescription drug benefit, which is passed on to taxpayers.  Any benefit to the coupon user in the form of reduced out-of-pocket expenses is diminished by higher premiums and taxes.  In the final analysis, the only real beneficiaries of these “pharmaceutical subsidies” are the drug companies who offer them.

Moving Forward

This issue is not one that is likely to disappear.  Currently, Massachusetts is the only state that does not allow pharmaceutical coupons; it is possible that other states or the federal government will follow suit.  As for insurers, some may begin requiring patients to try generic drugs first, as Capital District Physicians’ Health Plan has, or simply drop coverage of these drugs altogether.  Either way, drug company coupons will remain a topic to watch in 2011.

Spinal Fusion Controversy Underscores Extent of Conflicts of Interest

The Wall Street Journal recently published a report that outlines the extensive financial benefits that surgeons are receiving for spinal fusion surgeries. The “bounty” — a term used by the WSJ — comes from Medicare reimbursement as well as royalties for the intellectual property contributed by the surgeons to the spinal fusion procedures. Presumably the surgeons also receive money from speaking and training fees.

In short, spinal fusion is a surgical procedure whereby two or more vertebrae are fused together. The fusion is accomplished by creating a bridge between the vertebrae that is usually constructed out of bone taken from other parts of the body. The bone is inserted between the vertebrae, and is secured by rods, screws, and plates. This reduces the movement of each vertebrae that is connected to the bridge, thereby relieving stress on the injured vertebrae, disks, and nerves. Spinal fusion may be a necessary treatment in the face of trauma or debilitating diseases affecting the spine, such as scoliosis. However, the application of spinal fusion to treat certain types of back pain has been questioned.

In light of the dearth of comparative effectiveness research regarding nearly all surgical procedures, why then is spinal fusion so controversial? There appear to be two factors: the high price of the surgery, and  the strong ties between the surgeons performing the spinal fusions and the medical device manufacturers that produce the hardware used in the procedure.

In particular, the royalty payments are staggering. In the first three quarters of 2010, the WSJ reports that each of five spinal surgeons at Norton Hospital in Louisville Kentucky received more than $1.3 million from Medtronic — the leading manufacturer of spinal fusion devices. Norton Hospital — and its surgeons — are certainly not alone in profiting from the procedures.

Though the device manufacturers like Medtronic pay out large sums to physicians that develop, utilize, and promote spinal fusion treatments, the manufacturers clearly come out ahead after taking into account the price they charge hospitals for the spinal fusion devices. Not surprisingly, this money often comes from Medicare reimbursement.  According to the WSJ’s analysis of Medicare claims, spinal fusion went from costing Medicare $343 million in 1997 to $2.24 billion in 2008.  And as the Journal points out, the screws used in spinal fusion implants can cost between $1,000 to $2,000 a piece for reimbursement but actually turn out to cost less than $100 to make. Spinal surgeon Charles Rosen is quoted as stating that “You can easily put in $30,000 worth of hardware in a person during a fusion surgery.” A Los Angeles Times report in 2010 found that complex spinal fusion surgeries can end up costing $80,888 in hospital charges as compared to $23,724 for spinal decompression surgery — the latter referring to a group of procedures that can relieve painful pressure on the spine, but without the extensive implantation required by spinal fusion.

Nevertheless, it is true that there there are many expensive surgical procedures wherein the value to the patient justifies the high price. But it is more than the wise allocation of resources that is at issue. In the Journal of the American Medical Association’s April 2010 issue, Dr. Eugene Carragee M.D., professor of spinal disease and orthopaedic surgery at Stanford University School of Medicine summarized the clinical difficulties facing complex spinal fusion surgery, especially in older individuals:

…the complex reconstruction of spinal deformity in older patients remains a difficult and dangerous enterprise. Complication rates have declined but remain concerning (30%-40%) and the reoperation rates, in a population for whom there is a high risk of both medical and anesthetic complications with additional surgery, remains at 10% to 20% in the most optimistic reports. Moreover, despite these major interventions, this approach is still not effective in 30% to 40% of patients.

When asked about the need for spinal fusion surgeries, Dr. Steven Glassman — one of the Norton Hospital surgeons that has received millions to implant spinal fusion devices — stated that he and his colleagues were “leaders among spine surgeons nationally in comparative effectiveness research.” This is a troubling statement, precisely because of the significant royalty agreements between Dr. Glassman and Medtronic that are described in the WSJ report. Dr. Glassman is therefore incentivized — at least economically speaking — to interpret research findings in such a way that maximizes the contexts in which spinal fusion surgery can be recommended.

To combat these conflict of interest claims, Medtronic claims that it refrains from paying out royalties to the collaborating surgeons on the devices they personally use in their patients. This would appear to reduce the incentive for Dr. Glassman to personally churn out spinal fusion operations in the hope that he will get royalties for those instances where he implants hardware in which he holds a royalty agreement with Medtronic. This certainly helps to combat violations of the Federal Anti-Kickback Statute, which prohibits Medtronic from inducing surgeons to purchase their devices. But this policy does little to curb the general conflicts of interest of the general spinal surgery community when determining whether to recommend complex spinal fusion surgery. Even if a contributing surgeon does not receive royalty payments for the specific surgeries where his manual contributions are utilized, they still have an incentive to keep Medtronic “happy” by increasing demand for the spinal fusion hardware. And certainly one can envision a scenario in which a surgeon so situated might suggest such a surgery but then refer the procedure itself to a colleague, thereby allowing the royalty payments to flow unencumbered by the guise of propriety.  What does appear certain is that demand for complex spinal fusion operations has increased. Citing a study by Deyo and colleagues in the same JAMA issue, Dr. Carragee points out that:

…the rate of spinal stenosis surgery in the Medicare population has remained more or less stable, but the rate of complex surgery for this disease has increased from negligible levels in 2002 to nearly 15% of all spinal stenosis surgeries in 2007. These more complex surgeries are also reported to be independently associated with increased perioperative mortality, major complications, rehospitalization, and cost.

The findings do not provide explanations for the increase in complex surgery that has occurred during the past 6 years. Ideally, because the complex surgical techniques are used to treat complex deformities, the data should show that patients undergoing these procedures usually have these complex deformities. The diagnoses reported, however, do not support this “ideal” explanation; 50% of these new complex fusion operations were performed in patients with spinal stenosis alone and no deformity. Spinal stenosis with scoliosis by coding, accounted for only 6% of the complex fusions performed.

In other words, there has been an increase in the rate of a complex surgical procedures prone to severe complications, but with no concomitant increase in the rate of the severe conditions that would ostensibly warrant such surgery. Regardless, this demand pays dividends in the royalty agreements that the surgeons receive when the U.S. spinal surgery community implant the hardware that the contributing surgeons developed– and dividends to the manufacturer.

Currently, there appears to be little, if any, countervailing force that militates against the doctors recommending this complex and expensive procedure. By conducting the complex fusion operation, the surgeon and the hospital both make money through the handsome reimbursement from Medicare and private insurance, while Medtronic is handsomely paid by selling more devices. Those hurt, financially speaking, are the taxpayers in terms of Medicare, and those insureds in private plans whose premiums have risen because of the increased costs of this procedure. Private insurance plans are unable to combat this, as any limit on spinal fusion surgery will be framed as corporate greed coming at the expense of treatment. This is precisely what has occurred after Blue Cross and Blue Shield of North Carolina announced that it would place tighter restrictions on spinal fusion surgery. In response to the restrictions, Dr. John Wilson, a neurosurgeon at Wake Forest University Baptist Medical Center and president of the North Carolina Neurological Society stated that “If this intrusion into the physician-patient relationship goes unchallenged, other insurers will follow suit…It will be a progression of ever-more restrictive policies that will handcuff us as we try to treat patients.” Dr. Wilson was one of nine physicians to write a letter to Blue Cross urging the insurer to alter the new rules. Interestingly, the letter repeatedly supports its position by citing the studies of Dr. Daniel Resnick, a spine surgeon who is listed by the Congress of Neurological Surgeons as receiving grant money from Medtronic.

60 Minutes, Glaxo’s Bad Day & Why Compliance is So Terribly Important

In case you missed it: 60 Minutes segment with whistleblower Cheryl Eckerd, a former manager of global quality assurance for GlaxoSmithKline. She describes her experience inspecting Glaxo subsidiary, Cidra, in Puerto Rico. It views like an in-house counsel’s nightmare and a PR professional’s worst day. CBS states:

“But in November, we found out just how much could go wrong at one of the world’s largest drug makers. A subsidiary of GlaxoSmithKline pleaded guilty to [a felony] distributing adulterated drugs.

“There was reason to believe that some of the medications were contaminated with bacteria, others were mislabeled, and some were too strong or not strong enough.”

Ms. Eckerd brought suit under the Federal Whistleblower Act, with the government ultimately recovering $750 million; Ms Eckerd who was “downsized” by Glaxo, received $96 million as her share of the recovery. In addition, when Ms. Eckerd made the information she had gathered about the plant in Puerto Rico available to the FDA, federal agents executed a search warrant and seized drugs worth “hundreds of millions of dollars.”

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