Over the past year, the medical device industry has faced an onslaught from disruptive startups, an onerous U.S. regulatory environment and increased pricing pressure from abroad. While all industries face some scandalous activities from time-to-time, the unique nature of the medical device market makes it vulnerable to pricing kickbacks, regulatory schemes and the theft of patient data. In this report, QMed explores the top 10 scandals of the past year.
The lowly IV bag has a tremendous value for patients admitted to hospitals and are widely used to deliver medications and replenish lost fluids. IV therapy, however, can be billed at a exceptionally high rate in hospitals across the United States, despite its simplicity. A piece by The New York Times points out that patients can be billed “100 to 200 times the manufacturer’s price [to produce them], not counting separate charges for ‘IV administration.’” In some bills, the paper costs, IV therapy charges can results in bills in which patients pay nearly 1,000 times the cost of producing the bags.
Before a product is sold, the real cost of a medical device disappears into the realm of confidential rebates, byzantine contracts and fees that obscure real prices. In other industries, some of these costs could be considered illegal kickbacks. Hospitals themselves don’t negotiate prices. Instead, many healthcare facilities rely on giant distributors and group-purchasing organizations.
The U.S. Department of Justice is conducting an investigation on an alleged spinal implant kickback scheme. Under the alleged scheme, Dr. Aria Sabit, a spinal surgeon, operated a physician-owned distributorship (POD).
PODs give surgeons the ability to profit from the use of certain medical devices. In many cases, the identifies of physician owners aren’t publicly disclosed. Reliance Medical Systems, a company formed by Bret Berry and Adam Pike, manufactured spinal implants and distributed them through 11 sister PODs.
Under the Californian anti-kickback statute, paying doctors to induce patient referrals is illegal. The practice is also banned under federal law if patients are covered by government healthcare programs like Medicare or Medicaid.
Dr. Mark Midei is a cardiologist based in Maryland. Dr. Midei is alleged of pursuing an excessive number of stenting procedures to maximize his income. In the lawsuit, 21 former patients allege that they were left with a number of complications related to the procedures.
In 2009, Dr. Midei was pushed out of St. Joseph in a forced resignation. In 2011, his medical license was revoked. While Dr. Midei received pay based on his performance, his lawyer states that he only performed procedures in an effort to improve the health of his patients.
Earlier this year, Myriad Genetics lost its exclusive patents on BRCA1 and BRCA2, two genes that are correlated with an increased risk of breast cancer. While Myriad enjoyed a short-term monopoly on these two tests, SCOTUS didn’t agree with the concept of a company patenting parts of the human genome. After devalidating the company’s patents, a number of competitors jumped in with tests of their owns. After that happened, things got nasty. In particular, Quest Diagnostics faced the ire of Myriad after it released lower-cost BRCA1/2 tests of its own.
Following Quest Diagnostics’ announcement of a new low-cost BRCA breast cancer test, Myriad Genetics is fighting back. In remarks shared with the press, Myriad didn’t rule out a potential lawsuit.
For Quest, a potential lawsuit against its latest diagnostic was expected. Prior to the launch of its BRCAvantage diagnostic, Quest filed a lawsuit in a United States District Court, seeking a ruling that would affirm its latest test was not in violation of any Myriad patents surrounding BRCA1 and BRCA2 genetic mutations. In remarks shared with the press, Myriad spokesperson Ronald Rogers stated, “Once we are served with the complaint, we will read it and consider our options.”
With both companies battling over the world of BRCA, more lawsuits are likely in the future.
On October 1, the Affordable Care Act saw the introduction of state-level health insurance exchanges. In an effort to prevent their introduction, Ted Cruz (R-TX) launched a 21 hour oral argument against Obamacare. In his stand, he talked about Star Wars, the children’s books "Green Eggs and Ham" and "The Little Engine That Could." Less than 30 minutes into his speech, he began to compare his critics to Nazis.
Despite harsh rhetoric, Obamacare survived unphased for the time being. However, that doesn’t mean that it hasn’t been the subject of some harsh rhetoric in recent months. With talk of death panels, creepy anti-Obamacare ads and more, many who oppose the Affordable Care Act have pursued extreme methods to turn citizens against the law.
This past week, a helium shortage was averted. A bill, signed by President Obama, allowed the Federal Helium Reserve to continue its operations.
The Texas-based Federal Helium Reserve currently provides more than two-fifths of the helium used in the United States and approximately one-third of the helium used around the world. Without the bill, the reserve would have closed on October 7th.
Helium is an essential element for a variety of industries. In addition to the manufacture of semiconductors, many nuclear magnetic resonance instruments (MRIs) rely on helium for proper operation. For several years, MRI manufacturers lobbied Congress to prevent a helium reserve shutdown. Some were worried that the shortage could throw the market for helium into chaos, leading to price spikes and severe shortages.
7. Orthopedic Implant Recipients Are Getting Younger
The public tends to associate most medical devices with the elderly. The truth, however is that devices such as artificial hips and knees, and cardiovascular products such as pacemakers are used by patients of varied ages and that the use of many medical devices is becoming more common among the Baby Boomers and younger patients.
While the surge in medical device utilization can renew the lives of middle-age patients, some fear that long-term use of these devices could pose potential health hazards. For medical device manufacturers, the Baby Boomer demographic could prove a source of both growth and legal worries.
In the past decade, many Baby Boomers were the recipients of metal-on-metal hip implants, which were hailed as cutting-edge devices when they debuted. More recently, metal-on-metal hip implants have faced regulatory questions over their safety. Since this type of hip implant contains two metal surfaces that are in contact with each other, friction and shearing can lead to device failure in some patients. On top of this, friction between the metal ball and socket in these joints can cause metal particles to leach out of the device, entering a patient’s cardiovascular system. Many patients who received metal on metal hip implants have been diagnosed with cobalt poisoning, a serious disease.
For manufacturers, a 50-year-old with a hip implant could be a potential lawsuit 30 years down the road.
While Privacy Rule in HIPAA does protect patient health records in most cases, private information can be disclosed under certain terms. For instance, HIPAA does not protect a patient’s medical records from the National Security Agency and other law enforcement entities. The department of Health and Human Services explains that note that patient health information can be transmitted “to federal officials authorized to conduct intelligence, counter-intelligence, and other national security activities under the National Security Act (45 CFR 164.512(k)(2)) or to provide protective services to the President and others and conduct related investigations (45 CFR 164.512(k)(3)).”
As more patient data are stored in digital forms, the risk of information theft is on the rise. Since both HITECH and HIPAA are a huge concern for healthcare providers, medical device manufacturers must be attentive to the security of their systems.
For patients, protected health information is data that are transformed through any medium. When these data are transmitted electronically, they must follow both the Security Rule and the HIPAA Privacy Rule. To make these data individually identifiable, protected health information units identify a patient or have information that can be used to identify a patient. However, many mobile devices don’t meet these standards.
Since first approved 30 years ago, cochlear hearing implants have grown in popularity. As the technology has improved, newer implants can restore a user’s hearing to 70% of normal levels. In total, implants of cochlear hearing aids reach approximately 220,000 every year.
Many deaf people, however, view their lack of hearing as a natural part of who they are as a person. Following the introduction of some cochlear implants, deaf advocacy groups protested outside of hospitals. With the new devices, the culture that has arisen around a world without hearing may slowly erode. For deaf advocates, hearing aids could mean a scandalous end to a long-held culture.
In particular, sign language is on the decline. With newer cochlear implants, patients find that they don’t need to communicate with others in visual ways. With over 200 sign languages currently in existence, this part of the deaf culture could face extinction.
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