Amid Much Uncertainty, Hope for Medtech Innovation: New Administration and Congress positioned to drive innovation in medical technology

Tuesday, December 6, 2016 - 15:24

It seems clear that great changes for healthcare in general and medical innovation in particular are in the offing with the new administration. But whether those changes will be beneficial or detrimental – let alone cataclysmic – is anyone’s guess. Akin Gump healthcare specialists Nathan A. Brown and Martha M. Kendrick below offer some educated insights into what the new Republican regime might mean for medical innovation and the government agencies engaged in drug and medical device approval, regulation and oversight. Their remarks have been edited for length and style.

MCC: In statements following the election, the President and CEO of AdvaMed and the President and CEO of the Medical Device Manufacturers Association spoke about the strong tradition of bipartisanship surrounding issues of importance to the Medtech community. Given how divisive this election was, please give us your take on the bipartisan spirit reflected in these statements. 

Brown: There is a strong bipartisan tradition on the committees with jurisdiction over the Federal Drug Administration (FDA), the HELP Committee in the Senate, and the Energy and Commerce Committee in the House. The FDA space has been one where there has been significant legislation that has passed successfully in recent years, even at a time when Congress as a whole has often struggled to pass meaningful legislation in a bipartisan way. Next year’s FDA Reauthorization Package of the User Fee Act (UFA) programs will be particularly challenging. It’ll be the first time when that reauthorization takes place under one administration where the negotiations of the packages happened under a previous administration.

One particular challenge next year will be whether both parties can maintain cohesiveness within their respective caucuses, given the wide range of views on issues concerning medical product approvals, access issues, and quality and safety assurances on the post-market side. The FDA arena, in particular concerning medical devices, has really been bipartisan. There’s a hope, even with all the change going on, that it would continue next year.

Kendrick: President-elect Trump’s updated transition website includes a couple of noteworthy priorities. One is to advance research and development in healthcare as well as to reform the FDA to put greater focus on the needs of patients for new and innovative medical products. This leads us to conclude that he probably is going to be supportive and likely will push for faster medical innovation, hopefully with business financial incentives, but also could come in the form of increased National Institutes of Health (NIH) and FDA funding. This, too, is a reflection of the bipartisan spirit that has been so apparent in the Medtech and innovative health industry.

MCC: Many specific issues await the new government, including the medical device user fee agreement, repeal of the medical device tax, protection of IP rights, and patient access in general to the latest innovations. How are you currently advising clients when it comes to the uncertainties surrounding important issues such as these?

Kendrick: Uncertainty is typically present at the start of any new administration!  Repeal of the medical device tax is a good example of a 2017 issue that will need to be in the forefront. Permanent device tax repeal should be well-positioned under a Trump administration, particularly with a strong majority in Congress, that also historically has been very supportive of medical device repeal. After Budget Reconciliation and ACA repeal, Republicans in Congress are expressing interest in tackling tax reform, so the repeal of the device tax and the Cadillac tax could happen relatively early. Early signs point to the Republican Congress moving quickly, so the Trump Administration could initiate an effort to get an early bipartisan win. In achieving the two-year suspension of the medical device tax that expires in December of 2017, it was very clear that the device industry was a big propeller in creating and sustaining some of the best jobs in America. The industry worked very hard to get bipartisan support for the American products and device industry jobs that are an economic engine in many communities.

Within the Medtech sector, there’s strong bipartisan support thanks, in part, to the leadership of some key Democrats who stepped out front to work with Republicans the last time around.  Sen. Chuck Schumer (D-New York) certainly is a leading example, but there were many others. We are advising clients that the repeal of at least this portion of the Affordable Care Act and some of the other tax areas are likely to garner a fair amount of support.

Brown: What we’re advising clients now is that there is a great deal of uncertainty. In addition to the points Martie made, it’s important for the Medtech community to consider their specific issues in the context of some of the larger policy issues that are likely to animate the new administration. One of those is the broader question about the future of the ACA, and the other is the issue of global trade agreements that President-elect Trump focused on during the campaign. When it comes to talking about how these specific issues affect the Medtech community, it’s important to consider them in light of the access issues that will be relevant in considering alternatives to the current approach to healthcare under the ACA. With regards to global trade, the Medtech industry is increasingly global and it will be important for the community to be prepared to discuss how potential changes in global trade agreements would affect the industry.

MCC: In no small part due to his stance on climate change, President-elect Trump is widely seen as anti-science. At the same time, he has talked about the need to invest in science despite pressures to balance the federal budget. Give us a sense of what youre hearing as the health and medical technology communities digest what this new administration will mean for medical science and technology in the long run.

Kendrick: One characteristic that jumped out at me during the campaigns is the over-simplification and unfair characterizations on both sides. This anti-science sentiment is potentially one of them. It’s reassuring to look at President-elect Trump’s website and recognize that there is this commitment to advance research and development in healthcare, and promote new and innovative medical products, which would suggest that there’s potential for greater investment in medical research. It’s very interesting that as Congress reconvenes there’s a lot of support for the bipartisan 21st Century Cures Act, which Congressional Republican leaders are working very hard to try to get passed by year end and looks primed to pass [Note: Cures passed the House last week and is scheduled for a vote in the Senate this week.]. That would translate to enhanced funding levels for research at NIH and for the Centers for Disease Control and Prevention (CDC), among other agencies.

These are funding areas that ultimately are in the hands of Congress. We think there is hope there. Some observers have mentioned already that a potentially friendlier regulatory and tax environment for tech companies could be quite helpful to the industry as well.

It is also worth noting that anti-science fears seem to have dissipated with the nomination announcement of Rep. Tom Price, M.D., as the President-elect’s choice to serve as HHS Secretary.

MCC: The new administrations 100-day action plan specifically calls for cutting red tape at the FDA and speeding up approval of life-saving medications. Some say the FDA is already down that road, as indicated by its approval of Sarepta’s Duchenne muscular dystrophy drug, a drug with very limited clinical data. Where do we stand? Will this become the norm?

Brown: Sarepta was in many ways a unique case, but that’s an obvious place to start, and one that the Trump campaign mentioned in terms of considering patient preference and benefit/risk calculation as part of the drug and device approval process. The FDA has already begun the process of factoring in these considerations, or considering how to factor them in, but that effort could be invigorated. The House’s 21ST Century Cures Act contains a number of provisions relating to expediting clinical trials, and the focus on registries to leverage existing data, including real world evidence to reduce the size and quantity of new trials needed to support new indications for medical products. Those types of efforts, while they’re more technical in nature, seem more likely to bear fruit and to be a source of constructive reform than, for instance, taking on the safety and effectiveness approval standard itself, which remains a gold standard not just in the law, but really as a principle that is reflected in the culture of FDA scientists and reviewers who believe in the importance of an independent science-based process in coming to a determination that a medical product is safe and effective for use.

We may see greater consideration of a wider range of factors in determining whether a drug should be approved, but there always ends up being a balance with these things. At different points in our history, it was believed that medical products should be approved more quickly. Inevitably, when a safety issue does arise, then the pendulum swings back the other way. There is room for constructive engagement, but it should be undertaken carefully.

MCC: Theres much speculation about whether FDA Commissioner Robert Califf will stay on with a Trump administration, and the impact on policy and regulation his decision will have, particularly concerning efforts to speed up the agency’s processes. Where do you see the leadership of the FDA going?

Brown: The new administration may be wise to consider keeping Commissioner Califf on at least until they have a new commissioner identified and confirmed. Commissioner Califf is a nonpartisan figure who has a wide range of supporters. At the beginning of the Obama administration in 2009, there was a very significant salmonella outbreak. Ultimately, the FDA is a public health agency and you don’t want to be caught flat-footed if a public health crisis does occur. There will be so much going on in the first few months of 2017 that any administration should want a steady hand to ensure continuity of leadership, particularly with the user fee reauthorization process coming up fairly quickly in 2017.

Ultimately, the commissioner, in order to effect change within the agency, has to be somebody who combines both the ability to oversee a very large agency with oversight responsibilities over a vast array of products, and is also somebody with clinical expertise. That combination is a very challenging skill set.

Kendrick: One of the priorities that the Trump administration, potentially, and Congressional Republicans share, is the whole concept of speeding the approval process, including for generic drugs and potentially some orphan drugs as well. The FDA has been long perceived at one level as the people’s agency. This is an area where Republicans could face push-back from Democrats and patient safety groups if changes present increased risks for patients. 

MCC: Many have said that there will be more changes in the healthcare arena under a Trump administration than there would have been under a Clinton administration. We know the obvious talking points, but what about the less obvious ramifications? Are there issues lurking that could have major ramifications for healthcare innovation and medical technology?

Brown: There may well be more change in healthcare under a Trump administration if the president-elect and the Republican Congress move forward, as anticipated, with dramatic changes to the ACA. Healthcare is such an integrated system that changes have ripple effects that are often hard to predict. The amount of change remains to be seen, but if there are significant changes to the ACA, it is hard to underestimate what type of disruptive effects those changes would have. One important consideration for the healthcare innovation and medical technology industry is that some underlying forces may remain constant. Those involve moves towards value-based purchasing, comparative effectiveness, and the general need to show the clinical value of innovations. That pressure, from a cost perspective, and just from the perspective of having greater access to data that allow measurement of outcomes, will remain in place. This will continue to put pressure on the industry to show results, and to be creative about developing value propositions that often go beyond the technology itself, and look at creative service solutions working more closely with payors and providers.

Kendrick: There’s no question that there will be a continued move toward value-based care. This is something that Republicans on Capitol Hill have articulated and embraced as a concept. One of the components of the Affordable Care Act that has not received as much attention is the whole health delivery reform aspect of the ACA. We are in the middle of massive systemic change that Nate alluded to. Those areas are very important in terms of innovation in the medical technology sector, but the health system is also radically changing from one historically based on fee for service medicine, reimbursement, and payment program design, to one that is structured on pay-for-performance, and pay-for-outcomes. Specifically, there is a move toward alternative payment models with a major thrust in the managed care arena as well. It’s unclear how to reverse, or reverse engineer, some of those implications, and multiple changes are well-underway. When you peel the onion, many of these delivery system reforms truly do enjoy Republican support that runs deep in some of these areas. The reexamination that will undoubtedly occur will be very healthy for the healthcare delivery system, but it will be an interesting and challenging time for all of us engaged in the health policy development process.

MCC: Some observers have suggested that a Trump presidency could help clear the path to more investment in start-ups in therapeutic innovation. For example, a report from PwC Health Research Institute said, Healthcare can be expected to become more like other retail industries. Which could help companies of consumer type products find easier paths to break into the highly-regulated areas, especially around medical devices and new therapeutics.” Give us your take on what this means for both new entrants and established players.

Brown: When I was in government and while I’ve been in private practice, I’ve worked extensively in the digital health space. What we’re seeing there is a trend that suggests a move towards what I’ll call commodification of the hardware of much of medical technology. The issues there, from a risk and performance perspective, will diminish as technology and manufacturing improve, followed by a trade-off with greater scrutiny of the other aspects of technology, such as the software. It takes the form of monitoring, clinical decision support, and the like. That is consistent with a move towards more of an integrated value model rather than reimbursement, for instance, for a particular device or a piece of equipment. That dynamic, with a focus on more of the innovation occurring not with hardware but with software, and with more of the regulatory scrutiny occurring with software, is something that the medical device industry is well positioned to continue to take advantage of, but they don’t have a monopoly on that.

It’s an opportunity both for new entrants and established players. We could also continue to see a high degree of collaboration among traditional device manufacturers, and more technology companies that didn’t begin in the healthcare space, as well as providers, and payors.

Kendrick: There’s great hope here for companies that are engaged in creating innovative medicine solutions and early investment hopefully will be bolstered by Congress and under the new administration. President-elect Trump is first and foremost a businessman. There is hope that Congressional interest in tax reform will include a focus on improving incentives to help investments in the innovation and medical technology sector. Mr. Trump did, during the campaign, reference and tout the need for increased price transparency with healthcare providers. Although this is popular with some Republicans, generally, the Republicans have not favored industry negotiation or pricing. The regulatory relief and regulatory reform component of some of the campaign points could potentially be very helpful to this sector.

MCC: President-elect Trumps disdain for big government and bureaucracy are well known. Specially, he has taken the FDA to task for its role as food police and its approach to regulation in that area. What might that signal for drugs and healthcare regulation generally?

Brown: First, I would make the point that the FDA historically has been between a rock and a hard place on these types of issues, where a lighter touch might work until a problem arises, and then we wish that there had been greater scrutiny. The resource pressure on the FDA to oversee the vast and growing range of products under its purview is a real challenge. The traditional method of inspection and oversight simply cannot keep up with the widening range of establishments making food and medical products, and the fact that, increasingly, those establishments are overseas. The FDA has had to look at creative solutions such as harmonization between various regulatory bodies, information sharing between countries, and options such as third-party certification programs to serve as a complement to FDA’s oversight. Those types of models will continue to be of interest and will probably gain momentum during the next administration. 

The last point is that President-elect Trump’s emphasis on global trade agreements and equity for American companies has resonance in the FDA space where there is at least the perception that American manufacturing facilities located inside the United States, are subject to more frequent inspections. It’s easy to envision a move towards trying to level the playing field between domestic and foreign establishments.

Kendrick: President-elect Trump has called for a reduction in federal regulations in general, but it really remains to be seen as to what specific changes he would want to implement at the FDA, and more directly what changes Congress would be willing to get behind given the Congressional protection of the agency historically. It is worth noting that Representative HHS Secretary-designate Tom Price, M.D., is a highly respected, savvy, health leader and physician in Congress. He will be fearless in tackling the most challenging issues facing the Department of Health and Human Services and its agencies.

MCC: Whats the fate of the FDA’s proposed and oft-postponed final rule seeking to abolish generic preemption? When the FDA postponed the finalization date until after the election, many pronounced it dead. Is it? Do you expect the bar for approval of generic drugs to be lowered?

Brown: With regards to the rule that had to do with generic drug labeling changes and that would have implications for preemption, it’s very hard to see that rule, in the form that it was proposed, being accepted by the current Congress or being advanced by the next administration. The problem that it was aiming to solve, however, remains an important one. There may well be consideration of other approaches to solving that problem. That problem is that often it may be that a generic drug maker is in the best position to identify a safety issue. There currently isn’t a very good mechanism for that information to be identified and disseminated in a way that can be effectively used by clinicians and patients. There are different ways to go about solving that problem and it could be that there is a focus on alternative ways of doing so other than what the FDA proposed.

With regard to the standard of approval for generic drugs, it would be a very significant change with lots of implications for that standard for approval to be lowered. There will be greater focus, and some of that focus is reflected in the proposed Generic Drug UFA Reauthorization Package, on getting generic drugs to market faster, particularly where there’s a need for greater access and greater competition for a particular drug type. Trying to facilitate that process is probably a more constructive approach than actually changing the standard for approval. 

Nathan A. Brown is a partner in the Health Care and Life Sciences practice of Akin Gump who focuses on food and drug law and health care reimbursement and regulatory issues. He can be reached at nabrown@akingump.com

Martha M. Kendrick, a partner in the Public Policy practice of Akin Gump’s Washington, D.C. office, helps clients navigate the executive branch to solve challenges involving legislative, regulatory and administrative law for health and tax issues. She can be reached at mkendrick@akingump.com.