[caption id="attachment_4216" align="alignleft" width="254"]FDA to Congress; Got coin?[/caption]
Everybody thinks they're poor, but Uncle Sam does have an ongoing deficit problem, and these budget issues are showing up in interesting ways of late.
Needless to say, these problems are affecting the appropriations process, but there may be an escape hatch, and a couple of items of interest for device makers may be at risk, depending on the outcome.
Will user fees cure the Cures problem?
It's time for the negotiations for the next round of device user fees, and the first meeting toward this end was a pretty chummy affair, given how the MDUFA III negotiations ran. The thing I found interesting about industry's comments at the July 13 meeting is how much effort everyone put into saying that user fees are not designed to supplant appropriated jingle, but should be used strictly to augment taxpayer dollars.
Then, acting FDA commish Steve Ostroff made a point of saying that the user fee negotiations and the 21st Century Cures mass movement should be seen as separate but parallel items. Maybe I just have an overactive imagination, but do they all protest too much?
Mark Leahey of the Medical Device Manufacturers Association pointed out that the total user fee schedule has roughly doubled each time the agreement is renewed. Let's remind ourselves that the House Cures bill gives FDA several hundred million dollars less than it needs to handle its end of the Cures program. But going from $595 million over five years under MDUFA III to nearly a billion bucks under MDUFA IV seems like a stretch.
Still, one has to figure user fees are going to rise substantially, and the Cures deal is precisely the sort of thing that will prompt industry to cough up more, especially when one considers how mangled the appropriations process is these days. Speaking of which ...
Another CR to the rescue
The House and Senate are working on spending bills for FDA and agriculture and so on, but President Obama and several Democrats keep arguing the sequester has to go. The President even raised this issue in connection with the 21st Century Cures program, but it's tough to see the political advantage in a veto of this kind of populist, bipartisan bill.
Appropriations bills are a different discussion, though. Democrats and the White House are determined to do away with the sequester, which has no doubt helped constrain budget growth. The problem on the other side is that FDA would lose money if the budget-cutters have their way, and the sources of those user fees know all too well how fungible money can be.
The continuing reliance on continuing resolutions (CRs) has some drawbacks, but one supposes there are worse outcomes. The House budget bill would trim about $2 million from the CDRH budget for 2016, but a CR might leave those numbers more or less even, so that's one advantage. Some in industry do not seem overly concerned about the potential for a CR to drain away a substantial volume of device user fees, a second reason to see a CR as a not-so-poison pill that may be the best available treatment for what's ailing Washington.
[caption id="attachment_4185" align="alignleft" width="315"]Inversion; volume and sensibility[/caption]
There's no point in pretending that healthcare is a straightforward proposition in the modern world, but it is nonetheless interesting to bear witness to the associated rhetoric, some of which we may be forgiven for thinking is more than a little disingenuous. But ego and self interest are fun ingredients in this healthcare recipe, no? Read on to see what sort of rhetorical flourishes health care has wrought recently.
L'etat c'est who?
A recent series of Twitter exchanges dealt with the proposition that sugary drinks are creating health care havoc and thus, "we should remove them from the food supply," a statement attributed to Dariush Mozzafarian of Tufts University. My first reaction was to ask which "we" we're talking about. The answer inevitably becomes "we = government," because doctors do not yet run the joint, however dismaying this might be to these utterly benign social engineers of academe.
I also pointed out in this exchange that this discussion invokes the broccoli debate, which may strike some as farfetched, but ask yourself how most Americans would have reacted 20 years ago if someone had predicted that government would require us all to buy healthcare coverage on pain of financial penalty (or as Supreme Court Chief Justice Roberts might say, it's a tax and a penalty).
Most might have said that's a bit outlandish, but here we are. And it's no stretch at all to say that banning sugary drinks leads, with relatively little effort, to mandating a whole host of "healthy practices" and a ban on some other behaviors. The micromanagers among us might find that sort of thing appealing, but it's also a great way to alienate the population entirely.
One gets the sense that those who advocate such measures – which are designed to save we the ignorant masses from ourselves – truly believe that such things would never boomerang back on these healthy elites. Don't bet on it. And don't just assume your prescriptive social engineering dictates will actually work. They don't have that great a record in the U.S., after all.
Cures and the power of the people
We feel ennobled when we advocate for the patient, and FDA has indeed gone to some lengths to give patient advocates more than just looking-through-the-keyhole access to the agency's regulatory review process. Congress is getting in on the act, too, via the 21st Century Cures bill. The funny thing about all this is that FDA seems more subject than ever to "people power" and the whims of Congress, and the results might not please those very patients who are clamoring for more from FDA.
The influence of patients on FDA decision making has a history going back a few decades to the AIDS crisis, but an interesting piece by John Carroll of FierceBiotech adds another layer to the story. Carroll points out that flibanserin, the libido drug for women, had failed at its first FDA advisory hearing, although the sponsor, Sprout Pharmaceuticals, managed to come away from a recent hearing with an 18-6 win. FDA has apparently been accused of sexism because there are a number of libido-enhancing drugs available for men while Sprout's offering would be the first for women.
Three physicians, including a woman, opined recently in the Journal of the American Medical Association that the data for this drug are less than compelling, and they make note of an intensive lobbying effort dubbed "Even the Score" to prod FDA to approve flibanserin. Will women end up regretting this? If so, the blame will be placed entirely on FDA. Those who advocated for this will disappear into the night and they'll let FDA take the blame should this product wreak havoc on patients.
In any event, 21st Century Cures legislation is even more the subject of numerous homilies thanks to passage of H.R. 6 in the House, including by those with a lot to gain. In its desperation for a bipartisan marshmallow roast, Congress is now in full Pampalona mode, and FDA may fall under the sway of these magical 21st Century incantations despite that the legislation gives the agency little more than half the money it will need to move this program along. This does not even begin to address the load the Cures program would impose on the Centers for Medicare & Medicaid Services to review the avalanche of biomarkers that FDA presumably would validate.
We've seen medical stampedes before, but what's disturbing is that they seem more commonplace nowadays, and are coming from an ever-expanding pool of parochial interests. It's not an encouraging sign for the rule of common sense.
IPOs in the United States may be lagging overall, but in med-tech we have seen a flurry of IPO activity, sparking some long overdue optimism regarding the health of the industry.
Most recently, Natera, a California-based company, began trading (NASDAQ: NTRA) this past Thursday at $22.10 after pricing 10 million shares of its common stock at $18, the high end of the expected $17 to $18 range. Natera is a genetic testing company that develops non-invasive methods for analyzing DNA.
ConforMIS, a Massachusetts-based company, also received a warm welcome from investors when it began trading last Wednesday (NASDAQ: CFMS) at $18, after pricing its IPO of 9 million shares of common stock at $15 a share, the middle of the expected $14 to $16 range. Shares jumped to a high of $20.42 (a 36% increase over the IPO price) and closed Wednesday at $19.25. ConforMIS has developed a platform technology for making customized joint replacement implants that are individually sized and shaped to fit each patient’s anatomy, based on CT scans.
Other companies that have either gone public already this year or have reported plans to go public include Virginia-based Evolent Health, California-based Glaukos, Maryland-based OpGen, Massachusetts-based Infraredx and RainDance Technologies, California-based Avinger and Invitae,
The interest in the public markets has not been limited to the U.S. either. California-based AirXpanders has set its sights on an IPO in Australia, seeking to raise AU $36.5 million with plans to list on the Australian Securities Exchange. Also, Paris-based Labco reported plans to launch a €545 million ($598 million) IPO in Europe.
Interestingly, not all industries have enjoyed the same trend this year. CohnReznick, an accounting, tax, and advisory firm serving the middle market, reported a drop in IPOs during the first half of 2015. The firm found that 109 IPOs were launched in the first half of the year, a 32% decline compared to the first half of 2014. The firm said activity in the healthcare and life sciences sectors was consistent, however, and represented 43% of all middle market IPO activity compared to 38% in the second quarter 2014.
Time will tell what the current IPO window will mean for the medical device industry as a whole and how long it will last, but it is certainly a welcome trend over the IPO draught that we’ve been used to.