Medical-Device Makers See EU Rules Slowing U.S. Approvals

Medical-Device Makers See EU Rules Slowing U.S. Approvals

U.S. medical-device manufacturers are looking anxiously across the Atlantic as the European Union prepares to tighten the process to approve new products, a step companies say will crimp their lifeline to funding and patients. The EU’s overhaul is meant to close loopholes that allowed breast implants made with industrial-grade silicone to be implanted in thousands of women. Yet device makers say the new rules will delay approvals without increasing safety. The European Parliament is scheduled to vote on new regulations over the next couple of weeks. The draft, once approved, will be the basis for negotiating with member states on final rules.Smaller U.S. companies depend on the EU’s easier process to test their products and accumulate patient data that they can use to get approval in the U.S., the world’s most profitable health-care market. They can get their devices approved in Europe years earlier than in the U.S., according to the European device-industry group Eucomed.

“The bar is set artificially high in the U.S.,” said Kevin Sidow, chief executive officer of Moximed, a Hayward, California-based company with a knee-implant system approved in Europe. “If the rest of the world begins to raise the bar of approval to the U.S. level, it will surely damage investment in innovation and patient progress will plateau.” He expects a U.S. regulatory decision on the product, called KineSpring, in 2016, which would be seven years after getting EU clearance.

‘Notified Bodies’

The drug regulator for the 28-nation EU, the European Medicines Agency, plays no role in the device industry. Instead, private reviewers known as notified bodies are hired by manufacturers to vet products and grant a so-called CE mark that allows them to be sold in the EU. Notified bodies, which are certified by member state governments, are required to assess the device for safety according to standards set out by European Commission directives.

Device makers pointed to the speedier EU system as a model to follow when the U.S. was considering overhauling its own regulations last year, even as experts such as Oxford University’s Carl Heneghan said the European method resulted in EU citizens serving as “guinea pigs” for the device industry.

While Europe had been looking to overhaul its rules for some time, the scandal over the breast implants added a sense of urgency, David Hudson, a spokesman for the European Commission’s consumer policy division, said in an interview.

Industrial Gel

French manufacturer Poly Implant Prothese SA, or PIP, was liquidated in March 2010 after French authorities banned the company’s implants following complaints they were leaking industrial silicone inside patients.

The implants had been cleared by TUEV Rheinland, one of the EU’s roughly 80 notified bodies. TUEV said the Toulon, France-based manufacturer, which had been warned in advance of inspections, substituted a medically approved gel for the industrial variety when its officials were on site.

“Broadly, the system works,” Hudson said. “We haven’t had any more PIPs but there are weaknesses which we want to strengthen.”

The proposal at the European Parliament calls for notified bodies to be held to a common set of standards, requires them to conduct unannounced factory inspections and calls for personnel to be rotated periodically to new assignments so they don’t become too close to the companies they’re inspecting.

Centralized System

Eucomed opposes part of the plan, written by Dagmar Roth-Behrendt, the German parliamentarian leading discussion on the overhaul, that calls for high-risk implantable devices to go through a centralized approval process. She recommends a centralized committee be established at the EMA, which would track approval applications. It’s unclear if that will appear in the draft to be voted on in a committee today as amendments have been made behind closed doors.

Eucomed estimates that switching to a centralized system would cost small to mid-sized manufacturers an additional 17.5 million euros ($23.6 million) to get a device approved over a five-year period, based on a survey of its members.

Smaller companies would be hardest hit by any cost increases, Eucomed said. Often their success in Europe is the basis for attracting investors, said Andrew Elder, a partner with London-based investment firm Albion Ventures LLP.

“Acquiring companies are looking for commercial traction as proof of the product being validated,” he said in an interview.

FDA Standards

Even with changes, Europe will probably remain the first point of entry for many medical-device makers because the approval process in the U.S., where it’s handled by the Food and Drug Administration, is becoming more stringent and less predictable, said Jeffrey Gibbs, an attorney with Hyman, Phelps & McNamara PC in Washington and a former associate chief counsel at the FDA.

About 25 percent of devices submitted for approval every year are rejected by the FDA or the application is withdrawn, Gibbs said. “You can meet the standards in Europe and not meet the FDA’s regulatory standard,” he said in an interview.

Abbott Laboratories’ (ABT) MitraClip, a clamp for leaky heart valves, has been on the market in Europe for five years yet the FDA is still weighing whether to approve it. An advisory panel recommended in March that the company provide more data. Abbott hopes the clip will be approved based on its experience in Europe, said Steve Kelly, a spokesman for the Abbott Park, Illinois-based company.

Like many device companies backed by venture-capital firms, Moximed is looking to raise money and Sidow will be using his experience in Europe to make his case with investors, he said.

It’s getting tougher for companies like Moximed, as venture-capital funding for medical devices is at a more than 10-year low, Iain Scott, a life sciences analyst at EY, said in an interview. A report by Scott’s team this week cited “unease” in Europe as the reason investors are staying away.

“They don’t see an easy ride any more,” he said. “They’re now worried there will be two FDAs, one in the U.S. and one in Europe.”

For Related News and Information: Abbott’s MitraClip Device Needs More Study, FDA Staff Says

To contact the reporter on this story: Allison Connolly in London at aconnolly4@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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