In golf, there is no rule prohibiting the use of any club on any part of the course. A player could choose to utilize a putter off the tee or a driver on the green. One can think of a device classification protocol, which begins with a specific application type, as a golf club, but with the caveat that no similar latitude exists with the U.S. Food and Drug Administration and the path of medical device or biologic approvals. Instead, certain “clubs” or FDA classification protocols must be utilized under circumstances depending on the classification of the device. The options are limited to the circumstances.
In order to begin the route to FDA approval, a particular type of application must be submitted. The type of application depends on a multitude of factors including whether or not a similar product exists on the market; whether the device qualifies as a humanitarian device exemption; and if similar indications for the product are already being utilized on the market. Often times, testing is required to substantiate an application. This is an integral part of the FDA’s approval process. An important aspect of the approval process is the establishment of an Institutional Review Board and obtaining informed consent from a patient. Cabana v. Stryker Biotech, LLC; Stryker Corporation; Medtronic Sofamor Danek USA, Inc., Medtronic, Inc., Case No. BC 465 313 (California Superior Court, July 13, 2011) offers an example of a recent case involving the role of informed consent and the liability incurred by Medtronic as a result of not obtaining it.
This article will address the FDA’s history, relevant laws, device classifications, a discussion of the Stryker-Medtronic case and how these issues impact a company’s stock price. Overall, the “club” that is chosen and the requisite rules do matter when seeking FDA approval.
FDA history
Long before the FDA was established, cases regarding the safety of medicines and health-related products were already being heard in the courts. In 1852, the New York court in Thomas v. Winchester, 2 Seld. 397 (1852) held that a strict liability was established for mislabeling drugs and medicines and sending them into the stream of commerce. Here, Ms. Thomas was injured due to a dandelion elixir being mislabeled. In finding that individuals were liable, the court articulated:
A dealer in drugs and medicines, who carelessly labels a deadly poison as a harmless medicine, and sends it so labeled into market, is liable to all persons, who, without fault on their part, are injured by using it as such medicine in consequence of the false label.
The liability of the dealer in such case arises, not out of any contract or direct privity between him and the person injured, but out of the duty, which the law imposes upon him to avoid acts in their nature dangerous to the lives of others. He is liable therefore, though the poisonous drug with such label may have passed through many intermediate sales before it reaches the hands of the person injured.[1]
Thomas and similar cases were the impetus behind Congress establishing the FDA, though it was years before the FDA's oversight extended to medical devices. In 1906, the Pure Food and Drugs Act [2]came into law, which precluded the interstate marketing and distribution of mislabeled food and drugs.[3] Subsequently, the Federal Food, Drug and Cosmetic Act of 1938[4] only related to food, drugs and cosmetics – not medical devices.
It wasn't until 1976 that medical devices were subject to FDA oversight. "Periodic attempts to regulate some devices as drugs, for which the agency did not require premarketing clearance, proved to be cumbersome and inadequate," according to an article by former FDA head, David Kessler, MD. "Spurred by the increased technological complexity of devices and mounting disclosures of shortcomings involving pacemakers, intrauterine devices and intraocular lenses, Congress enacted the comprehensive Medical Device Amendments of 1976[5] to the Federal Food, Drug, and Cosmetic Act. The primary purpose of the amendments was to ensure that new devices were safe and effective before they were marketed.”[6] A key component of the Medical Device Amendments of 1976 was the establishment of three device classes (class I, II and III) to provide the public with assurances of efficacy and safety based upon regulatory requirements.
Subsequent laws and regulations followed the passage of the MDA and include:
- The Safe Medical Devices Act of 1990[7]
- The Food and Drug Administration Modernization Act of 1997[8]
- The Medical Device User Fee and Modernization Act[9]
- The Food and Drug Administration Amendments Act of 2007[10]
- Various Code of Federal Regulations provisions[11]
These laws form the basis for the regulation of medical devices in human beings. When the MDA were drafted, medical devices were separated in two ways: (1) according to the class I, II or III; and (2) according to seven categories – pre-amendment, post-amendment, substantially equivalent, implant, custom, investigational and transitional. The regulation of drugs and devices differs in a significant way – safety and efficacy standards are applied uniformly for drugs, while medical device regulation is based on risk. Post–amendment devices were classified by statute as a class III, which requires an applicant to submit a premarket approval application, unless the device is reclassified as a I or II, or the FDA approves it through the 510k process because a substantially similar device that has been approved for a similar application already exists.[12]
A recent effort by the industry and the FDA is the establishment of a national medical device registry to enhance post-market device surveillance. The FDA’s National Medical Device Postmarket Surveillance Plan states the registry is a “system that collects and maintains structured records on a specific disease, condition, procedure or medical product for a specific time period and population.”[13] This is a good place to start in terms of ensuring safety and efficacy; however, more attention should be given to clinical trials, off-label use and informed consent.
Informed consent and the Stryker-Medtronic case
The Stryker-Medtronic case and its subsequent settlement involving bone morphogenetic protein and off-label use by physicians underscores the risk and need for informed consent. According to a recent news article, one individual believes, “this settlement is simply the 'cost of doing business.' Up to 85 percent of those million people had the bone graft surgery off-label.” In the same article, Dan Spengler, MD, the former chair of Orthopaedic Surgery at Vanderbilt University in Nashville, Tenn., opined, “that with many off-label surgeries, there are going to be problems. He suspected that many of the lawsuits involved patients who experienced excess bone growth that occurred after their off-label surgery.”[14] As a result of the off-label promotion, many patients were injured.
In Stryker-Medtronic, the injured patient filed suit and the court ruled on summary judgment that “OP-1 [a bone morphogenetic protein] was approved by the FDA under a rare classification known as Humanitarian Use Device, meaning, inter alia: (a) the FDA had not determined the efficacy of OP-1; (b) due to its experimental nature, it could only be implanted in less than 4,000 patients annually; and importantly (c) prior to being implanted, the hospital’s Institutional Review Board (i.e., research committee) needed to approve and monitor the use of OP-1 and renew the approval on an annual basis.”[15] Complementary to the FDA standard for informed consent set forth above, the widely cited California Supreme Court case, Moore v. Regents of Univ. of California, 51 Cal. 3d 120, 129-131 (1990) held a common law duty exists to obtain informed consent. While a HUD was not at issue, the use of a patient’s cells to develop a patented and commercially viable cell treatment without obtaining the patient’s informed consent was a crucial item. The California Supreme Court held:
Our analysis begins with three well-established principles. First, ‘a person of adult years and in sound mind has the right, in the exercise of control over his own body, to determine whether or not to submit to lawful medical treatment.’ Second, ‘the patient’s consent to treatment, to be effective, must be an informed consent.’ Third, in soliciting the patient’s consent, a physician has a fiduciary duty to disclose all information material to the patient’s decision.
Accordingly, we hold that a physician who is seeking a patient’s consent for a medical procedure must, in order to satisfy his fiduciary duty and to obtain the patients informed consent, disclose personal interests unrelated to the patient’s health, whether research or economic, that may affect his medical judgment.[16]
Informed consent was a cornerstone to this case, which eventually led Medtronic to settle. The role of Institutional Review Boards is crucial in assuring that the patient’s informed consent is obtained and recorded. In the Investigational Device Exemption Draft Guidance,[17] the FDA indicated:
A device being used under an approved IDE is a device that has not been cleared or approved by FDA for marketing but has been authorized for investigational use in an FDA-regulated clinical investigation (i.e., an IDE is an investigational exemption). With this exemption, the investigational device can be shipped lawfully for purposes for the purposes of conducting clinical investigations of the device without complying with certain other requirements that would apply to devices in commercial distribution. See 21 CFR Part 812.
A central function that IRBs play is the oversight and reporting of adverse events to the FDA.[18] Obtaining informed consent from the patient is a rudimentary requirement, as a California Court of Appeals articulated, “the IRB’s responsibilities include requiring documentation of informed consent from subjects (21 C.F.R. § 56.109(b), (c).… It is the IRB’s duty to require that each patient be adequately informed of the nature of the study and the possible side effects, risks and consequences of an investigational drug or device. It is also the IRB’s duty to require that each patient sign an informed consent.”.[19] An applicant should also remain vigilant of whether or not comparable devices have cleared the PMA or 510(k) approval process.[20] And, considering off-label promotion and the risk of harm to the patient is crucial. Medtronic’s failure to obtain informed consent as part of the regulatory process proved costly – not only to the patients, but its shareholders.
Market implications
On May 6, 2014, Medtronic announced it had agreed to settle certain cases. Specifically, the company indicated:
Under the terms of the agreement, Medtronic has agreed, subject to certain conditions, to resolve the claims of an estimated 950 claimants for a total payment of approximately $22 million.
This agreement is a compromise of disputed claims and is not in any way an admission of liability or validity of any defense in the litigation by Medtronic. The company continues to stand behind INFUSE Bone Graft, which has been utilized in more than one million patients since it was approved more than ten years ago, and will vigorously defend the product and company actions in the remaining cases. Earlier this month, on the eve of trial and after several days of pretrial motions, a California trial judge entered summary judgment in favor of Medtronic in the first INFUSE Bone Graft case scheduled to go to trial. Approximately 750 filed cases brought by approximately 1,200 individual plaintiffs remain pending in various courts throughout the United States. The majority of these cases are still in the early procedural stages and none have resulted in a finding of liability against Medtronic.
As previously disclosed in Medtronic's SEC filings, certain law firms have advised the company that they may bring a large number of similar claims against the company in the future. The company estimates those law firms represent approximately 2,600 additional unfiled claimants.
The company anticipates it will take a special charge in the range of $120 to $140 million in its recently completed fourth quarter under the guidelines of FAS 5. This charge accounts for the $22 million settlement announced today, the estimated settlement of the approximately 3,800 (1,200 filed; 2,600 unfiled) additional claims, and certain costs associated with these settlements.[21]
A settlement not only gives remuneration to harmed patients, it also can impact stock price, market cap and other variables investors consider. For a few days after the settlement announcement, Medtronic’s stock price dipped to below $59.50 and then rose again a few days later. Since market cap equals the number of shares outstanding multiplied by the price per share, this movement could have an impact on an investor’s decision to buy or sell stock, as well as enter options trading. Medtronic’s current market cap, as of Sept. 12, was $63.85 billion.
Conclusion
Unlike the game of golf, manufacturers, physicians and hospitals have strict guidelines to follow when choosing a “club” or process to file for medical device approval. There is not a lot of leeway and the number of “clubs” is also limited. A key component to reducing adverse patient outcomes and increasing regulatory compliance is following the rules, obtaining the patient’s informed consent and disclosing all of the adverse information to the FDA during the approval process. This could lead to a more robust stock price and better consumer confidence both in the market and in the physicians using the medical device.
Rachel V. Rose, JD, MBA is a principal with Rachel V. Rose – Attorney at Law, P.L.L.C. located in Houston. Ms. Rose holds an MBA with minors in healthcare and entrepreneurship from Vanderbilt University, and a law degree from Stetson University College of Law. She is chair of the Federal Bar Association’s Corporate and Association Counsel Division, the co-editor of the American Health Lawyers Association’s Enterprise Risk Management Handbook for Healthcare Entities (2nd Edition) and vice-chair of the Distance Learning Committee for the Health Law Section of the American Bar Association, as well as a co-author of the book The ABCs of ACOs. Ms. Rose is an affiliated member with the Baylor College of Medicine’s Center for Medical Ethics and Health Policy. She can be reached at rvrose@rvrose.com. The author would also like to thank Jackson Nicholson at The Golf Channel for his insights.
[1]Thomas v. Winchester, 2 Seld. 397 (1852).
[2] Pub. L. 59-384 34, STAT. 768 (1906).
[3] http://www.fda.gov/aboutfda/whatwedo/history/default.htm.
[4] Pub. L. 75-717, 52 Stat. 104 (1938).
[5] Pub. L. 94-295 (1976).
[6] Kessler DA et al, The Federal Regulation of Medical Devices, The New England Journal of Medicine (Aug. 8, 1987).
[7] Pub. L. 101-629 (1990).
[8] Pub. L. 105-115 (1997).
[9] Pub. L. 107-250.
[10] Pub. L. 110-85.
[11] The Code of Federal Regulations defines the three classes of devices. Class I devices present a very low risk of illness or injury and are subject to general controls. (21 U.S.C. 360c(a)(1)(A)). Class II devices carry more risk and are subject to both “general controls” and “special controls.” (21 U.S.C. 360c(a)(1)(B)). Class III devices are considered to present “a potential unreasonable risk of illness or injury.” (21 U.S.C. 360c(a)(1)(C)(ii)(II)).
[12] See 21 U.S.C. 360c(f)(2), 21 U.S.C. 360c(i), and 21 U.S.C. 360c(a)(1)(C), 360e(a).
[13] Food and Drug Administration, Strengthening Our National System for Medical Device Postmarket Surveillance, p. 1 (2012), available at, http://www.effectivehealthcarea.ahrq.gov/ehc/products/74/531/Registries%202nd%20ed%20final%20to%20Eisenberg%209-15-10.pdf.
[14] J. Mundy, Settlement Good News for Medtronic Infuse Bone Graft Victims (May 13, 2014), available at, http://www.lawyersandsettlements.com/articles/medtronic-infuse-bone-graft/medtronic-lawsuit-bone-graft-16-19774.html#.VBbUUlaaGzA.
[15] See Plaintiff’s Opposition to Defendant Pomona Valley Hospital Medical Center’s Motion for Summary Adjudication of Issues; Memorandum of Points and Authorities, p. 2, Case N. BC 465 313 (filed Oct. 11, 2013).
[16] Rachel V. Rose, The Role of Informed Consent in Utilizing Medical Devices and the FDA’s Humanitarian Device Exemption, NV State Board of Medical Examiners Newsletter (June 2014), available at, http://www.medboard.nv.gov/Newsletters/2014/June_2014_Newsletter.pdf.
[17]http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM279107.pdf.
[18] 21 CFR 814.126(b)(1).
[19] Pomona Valley Hosp. Med. Ctr., 209 Cal. App. 4th 687, 691 (2012). See also, Grimes v. Kennedy Krieger Inst., Inc., 366 Md. 29, 38-39, 782 A.2d 807, 813 (2001) (relaying the history of IRBs).
[20] 21 CFR 814.118(a).
[21] Medtronic, Medtronic Agrees to Settle Certain INFUSE® Bone Graft Product Liability Cases (May 6, 2014), available at, http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&ID=1927406&highlight=.