TESTIMONY BEFORE

THE SUBCOMMITTEE ON REGULATION AND GOVERNMENT INFORMATION

COMMITTEE ON GOVERNMENTAL AFFAIRS

U.S. SENATE

by

James S. Benson

Senior Vice President

Technology and Regulatory Affairs

Health Industry Manufacturers Association

May 20, 1994

Mr. Chairman, my name is James S. Benson, and I am senior vice president for technology and regulatory affairs of the Health Industry Manufacturers Association (HIMA).  HIMA is a national trade association representing more than 700 manufacturers of medical devices, diagnostic products, and health care information systems.  HIMA's members manufacture more than 90 percent of the approximately $40 billion of health care technology products purchased annually in the United States.

I appreciate the opportunity to testify here today, Mr. Chairman, on a subject that is of potentially grave concern to our nation's public health—an impending shortage of the raw materials medical device manufacturers need to produce certain devices designed for implantation within the human body.  The materials in question are used as biomaterials.  Biomaterials, to put the concept simply, are materials that, because they are generally compatible with the human body, are used in medical devices placed in contact with internal tissue and fluids.  

The biomaterials that these raw materials become when used in this fashion are an indispensable element in hundreds of life-saving and life-enhancing products, from pacemakers to surgical stitches.  Without a reliable supply of those basic materials, the lives of thousands of patients may be in jeopardy.  Equally important, without a reliable supply of materials, the innovation that produces these life-saving devices may come to a halt; already, many companies are backing away from engaging in research and development for new products that may require biomaterials.  

The medical device industry is extremely grateful to you, Mr. Chairman, for holding this hearing so that this problem can be brought before this committee, the Congress, and the American people.

The Problem

Basically, the problem is this:  In the current litigious environment in the United States, companies that supply to our industry the raw materials ultimately used as biomaterials are reluctant to continue doing so.  They tell us that under existing legal procedures, they will be liable for potentially huge costs of litigation for products that account for a very small part of their sales.  A supplier of a raw material may be brought into litigation even though the supplier has no direct role in the material's ultimate use as a biomaterial.  And suppliers may spend millions of dollars defending lawsuits involving products that account for only a fraction of their total market.

There are those, Mr. Chairman, who would argue that suppliers ought to be held liable if a manufactured product using their materials causes injury.  But suppose a car wrecks because its steering mechanism fails.  Should the supplier who provided the steel to the car company be held accountable if the steel meets company specifications and the failure is the result of a faulty design decision by the car company?  Shouldn't the supplier's responsibility to defend lawsuits be limited to situations where its wrongdoing led to the injury?

As a direct result of the liability environment in this country, three major raw materials suppliers recently announced that they would limit or cease altogether their shipments to medical device manufacturers.  In all three instances, the companies stated that these were purely rational business decisions.  To these companies, the cost of responding to litigation related to the affected product areas—even in frivolous lawsuits dismissed out of hand—were simply too high, far exceeding the relatively minuscule revenues generated from these materials.  For example, the approximate total market value for DuPont's Dacron® polyester (PET yarn) is $9 billion.  Yet the approximate value of the market for medical device usage of PET yarn is only $185,400.

When suppliers withhold materials because they fear the cost of litigation, the ability of some manufacturers, especially smaller companies with limited resources, to continue producing their life-saving products is threatened.  And that, in turn, poses problems for the public health, as thousands of Americans could be denied access to critical products for which there are, currently at least, no substitutes.

The Medical Device Industry

Before I discuss the history of this problem in more detail and offer some possible solutions, let me say a word about the medical device industry.  First of all, device companies are innovative; they invest an average of 6.7 percent of sales in research and development, nearly double the 3.7 percent national average for manufacturing companies.  The fruits of this investment are products that enhance the quality and value of patient care and increase the productivity of the U.S. health care system.

In the last 20 years alone, several innovative products have added immeasurably to the health and well-being of patients.  Those products range from non-invasive diagnostic tools, which allow doctors to pinpoint a disease process with such astonishing accuracy that the frequency of "exploratory surgery" has been significantly reduced, to implantable devices such as pacemakers and defibrillators, which use the latest in microprocessing technology to assist malfunctioning hearts, and to lasers and other sophisticated devices that allow surgeons to remove affected tissue safely from even the most delicate areas of the human brain.  These products may not all use biomaterials, but many life-sustaining ones, such as pacemakers and defibrillators, do.

Innovation by U.S. medical device manufacturers has made the U.S. industry the world leader.  But our industry's global competitiveness is clearly at risk absent a steady supply of raw materials.  The device industry is made up primarily of small, entrepreneurial companies, the majority of them employing fewer than 100 workers.  These smaller companies account for the bulk of new innovations, and it is these companies that have helped make the industry one of our nation's most competitive.

More specifically, the medical technology industry is one of the fastest-growing manufacturing sectors in the United States.  The Commerce Department reports that four of the top nine fastest-growing manufacturing industries of the U.S. economy from 1987-1994 are in medical device technology.  This industry achievement is unprecedented in the history of Commerce Department tabulations.  Our industry generated a $4.5 billion trade surplus last year, a figure that has grown steadily each year; more than a third of the industry's growth is in exports.  Currently, U.S. based companies supply 46 percent of the world's medical devices.   

And our industry has been adding people to the workforce at an average annual rate of nearly 4 percent.  Today, some 280,000 men and women are employed in the medical technology industry throughout the United States.

In sum, then, the medical device industry is one of America's most competitive.  That competitiveness—like the improved medical care that new technologies make possible—is very much at stake, Mr. Chairman, as we consider remedies to the shortage of biomaterials our companies face in the very near future.

History of the Problem

Let me offer a brief history of the problem.  Within the last several years, we have witnessed an alarming and accelerating trend in which the three major suppliers of materials used in critical medical implants first have announced their intention to withdraw from the market, and then have followed through by either restricting sales or halting them altogether.  

Dow Chemical, for example, has virtually stopped supplying its medical grade resin and film to the implant market, with one exception -- apparently, polyurethane will be supplied only for limited use in pacemaker leads and related pacing devices, but only until April 30, 1995.  With respect to silicone, in March 1993, it is our understanding that Dow Corning stopped supplying it for use in permanent medical implants (implanted for more than 30 days) and in all reproductive, contraceptive, obstetric, and cosmetic applications.

Finally, on January 31, 1994, DuPont ended a one-year grace period and discontinued its supply of materials—including PTFE (Teflon®), polyester (Dacron®), and polyacetal (Delrin®)—to the permanent medical implant industry.  Supply for temporary implants (generally less than 30 days) are to be decided on a case by case basis.  Other material suppliers have followed suit or are currently reviewing their policies regarding the market.  Without such materials, it would be impossible for doctors to implant a host of very important devices, such as the "shunts" that drain excess fluid from the brains of children afflicted with hydrocephalus.

The polymers that have been withdrawn serve multiple functions in a range of medical devices, from being the primary device component (e.g., in shunts) to being simply electrical insulation (e.g., in pacemakers).  Currently, material suppliers' policies primarily focus on permanent implants and temporary medical implants.  However, future restrictions may be extended to any material which comes in contact, internally or externally, with a patient.  In fact, there is the potential for a "snowball" effect here, as more and more component suppliers withdraw from the medical implant market because they, too, fear liability costs.  

For now, we believe we can say that, as a result of the reduced availability of biomaterials, it is likely that certain vital life-saving and life-enhancing medical devices will be unavailable to patients in the near future.  And, it bears repeating, that these are merely the products we now have.  The insidious danger, of course, is that the public may never know what new life-saving and life-enhancing products had to be sacrificed on the drawing board because biomaterials -- the building blocks of many medical devices -- were unavailable because of the practice of "defensive innovation."  Defensive innovation happens when companies turn from the goal of advancing medical science because of the fear of or fallout from the litigation environment.  

Market Study

The effects of a biomaterials shortage are confirmed in a market study conducted by Aronoff Associates (a copy of which is attached to this testimony), a consulting firm specializing in the use of polymers in health care products.  The study focused on the three materials that have been withdrawn by DuPont from the permanent medical implant market:  Dacron® polyester, Teflon® PTFE, and Delrin® polyacetal.  HIMA commissioned the study to gain an understanding of the biomaterial market structure, the supply situation, and the future of the market.  The study found that the combined size of the permanent medical implant markets for the three materials is minute ($600,000) compared with the total markets for those materials ($10.5 billion). 

In many cases, there are no alternative suppliers of Dacron® polyester, Teflon® PTFE, or Delrin® polyacetal.  Where alternative suppliers exist, those willing to consider supplying will insist on financially stringent indemnification agreements—costing millions of dollars—a condition that could literally put them out of reach for small companies, the engines of innovation in the medical technology industry.  Unfortunately, for many materials, suitable replacements simply do not now exist.  Some manufacturers may have stockpiled approximately a three-year supply of DuPont materials, many others have less.  The study concludes that these findings can be applied to all materials used in medical implants.

Aronoff Associates offer some startling forecasts.  Over the short term (1-3 years), the financial requirements needed to back indemnification agreements will begin to force small manufacturers and start-ups out of business.  U.S. manufacturers will have to divert resources from research and development to search for and qualify replacement materials.  That is already happening for many companies.

Assuming manufacturers' reserves of the DuPont materials do not deteriorate, a DuPont materials shortage will not be felt by patients in the short term.  However, they will surely feel the shortage in the long term.  Over the next three to ten years, Aronoff Associates estimate, the full effect of the biomaterials crisis will be felt—unless substitute materials are found and approved for marketing.  This means, quite simply, that patients will not have access to life-saving, life-enhancing medical implants if suitable replacements are not available.  Unique, "tried and true" study materials will, in all likelihood, disappear completely, with profoundly damaging consequences for small manufacturers and the innovations they typically spawn.

Impact of a Shortage

Manufacturers cannot produce implants if the appropriate raw materials are not available, and, as reported in the Aronoff market study, materials may not be available for three primary reasons.  First, as I have mentioned above, the fear of litigation may prevent existing and potential material suppliers from participating in the implant market.  Second, suitable replacements for the materials withdrawn may simply not exist.  And third, even if replacement materials are found, it may be several years before they can be used because approval for their use in existing implants may be further delayed due to FDA requirements for long-term testing.  

I know there are those who believe that consumer protection only means protecting consumers from unsafe products—and that is certainly an important aspect of this issue that we fully support.  But too often we overlook another important aspect of consumer protection, and that is, that consumers are also protected when companies bring forward new products that attack disease, that make people healthier, that sometimes save their lives.  As a federally appointed blue ribbon panel reviewing the Food and Drug Administration (FDA) said, "The FDA must recognize that approval of useful and safe new products can be as important to the public health as preventing the marketing of harmful or ineffective products."  The panel concluded that we can "strengthen the competitive nature of American innovation without . . . compromising consumer protection."

There are also those who would argue that, because some manufacturers may have experienced problems with a particular material, the use of all biomaterials should be questioned.  That argument misses the point entirely.  First, if there is a problem, it is not with the biomaterials themselves, which, in general, are inherently safe, but rather with the way in which they may have been inappropriately applied.  Second, the proper use of those biomaterials has made possible devices that have saved thousands of lives.  Let me mention a few of those products and what they make possible:

Heart valves.  Heart valves are used to control the flow of blood between chambers in the heart.  Mechanical and tissue heart valves replace damaged or missing valves in patients.  When a damaged valve leaks, a backwash of blood flows from the bottom chamber (ventricle) to the top chamber (atrium) during the heart's ventricular contraction.  This causes the heart to function inefficiently and, in severe cases, leaves the heart unable to circulate blood.  Without replacement heart valves, patients would suffer improper blood flow, premature heart fatigue, or death.

Pledgets.  Pledgets are a common tool surgeons use in a variety of surgical procedures.  Pledgets buttress fragile tissue and are a staple in cardiovascular-related operations.  In addition, they serve to reinforce sutures or soft tissue and prevent leaking in numerous other applications.  Without pledgets, physicians would find it more difficult to perform a range of surgeries, from basic operations to heart bypass surgery.

Vascular grafts.  Vascular grafts are used to repair or replace arteries in people whose own arteries have become dilated or injured.  Many vascular grafts are "tubes" made of synthetic material(s).  For example, a polyester vascular graft can be used to treat a dilated aorta (aneurysm).  Left untreated, the aneurysm will rupture, and the majority of these patients will die.  The use of polyester grafts has reduced dramatically the death rate from ruptured aneurysms. 

Vascular grafts are also used to replace blocked major arteries.  If the blocked artery is not replaced, the patient often suffers from gangrene and infection of limbs, which can lead to amputation and, in some cases, death.  Short grafts are used to replace blocked arteries to the kidneys.  Similar grafts are used as shunts in infants who have inherited heart defects.  Approximately 330,000 vascular grafts were implanted in 1991-92.

Hydrocephalus shunts.  Hydrocephalus is a very serious condition for which there is no cure.  The condition occurs in approximately one of every four hundred live births, or can be triggered by disease, infection, tumor encroachment, traumatic injury to the head, or aging.  A build up of cerebrospinal fluid in the brain causes an increase in pressure within the skull.  Untreated, hydrocephalus can lead to stunted mental and physical development, coma, or premature death.

Hydrocephalus can be managed through shunting or moving the fluid from the brain to another location in the body, where it can be absorbed.  There is no alternative therapy, drug, or device regimen, and the condition requires lifelong treatment.  The hydrocephalus shunt is fully implanted and, typically, will function for many years.  With regular follow-up care, modern hydrocephalus shunts are well tolerated and allow patients to lead normal and complete lives.  About 75,000 shunts are implanted annually.

Other devices that might be affected by a biomaterials shortage include sutures used on internal tissues, heart valves, and penile implants.  Even more important, though, than the fact that the device may be unavailable is what that means for the practice of medicine and for the patient.  Because devices are the tools through which millions of medical procedures are performed—procedures which are performed for the ultimate benefit of patients—the reduced availability of biomaterials means the reduced ability to receive adequate health care for literally millions of patients from infants to the elderly.  To help grasp the sobering impact of a biomaterials shortage on patients and medical procedures, I have attached a chart which shows just how particular devices, procedures and patients are linked.   

A biomaterials shortage could also have severe economic ramifications—perhaps as soon as a year from now.  Many device manufacturers, especially small companies, could be forced either to cut back significantly on their operations, or, conceivably, forced out of the medical implant business entirely.  Under either scenario, the economy would suffer, both locally and nationally as the job losses across the country accumulate.  That, in turn, would undoubtedly deliver a severe blow to our industry's innovative capabilities and limit the variety of medical products available in the future.  And, if industry innovation suffers, a vibrant segment of our national economy, one of the few, in which we demonstrate clear global leadership, will regrettably diminish.

One possible result is that the medical implant industry will move their operations overseas, a trend that, for a variety of reasons, is already taking place today.  In the absence of U.S. suppliers, U.S. medical device manufacturers will be forced to seek raw material suppliers elsewhere.  They will also be driven to develop and introduce their products overseas due to the litigious U.S. environment.  Ironically, the best U.S. medical products might then be available only to patients in foreign lands.  Moreover, in an industry currently dominated by the United States, the global competitiveness of U.S. companies could be jeopardized.

Along these lines, HIMA would also like to go on record in support of S.687, "The Product Liability Fairness Act," which, if enacted, would certainly improve the climate for innovation in medical technology and encourage companies to continue to export U.S. products, not U.S. jobs.

Work on the Issue

The Health Industry Manufacturers Association has been engaged in several efforts to ensure that patients continue to have access to critical medical devices.  HIMA has already worked with the FDA, manufacturers, scientists, and chemical companies to explore ways in which alternative supplies of silicone could be used to keep existing products on the market.  In particular, HIMA has assisted FDA in establishing a testing regimen to demonstrate the equivalence of the silicone available from alternative suppliers who step forward with a substitute to Dow's silicone.

Unfortunately, however, because the risk of liability still exists, the current supply situation for silicone should be considered fragile at best, especially since the two companies that have so far stepped forward as alternative suppliers are small.  Although the silicone resolution might be used as a model for other materials, that process will be much more difficult because "equivalent" materials are less abundant and may not even exist for these other materials.  There is, in short, no guarantee that companies will be able to find alternate suppliers for the polymers that have been withdrawn.

HIMA is part of the Biomaterials Availability Coalition (BAC), which was formed to help avert a biomaterials crisis.  The BAC comprises medical societies and scientific organizations and is working to educate the medical community, Congress, and the general public on the impact of a biomaterials shortage on the delivery of patient care.  The BAC founding member organizations include the American Academy of Ophthalmology, the American Academy of Orthopedic Surgeons, the American Association of Neurological Surgeons, the American College of Cardiology, the Joint Vascular Societies, the American College of Obstetricians and Gynecologists, the American Society of Plastic and Reconstructive Surgeons, the American Urological Association, the Society for Biomaterials, the Society of Thoracic Surgeons, and the American Society for Artificial Internal Organs.

Conclusion

In conclusion, Mr. Chairman, the public health of thousands, maybe millions of patients and the economic health of our nation will likely be adversely affected by a biomaterials shortage.  HIMA believes a solution requires immediate congressional attention, in order to provide continued patient access to life-saving, life-enhancing implantable medical devices.  We believe this hearing is an important first step in that process.

The medical device industry, the FDA, and others are all working to find solutions to this potential crisis.  HIMA believes, however, that the only way to avert a biomaterials crisis is timely legislation that limits supplier liability to instances of genuine fault and establishes a procedure ensuring that raw materials suppliers will not be brought into litigation unless there is good reason to believe they are, in fact, at fault.  The impact of this approach will be that manufacturers ordinarily appear in lawsuits on behalf of suppliers, thus relieving the suppliers of heavy legal defense costs.  Device manufacturers are willing to assume this burden as a way to help ensure the continued availability of the materials they need to make their products, products that American patients so desperately need.

HIMA appreciates your interest in this matter, Mr. Chairman, and we would be happy to work with the Subcommittee in any way we can to find a workable solution.  Thank you.

TESTIMONY BEFORE

THE SUBCOMMITTEE ON REGULATION AND GOVERNMENT INFORMATION

COMMITTEE ON GOVERNMENTAL AFFAIRS

U.S. SENATE

by

James S. Benson

Senior Vice President

Technology and Regulatory Affairs

Health Industry Manufacturers Association

May 20, 1994