Federal Register / Vol. 83, No. 111 / Friday, June 8, 2018 / Rules and Regulations 26577 

order. The necessary special controls 

appear in the regulation codified by this 

order. This device is subject to 

premarket notification requirements 

under section 510(k) of the FD&C Act. 

III. Analysis of Environmental Impact 

The Agency has determined under 21 

CFR 25.34(b) that this action is of a type 

that does not individually or 

cumulatively have a significant effect on 

the human environment. Therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required. 

IV. Paperwork Reduction Act of 1995 

This final order establishes special 

controls that refer to previously 

approved collections of information 

found in other FDA regulations and 

guidance. These collections of 

information are subject to review by the 

Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501–3520). The 

collections of information in the 

guidance document ‘‘De Novo 

Classification Process (Evaluation of 

Automatic Class III Designation)’’ have 

been approved under OMB control 

number 0910–0844; the collections of 

information in 21 CFR part 814, 

subparts A through E, regarding 

premarket approval, have been 

approved under OMB control number 

0910–0231; the collections of 

information in part 807, subpart E, 

regarding premarket notification 

submissions, have been approved under 

OMB control number 0910–0120; and 

the collections of information in 21 CFR 

part 801, regarding labeling, have been 

approved under OMB control number 

0910–0485. 

List of Subjects in 21 CFR Part 878 

Medical devices. 

Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs, 21 CFR part 878 is 

amended as follows: 

PART 878—GENERAL AND PLASTIC 

SURGERY DEVICES 

■ 1. The authority citation for part 878 

continues to read as follows: 

Authority: 21 U.S.C. 351, 360, 360c, 360e, 

360j, 360l, 371. 

■ 2. Add § 878.4430 to subpart E to read 

as follows: 

§ 878.4430 Microneedling device for 

aesthetic use. 

(a) Identification. A microneedling 

device for aesthetic use is a device using 

one or more needles to mechanically 

puncture and injure skin tissue for 

aesthetic use. This classification does 

not include devices intended for 

transdermal delivery of topical products 

such as cosmetics, drugs, or biologics. 

(b) Classification. Class II (special 

controls). The special controls for this 

device are: 

(1) The technical specifications and 

needle characteristics must be 

identified, including needle length, 

geometry, maximum penetration depth, 

and puncture rate. 

(2) Non-clinical performance data 

must demonstrate that the device 

performs as intended under anticipated 

conditions of use. The following 

performance characteristics must be 

tested: 

(i) Accuracy of needle penetration 

depth and puncture rate; 

(ii) Safety features built into the 

device to protect against crosscontamination, including fluid ingress 

protection; and 

(iii) Identification of the maximum 

safe needle penetration depth for the 

device for the labeled indications for 

use. 

(3) Performance data must 

demonstrate the sterility of the patientcontacting components of the device. 

(4) Performance data must support the 

shelf life of the device by demonstrating 

continued sterility, package integrity, 

and device functionality over the 

intended shelf life. 

(5) Performance data must 

demonstrate the electrical safety and 

electromagnetic compatibility (EMC) of 

all electrical components of the device. 

(6) Software verification, validation, 

and hazard analysis must be performed 

for all software components of the 

device. 

(7) The patient-contacting 

components of the device must be 

demonstrated to be biocompatible. 

(8) Performance data must validate 

the cleaning and disinfection 

instructions for reusable components of 

the device. 

(9) Labeling must include the 

following: 

(i) Information on how to operate the 

device and its components and the 

typical course of treatment; 

(ii) A summary of the device technical 

parameters, including needle length, 

needle geometry, maximum penetration 

depth, and puncture rate; 

(iii) Validated methods and 

instructions for reprocessing of any 

reusable components; 

(iv) Disposal instructions; and 

(v) A shelf life. 

(10) Patient labeling must be provided 

and must include: 

(i) Information on how the device 

operates and the typical course of 

treatment; 

(ii) The probable risks and benefits 

associated with use of the device; and 

(iii) Postoperative care instructions. 

Dated: June 4, 2018. 

Leslie Kux, 

Associate Commissioner for Policy. 

[FR Doc. 2018–12335 Filed 6–7–18; 8:45 am] 

BILLING CODE 4164–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 888 

[Docket No. FDA–2018–N–1863] 

Medical Devices; Orthopedic Devices; 

Classification of the In Vivo Cured 

Intramedullary Fixation Rod 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final order. 

SUMMARY: The Food and Drug 

Administration (FDA or we) is 

classifying the in vivo cured 

intramedullary fixation rod into class II 

(special controls). The special controls 

that apply to the device type are 

identified in this order and will be part 

of the codified language for the in vivo 

cured intramedullary fixation rod’s 

classification. We are taking this action 

because we have determined that 

classifying the device into class II 

(special controls) will provide a 

reasonable assurance of safety and 

effectiveness of the device. We believe 

this action will also enhance patients’ 

access to beneficial innovative devices, 

in part by reducing regulatory burdens. 

DATES: This order is effective June 8, 

2018. The classification was applicable 

on December 19, 2017. 

FOR FURTHER INFORMATION CONTACT: 

Peter Allen, Center for Devices and 

Radiological Health, Food and Drug 

Administration, 10903 New Hampshire 

Ave., Bldg. 66, Rm. 1512, Silver Spring, 

MD 20993–0002, 301–796–6402, 

Peter.Allen@fda.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Upon request, FDA has classified the 

in vivo cured intramedullary fixation 

rod as class II (special controls), which 

we have determined will provide a 

reasonable assurance of safety and 

effectiveness. In addition, we believe 

this action will enhance patients’ access 

to beneficial innovation, in part by 


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reducing regulatory burdens by placing 

the device into a lower device class than 

the automatic class III assignment. 

The automatic assignment of class III 

occurs by operation of law and without 

any action by FDA, regardless of the 

level of risk posed by the new device. 

Any device that was not in commercial 

distribution before May 28, 1976, is 

automatically classified as, and remains 

within, class III and requires premarket 

approval unless and until FDA takes an 

action to classify or reclassify the device 

(see 21 U.S.C. 360c(f)(1)). We refer to 

these devices as ‘‘postamendments 

devices’’ because they were not in 

commercial distribution prior to the 

date of enactment of the Medical Device 

Amendments of 1976, which amended 

the Federal Food, Drug, and Cosmetic 

Act (FD&C Act). 

FDA may take a variety of actions in 

appropriate circumstances to classify or 

reclassify a device into class I or II. We 

may issue an order finding a new device 

to be substantially equivalent under 

section 513(i) of the FD&C Act (21 

U.S.C. 360c(i)) to a predicate device that 

does not require premarket approval. 

We determine whether a new device is 

substantially equivalent to a predicate 

by means of the procedures for 

premarket notification under section 

510(k) of the FD&C Act (21 U.S.C. 

360(k)) and part 807 (21 CFR part 807). 

FDA may also classify a device 

through ‘‘De Novo’’ classification, a 

common name for the process 

authorized under section 513(f)(2) of the 

FD&C Act. Section 207 of the Food and 

Drug Administration Modernization Act 

of 1997 established the first procedure 

for De Novo classification (Pub. L. 105– 

115). Section 607 of the Food and Drug 

Administration Safety and Innovation 

Act modified the De Novo application 

process by adding a second procedure 

(Pub. L. 112–144). A device sponsor 

may utilize either procedure for De 

Novo classification. 

Under the first procedure, the person 

submits a 510(k) for a device that has 

not previously been classified. After 

receiving an order from FDA classifying 

the device into class III under section 

513(f)(1) of the FD&C Act, the person 

then requests a classification under 

section 513(f)(2). 

Under the second procedure, rather 

than first submitting a 510(k) and then 

a request for classification, if the person 

determines that there is no legally 

marketed device upon which to base a 

determination of substantial 

equivalence, that person requests a 

classification under section 513(f)(2) of 

the FD&C Act. 

Under either procedure for De Novo 

classification, FDA shall classify the 

device by written order within 120 days. 

The classification will be according to 

the criteria under section 513(a)(1) of 

the FD&C Act. Although the device was 

automatically placed within class III, 

the De Novo classification is considered 

to be the initial classification of the 

device. 

We believe this De Novo classification 

will enhance patients’ access to 

beneficial innovation, in part by 

reducing regulatory burdens. When FDA 

classifies a device into class I or II via 

the De Novo process, the device can 

serve as a predicate for future devices of 

that type, including for 510(k)s (see 21 

U.S.C. 360c(f)(2)(B)(i)). As a result, other 

device sponsors do not have to submit 

a De Novo request or premarket 

approval application in order to market 

a substantially equivalent device (see 21 

U.S.C. 360c(i), defining ‘‘substantial 

equivalence’’). Instead, sponsors can use 

the less burdensome 510(k) process, 

when necessary, to market their device. 

II. De Novo Classification 

On December 28, 2016, IlluminOss 

Medical, Inc. submitted a request for De 

Novo classification of the IlluminOss 

Photodynamic Bone Stabilization 

System. FDA reviewed the request in 

order to classify the device under the 

criteria for classification set forth in 

section 513(a)(1) of the FD&C Act. 

We classify devices into class II if 

general controls by themselves are 

insufficient to provide reasonable 

assurance of safety and effectiveness, 

but there is sufficient information to 

establish special controls that, in 

combination with the general controls, 

provide reasonable assurance of the 

safety and effectiveness of the device for 

its intended use (see 21 U.S.C. 

360c(a)(1)(B)). After review of the 

information submitted in the request, 

we determined that the device can be 

classified into class II with the 

establishment of special controls. FDA 

has determined that these special 

controls, in addition to the general 

controls, will provide reasonable 

assurance of the safety and effectiveness 

of the device. 

Therefore, on December 19, 2017, 

FDA issued an order to the requester 

classifying the device into class II. FDA 

is codifying the classification of the 

device by adding 21 CFR 888.3023. We 

have named the generic type of device 

in vivo cured intramedullary fixation 

rod, and it is identified as a prescription 

implanted device consisting of a balloon 

that is inserted into the medullary canal 

of long bones for the fixation of 

fractures. The balloon is infused with, 

and completely encapsulates, a liquid 

monomer that is exposed to a curing 

agent that polymerizes the monomer 

within the balloon creating a hardened 

rigid structure. 

FDA has identified the following risks 

to health associated specifically with 

this type of device and the measures 

required to mitigate these risks in table 

1. 

TABLE 1—IN VIVO CURED INTRAMEDULLARY FIXATION ROD RISKS AND MITIGATION MEASURES

Identified risks Mitigation measures 

Adverse tissue reaction resulting from: .................................................... Biocompatibility evaluation and Labeling. 

• Balloon leakage.

• Device materials.

Infection, including wound complications ................................................. Sterilization validation, Reprocessing validation, Shelf life testing, 

Pyrogenicity testing, and Labeling. 

Bone fracture resulting from: .................................................................... Non-clinical performance testing and Labeling. 

• Device bending, cracking, or fracture.

• Device migration or instability, including initial inadequate fixation.

• Inability to properly deploy or remove device.

Soft tissue damage including transection or laceration of neural, vascular, or muscular structures.Non-clinical performance testing and Labeling. 

Pain and/or loss of function resulting from: ............................................. Non-clinical performance testing and Labeling. 

• Balloon leakage.

• Device bending, cracking, or fracture.


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Federal Register / Vol. 83, No. 111 / Friday, June 8, 2018 / Rules and Regulations 26579 

TABLE 1—IN VIVO CURED INTRAMEDULLARY FIXATION ROD RISKS AND MITIGATION MEASURES—Continued 

Identified risks Mitigation measures 

• Device migration or instability, including initial inadequate fixation.

• Inability to properly deploy or remove device.

Revision .................................................................................................... Non-clinical performance testing and Labeling. 

Electric shock or interference with other electrical devices ..................... Electrical safety testing, Electromagnetic compatibility testing, and Labeling. 

Exothermic reaction leading to tissue injury ............................................ Non-clinical performance testing. 

FDA has determined that special 

controls, in combination with the 

general controls, address these risks to 

health and provide reasonable assurance 

of safety and effectiveness. For a device 

to fall within this classification, and 

thus avoid automatic classification in 

class III, it would have to comply with 

the special controls named in this final 

order. The necessary special controls 

appear in the regulation codified by this 

order. This device is subject to 

premarket notification requirements 

under section 510(k) of the FD&C Act. 

At the time of classification, in vivo 

cured intramedullary fixation rods are 

for prescription use only. Prescription 

devices are exempt from the 

requirement for adequate directions for 

use for the layperson under section 

502(f)(1) of the FD&C Act (21 U.S.C. 

352(f)(1)) and 21 CFR 801.5, as long as 

the conditions of 21 CFR 801.109 are 

met (referring to 21 U.S.C. 352(f)(1)). 

III. Analysis of Environmental Impact 

The Agency has determined under 21 

CFR 25.34(b) that this action is of a type 

that does not individually or 

cumulatively have a significant effect on 

the human environment. Therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required. 

IV. Paperwork Reduction Act of 1995 

This final order establishes special 

controls that refer to previously 

approved collections of information 

found in other FDA regulations and 

guidance. These collections of 

information are subject to review by the 

Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501–3520). The 

collections of information in the 

guidance document ‘‘De Novo 

Classification Process (Evaluation of 

Automatic Class III Designation)’’ have 

been approved under OMB control 

number 0910–0844; the collections of 

information in 21 CFR part 814, 

subparts A through E, regarding 

premarket approval, have been 

approved under OMB control number 

0910–0231; the collections of 

information in part 807, subpart E, 

regarding premarket notification 

submissions, have been approved under 

OMB control number 0910–0120; and 

the collections of information in 21 CFR 

part 801, regarding labeling, have been 

approved under OMB control number 

0910–0485. 

List of Subjects in 21 CFR Part 888 

Medical devices. 

Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs, 21 CFR part 888 is 

amended as follows: 

PART 888—ORTHOPEDIC DEVICES 

■ 1. The authority citation for part 888 

is revised to read as follows: 

Authority: 21 U.S.C. 351, 360, 360c, 360e, 

360j, 360l, 371. 

■ 2. Add § 888.3023 to subpart D to read 

as follows: 

§ 888.3023 In vivo cured intramedullary 

fixation rod. 

(a) Identification. An in vivo cured 

intramedullary fixation rod is a 

prescription implanted device 

consisting of a balloon that is inserted 

into the medullary canal of long bones 

for the fixation of fractures. The balloon 

is infused with, and completely 

encapsulates, a liquid monomer that is 

exposed to a curing agent which 

polymerizes the monomer within the 

balloon creating a hardened rigid 

structure. 

(b) Classification. Class II (special 

controls). The special controls for this 

device are: 

(1) Non-clinical performance testing 

must demonstrate that the device 

performs as intended under anticipated 

conditions of use. The following 

performance characteristics must be 

tested: 

(i) Mechanical testing must be 

conducted on the final device to assess 

burst, abrasion, bending, and torsion in 

static and dynamic conditions. 

(ii) Mechanical testing must 

demonstrate the integrity of the balloon 

including testing for leaks, ruptures, and 

release of cured/uncured material. 

(iii) Performance testing must 

demonstrate that the device can be 

inserted and removed. 

(iv) Performance testing must 

demonstrate the ability, in the event of 

a leak, to remove the uncured material 

from its in vivo location. 

(v) Performance testing must 

demonstrate the reliability and accuracy 

of the curing method used. 

(vi) Thermal safety testing must be 

conducted to evaluate the temperature 

rise during curing. 

(2) Electrical safety, electromagnetic 

compatibility (EMC) testing, and 

electromagnetic interference (EMI) 

testing must be conducted for all 

electrical components. 

(3) All patient-contacting components 

must be demonstrated to be 

biocompatible. 

(4) Performance data must 

demonstrate the sterility and 

pyrogenicity of patient contacting 

components of the device that are 

provided sterile. 

(5) Performance data must validate 

the reprocessing instructions for any 

reusable components or instruments. 

(6) Performance data must support the 

shelf life of the system by demonstrating 

continued sterility, package integrity, 

and system functionality over the 

established shelf life. 

(7) Technological characterization of 

the device must include materials, 

curing agents, and a description of the 

operating principles of the device, 

including the delivery system and 

devices which initiate the curing 

process. 

(8) Labeling must include the 

following: 

(i) A detailed summary of the device 

technical parameters. 

(ii) Information describing all 

materials of the device. 

(iii) Information describing how to 

perform the procedure and use the 

device, including the delivery system 

and devices which initiate the curing 

process, as well as how to remove the 

device and any uncured materials. 

(iv) A shelf life. 

(v) Validated methods and 

instructions for reprocessing any 

reusable components or instruments. 


amozie on DSK3GDR082PROD with RULES
26580 Federal Register / Vol. 83, No. 111 / Friday, June 8, 2018 / Rules and Regulations 

Dated: June 4, 2018. 

Leslie Kux, 

Associate Commissioner for Policy. 

[FR Doc. 2018–12339 Filed 6–7–18; 8:45 am] 

BILLING CODE 4164–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9833] 

RIN 1545–BO43 

Partnership Transactions Involving 

Equity Interests of a Partner 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final rule. 

SUMMARY: This document contains final 

regulations that prevent a corporate 

partner from avoiding corporate-level 

gain through transactions with a 

partnership involving equity interests of 

the partner or certain related entities. 

This document also contains final 

regulations that allow consolidated 

group members that are partners in the 

same partnership to aggregate their 

bases in stock distributed by the 

partnership for the purpose of limiting 

the application of rules that might 

otherwise cause basis reduction or gain 

recognition. This document also 

contains final regulations that may also 

require certain corporations that engage 

in gain elimination transactions to 

reduce the basis of corporate assets or to 

recognize gain. These final regulations 

affect partnerships and their partners. 

DATES: 

Effective Date: These final regulations 

are effective on June 8, 2018. 

Applicability Date: These final 

regulations are applicable on or after 

June 12, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the final regulations, Kevin 

I. Babitz, (202) 317–6852. 

SUPPLEMENTARY INFORMATION: 

Background 

1. Overview 

On June 12, 2015, the Department of 

the Treasury (and the IRS published 

final and temporary regulations (TD 

9722) under section 337(d) of the 

Internal Revenue Code (Code) in the 

Federal Register (80 FR 33402). On July 

8, 2015, corrections to TD 9722 were 

published in the Federal Register (80 

FR 38940–38941) (together with TD 

9722, the temporary regulations). The 

temporary regulations expire on June 

11, 2018. 

A notice of proposed rulemaking 

(REG–149518–03) withdrawing 

proposed regulations under section 

337(d) published in 1992, and 

proposing new proposed regulations by 

cross-reference to the temporary 

regulations, was published in the 

Federal Register (80 FR 33451) on the 

same date as TD 9722. Additionally, on 

June 12, 2015, the Treasury Department 

and the IRS published proposed 

regulations (REG–138759–14) under 

section 732(f) in the Federal Register 

(80 FR 33452) (together with the 2015 

proposed regulations under section 

337(d), the 2015 regulations). 

The Treasury Department and the IRS 

received one comment letter in response 

to the 2015 regulations. Except as 

described below, the commenter largely 

supported the 2015 regulations while 

recommending some minor 

modifications and clarifications to the 

2015 regulations under both section 

337(d) and section 732(f). The comment 

letter is discussed in detail in the 

Explanation of Provisions section of this 

preamble. 

After considering this comment letter, 

this Treasury decision adopts as final 

regulations the rules set forth in the 

2015 regulations under section 337(d) 

(with only minor, nonsubstantive 

clarifications in response to the 

commenter’s request for additional 

certainty regarding certain collateral 

effects) and section 732(f) (without any 

change). However, the Treasury 

Department and the IRS are considering 

publishing a new notice of proposed 

rulemaking to propose more substantive 

amendments to the final regulations 

under section 337(d) and to allow for 

additional public comment with respect 

to these more substantive proposals in 

response to the comment letter, further 

reflection by the Treasury Department 

and the IRS, and concerns raised by 

practitioners. 

2. Regulations Under Section 337(d) 

A. Background 

In General Utilities & Operating Co. v. 

Helvering, 296 U.S. 200 (1935), the 

Supreme Court held that corporations 

generally could distribute appreciated 

property to their shareholders without 

the recognition of any corporate level 

gain (the General Utilities doctrine). 

Beginning with legislation in 1969 and 

culminating in the Tax Reform Act of 

1986, Public Law 99–514 (100 Stat. 

2085) (the Act), Congress repealed the 

General Utilities doctrine by enacting 

section 336(a) to apply gain and loss 

recognition to liquidating distributions. 

Under current law, sections 311(b) 

and 336(a) require a corporation that 

distributes appreciated property to its 

shareholders to recognize gain 

determined as if the property were sold 

to the shareholders for its fair market 

value. Additionally, section 631 of the 

Act added section 337(d) to permit the 

Secretary to prescribe regulations that 

are necessary or appropriate to carry out 

the purposes of the General Utilities 

repeal, ‘‘including regulations to ensure 

that [the repeal of the General Utilities 

doctrine] may not be circumvented 

through the use of any provision of law 

or regulations.’’ 

After the enactment of sections 311(b) 

and 337(d), the Treasury Department 

and the IRS became aware of 

transactions in which taxpayers used a 

partnership to postpone or avoid 

completely gain generally required to be 

recognized under section 311(b). In one 

example of this transaction, a 

corporation entered into a partnership 

and contributed appreciated property. 

The partnership then acquired stock of 

that corporate partner, and later made a 

liquidating distribution of this stock to 

the corporate partner. Under section 

731(a), the corporate partner did not 

recognize gain on the partnership’s 

distribution of its stock. By means of 

this transaction, the corporation had 

disposed of the appreciated property it 

formerly held and had acquired its own 

stock, permanently avoiding its gain in 

the appreciated property. If the 

corporation had directly exchanged the 

appreciated property for its own stock, 

section 311(b) would have required the 

corporation to recognize gain upon the 

exchange. 

In response to these types of abusive 

transactions, the Treasury Department 

and the IRS issued Notice 89–37, 1989– 

1 CB 679, on March 9, 1989. Notice 89– 

37 announced that future regulations 

under section 337(d) would address the 

use of partnerships to avoid the repeal 

of the General Utilities doctrine. 

On December 15, 1992, the Treasury 

Department and the IRS published a 

notice of proposed rulemaking under 

section 337(d) (PS–91–90, REG–208989– 

90, 1993–1 CB 919) in the Federal 

Register (57 FR 59324) addressing 

abusive partnership transactions 

involving stock of a corporate partner 

(the 1992 proposed regulations). The 

1992 proposed regulations set forth a 

deemed redemption rule and a separate 

distribution rule to prevent a corporate 

partner from avoiding corporate-level 

gain through transactions with a 

partnership involving stock of the 

corporate partner, stock of the partner’s 

affiliate, and other equity interests in 

the corporate partner or affiliate. The 

1992 proposed regulations treated a 

corporation as an affiliate of a partner at 


amozie on DSK3GDR082PROD with RULES