Guest Column | December 19, 2016

Reconditioned Devices: Potential Regulatory Changes Create Tension Between Third-Party Entities, OEMs

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By Peter Ohanian, Halloran Consulting Group

In recent days, there’s been an uptick in the conversation surrounding the refurbished medical device market. Much of the buzz concerns changes to quality system regulation (QSR) for third-party entities and original equipment manufacturers (OEMs) operating in the refurbished equipment market. These manufacturers have largely been exempt from existing QSR requirements under CFR part 820, due to a 1998 decision by FDA to exclude refurbishers and servicers. The 1998 decision came after a thorough evaluation of the regulation of device servicing, refurbishing, and remarketing; so why is this rule reemerging?

First, in March of 2016, the FDA released a request for comments regarding its draft rule entitled Refurbishing, Reconditioning, Rebuilding, Remarketing, Remanufacturing, and Servicing of Medical Devices Performed by Third-Party Entities and Original Equipment Manufacturers. This rule is an attempt by FDA to address concerns over quality, continued effectiveness, and patient safety. Bringing attention to a dormant subject, FDA noted that “possible public health issues arising from these activities include ineffective recalls, disabled device safety features, and improper or unexpected device operation.” If these “possible issues” are found to be actual issues, FDA may decide to strengthen regulatory requirements, bringing major changes to the refurbished medical device market.

The second element bringing attention to this subject is a report released this fall by Technavio, which predicts the global market for refurbished medical devices will reach $11.9 billion by 2021, driven mainly by advancements in new medical equipment technology, such as diagnostic medical imaging equipment, and increased demand for affordable equipment, especially in developing countries. In such a huge market with growth on the horizon, both OEMs and third-party entities are jostling for position. In this arena, any changes to regulatory requirements could make or break some companies, so competitors in the space need to remain nimble, ready to make any necessary changes resultant of a regulatory overhaul.

While everyone is concerned about protecting patient safety, there has been some discord between OEMs and third-party entities. FDA held a two-day workshop in October at the its Silver Springs, MD, headquarters and, according to a report by the AAMI Foundation, during the meeting between OEMs, third-party vendors, and hospital-based healthcare technology management (HTM) professionals the “tension in the room was sometimes palpable.” 

Some OEM concerns voiced in the Refurbishing, Reconditioning, Rebuilding, Remarketing, Remanufacturing, and Servicing of Medical Devices Performed by Third-Party Entities and Original Equipment Manufacturers request for comments represent a genuine concern for quality and public health issues. For example, one manufacturer of endoscopes noted that some (not all) third-party entities fail to conform to the original product specifications when reconditioning, servicing, repairing, and/or remanufacturing products. That commenter includes a list of device failures allegedly arising from the use of low-grade materials, replacement parts that are not functionally equivalent or superior to the OEM replacement parts, use of parts that are incompatible with the validated instructions for use, and unqualified personnel who lack proper knowledge, training, and expertise of the device instructions for use (IFU).

Third-party vendors and HTM professionals have countered OEM claims by pointing to research conducted by ECRI Institute, which indicates that the safety concerns raised by OEMs are anecdotal and that adverse events related to repair or refurbishment are statistically insignificant. The study — which included a search of the FDA’s Manufacturer and User Facility Device Experience (MAUDE) database, ECRI’s internal databases, and PubMed data — resulted in 96 reports of safety and/or performance issues related to refurbishment out of 2,115,523 records (0.005%).  As such, independent service organizations (ISOs) see the push for increased regulation as a way to slow or reduce competition across their industry. 

ISOs also allege that a lack of OEM transparency has contributed to the cases of product non-conformance, due to difficulties accessing well-written service manuals. Currently, only manufacturers of radiation-emitting devices are required to provide assembly, installation, adjustment, and testing documentation to end users, per 21 CFR 1020.20(g). At least one trade group, the International Association of Medical Equipment Remarketers and Servicers (IAMERS), believes that this mandate should be expanded to all medical devices.

For its part, the FDA appears to be agnostic view regarding claims of safety issues connected to refurbished equipment, as evidenced by the agency’s request for comment:

  • “What evidence exists regarding actual problems with the safety and/or performance of devices that result from these activities? Specific examples should be submitted”
  • “We are interested in knowing if these activities are more difficult or riskier to perform on certain devices versus others. Please cite specific examples in your response, along with an explanation of the source of this particular complexity.”  

It is hard to overlook the financial gain OEMs stand to realize if ISOs are regulated out of business. Per the AAMI’s comment to the FDA:

“From the perspective of healthcare delivery organizations, they believe that more regulation or other restrictions on service will increase the cost of healthcare. Increased costs could result if such regulations further limit their access to competitively priced service and parts; increase the cost of refurbished equipment or third-party repairs; create a market environment that results in monopoly power for parts and service by OEMs; or impose additional requirements on healthcare delivery organizations that sell their own third-party service and repair to other healthcare delivery organizations (note: in these roles, healthcare delivery organizations become third-party service organizations). For facilities with access to expert on-site technical support (either employees or contracted ISO on-site staff), HTM professionals believe their facilities save significant dollars relative to a typical full service contract from the OEM.”

The comment period closed on June 3, 2016, with 176 comments from stakeholders and the public at large. While any sort of decision is not expected for at least a year, it remains unclear how the incoming presidential administration and changes in the leadership of the Department of Health and Human Services (HHS) may or may not affect the FDA’s approach to this issue.  It will, however, be interesting to see the Agency’s response once the comments have been reviewed and the dust is settled, especially concerning where the agency will draw the line on regulation and requirements across the different players — OEMs, third-party entities, hospitals, healthcare facilities, and government agencies.

Quality and patient safety must always be core principles guiding the design, creation, and regulation of devices used in patient care. However, cost and accessibility are realities that cannot be ignored. Ultimately, competition within the market, balanced with adequate quality oversight, should result in the best outcomes for patients, consumers, and the industry as a whole.

For additional reference, please see these transcripts from the October 27 and October 28 FDA public meetings. 

About The Author

Peter Ohanian joined Halloran Consulting Group in 2015. He has more than 35 years of industry experience in medical device quality assurance and regulatory affairs. He has an extensive background establishing compliance programs and developing product clearance strategies.

Prior to joining Halloran, Peter was the Vice President of Quality and Regulatory Affairs for Philips Healthcare, providing leadership and strategic direction for their patient monitoring and clinical informatics business. Peter also held similar roles with ZOLL Medical Corporation and Visualization Technology Corporation and has served on the Board of Directors for MassMedic.

Peter earned a bachelor’s degree in biology from Boston College and a master’s in engineering management from Northeastern University.  He also is Regulatory Affairs Certified by the Regulatory Affairs Professional Society.