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Hoops and Hurdles on Path to Innovation

“All of our products launch in Europe first,” said Scott Huennekens, president and chief executive officer of San Diego-based Volcano Corp., whose products include catheter-based imaging and ultrasound systems that doctors insert into patients to view the inside of arteries. “The FDA’s approval times are taking much longer, trials are becoming more costly and, most importantly, the process is becoming harder to predict.”

Volcano, with 2010 revenues of $294.1 million, has three products currently pending U.S. Food and Drug Administration approval, Huennekens said. All of them are already on the market in Europe, and two are also selling in Japan. “That innovation is not being made available to U.S. patients,” he said.

The FDA’s slow and unpredictable process of approving medical devices is hurting the San Diego economy and depriving the region of hundreds, if not thousands, of high-paying jobs, local biotech industry leaders say.

Because of the longer-than-expected FDA timelines and other difficulties in dealing with the federal agency, device companies are routinely choosing to launch their products first overseas where they say it is easier to deal with regulatory agencies.

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In fact, launching first in Europe is becoming a stipulation of venture capital firms who want a quicker and more reliable return on their early-stage investments, said David L. Gollaher, president and CEO of the San Diego-based California Healthcare Institute, a nonprofit trade group and lobbying force for the state’s biomedical companies.

“The whole idea of regulatory risk is something that investors take into account more and more,” Gollaher said. “If I’m a venture capitalist and you come to me with a promising drug for diabetes or weight loss, I’d probably say, ‘That’s great, but the FDA has a record of requiring extremely expensive clinical trials. The regulatory risk is just too great.’ ”

Already feeling the pinch of a sluggish economy, medical device companies are becoming more vocal about the need for FDA, led by commissioner Margaret Hamburg, to improve its processes so products can more quickly move to the market.

Exporting Jobs

When business shifts overseas, inevitably so do jobs. “It’s a trend that’s disturbing if you just think about the future of American business,” Gollaher said. “Any time that you’re exporting jobs, it makes you raise the question: Why are we doing that and is it necessary?”

Most medical devices ranging from scalpels to surgical needles go through a system called the 510(k) process for approval, while riskier devices such as heart valves and pacemakers go through a process known as PMA, or Premarket Approval. Clinical data to show safety and efficacy are increasingly required for 510(k) clearances, Gollaher said, and the FDA is more often asking for complex information that adds to the time and cost of approval.

In an effort to urge reform, San Diego-based Biocom, a nonprofit membership organization for the life sciences industry, is seeking to quantify the economic impact of FDA delays. An informal survey this summer of member companies’ CEOs revealed that more than 1,700 potential jobs — with an average salary of $72,000 — were not realized in 2010 due to product holdups at the FDA, a Biocom spokeswoman said. The full survey results will be released this fall.

Biocom is asking for leadership on FDA reform to come from the White House, said the organization’s President and CEO Joseph Panetta. In explaining why the FDA has become so problematic for medical device and drug companies, Panetta said that during the past 15 years the government agency has become overworked. It has taken on a vastly expanded role regulating food safety and has added tobacco to its purview “without a commensurate increase in budgets and resources,” he said.

At the same time, there are greater political pressures on FDA investigators, creating a risk-averse environment, he said. “Whenever something goes wrong, Congress comes down hard on the FDA and its leadership,” Panetta said. “No one wants to be blamed.” But as a result, the approval process isn’t keeping up with advances in science and technology.

Panetta said that biopharmaceutical companies also are being held back by the FDA, noting several local drug companies including publicly held Orexigen Therapeutics Inc.

Regulatory Setback

San Diego-based Orexigen saw its shares plunge in February after the FDA surprised analysts by demanding more clinical trial data before Orexigen’s first product, a diet pill called Contrave, could go on the market. CEO Michael Narachi, citing concerns that the FDA’s actions are holding up “much needed treatment options for obese patients in the U.S.,” has put on hold any further clinical development until the company has identified a clear path to regulatory approval.

Still, Gollaher said, “there’s more of a crisis with medical devices.” Just ask NuVasive Inc., one of San Diego’s largest public companies and a major player in the global spinal device industry. The company has four products in the 510(k) process, “on much longer timelines than we’ve ever seen before,” said Keith C. Valentine, NuVasive president and chief operating officer.

“The challenge is that the FDA has been introducing questions and changing the process in midreview,” Valentine said. “It makes it difficult to figure out what’s coming next. It’s like moving the target after the arrow has already been launched.”

The end result: “It’s slowed down our ability to bring innovative products to the market,” he said. “Whether it’s medical devices or Pharma, it’s all had the same impact. Innovative products are taking longer to come to the U.S.”

Valentine said that he’s pleased the FDA has made itself more visible to the industry and is willing to amend its 510(k) process. The agency in early 2011 released a list of 25 actions it will take this year to foster device innovation and improve patient safety. Those actions included doing a better job of sharing knowledge among staff and staying abreast of scientific advancements.

In late July, the nonprofit Institute of Medicine said the FDA should abandon its 510(k) process altogether and start from scratch. But the California Healthcare Institute, among other groups, said such a measure would be far too drastic and detrimental to the industry, and instead is urging improvements based on “clarity, consistency and predictability in the device review process,” the organization said.

Valentine’s worry is that reform has become such a large-scale issue that the FDA doesn’t know where to begin. “We’re feeling an agency that’s uncertain where the process is going to go,” he said. “And it’s going to be even more of a challenge in 2012 and 2013 with further changes to health care policy.” In the meantime, he said, “it’s not just new technology that’s not being made available to new patients, but it’s also the jobs and innovation side that’s suffering.”

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