April 29, 2020

An editorial by Robert J. Kerwin
Originally publish on DOTMed Health Care Business News

With a big tip of the hat to Captain Obvious, our hospitals and health delivery organizations are heroically dealing with a terrible pandemic the likes of which we have no real comparison for in our lifetime. As Healthcare Business News has reported, hospitals have incurred substantial financial losses during the pandemic. Two hospitals in West Virginia recently closed. Rural hospitals are particularly at risk, and hospitals were already spending $25.7 billion more than necessary on supply chains.

While there are plans afloat to resume outpatient and inpatient operations for many hospitals, there are no magic solutions to ensure hospitals will be able to manage their future operational costs. For many, buying new equipment will not be the optimal choice.

Now, more than ever, hospitals and health delivery organizations need choices when it comes to safely servicing their medical equipment. For some, this means using their trained in-house teams to service medical equipment. For others, the right choice is perhaps to use the original equipment manufacturer, particularly if the OEM originally bundled the equipment purchase with services. For still others, the right choice is to use a trained independent service organization. ISOs can represent a savings of as much as 50% when compared to the OEM service charges. In its 2018 report on servicing, the FDA noted that the continued availability of ISOs was critical to the healthcare infrastructure.

But even in the midst of a pandemic, ISOs are being denied service information access. One highly regarded ISO recently reported to IAMERS that its requests to simply change an IP address were being denied. Another reported that equipment manuals issued by a leading manufacturer are being released on a per-request basis to its own employees and that no actual manuals are being physically delivered. Though we have learned that some providing ventilators have cooperated, by and large, ISOs who are maintaining some of the diagnostic equipment, are still not being provided service access information. Perhaps recognizing the seriousness of the situation, on April 20, 2020, a Right to Repair Bill for digital electronic equipment was filed in the General Assembly of Pennsylvania. See House Bill No. 2326. We will continue to encourage “right to repair” filings on a state and federal level. They are especially needed at this time.

Manufacturers are working with stakeholders on myriad standards and best practices ranging from cyber security to “good refurbishment practices” to “post market vigilance”. Their representatives speak openly and sincerely about possible national and international adoption of these standards and best practices for risk management and safety. They have spent countless hours devoted to collaborative endeavors aimed at advancing the industry and meeting patient safety needs, but there are still very big elephants in the room.

Absent from many of the standards and white papers for device purchase, repair and refurbishment, are sections addressing concretely how to: (i) participate in manufacturer training on device repair; (ii) obtain manuals and technical information; (iii) product alerts/updates; and (iv) service access information including service keys. The reasons for the omission of this information range variously from claims of trade secrets to cyber security.

With all this good work, failing to address these key concerns and for all practical purposes locking ISOs out does not seem to meet the American National Standards Institute or other standards organizations requirements for openness, lack of dominance and coordination and harmonization of standards. The standards should not cause one critical party within the healthcare ecosystem to be unable to do its job.

One might expect during a pandemic that a moratorium would be reached with regard to service access information. However, no industry-wide moratorium has been voluntarily reached. Some larger hospitals may have successfully negotiated, pre-pandemic, for access to service information, but we are hearing that, even at this time in our history, there has been little cooperation afforded smaller healthcare institutions with their financial challenges and ISOs.

And yet, some medical device trade associations, their lawyers and lobbying firms, business and governmental affairs consultants have reported in their first quarter 2020 Lobbying Reports (filed with the clerk of the U.S. House of Representatives) significant expenses related to lobbying activities for their manufacturer members. AdvaMed reports expenses related to lobbying activities in the first quarter were $1,400,000. Separately, it appears several other firms filed reports for this quarter advising that they were lobbying on behalf of AdvaMed. NEMA, of which MITA is a division, reported expenses related to lobbying activities for the first quarter were $670,000. Some of the specific lobbying issues for both trade associations are reported as related to third-party servicing of medical devices.

These trade associations are, of course, free to lobby the Congress and others. I am not a mathematician but when I totaled the expenses related to lobbying by AdvaMed and NEMA and various firms and business consultants, the total for the first quarter appeared to be $2,800,000. Could their energies have also been used to come up with solutions for, among other things, the elephants in the room? Many manufacturers have multi-vendor contracts and face some of the same challenges as ISOs when servicing equipment that they did not manufacturer. IAMERS has been informed that some administering multi-vendor contracts would welcome cooperation when servicing other manufacturers’ equipment.

Rumors abound about the efforts of some to renew their interest in further regulating ISOs. One rumor suggests that around the time of discussions on the upcoming user fee funding package reportedly beginning later this year, some will call again for the further regulating of ISOs. Meanwhile, there is the pandemic and it appears that a responsible referee is what is needed to ensure that smaller healthcare institutions and independent servicers are provided necessary information in order to safely service devices.

While the FDA has led the way and continues to lead the way worldwide in patient safety, its goals are rightly to focus on patient safety and not on sorting out de facto competition issues with some of the largest companies in the world or in determining what device equipment information is/is not a protected “trade secret”. Accordingly, IAMERS calls for a moratorium during this pandemic on limiting access to medical equipment servicing information. IAMERS recommends the assignment by the Federal Trade Commission of one or more liaisons to address these concerns. Though this particular liaison role is new to the FTC on this matter, memorandums of understanding have been previously reached by the FDA and FTC on matters of importance.

About the author: Robert J. Kerwin is general counsel for IAMERS, the International Association of Medical Equipment Remarketers and Servicers.