How Notified Body Notifications Could Handicap Parts of the Medtech Industry

POLICY & REGULATION COMMERCIAL R&D Challenging patent landscape for J&J gets a leg-up in robotics, p. 5 How medtech is muscling in on digital health, p. 6 rheumatoid arthritis market, p. 10

Medtech Issue 84 Pharma Intelligence Informa

March 5, 2018 medtech.pharmaintelligence.informa.comInsight

How Notified Body Notifications Could Handicap Parts Of The Medtech Industry

AMANDA MAXWELL [email protected]

re we heading toward a scenario that might enable the system to move some. At the moment, there is no sign of in the EU where some parts of forward without too much disruption to how the European Commission and EU A the very heterogeneous medtech product supply and access, Bisazza said. member states intend to inform the sec- industry can move forward and others On the other hand, if it is a handful of tor about progress in assessing notified cannot? That is among the concerns in smaller notified bodies, or notified bodies bodies for notification under the new industry due to the effectively random with a narrow remit, that are the first to be regulations. This is something MedTech coverage of scope that could result from designated, then only part of the industry Europe wants to see urgently addressed. the appointment of notified bodies on a will be able to move forward. Others will "If we reach the final moments of the first-come, first-served basis. have to wait for the designation of notified transition period and some codes are not The specific makeup of the first wave bodies that are active in their specific field, covered, that points to parts of the indus- of notified bodies to be designated un- he warns. That is more likely to create de- try where the new regulations can't be der the Medical Device and IVD Regula- lays and bottlenecks in certain areas that applied," Bisazza told Medtech Insight. He tions will be an important tell as to how could impact industry and patients. says industry is urging the Commission effectively the new system will be able to The first-come, first-served approach is and member states to act to avoid a situ- move forward, explained Oliver Bisazza, egalitarian, but it may leave too much to ation where some product types must be MedTech Europe's director of regulations chance on which kinds of devices can be removed from the marketplace. and industry policy for medical devices certified first, Bisazza argued. Although and IVDs, in a recent interview. he conceded that a different approach, POSSIBLE EXTENSIONS "If we reach the final moments of the where the designating authorities pri- Some point out that an extension exists transition period and some codes are not oritized review of notified bodies based in the new regulation until May 2024 for covered, that points to parts of the indus- product areas, for example, cardiology, certain products that comply with the try where the new regulations can't be would also create delays. current medical device directives. This applied," MedTech Europe's Oli- What is certain, he says, is could make the order in which notified ver Bisazza says. that MedTech Europe, industry's bodies are designated less concerning. If only a handful of notified largest EU trade association for But the unclear conditions under which bodies are among the first to CLICK device and IVD manufacturers, the extension derogations apply may be designated, but they are all Check out our in-depth intends to monitor whether no- make it difficult for many companies to interview with MedTech large notified bodies that able Europe's Bisazza on tified bodies that are being no- make use of them. to assess a huge range of prod- notified body issues at tified are going to cover all the http://bit.ly/2F20IWG. ucts in the medtech area, then scope designation codes or just Published online 02/23/18

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Don’t wait – tap into the depth and breadth of market knowledge that only Medtech Insight provides with your free copy of Medtech Insight 100 Medtech Insight Rankings Pharma intelligence | 6 9 10 inside: explore more: Cover / How Notified Body Notifications Could Handicap exclusive online content Parts Of The Medtech Industry – EU industry association MedTech Europe explains how the first-come, first-served approach to notified body notification threatens to Kerching! for change disadvantage some in industry. http://bit.ly/2F0u2gk EDITORS' PICKS An industry survey shows that medtech companies are 5 J&J Adds To Robotic Focus With French Firm Acquisition – reassessing their business models and those who make Johnson & Johnson has purchased Orthotaxy, a French the change effectively are reaping rewards. developer of software-based surgical technologies.

5 Dental Supply Companies Fight Collusion Charges – Starts & Stops The US Federal Trade Commission has filed an antitrust http://bit.ly/2CM5ohG complaint against the three largest US-based dental supply Find out which clinical trials were initiated and companies. The government alleges that the companies completed in our regular round-up. conspired to refuse to offer collective discounts to dental provider groups. The companies issued strong denials.

Blockchain traceability 6 "Alice" In Patent Land: Finding Patentable Digital Health http://bit.ly/2F8XIev Innovations Is No Easy Task – While the mobile health Blockchain technology is most often associated with sector and digital health in general is poised for a major cryptocurrencies but it has a lot to offer to the medtech boom, a 2014 case, Alice Corp. v. CLS Bank International, space as a tool to enhance traceability and address new continues to be a major hurdle for manufacturers wanting to EU regulatory requirements, attorney Lydia Torne writes. patent their software. While there are some recent positive trends, attorneys recommend caution and proactive steps to make the best of the current patent environment. More on notified bodies http://bit.ly/2HRWbId POLICY & REGULATION More from MedTech Europe's Oliver Bisazza on 7 One UK Notified Body To Be Phased Out This Year As It challenges for device firms with the EU notified body Moves To Sweden – Notified bodies are busy repositioning designation process. themselves this year in the light of Brexit. One UK notified body is relocating to Sweden, but it is playing down Brexit and emphasizing the benefits of centralization. Device Week http://bit.ly/2y4lpgk 7 India’s Top Regulator Relieved Of Post; Temporary Head In Place – India has appointed a temporary head Our weekly podcast, where Medtech Insight journalists for its Central Drugs Standard Control Organization, after discuss topics they are covering that impact the device terminating GN Singh’s position. and diagnostics sector. 8 Eurasian Union Medtech Harmonization Likely To Be medtech.pharmaintelligence.informa.com Delayed, Says Russian Industry Group – The January 2022 entry-into-force date of a Eurasian Economic Union- wide regulatory system dominates thinking in Russia and the other EAEU member states. But differential progress

medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 3 Medtech insight has meant that a deadline extension is now working its way DAVID FILMORE @MEDTECHDAVID onto the agenda, observes Sergey Vanin, head of IMEDA, [email protected] the Russian industry association. TINA TAN @MEDTECHTINATAN [email protected] 9 FDA Awash In Adverse Events: All-Time High Of 1.5 SHAWN M. SCHMITT @MEDTECHSHAWN Million MDRs Reported In 2017 – US FDA statistics shared [email protected] with Medtech Insight show that the number of Medical REED MILLER @MEDTECHREED Device Reports sent to the agency dramatically rose last year, [email protected] both in individual and summary formats. Might the agency's AMANDA MAXWELL @MEDTECHAMANDA upcoming Voluntary Malfunction Summary Reporting [email protected] Program slow the overall number of MDRs this year? MARION WEBB @MEDTECHMARION [email protected] 19 Labs File Suit Against US Government In Dx Pay-Rule SUE DARCEY @MEDTECH_INSIGHT Case – The American Clinical Laboratory Association last [email protected] week requested summary judgment in federal court against FERDOUS AL-FARUQUE @MEDTECH_DANNY the US Department of Health and Human Services over a [email protected] Medicare final rule setting clinical diagnostic laboratory test ELIZABETH ORR @ELIZABETHJORR [email protected] reimbursement rates. CATHERINE LONGWORTH @MEDTECHCATE R&D [email protected] ASHLEY YEO @ASHLEYPYEO 10 Bioelectronics, Imaging Fortify Medtech's Defense [email protected] Against Rheumatoid Arthritis – As rheumatoid arthritis MAUREEN KENNY @SCRIPREGMAUREEN treatment improves in the biologics era, patients need [email protected] fewer joint replacements. Instead, they now require more NEENA BRIZMOHUN @SCRIPREGNEENA closely monitored, agile care, in the face of a growing [email protected] shortage of qualified rheumatologists. These demands help VIBHA SHARMA @SCRIPREGVIBHA propel digital health applications, bioelectronic devices and [email protected] novel imaging modalities into the medtech spotlight. JANET HANIAK SENIOR DESIGNER GAYLE REMBOLD FURBERT DESIGN SUPERVISOR COMMERCIAL RICHARD FAINT HEAD OF MEDTECH 15 Roche To Improve Real-World Cancer Data Extraction [email protected] With Flatiron Buy – Deal reflects regulatory-grade PHIL JARVIS MANAGING DIRECTOR real-world evidence's increasing role in drug discovery, Editorial office: development, commercialization and reimbursement. 52 Vanderbilt Avenue, 11th Floor, New York, NY 10017 phone 240-221-4500, fax 240-221-2561 16 Sinclair Drops InstaLift US Distributor – Sinclair Pharma CUSTOMER CARE: is bringing an early end to a four-year contract with 1-888-670-8900 OR 1-908-547-2200 ThermiGen LLC, the exclusive US distributor of its non- FAX 646-666-9878 surgical "one-stitch" facelift Silhouette InstaLift following [email protected] lackluster re-order rates. © 2018 Informa Business Intelligence, Inc., an Informa company. All rights reserved. 16 Novacyt Confident Of Further APAC Growth – Clinical No part of this publication may be reproduced in any form or diagnostics firm Novacyt is confident of further growth in incorporated into any information retrieval system without the Asia-Pacific after sales in China exceeded expectations. written permission of the copyright owner. 17 Medicare Drops Registry Requirement In ICD Coverage Policy – The new Medicare coverage policy for implantable cardioverter defibrillators, the first revision since 2005,  join the conversation incorporates MRI-compatible devices, tweaks some patient criteria, removes the national registry requirement, and We are tweeting, chatting, liking and sharing the latest adds a new requirement for "shared decision-making" prior industry news and insights from our global team of to implanting an ICD in certain patients so the patients editors and analysts — join us! understand their options. @Medtech_Insight

4 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � EDITORS’ PICKS� J&J Adds To Robotic Focus With French Firm Acquisition ELIZABETH ORR [email protected]

ohnson & Johnson is building on its company group chair, DePuy Synthes. ed to hit the market in 2020 (Also see "Exec efforts to enter the growing surgical Orthotaxy, founded by robotics entre- Chat: How Verb Surgical Will Deliver On Sur- J robotics market with the purchase preneur Stéphane Lavallée, also designs gery 4.0" - Medtech Insight, 14 Nov, 2017). of a French firm that focuses on surgical and develops computer-assisted plat- Romer said that while products from robots for orthopedic operations. forms. The company's 16 employees will both Verb Surgical and Orthotaxy were The medtech giant announced Feb. continue their research from their current key parts of J&J's digital product portfolio, 20 that its subsidiary, Apsis SAS, has headquarters in Grenoble, France, as part they would remain distinct efforts. The purchased privately held company Or- of J&J Medical Devices' R&D organization, company plans to broaden Orthotaxy's thotaxy for an undisclosed sum. Or- Romer said. use across the range of orthopedic dis- thotaxy makes software-enabled surgical This isn't J&J's first venture into robot-as- orders, while Verb Surgical is focused on technologies. It's now developing a surgi- sisted surgery. The company announced a general surgery. cal robot for use in total and partial knee collaboration with Google parent compa- A recent report from Meddevicetracker replacement surgeries, which J&J hopes ny Alphabet in March 2015. The resulting projected that the global market for robot- can someday be used for a range of or- joint venture, Verb Surgical, is developing assisted surgery would rise from $3b in 2016 thopedic surgeries. a digitally-enabled surgery system that is to $5.3b by 2021. (Also see "Rivals Catching J&J's goal is to develop an advanced intended to give surgeons access to ad- Up To Intuitive Surgical In Fast-Growing, Fast- orthopedic surgery platform "that is cost vanced technologies that can help make Innovating Robotic-Assisted Devices Market" effective, time efficient, and user-friendly surgeries more repeatable and less vari- - Medtech Insight, 10 Nov, 2017.) in a variety of care settings while showing able around the world. The firm has made improved outcomes," said Ciro Romer, a fully functional prototype that is project- Published online 2/22/18 Dental Supply Companies Fight Collusion Charges ELIZABETH ORR [email protected]

merica's largest dental supplies er concessions from the manufacturers. spiracy by February 2013. The arrange- companies have strongly denied FTC says Benco, Schein and Patterson ment continued at least through 2015, A US Federal Trade Commission refused to work with these groups. the complaint says. (FTC) allegations that the companies con- But Patterson and Schein have both dis- "The distributors feared that buying spired to refuse to provide discounts to puted the charges and announced plans to groups would drive down prices and dental practice buying groups. defend themselves. Patterson described threaten their profit margins, and they The commissioners voted 2-0 Feb. 12 the allegations as "meritless." Benco, which sought to prevent independent dentists to issue an antitrust complaint against is the only of the companies to be privately from obtaining greater bargaining power Benco Dental Supply Company, owned, has declined to comment. through Buying Groups," the complaint Henry Schein Inc., and PattersonCos. "Henry Schein was a leader in supply- recounts. "They also recognized that Inc.. The companies named in the coming dental buying groups, has consistently group purchasing organizations had led plaint control more than 85% dental sup- done business with dental buying groups, to lower prices and profit margins for dis- plies sold through distributors, and 61% has a dedicated team to serve dental buy- tributors in the medical supplies indus- of all dental supplies sold, FTC says. They ing groups, and never entered into an try, and they feared the same fate for the deal in devices and equipment including agreement with others regarding pricing or dental products industry." gloves, cements, sterilization products any refusal to do business with dental buy- Additionally, the conspirators allegedly and dental chairs. ing groups," the Schein statement reads. agreed not to offer discounts to buying Over the last decade, mounting groups comprised of members of state competitive pressures and lowered re- CONSPIRACY SAID TO dental associations in Texas and Arizona. imbursement rates have driven many BEGIN IN 2012 Senior executives at all three companies independent dentists to join buying According to FTC, Benco and Schein had discussed an arrangement not to provide groups to leverage their collective buy- agreed not to sell to buying groups by discounts to, or otherwise contract with, ing power to obtain discounts and oth- July 2012, and Patterson joined the con- independent dentist buying groups, FTC medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 5 � EDITORS’ PICKS�

alleges. The agreement was monitored ing careful not to cross any boundaries, khart, which sells dental supplies across through a series of private interfirm com- like collusion.” the western US, is the fourth largest full- munications, the complaint says. FTC says the agreement between the service distributor in the nation. It refused The emails excerpted in the complaint companies "unreasonably restrained" to join the conspiracy and continued to show company employees repeatedly price competition for dental products; offer discounts to buying groups, the discussing the decision not to sell to buy- undermined the ability of independent complaint says. ing groups. In one 2015 email, a Benco dentists to obtain lower prices and dis- FTC is asking the court to tell the com- exec told a sales representative, "We counts; and deprived independent den- panies to stop the behavior alleged in the don’t allow [volume discount] pricing un- tists of the benefits of vigorous compe- complaint. The commission further wants less there is common ownership. Neither tition. The complaint further says the the companies to provide annual reports Schein nor Patterson do either." companies reduced the products avail- on any communication with competitors At times the emails' authors seemed able to dental buying groups, and elimi- to an independent monitor for a period aware of possible legal issues. For ex- nated the competitive bidding process of up to 15 years. ample, one Schein employee told their for sales to the buying groups. An administrative trial is scheduled to manager in an Oct. 9, 2013, email that Benco is also charged with violating the begin Oct. 16. they'd spoken to a Benco employee FCT Act's Section 5 by inviting Burkhart about buying groups and noted, "I’m be- Dental Supply to join the conspiracy. Bur- Published online 2/26/18

'Alice' In Patent Land: Finding Patentable Digital Health Innovations Is No Easy Task

FERDOUS AL-FARUQUE [email protected]

igital-health companies must adopt proactive, creative pat- D ent strategies, including an approach that emphasizes hardware even if software is the innovation, in the current challenging intellectual property environment, attorneys say. A primary reason for the challenges is a case called "Alice." According to legal experts, the prec- edents from that case could make it very hard for new device-makers in the digital health space to patent software. Although very recent case law suggests a potential for positive trends toward better protections of health software

patents, attorneys say, caution is needed ImageFlow Shutterstock: when moving to market such products or making acquisitions in the space. ing digital health sector. (Also see "2018 An "Supreme Court Overturns Personalized Inflection Point For mHealth After An Active Medicine Patents, Creating Confusion In CAN OF WORMS Year" - Medtech Insight, 8 Jan, 2018.) Diagnostics Realm" - Medtech Insight, 26 In 2014, the Supreme Court of the United In the Alice opinion, the Supreme Mar, 2012.)Based on that and other prec- States made a landmark unanimous rul- Court turned to a previous, diagnostics- edents, the court ruled that electronic ing on what can be patented and what focused case called Mayo v. Prometheus methods and computer programs for can't ("patentable subject matter") in the where it determined abstract ideas could financial-trading systems were not con- case of Alice Corp. v. CLS Bank Interna- not be patented if they are only using sidered patentable because they were tional. The case could have serious con- specialized tools to process information abstract ideas. It developed a two-step sequences for companies in the burgeon- that could be done by people. (Also see CONTINUED ON PAGE 20

6 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � POLICY & REGULATION �

One UK Notified Body To Be Phased Out This Year As It Moves To Sweden

AMANDA MAXWELL [email protected]

ntertek has announced that it submitted it application for noti- the UK and the Dutch authorities, again to navigate the potential fied body status under the EU Medical Devices Regulation to threat ahead with Brexit. I the Swedish Medical Products Agency in January 2018. The Intertek decision means that there will be four notified Also, as part of its move to centralize its notified body medical bodies left in the UK of the original five. Besides BSI and UL, function, it is also moving its European notified body medical ac- Lloyd's Register Quality Assurance and SGS UK also have notified tivities to Intertek Semko in Kista, Sweden. As a result, Intertek's bodies designated under the current Medical Devices Directive. UK notified body, Amtac Certification Services, will be gradually The four that will be left are notified to test products under the phased out and closed by July 1, 2018. IVD Directive as well as the Medical Devices Directive, whereas Am- A spokeswoman for Intertek emphasized to Medtech Insight tac/Intertek is not. BSI is the only UK notified body designated to test that the purpose of the move is to centralize the medical device products against the Active Implantable Medical Devices Directive. function and to create a center of excellence in Sweden. Overall, in the EU, notified body numbers remain steady for Intertek played down the Brexit factor, although this has been now. the factor behind other UK notified bodies, such as BSI and UL, As of February 20, according to the European Commission's which have announced they would become designated in other Nando database updated to February 20, there were 58 noti- EU countries, including by opening offices in the relevant coun- fied bodies under the Medical Devices Directive, 14 under the tries. UL has applied to the Irish authority for designation, a Active Implantable Medical Devices Directive and 22 under the change from its current designation under the UK MHRA, in the IVD Directive. light of potential threats under Brexit. BSI has sent its applications for designation under both the MDR and the IVDR to both Published online 02/21/18

India’s Top Regulator ‘Relieved Of Post’; Temporary Head In Place

NEENA BRIZMOHUN [email protected]

he Drugs Controller General of India, GN Singh, has been relieved of his post and replaced on an interim basis by the T Joint Drug Controller of India S Eswara Reddy, according to a Feb. 20 circular from the Ministry of Health & Family Welfare. Reddy will hold India's top health care products regulatory post for a period of three months or until the “regularly appointed person takes charge of the post or until further orders, which- ever is earlier,” said the circular, a copy of which was published by the Indian news website, Pharma Pathway. Singh had been the DCGI since 2012. During his tenure as the

head of the Central Drugs Standard Control Organization, he US FDA Source: oversaw efforts to strengthen the regulatory regime that includ- GN Singh, left, meets with FDA officials in 2015. ed initiatives relating to clinical trials rules, the introduction of medical device-specific legislation, and the development of risk- inspectors and technical officers to various zones across the based inspection criteria for manufacturing sites. country. According to a separate Feb. 20 office memorandum, The MHFW circular said that Singh had been relieved of his the agency wants to strengthen "various Zones/Sub-Zones/Port post with immediate effect. The CDSCO announced Reddy’s ap- Offices" by transferring inspectors. pointment on Twitter yesterday. The CDSCO on Feb. 20 also announced the transfer of 42 drug Published online 02/22/18

medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 7 � POLICY & REGULATION � Eurasian Union Medtech Harmonization Likely To Be Delayed, Says Russian Industry Group ASHLEY YEO @ashleypyeo [email protected]

urasian Economic Union (EAEU) medtech regulations will soon supersede the national regulatory codes used in each E of the union's five member states. Compliance with EAEU laws requires significant adjustment at the national level, and countries are in varied states of readiness of the member states. As a result, medtech companies operating in the region see this transition as the biggest political and trade hurdle to overcome. But Sergey Vanin, the new chief executive of IMEDA, the Mos- cow-based association that represents medtech multinationals in the Russian territory, thinks that a practical solution may be at hand, namely a delay in implementation. "The industry might succeed in convincing the government [in Russia] that the transi- WindVector Shutterstock: tion period should be extended," he told Medtech Insight. Interviewed during the 2018 MedTech Europe Forum in Brussels last month, Vanin said that talks have begun among the officials of What's New all EAEU countries to broach this issue. He says they have agreed in Delayed implementation of a harmonized Eurasian principle that the transition period should be extended. Economic Union regulatory system seems more and more Members of the EAEU are Russia, Belarus, Kazakhstan, Kyr- likely. They extension could go up to as much as 10 years. gyzstan and Armenia. Some countries, Kyrgyzstan and Armenia That will mean the device industry will have to use the na- especially, which have never been regulated, simply will not be tional systems for longer, although Armenia and Kyrgyzstan ready. "The key question," Vanin says, "is how long to extend the have little medtech regulatory structure to speak of. transition period by: two, four or maybe even 10 years."

LAB ACCREDITATION IS A SLOW PROCESS SO FAR Both internal politics and practical issues are playing a part in the see on the system in general, as the market is not yet in operation. slower-than-hoped-for progress toward the development of the "At this early stage, we don't see any 'stop business' factors," he said. EAEU medtech system. The infrastructure is just not available yet. Work is still ongoing on level 3 documents, only two of which (on For instance, in Russia, which is the key player in the system, at the standards for product compliance) having been completed. start of 2018, there were only two labs accredited for technical test- Meanwhile, a key date is looming for the system. The IT system ing and one lab for clinical trials. "It's not yet enough to re-register all that will underlie the EAEU medtech registration system is sup- products circulating on the market to and provide adequate support posed to be ready by the end of March 2018. It is claimed that this to the market," said Vanin. (By mid-February, the numbers had risen key element of the whole scheme is 90% completed, although there modestly to six labs for technical testing and two for clinical trials.) are the major question marks over Kyrgyzstan and Armenia's readi- IMEDA is part of the EAEU working group on medtech, and has ness. But all countries must be ready to use the system, which allows been tracking the latest developments for it members. Level 1 and documents submitted in one country to be visible in all other EAEU 2 documents have now all been completed. The breakthrough member states. The slow pace on this critical element is a barrier to needed to finalize the crucial quality management system (sec- the launch of the EAEU common market in medtech, says IMEDA. ond-level) document came on December 16, but publication was A decision on whether to extend the transition time is likely to still pending in mid-January. Kazakhstan's Ministry of Justice is be made official later this year. Vanin suggests that for pragmatic waiting for feedback on its comments. Vanin believes that reasons the authorities should also consider the option of it will take a year for QMS to be fully implemented. developing a simplified registration pathway for manufac- But a harmonized approach to QMS will ultimately be turers of medical devices that are already proven safe and obligatory for all EAEU national authorities. It was based on CLICK are circulating on the markets of EAEU countries. the ISO 13485 international quality standard, but it is not a For a follow-up article One way or another, 2018 is going to be a key year for focusing on Russian 100% copy, having been tailored to the needs of local man- regulatory and market the EAEU medtech system. ufacturing plants. "It is more or less acceptable," says Vanin, issues go online: http://bit.ly/2BV4gvp. indicating that, for IMEDA, it is more of case of a wait-and- Published online 02/23/18

8 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � POLICY & REGULATION � FDA Awash In Adverse Events: All-Time High Of 1.5 Million MDRs Reported In 2017 SHAWN M. SCHMITT [email protected]

evice-users and companies had 2016, when 871,654 individual reports the dubious distinction of mak- were filed. D ing history last year by sending The remaining 495,603 reports were the largest number of Medical Device Re- sent to FDA in 2017 as part of its Alter- ports ever – nearly 1.5 million – to US FDA. native Summary Reporting Program, Statistics shared with Medtech Insight which allows firms to submit abbrevi- by the Office of Surveillance and Bio- ated reports in a summarized, line-item metrics (OSB) within the agency's Cen- format. That's up 6% from 2016's 465,624 ter for Devices and Radiological Health summary reports – a modest increase show that 1,459,928 adverse events that's headed in the anticipated direc- were submitted via the MDR system in tion, given the agency's recent work to calendar year 2017. boost the number of reports it receives That represents a 9% increase from in the form of summaries. CY 2016, when 1,335,278 adverse events FDA announced in December that were submitted. (Also see "Adverse makers of an array of devices will soon Events Dip Slightly In 2016; MDR Summary be able to submit adverse events in a facilities – FDA is aiming to receive Reporting To US FDA Ticks Up" - Medtech summary format to the agency through fewer individual MDRs. The program ad- Insight, 8 Feb, 2017.) Last year's figure is its upcoming Voluntary Malfunction dresses goals outlined in a 2016 MDUFA also 4% higher than the former all-time Summary Reporting Program. (Also see IV commitment letter that directs the high of more than 1.4 million events, re- "FDA Asks For More Summary Adverse agency to allow makers of most devices ported in 2015. Event Reports Under Proposed MDR Pro- to report adverse events quarterly in a A total of 964,325 MDRs were sent to gram" - Medtech Insight, 26 Dec, 2017.) summary format. FDA on full MedWatch reporting forms Under the proposed program – which in 2017. That's an 11% increase from does not extend to importers or user Published online 02/21/18

Adverse Events, 2003-2017

Reported in Summaries Reported Individually 1,459,928 1,500,000 1,409,841 1,335,278 1,300,643 1,1,250,000 1,088,807 1,000,000 939,233 840,440 827,681 769,488 750,000 597,035 567,434 500,000 315,659 250,000 186,675 160,601 151,879

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: US FDA

medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 9 � R&D� Bioelectronics, Imaging Fortify Medtech's Defense Against Rheumatoid Arthritis JENNY BLAIR [email protected]

drugs constitute a large portion of that market. But RA sits at the intersection of several other markets as well. Arthritis is a big one, and a device for one type may, in some cases, work for another. Berlin, Germany-based imaging company Xiralite’s joint-imaging device, for instance, can distinguish rheumatoid from psoriatic and osteoarthritis. That’s mean- ingful, given the high prevalence of joint inflammation. Some 54.4 million US adults reported being diagnosed with arthritis of some kind in the 2013-2015 National Health Interview Survey; 23.7 million with X-ray arthritis-attributable activity limitations. These patients incur $81bn in direct costs highlighting annually. The Centers for Disease Control inflamed and Prevention projects that by the year joints 2040, 78.4 million (26%) US adults will have some form of doctor-diagnosed arthritis. Other diseases share common pathways heumatoid arthritis (RA), a painful multiple tech sectors. Bioelectronics with RA, affecting bioelectronics research. autoimmune inflammatory condi- company SetPoint Medical Corp.; imag- Santa Clarita, California-based SetPoint R tion affecting joints and other body ing companies Butterfly Network, Hemics Medical is testing its implanted nerve- systems, afflicts some 1.5 million people BV and Xiralite GmbH; and a host of digi- stimulation platform not only in RA, but in the US alone. In recent decades, with tal health/telemedicine companies are also in Crohn’s disease and multiple sclero- the advent of biologic disease-modify- among those spurring innovations that sis. Bioelectronics company electroCore ing antirheumatic drugs (DMARDs), the could ease rheumatologists’ workloads LLC, based in Basking Ridge, New Jersey, disease has become more amenable to and benefit RA patients. said it developed a non-invasive gamma- treatment, with fewer flare-ups, less joint Core stimulator that treats migraine and destruction and lower mortality. MULTIFACETED MARKET cluster headache and also mentions an Yet managing RA remains challenging According Datamonitor, in 2015, there interest in rheumatoid arthritis (Also see and patients need close monitoring, in- were approximately 4.3 million total prev- "SetPoint Turns Up The Heat On Rheuma- cluding frequent appointments and im- alent cases of RA in the US, Japan, and the toid Arthritis Program" - Medtech Insight, 3 aging studies. There are also issues with five major EU markets (France, Germany, It- Sep, 2017.) (Also see "Medtronic Alumni Take DMARDs that need to be addressed: they aly, Spain, and the UK), with 41.2% of cases Up SetPoint Regulatory Leadership Roles" come with side effects, some of these in the US alone. The number of prevalent - Medtech Insight, 13 Sep, 2016.). Bioelec- drugs are expensive and not every drug cases is expected to grow to 5.2 million tronic medicine will constitute a $25.2bn works for every patient. At the same time, cases by 2035. The increase in RA patient market by 2021, according to research a growing shortage of rheumatology population is largely attributable to the company Markets and Markets. That firm specialists makes focused care difficult. A effects of population growth and aging, predicts the pain-management device recent study of the adult rheumatology rather than increasing disease prevalence. market will reach $4.64bn by 2021. workforce, published in Arthritis Care & The market for RA care-related prod- Then there’s ultrasound, which is likely Research, projects a 4,133-provider short- ucts is substantial, and is boosted by the to remain a central component of RA man- fall in the US by 2030 (See Figure introduction of innovative drugs and bio- agement, a $6.86bn global market by 2121, In light of these realities, the care of RA similars, and the trend toward early diag- forecasted Markets and Markets. One hot patients calls for solutions that touches nosis and treatment. Lab diagnostics and ultrasound player: New York City-based

10 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � R&D�

Butterfly Network, whose iQ is an un- SetPoint CEO Anthony Arnold said a fu- remotely using smart devices: "I think der-$2000 pocket-sized ultrasound device ture version of its implanted bioelectron- that's the real future.” that communicates with a smartphone ic device will interface with a smartphone chip. It has gained 510(k) clearance from or watch, offering patients optional en- NOVEL IMAGING DEVICES the FDA for 13 diagnostic applications, in- couragement to, say, walk more. Early diagnosis, close monitoring and fre- cluding superficial musculoskeletal imag- “We’re trying to help them improve their quent treatment adjustments are main- ing, which is commonly performed for RA. outcomes with a more holistic approach stays of RA management. Yet, ultrasound Minna Kohler, director of Massachu- that's custom-tailored for every patient. and MRI, commonly used for RA assess- setts General Hospital’s rheumatology [A future version would] tie more into the ment, can be slow and expensive. That musculoskeletal ultrasound program, be- whole lifestyle and try to help them take opens the door to novel imaging devices lieves that iQ will “revolutionize medicine broader control of their disease by using to detect early inflammation. in 10 years." Provided it truly brings down this implanted hardware," Arnold said. Before we get to the companies, a little the price point of ultrasound, “it’s going to be in every [doctor’s] pocket," she said. “In a few years, we'll get smarter devices that

CONNECTIVITY IS KEY can tell us more and perhaps even tell us about body As digital health, wearables, and tele- temperature or joint temperature, which may be medicine mature, RA patients may soon carry novel pocket devices of their own. informative about inflammation,” says Hein Moens, “Looking for ways for technology to president of the Dutch Society for Rheumatology. enhance and extend each rheumatologist’s reach is of high interest,” Kohler said (Also see "Virtual Reality: The New Game In Mental Health Care To Improve Outcomes" - Medtech Insight, 22 Jun, 2017.). Smartphone apps for RA are also ap- background. The groundbreaking 2004 She cites the American College of Rheu- pearing. Last year, GlaxoSmithKline PLC Tight Control of Rheumatoid Arthritis matology’s 2016 meeting, where keynote completed and submitted a paper on the trial compared RA patients who made speaker Joseph Kvedar, a digital-health Patient Rheumatoid Arthritis Data from monthly doctor's visits for formal disease opinion leader and author of the book the Real World (PARADE) clinical study, assessments and medication tweaks to "The Internet of Healthy Things," talked which used iPhones to track vital signs, patients who visited every three months about how digital health platforms could activity, and other feedback in RA patients. and didn’t get formal assessments. advance rheumatology and ease special- NeuroMetrix Inc.'s wearable nerve The monthly patients fared better: some ists’ burden. Kvedar told the audience stimulator Quell and Crescendo Biolog- 82% achieved a good response vs. 44% in that key steps include transforming raw ics Ltd.’s VectraDA biomarker panel for the three-months group. TICORA’s results data into patient-friendly feedback, flaw- RA both come with apps. have been confirmed since, and standard of less analytics that make sound recom- While those commercial RA apps are cur- care now calls for a treat-to-target strategy mendations and patient engagement. rently aimed at patients, they may eventu- that measures disease activity with validat- Kvedar told Medtech Insight that “the op- ally incorporate more sophisticated sen- ed clinical tools, then accelerates treatment portunity to change the locus of care, the sors that funnel data straight to doctors. until the patient reaches remission or low way we deliver care, [is] what I spend my Smart wearables will grow annually by disease activity. Called tight control, this ap- days thinking about, …how these technol- 13.6% in the next 15 years, forecasted a proach to RA management requires a lot of ogies can support alternative care models.” 2016 Research and Markets report. FitBit, assessments, and, in turn, a lot of office vis- He points out that smart wearables; the classic example, announced on Feb. its. Rheumatologists start patients on medi- home movement monitors like MIT spinoff 13 it would acquire Twine Health, a HIPAA- cations, then adjust or discontinue any that Emerald BioStructures Inc. and compli- compliant connected health platform. aren’t working and switch to others. ance-related companies like Medisafe and Hein Moens, president of the Dutch Currently, decisions about what’s work- TowerView, whose devices track pill con- Society for Rheumatology, sees such ing are based largely on point-of-care sumption, might help RA patients. change on the horizon. ultrasound, MRI and clinical disease ac- Rheumatology may well begin incor- “In a few years, we'll get smarter de- tivity scales. But two European imaging porating such alternatives out of sheer vices that can tell us more and perhaps companies believe their devices could necessity. even tell us about body temperature or streamline RA care, save money, and free Hemics BV and Xiralite are looking to joint temperature, which may be informa- up clinical resources. that future with platforms that incorpo- tive about inflammation,” Moens said. He Eindhoven, Holland-based company rate telemedicine capabilities. dreams of being able to monitor patients Hemics is marketing the noninvasive medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 11 � R&D�

HandScan in Europe. The device uses red- and near-infrared light technology, similar to that of pulse oximetry, to detect pooled blood in joints of the hand and wrist, telling the machine which are inflamed. The inflammation is reported to rheumatologists both visually and on a numeric scale. The whole process takes a few minutes. (See Figures 1 and 2.) Photo credit: HEMICS credit: Photo Wouter Rensen, Hemics’ co-founder and vice president of clinical application, Figure 1 (left). Hemics' Handscan uses infrared light to detect joint inflammation in hands/wrists. said the device could allow for earlier de- Figure 2 (right). Image shows inflammed joints. tection of inflammation, which could signal that a medication isn’t working." About 20% of patients do not respond to a specific type of biological, and they need to be switched to another biological as soon as you learn that the medication they’re currently receiving is not effective,” Rensen explained. “If they can learn earlier that it’s not working, that’s of course a big cost savings and health outcome improvement for those patients.”Another boon: speedier doctor’s visits. A trained assistant can run HandScan and upload results to a rheumatologist, who then decides whether to see the patient in person. “We believe that way, you can do tight control with the current number of rheumatologists that are available,” Rensen said. Hemics was spun off from Holland- based Philips Research Laboratories in 2011, armed with a prototype, patents and a study protocol and is backed by three Dutch venture funds. A 2012 clinical study found the device stacked up favorably against rheumatologists’ judgment, using ultrasound as a reference. That led to CE mark and B- round financing in January 2015 with an additional Dutch investor; EU sales began in 2016. HandScan is priced in the low six figures, and 14 are currently in use, mainly by Dutch research facilities, Rensen said. Another benefit of HandScan is that

it could permit remote scanning from Xiralite credit: Photo nursing homes or from a patient’s home, where it could connect via telemedicine Figure 3. Xiralite's machine uses injected fluorescent material to highlight joint inflammation. to rheumatologists, he added. Hemics’ path won’t be entirely smooth. Western Europe — there are no reim- a de novo petition with the FDA. Though the market is potentially large, if bursement codes available for HandScan. Harrold van Barlingen, founder and HandScan becomes de rigueur for rheu- Hemics is currently gathering data to managing director of Hemics' investor, matology practices — with more than present to European payors and regula- Thuja Capital Management B.V., and chair 6,000 providers in the US and 7,000 in tors in the US, where Rensen plans to file of Hemics’ supervisory board, said he

12 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � R&D� knew of these challenges going in. A veteran RA investor — he also serves on the board of the Belgian biotech company Galapagos, which developed the investigational JAK1 inhibitor filgotinib for RA — van Barlingen said the company’s current situ- ation is “no different than our investment case … We knew that the reading of this device could be seen as a new biomarker.” He remains confident that the user- friendly device will ultimately save health systems money. “It’s a novel device; it’s a novel approach -- In a way, it’s disruptive,” van Barlingen said. “As investors, we’re familiar with that, we like that, but we also know that that requires some heavy lifting.” Meanwhile, Xiralite's eponymous device also creates images of disturbed microcirculation in the hands and wrists with a scan that doesn’t require a doctor’s presence. After intravenous injection of fluorescent indocyanine green (ICG), patients’ hands are imaged under LED lights as blood circulates. (See Figure 3, p. 12.) Figure 4. Under Xiralite, different kinds of arthritis look distinct. Proprietary XiraView algorithms then process the images and report, both visually nual earnings of €20m, according to Briel. tap huge markets. and quantitatively, the presence of inflamed Its target customers are hospitals, outpa- In the summer of 2016, GlaxoSmithKline joints for patients with arthritis. Telltale pat- tient clinics and primary-care physicians’ and the Alphabet company Verily Life terns allow for a clear distinction among offices, where Xiralite may assist in refer- Sciences LLC (formerly Google Life Sci- different arthritis types, said Xiralite's man- ral decision-making. ences), placed a bet of up to £540m on bio- aging director Andreas Briel. Like HandScan, The company also embraces telemedi- electronic medicines by forming Galvani Xiralite takes mere minutes to complete. Xi- cine, with its units being connected to a Bioelectronics (Also see "New GSK-Verily ralite is also more sensitive than ultrasound, server in Berlin, and with deep machine JV Aims For Smart, 'Grain Of Rice' Neuromod Briel said. (See Figures 4 and 5.) learning refining the platform’s algorithm as Tech" - Medtech Insight, 2 Aug, 2016.). Privately held Xiralite was spun out it accumulates millions of scans to analyze. Though GSK declined to comment for of Bayer Schering in 2008. The device is Briel said the five-year target for turnover is this story on ongoing bioelectronic medi- manufactured in-house and earned the €500M. And it's also eyeing other markets: cine projects, arthritis appears on its short- CE mark in 2009 and 510(k) FDA clearance pipeline projects include scanners for foot list of targeted chronic conditions. Notably, in 2015. The predicate device was No- joints, skin conditions, and mammography. in late September 2017, the FDA announced vadaq Technologies Inc.’s Spy Fluores- that Verily had become one of nine compa- cence Imaging System, an intraoperative NEW WORLD: BIOELECTRONICS nies to win the competition to participate in tool. (See Figure 4.) “Bioelectronic medicine,” a term that may its software pre-certification pilot program. (Also see "M&A Analysis: M&A Rises In be superseding “electroceuticals” refers The companies agreed to reveal mea- 2017 As Market Set To Bounce Back In 2018" to a type of neuromodulation that aims sures they use to develop, test and main- - Medtech Insight, 8 Jan, 2018.) Xiralite is to modify disease by delivering electrical tain their software. Ultimately, pre-cer- pending approval in Canada and Japan. impulses to specific neural circuits with tification could allow some companies Some 49 units have been installed, most- tiny implantable devices. The approach a speedier path to approval of digital ly in Germany, and 16 clinical trials are fin- alters underlying disease mechanisms health products — like being TSA pre- ished or underway. rather than merely treating symptoms. checked at the airport. The price point ranges from €80,000 to By any name, nerve stimulation is a hot Waltham, Massachusetts-based Neu- €140,000, depending on the system and field. It has the potential to affect numer- roMetrix sells Quell, an FDA-cleared, over- service package, Briel said. In Germany, ous organ systems, disrupt the standard the-counter wearable TENS device for the company is aiming for short-term an- of care in a wide range of diseases and chronic pain, which is priced at $250, plus medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 13 � R&D�

$30 per pair of electrodes. NeuroMetrix ciates, Morgenthaler, Medtronic PLC, Bos- cus initially on the 300,000 to 400,000 US sold nearly 81,000 units last year. In Janu- ton Scientific Corp. and Topspin Partners. patients with moderate-to-severe dis- ary, the company estimated its US market SetPoint had a good year, last year. In ease nonresponsive to biologics. comprised 19 million people. January 2017, the company reported that “I think it's logical to assume that we Meanwhile, electroCore LLC, a bioelec- six of eight Crohn’s disease patients had could eventually evaluate the therapy in tronics company based in Basking Ridge, achieved a good response to bioelectron- less sick patients or patients that don't New Jersey, announced last month that its ic therapy with three receiving remission. want to be on biologic therapies, or are non-invasive vagus nerve stimulation de- Last autumn, it presented preclinical data having problems with their biologic ther- vice gammaCore received FDA 501(k) clear- suggesting its platform reduced demy- apies,” Arnold said. The drugs, he pointed ance for treating migraine. The device was elination and accelerated remyelination in out, carry heightened risks for lymphoma already cleared for treating cluster head- a multiple sclerosis model. And in Decem- and opportunistic infections. ache. Though the company declined to ber, it announced it had received the FDA’s “Pharma companies may underesti- comment for this story, its website makes no Investigational Device Exemption (IDE) ap- mate how strong the patient demand for secret of its interest in rheumatoid arthritis. proval for a randomized controlled trial of this alternative to biologics is," he said. "Patients are looking for something dif- “Neuromodulation therapy and bioelectronic medicines are ferent and don’t want to be on drugs for the rest of their life." expected to have a much better safety profile than most With regards to reimbursement, Arnold biologic therapies do," says Juan-Pablo Mas, partner at has an unusual risk-share pricing arrangement in mind: a monthly fee for the thera- GSK's biolectronics fund Action Potential Venture Capital. py, rather than an up-front purchase. He anticipates that will save payors money compared to year-after-year of biologics. It also ensures the company a steadier income stream“Many implant- “RA is a very good example of ground- its proprietary microstimulator therapy in able neuromodulation devices can cost breaking applications in bioelectronic 15 patients with drug-refractory RA. upwards of $30,000 up front, but we're medicine,” said Juan-Pablo Mas, a part- SetPoint’s previous first-in-human going to be taking care of that patient ner at GSK’s bioelectronics fund Action proof-of-concept study of 17 RA patients to some degree for a decade,” Arnold Potential Venture Capital. He finds that made headlines in the summer of 2016 noted. “In years two to 10, we're still car- a safe, set-and-forget implanted device when several experienced substantial im- ing for them and driving innovation, [but] may make an attractive alternative to the provement and TNF levels fell. The results under the current reimbursement model, risks and inconvenience of biologics. appeared in Proceedings of the National we would have no revenue attached. “Neuromodulation therapy and bioelec- Academy of Sciences on July 19, 2016. Arnold’s planned pitch to payors: “‘Pay tronic medicines are expected to have a Patients seem to like the device so us each month your patient is well ... be- much better safety profile than most bio- far. After the three-month pilot study cause we're constantly innovating on this logic therapies do," Mas said. "It's hard for wrapped, all 17 patients elected to retain platform.’ … It aligns all players to this me to imagine a version of the future that the device and continue therapy, accord- same goal: making patients better.” doesn’t include bioelectronic medicines as ing to SetPoint's CEO Anthony Arnold. Mas also likes this idea. Being a hy- a first or second line therapy in treating in- By now, some have used the device for brid of medical devices and targeted flammatory diseases, such as RA.” nearly five years. The company will pres- pharmaceuticals, he said, bioelectronic Mas is also a board member at Santa ent long-term follow-up data at the An- technology is “begging for creative re- Clarita, California-based bioelectronic nual European Congress of Rheumatol- imbursement solutions and reimburse- company SetPoint Medical. Founded ogy (EULAR) conference in Amsterdam ment models. I think payers will be in 2007, its tiny implanted proprietary this June. receptive to those…on a case-by-case bioelectronic medicine platform is built Results of the current IDE trial should basis.“With enough evidence behind upon evidence that selective stimula- appear in mid-2019. If all goes well, the us, SetPoint’s bioelectronic therapy for tion of the vagus nerve can moderate company plans a multinational pivotal tri- RA really does have a shot at being an the “inflammatory reflex” and reduce al and possible FDA approval in 2021. A CE integral part of the evolving standard of inflammation. mark is also possible in 2019. The device care,” Mas said. A long-time recipient of APVC invest- is expected to be priced around $30,000. ment, SetPoint closed a $30m series D If successful, the device might be used Published online 2/21/18 round last August with returning share- early in the course of disease, Arnold said. holders that included New Enterprise Asso- Though, he added, the company will fo-

14 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � COMMERCIAL �

Roche To Improve Real-World Cancer Data Extraction With Flatiron Buy

STEN STOVALL [email protected]

oche says its planned purchase of cancer data specialist "We believe that regulatory-grade real- Flatiron Health Inc. will help the Swiss group progress its R own pipeline while helping to design the use of real-world world evidence is a key ingredient to evidence to set new industry standards for oncology research accelerate the development of, and and development. The acquisition, announced Feb. 15, stems from an existing part- access to, new cancer treatments" nership between the two companies, with Roche already holding a 12.6% stake in Flatiron. Roche said it will pay $1.9bn for the re- - Roche Pharmaceuticals CEO Daniel O’Day mainder and expects the deal to close during the first half of 2018. Launched in 2012, Flatiron Health operates as a technology platform providing oncology-specific electronic health record software and a suite of software products for advancing real- world evidence of cancer research. The transaction comes at AS FLATIRON REMAINS UNHAMPERED a time when digital health is heating up and partnerships are From an organizational point of view, Flatiron Health will be- blurring the lines from more traditional therapeutic company come an indirect wholly owned subsidiary of Roche, maintain- acquisitions. ing its own executive management and board of directors and Analysts say acquiring Flatiron makes sense given Roche's ther- reporting directly to O'Day. apeutic focus. And although Flatiron is to remain autonomous, "The acquisition encompasses the proliferation of regulatory- Roche's owning it outright could give the big pharma a big ad- standard real-world data and infrastructure around it that can be vantage, as regulators and the biopharma industry increasingly used to aid faster, more effective R&D, efforts toward value-based grapple with demands for evidence-based outcomes to justify pricing, new regulatory approaches and overall improved under- approval of increasingly expensive new medicines. standing of care for patients," the Roche spokesman told Scrip. "And it is part of the eventual aim, with support and invest- ROCHE REAL-WORLD EVIDENCE DEFINITION ROLE? ment from Roche, to bring Flatiron Health’s services to new mar- A major challenge to real-world evidence becoming truly em- kets and geographies. We are not able to discuss specific market bedded in the evolving health-care landscape is that there is still plans and timelines at this point," he added. not common ground about what counts as relevant data. Flatiron Health already partners with more than 265 commu- Roche and Flatiron say that together they will leverage their nity cancer clinics, six major academic research centers and 14 combined expertise to advance the use of real-world evi- out of the world's top 15 oncology companies. dence to set new industry standards for oncology research and Flatiron co-founder and CEO Nat Turner in a Feb. 15 blog wrote: development. "we have a clear mandate and structure to continue to operate "We believe that regulatory-grade real-world evidence is a key industry-wide with all stakeholders and customers as we build ingredient to accelerate the development of, and access to, new a learning health-care platform for oncology. Importantly, this cancer treatments," said Daniel O’Day, CEO of Roche Pharmaceu- does not change our strategic objectives and our priorities; it ticals, adding: "Flatiron Health is best positioned to provide the only helps us get to the finish line faster." technology and data analytics infrastructure needed not only "Roche is committing additional resources to Flatiron so that for Roche, but for oncology research and development efforts we can continue on our mission and have an even greater im- across the entire industry." pact. Their support is centered around Flatiron continuing to A Roche spokesman told Scrip "the elevation of the relation- operate autonomously alongside their other business units and ship with Flatiron Health is an important step in our personal- divisions such as Roche Pharmaceuticals and Roche Diagnostics. ized health-care strategy. It enhances Roche’s position as an early We believe that this will lead to stronger products and services adopter of the application of insights from real world data across benefiting all of our customers," Turner said. the health-care value chain." Industry sources believe US drug wholesaler McKesson Corp. "This will further contribute to the understanding of disease, as had also shown interest in possibly acquiring Flatiron, according well as the design and execution of clinical trials, and will dem- to Strategic Transactions. onstrate treatment benefits to regulators, payers, patients and society," the spokesperson said. Published online 2/21/18

medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 15 � COMMERCIAL � Sinclair Drops InstaLift US Distributor CATHERINE LONGWORTH [email protected]

inclair Pharma is parting ways with ThermiGen, less than not converted into ordinary shares, will mature no earlier than 1 two years after the UK aesthetics company enlisted Thermi September 2020. S to be its US distributor of Silhouette InstaLift products for ThermiGen launched Silhouette InstaLift in the US in August non-surgical alternative to facelifts. 2016. Sinclair recorded US sales in 2017 of £5.2m, in-line with the The two companies entered into the partnership in 2016, giv- minimum purchase obligations of the distribution agreement. ing Thermi, the aesthetics subsidiary of pharma group Almirall, In a Jan. 15 preliminary trading update of Sinclair's 2017 full-year exclusive US distribution rights for Silhouette InstaLift until results, the company had said "re-order rates in the period were mid-2020. (Also see "Sinclair’s Eyes Major Uplift With Thermigen US disappointing and it was evaluating a number of options to im- Team-Up " - Medtech Insight, 23 May, 2016.) Sinclair announced prove performance." on Feb. 22 that it terminated its contract with Thermi by mutual Following the announcement, Sinclair CEO Chris Spooner said agreement, with effect from Mar. 31, 2018. The company will pay the company was carrying out advanced discussions with po- Thermi a one-off, undisclosed payment for early termination and tential US distributors, with the aim of signing a new arrange- regain full US distribution rights for the products. ment for Silhouette from Apr. 1. No comment was provided on A $5m investment from specialist health-care investor, EW whether these new agreements would be on an exclusive or Healthcare Partners, will be used by Sinclair to finance this one- non-exclusive basis. off payment and to buy back remaining stock. Interest on the convertible loan will accrue at 8%, compounded annually, and if Published online 2/22/18

Novacyt Confident Of Further APAC Growth CATHERINE LONGWORTH [email protected]

ovacyt SA is confident of further revenue growth in Last year, Novacyt completed a dual-listing on the Alternative Asia-Pacific after 2017 sales in China exceeded the com- Investment Market (AIM) of the London Stock Exchange, raising N pany's expectations. €9.7m before expenses. The company made history by being the The emergence of cancer screening programs in China, Indo- first healthcare firm to be dual-listed on both the London AIM nesia, Vietnam, and Thailand have created an opportunity for market and Euronext Growth Paris. cervical cancer screening technology like Novacyt's NovaPrep (Also see "Novacyt Raises €9.7M, Ahead Of UK IPO" - Medtech In- cytology test for cervical cancer. The total market in the region sight, 19 Oct, 2017.) estimated at approximately two billion people. Mullis said the listing put the company in a good position to "Asia Pacific has grown from being 22% of our overall revenue identify potential acquisition opportunities including sales dis- to 27% in real terms that actually represents an increase of €1.6m tributors that could help it penetrate key markets. "There will be and based on what we see today; I believe this level of growth M&A this year," said Mullis. "We're always looking for acquisition is sustainable going forward," CEO Graham Mullis told Medtech opportunities and we will continue to be very active in M&A and Insight. "It's not a surprise to us as China is the second largest that’s one of the principal reasons of listing on the AIM market, as health-care market in the world and is also the fastest growing we have some very good quality institutional shareholders who health-care market so very soon it will overtake the US in lots understand the consolidation opportunity. of health-care segments." He added the company hopes to hire "We are looking for more distributors and looking to add fi- more people in the region to support growth. nancial strength to the business so where possible we will target The APAC market continues to be Novacyt's fastest growing assets that are already profitable and have very strong local dis- region. NovaPrep sales in the region were up 36% to €2.2m in tribution," he said. "If a company brings additional products or 2017 and Primerdesign, the company's lab-testing business also technology then that’s a bonus, but not specifically what we're increased revenues in the Asia-Pacfic region from €5.1m in 2016 looking for because we actually believe in the product range we to €6.1m in 2017, partly driven by new sales in China. already have." (Also see "Novacyt Full Of Eastern Promise, Following Strong H1 Sales" - Medtech Insight, 18 Aug, 2017.) Published online 2/21/18

16 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � COMMERCIAL � Medicare Drops Registry Requirement In ICD Coverage Policy And Adds 'Shared Decision-Making' REED MILLER [email protected]

he US Centers for Medicare and Medicaid Services has de- The policy now requires a documented "shared decision- termined that the long-running coverage-with-evidence- making encounter" prior to ICD-implantation in certain heart- T development policy for implantable cardioverter defibrilla- failure patients considering an ICD for primary prevention of tors has served its purpose; participation in the American College sudden cardiac death. Specifically, the new policy states "a for- of Cardiology's National Cardiovascular Data Registry (NCDR) ICD mal shared decision-making encounter must occur between Registry will no longer be a condition for Medicare coverage of ICDs. the patient and a physician, or qualified non-physician practi- "The initial data collection requirement through the NCDR tioner such as a physician assistant, nurse practitioner, or clini- has served to generate and improve the evidence base for the cal nurse specialist, using an evidence-based decision tool prior use of ICDs in certain Medicare beneficiaries," CMS explains in to initial ICD implantation. The shared decision making encoun- a new final decision memo, announced Feb. 15. The NDCR ICD ter may occur at a separate visit. Registry now includes records from more than 1.7 million ICD The November proposal stated that this shared decision- implantations that are linked to Medicare claims showing the making encounter had to be with an “independent” physician outcomes. "We acknowledge the substantial contribution of or qualified non-physician practitioner, but several public com- the NCDR, the input of a number of professional societies and menters said that insisting the process include an independent contribution of manufacturers in this positive collaborative ef- third-party could delay the procedure and increase burden on fort over the past decade. We believe it has served its purpose patients and physicians. Some stakeholders argued that exist- and are ending the registry data collection requirement." ing informed consent would be sufficient for the patient and This is the first time the national Medicare policy for ICDs has that a documented shared decision-making encounter would been changed since 2005. That's when the registry requirement be unnecessary. was added in the national coverage determination as a condi- For example, in its Dec. 20 comments, device trade group tion of greatly expanding the ICD covered population in one AdvaMed "recommends that CMS revise the language to re- of CMS' first coverage-with-evidence-development policies. move the word 'independent' and to clarify that the physi- The agency reopened its policy for review in May 2017. The pro- cian involved in the shared decision-making interaction could posed decision memo was released in November and the agen- be the implanting physician, or a physician assistant or nurse cy reviewed 35 public comments in the initial comment period practitioner member of the physician’s practice. It is important last summer, and 23 comments – overwhelmingly in support of to ensure that shared decision-making, a concept that seems the proposed decision – in November and December, before patient-centric in theory, does not actually become a barrier to releasing the final national coverage determination on Feb. 15. access for certain patients." (Also see "Medicare Agency Solicits Input On ICD Coverage For First Maria Stewart, Boston Scientific's VP-Global Health Econom- Time Since 2005" - Medtech Insight, 21 Jul, 2017.) ics and Market Access, asked CMS to clarify that shared deci- In developing the revised coverage policy, CMS looked at a sion-making may be provided by the implanting physician or formal technology assessment produced by the US Agency for a member of their team. In comments dated Dec. 19, Stewart Healthcare Research and Quality. The assessment covered 14 points out that Boston Scientific has had a unique opportunity studies comparing ICD therapy to no ICD therapy, three studies to evaluate the execution of shared decision-making require- comparing regular ICDs to cardiac rhythm management defi- ments since there is a shared decision-making requirement in brillators, and 59 articles contributing data on adverse events the national Medicare coverage policy for its Watchman left- after ICD-implantation. CMS also reviewed a 2014 technology atrial appendage closure system. (Also see "Boston Sci's Watch- assessment funded by UK National Institute for Health Research man Gets Positive Medicare Coverage Policy" - Medtech Insight, 18 that included 26 randomized controlled trials. Two additional Feb, 2016.) meta-analyses, 11 separate major randomized trials, eight stud- "In the period since publication of the [left-atrial appendage ies derived from the NCDR ICD registry, and evidence-based closure national coverage determination], Boston Scientific has guidelines from professional cardiology societies. encountered extensive confusion among providers due to a variety of interpretations regarding the meaning of independent' CMS WANTS PATIENTS TO BE INVOLVED in this coverage provision," Stewart explains. "For ICDs, the only IN CARE DECISIONS non-implant alternative for patients at risk for sudden cardiac The new policy makes six other changes to the ICD coverage death is non-treatment. Patients are not choosing between policy, in addition to removing the registry requirement. medical and surgical therapy; therefore it is not necessary to medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 17 � COMMERCIAL � require an independent physician to conduct shared decision- The new policy specifies that patients who have severe non- making. In fact, the clinicians most appropriate to provide ischemic dilated cardiomyopathy without any personal history shared decision-making for patients at risk for sudden cardiac of sustained ventricular tachyarrhythmia or cardiac arrest due death are those who know most about devices: implanting phy- to ventricular fibrillation must try optimal medical therapy for sicians and their teams." at least three months before being considered for ICD therapy. The proposed policy would have put this requirement on patients with both ischemic and non-ischemic dilated cardio- "We want to ensure that the patient myopathy, but "the evidence is equivocal on whether patients receives more information than the with ischemic cardiomyopathy and systolic heart failure would benefit from a new requirement for at least three months of risks and benefits of the procedure," optimal medical therapy alone prior to ICD placement, if they CMS explains in the national coverage otherwise met criteria for an ICD," so CMS accepted the recom- mendation, offered by several different commenters, to only determination for ICDs. apply it to the non-ischemic category. The three-month optimal medical therapy requirement is in the inclusion criteria of multiple ICD trials, including the 2016 DANISH trial, which called into question the utility of ICDs for In the final policy, CMS says it removed the word "indepen- certain patients with heart failure and non-ischemic cardio- dent" from this requirement because "it could create unneces- myopathy. CMS concluded the restriction is reasonable for sary burden," but underscores the importance of a document- non-ischemic heart failure patients, but CMS says it found no ed shared decision-making process. evidence to support making any other changes to the 2005 na- The 2017 guidelines from the American Heart Association, tional coverage determination on the use of ICDs for patients American College of Cardiology, and Heart Rhythm Society rec- with non-ischemic dilated cardiomyopathy. ommend a shared decision-making process that accounts for The new policy also removes the section on implanting re- the patient health goals, preferences, and values, which are not synchronization ICDs (CRT-D) in patients in New York Heart typically covered in the informed consent, CMS points out. "We Association Class IV heart failure. "CRT is a separate therapy want to ensure that the patient receives more information than and should be evaluated in a distinct determination. Because the risks and benefits of the procedure," the agency explains. there is no national coverage criteria for CRT, we have re- "In order to provide flexibility for this requirement, we are indi- moved this section of the national coverage determination," cating that the shared decision-making interaction may occur CMS explains. at a separate visit." The new policy upholds the requirement that most patients CMS insists that only an "evidence-based decision tool" considering an ICD for primary prevention of sudden cardiac should be used in a shared decision-making encounter; sev- death following a myocardial infarction must wait at least 40 eral commenters wanted clarity on what will be considered an days for the implantation. This criteria is based on the results “evidence-based decision tool” for the purposes of this require- of the 2004 DINAMIT and 2009 IRIS trials, both of which found ment. The final decision memo clarifies that CMS has not speci- no survival benefit with ICDs implanted within 40 days af- fied the type of tool that will meet this requirement, but points ter a myocardial infarction. However, CMS clarified that this to a tool created with funding from the National Institutes on waiting-period rule does not apply to patients meeting the Aging and the Patient-Centered Outcomes Research Institute Medicare coverage requirements for a cardiac pacemakers as example of what might be used for ICDs. and an ICD, or patients with an existing ICD qualifying for a CMS says it is not requiring this documented shared deci- replacement. sion-making encounter for all ICD implants, because it recog- The new policy also adds cardiac magnetic resonance imag- nizes "that certain patient populations, such as patients with ing to the list of diagnostic imaging studies that can evaluate a personal history of sustained ventricular tachyarrhythmia or left ventricular ejection fraction in patients being considered cardiac arrest due to ventricular fibrillation, lack alternate treat- for an ICD. US FDA has approved multiple models of ICD as ment options and shared decision-making would have less of compatible with MRI, and CMS is currently considering cover- an impact compared to patient populations with more treating MRI for patients with an implanted cardiac rhythm man- ment options available." agement device, even if the device is not FDA-approved as MRI-compatible, in certain circumstances. (Also see "MRI And NEW POLICY TWEAKS PATIENT CRITERIA Cardiac-Rhythm Devices: A Match Made In Medicare" - Medtech In light of the clinical data on ICDs collected over the past 13 Insight, 16 Jan, 2018.) years, the new decision memo makes several other changes to the Medicare ICD policy to update the criteria for patients who Published online 2/23/18 should be considered for an ICD.

Labs File Suit Against US Government In Dx Pay-Rule Case

SUE DARCEY [email protected]

he association representing commercial clinical laborato- ACLA and AdvaMedDx had told CMS that the market-based rates ries has asked the US District Court in Washington DC for calculated by CMS did not reflect a statistically valid represen- T summary judgment against the US Department of Health tation of private payer rates. (Also see "Lab Sector Vs. CMS Battle and Human Services that a final Medicare payment rule for clini- Heats Up As Medicare Agency Moves Forward With 2018 Rates" - cal diagnostic labs is "impermissible," and does not comply with Medtech Insight, 20 Nov, 2017.) the law. The rule was written and finalized by the Centers for For example, Julie Khani, president of ACLA, said Nov. 17, "CMS's Medicare and Medicaid Services (CMS). decision today to move forward with these rates is ill-advised, in- Issued under the Protecting Access to Medicare Act (PAMA) consistent with the statute and more importantly, detrimental to on June 23, 2016, the final rule was supposed to modernize the patient care." AdvaMedDx, in comments on the rule, said that the Medicare payment program by making certain that government CMS private payer rate data was missing too much information reimbursements provided to clinical diagnostic laboratories to correctly calculate payments. more closely reflect private payer rates. American Clinical Labo- However, in a statement accompanying its final CLFS, CMS ratory Association has been arguing that the rule as it was carried wrote, "The data reported to CMS captures over 96% of laborato- out, does not truly reflect median private-payer rates. ry tests on the CLFS, representing over 96% of Medicare's spend- The rule relies on most laboratories to report to CMS the rate ing on the CLFS tests in Calendar Year 2016." paid to the lab by each private insurer for each test, and for CMS Nonetheless, attorneys for ACLA argued in their suit for sum- to use that information to calculate the weighted mean of the mary judgment that CMS too narrowly defined "applicable labo- private payer rate for each test, with the process being repeated ratory," by stating that in the case of hospital-based laboratories, once every three years. these labs must have a separate national provider identifier (NPI) Under PAMA CMS was required to collect information from "all – one that is separate from the hospital where the lab is based – applicable laboratories," to find the median lab payment rates that it could use on billing claim forms. per test, argued the plaintiff's attorneys, partners Mark D. Polston For example, CMS wrote, in its "Summary of Data Reporting and Ashley C. Parrish of King & Spalding, LLP. But, ultimately, the for the Medicare CLFS" document, published on Sept. 22, "In agency failed to collect payment information from most hospi- order to be an applicable laboratory, a laboratory must meet tal-based laboratories, ACLA's attorneys stated, with the results the CLIA definition of a laboratory … and, by its own billing that average payments per test were lower than they would be if National Provider Identifier (NPI) must meet the 'majority of all laboratory reimbursements were taken into account. Medicare revenues' threshold from the CLFS and or physician The request for summary judgement asks the court to invali- fee schedule." date the June 2016 regulations, saying that the final clinical labo- But in its Feb. 14 suit, ACLA stated, "There is no requirement ratory payment rule violates the congressional intent of PAMA. that a hospital laboratory have its own NPI or taxpayer identifi- Plaintiff attorneys also argued that HHS and CMS "attempts to re- cation number to bill the Medicare program. In fact, it is almost write the statute to exempt hospital laboratories" from the defi- always the case that a hospital laboratory will bill for services nition of all applicable laboratories who must report their data to under the CLFS or physician fee schedule using the NPI of the the agencies "is inconsistent with the statute's design, structure, hospital itself." and purpose." Further, CMS appeared to only partially have responded to Finally, in its call for summary judgment against the rule, ACLA industry comments on its final payment rule, by reversing a says the final rule is "arbitrary and capricious," and that CMS's plan that would have cut the reimbursement rate for about only reason for exempting hospital laboratories from reporting 16 test codes beyond a 10% price-reduction cap mandated by – because there were "administrative challenges"' in determin- Congress. ing which hospital labs would have to report – cannot justify the "We are pleased that CMS made improvements to payment agency's failure to comply with the underlying law. rates for panel tests that we requested, but we remain concerned that new rates overall do not accurately reflect the commercial CMS, INDUSTRY DISAGREE OVER rate for all segments of the laboratory marketplace – physician PROPORTION OF DATA CAPTURED office laboratories, hospital laboratories, and independent labo- Both before and after CMS issued its final 2018 Medicare clinical ratories," AdvaMedDx said in response to the final CLFS. laboratory fee schedule (CLFS) on Nov. 17, showing the new reimbursement rates for tests, laboratory trade associations including Published online 02/23/18 medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 19 � EDITORS’ PICKS�

CONTINUED FROM PAGE 6 A BULLS-EYE ON cases...where district courts are invalidat- test for determining what is and isn't SOFTWARE PATENTS ing these patent claims for medical de- patentable subject matter. There are generally two types of patent vices doing these kinds of software or al- Monte Falcoff, a patent attorney at Har- claims including apparatus and method gorithm calculations for medical devices." ness Dickey, says that patent eligible sub- claims. The first typically is a new kind Falcoff notes the potential threat of ject matter has generally been defined of machine or device, while the later in- Alice to software however was foreshad- as any new and useful process, machine, volves a method of making or a method owed by those in the medical device in- manufacture, or composition of mat- of using a machine. Health software can dustry. Medtronic, for example, filed an ter, or any new and useful improvement be a method of using a medical device. amicus brief in the 2010 Bilski v. Kappos thereof. While the concept may sound "Method claims particularly have a case, a precursor to Alice and which was simple, the ruling in Alice has opened a bulls-eye on them on these abstract cited in the case. (Also see "Supreme Court whole new can of worms. ideas, patentable subject matter issues Gives Some Relief, But Leaves Open Ques- Falcoff notes things already started because, by their nature, they are more tions For Dx Patents" - Medtech Insight, 5 to get a bit more complicated when the functional and less hardware intensive," Jul, 2010.) The company cautioned an court in the Mayo case attempted to dis- said Falcoff. "So there are plenty of 2017 overly strict view of patentability was tinguish patents that claim laws of nature, natural phenomena, and abstract ideas It's important for patent holders of medical devices that from those that claim patent eligible applications of those concepts. Patents that include software to provide as much detail about the claim laws of nature, natural phenomena, hardware and electrical circuit as possible in a new patent and abstract ideas are not patentable based on the Mayo ruling. application even if the hardware isn't the point of novelty. "That's a very loaded sentence," said Falcoff. "Especially with the abstract ideas portion, that's where all the controversy is right now." "[As for the two-step test in Alice] it only really comes up when either a pat- Copyright Versus Patent ent examiner or a judge, if you're enforc- Another legal consideration for health software companies is copyrighting their ing the thing, says, 'Yup, smells like an code and protecting the copyright, but it is easier said than done. abstract idea to me,'" he added. "And if it's got heavy computer software, diagnoses According to Monte Falcoff, with Harness Dickey, companies must prove another claims, those kinds of things, a patent ex- entity copied the code, or at least show circumstantial evidence to infer it was aminer or a judge is most likely to say, 'Yup, copied. There is no innocent copyright infringement where a person indepen- under step one it looks like an abstract dently came up with similar code. This is different from patents, where there can idea.' Which means you go to step two." be innocent infringement when an entity develops a similar product indepen- That's where things get worse for po- dently and is held liable for infringement by the patent owner. tential mHealth companies, Falcoff says, "Ideally there's a smoking gun that shows a person violated copyright but because the test needs to prove the usually the second guy makes modifications that makes it more complicated product is considered obviously, truly in- to prove infringement," added Falcoff. "A patent can claim things broader than ventive. He says the question of whether the one example that's disclosed in it so you have broader protection, you can a patent is obviously inventive bring back protect the whole system including the hardware as well as the software." to how the courts interpreted patents more than a hundred years ago. He also notes a patent for a medical device software algorithm can be awarded In cases where the true point of nov- even if the patent holder hasn't written the code, as long as they show a general elty is the algorithm or software used to concept and provide sufficient logical detail. With copyright, the copyright-hold- diagnose or treat a patient, the ability to er has to have the code written out. defend a patent on the product becomes On the other hand, copyright is very useful, according to Falcoff, when a com- overwhelmingly difficult. pany is trying to stop a former employee from competing or stop a supplier or "In today's world of big data analytics... customer from simply copying the code and walking away. it's really the software and algorithms doing the work, but patents are being re- "[Patents and copyright] can be complimentary but the patent is usually consid- jected," said Falcoff. "It's worse if the claim ered a much stronger weapon and asset than would be a copyright," said Falcoff. is a method type claim."

20 | Medtech Insight | March 5, 2018 © Informa UK Ltd 2018 � EDITORS’ PICKS� harmful and argued software processes a very expensive process and could buy faces and statistics and maybe even some are far from trivial in terms of their inno- the company time. predictions on some future events," he vative value. "It also delays the ultimate decision un- said. "But because it is just playing around til more patent-friendly cases come out with data; the ability to get that patent PRACTICAL STRATEGIES from the Court of Appeals for the Federal subject matter allowed or enforced is go- In light of Alice, what should medical de- Circuit," he added with the hope it will ing to get more and more difficult." vice companies do? Falcoff says there are buy the company enough time and the With that in mind, Lateef says mHealth four things companies should consider: pendulum will swing back. companies are finding it harder to get their 1. Provide thorough details on hardware in patent applications, "I work with several start-ups and this Alice decision 2. Talk to the patent examiner, has really come into play with them," says Irfan Lateef, 3. Include differently written independent claims; and a patent attorney at Knobbe Martens. 4. Appeal to the United States Patent and Trademark Office. He says it's important for patent holders of medical devices that include soft- WHEN ACQUIRING AN products patented. As a result, other com- ware to provide as much detail about the MHEALTH COMPANY panies trying to buy them might be bet- hardware and electrical circuit as possible Another important consideration in the ter off making their own version of an app in a new patent application even if the current environment is how patent protec- rather than acquiring it, or at least make hardware isn't the point of novelty. tions should be weighed as part of M&A a valuation based on how much it would "It allows the patent attorney to draw activity. Irfan Lateef, a patent attorney at cost to make the app, the attorney said. from this material to add to the claims by Knobbe Martens, says digital health com- The company looking to buy the amending it during prosecution of the panies looking to buy other companies mHealth company should also consider application if patentable subject matter mobile health or related software in their whether the acquisition target has any becomes an issue," the attorney noted. portfolio need to keep two issues in mind. value in terms of name recognition and Falcoff says it's also useful to interview First, they should scrutinize whether any market penetration, which may make it and negotiate with the patent examiner, patents held in the targeted firm's soft- worth the lack of patent protections. typically by phone, during the prosecu- ware are still valid and valuable, and, sec- "I work with several start-ups and this tion of a pending applications. ond, they should develop legal strategies Alice decision has really come into play "Half the time, the examiner will have to improve their odds of a stronger pros- with them," said Lateef. "Even if they do suggestions on how to amend the claims ecution of the patent application. have hardware elements, a lot of times to overcome a [patentable subject mat- "In some sense, those are two things what they are trying to do is get a patent ter] rejection," he added. "This is also any company should be aware of, but in that involves some aspect of their inter- more cost effective than doing every- the medical device industry, where pat- play with a smartphone. That is what has thing in writing, faster and leaves less of ents are particularly important to keep become somewhat challenging." a harmful paper trail called 'prosecution your market base and to prevent a com- According to Lateef, companies seek- history estoppel.'" petitor from coming into your market, ing a patent for their medical software Another strategy is to include multiple, the value of patents I think is pretty im- ultimately must create something ex- differently written independent claims, portant," he said. ceptionally innovative, for example, a including claims focusing on the hardware Lateef says he's recently been involved in never-before-seen use of database man- in the patent application while sneaking cases where he reviewed patents related to agement or some type of artificial intel- the software element into the claims. a potential acquisition and valued the com- ligence or deep-learning algorithm that is "This would be in addition to the usual pany in large part based on the fact that a game-changer for patient care. 'method of use' claims, which are easier to much of their software patents were not write for the novel software function but very valuable in light of the Alice decision. THE PENDULUM SWINGS are more likely to draw this type of rejec- In particular, Lateef cautions that well- While the issue is causing a headache tion," added Falcoff. ness products such as fitness trackers, for device-makers, Falcoff observes that Finally, Falcoff says, if a patent is reject- which mostly use signal processing and more and more cases coming out reed solely based on the decision that it is analytics crunching, are a tough patent sell. cently are more favorable to makers of not considered a patentable subject mat- "There's not really that much going on medtech software. ter and there are no prior art rejections, in terms of the hardware innovation; it's "As with a lot of things legal, the pendu- the company should appeal the applica- more just kind of crunching the data and lum tends to swing one direction or the tion to the USPTO which he argues is not coming up with some very cool user inter- other, rarely is it dead center, which would, medtech.pharmaintelligence.informa.com March 5, 2018 | Medtech Insight | 21 � EDITORS’ PICKS�

"It's somewhat chaotic right now, very subjective, both in the patent office and in Using 'Alice' Against Trolls the courts but for every case invalidating One area that patent trolls are active in is finding open-source code or stan- a patent there may be one or two uphold- dards and filing a patent on them so they can come after companies for in- ing the patent validity so the pendulum is fringement. Irfan Lateef, from Knobbe Martens, says this is more common with swinging to center again and will probably standards-based organizations, such as IEEE, which sets wireless standards go the other way," Falcoff added. based on agreements between a conglomeration of companies. While there may be need for Congress "All of a sudden you see patent trolls buy up tons of patents that deal with to step in and help decide whether soft- wireless standards and then they go after people whoever uses 802.11a [a wire- ware is patentable subject matter and to less standard] and regardless of what industry you're in, you're violating their what extent, Falcoff acknowledges that patents," he added. with the rapid evolution of software, it is While such trolling has so far mostly been centered around the wireless difficult for any legislative efforts to stay technology industry, there is a significant risk that as digital health standards ahead of the curve. become more widely adopted, patent trolls will come after companies in that space. HARDER IN EUROPE, BUT "That's definitely going to happen," said Lateef. "One area that's ripe for that 'CHAOTIC' IN US is electronic health records." By comparison, the standards in Europe "[Patent trolls are] looking for what is the most target-wise valuable industry to find software patentable is even more they can go after, which is currently smart phones and cellphone providers, but difficult than in the US. Europe questions as medical devices start using software they can point to, I think they would be the significance of the technical effect of ripe for that as well," he added. the software to determine if it should be In these types of cases, ironically, manufacturers may turn to the Alice prec- granted a patent. edent to help shut down the trolls from claiming patent infringement by argu- "They don't like granting patents on ing the software shouldn't be considered patentable subject matter. pure software," said Falcoff. "Sometimes you can get them if it's much more hardware intensive but with pure software your chances are better in the United States." of course, ultimately be fair," he said. started to accept some software patents, "The case law [in the US] has developed He notes in the 70s and 80s, the pat- such as for facial software recognition, as down this very strange and very subjective ent office was "dead set against software novel enough to be patentable. path now," he added. "It's fairly chaotic. It's patents" being considered in any way "[Software patent holders] are kind of not good for companies, especially medi- patentable subject matter. Eventually the playing the waiting game to find more cases cal companies, that have poured all this federal circuit court of appeals stepped that are patent-owner friendly," he added. R&D investment money into developing in and overruled the patent office in sev- Patent examiners themselves are fol- new inventions and getting them to mar- eral cases opening the door for business lowing these post-Alice cases closely to ket and passing all the regulatory hurdles, method patents. That eventually led to a figure out how they should decide what is and then having this valuable patent as- boom in patent filings for business meth- and is not patentable subject matter. Ac- set invalidated when it is a true invention ods and software patents. cording to Falcoff, they are given guide- and true improvement in the industry that With Alice and the other cases, the lines typically a couple times a year, with is very successful. It seems the policy is all pendulum swung back, making it much the last one sent around in November, backwards on this issue." harder for software to be considered pat- that outline recent SCOTUS and appeals entable subject matter. This was in large court cases to help guide their decisions. Published online 02/23/18 part a response to patent trolls who were buying up patents, especially in the e- commerce sector, with the aim of suing industries using similar methods. As a result, the courts have stepped LET’S GET SOCIAL in to quell such practices by stating that business methods are not patentable. We are tweeting, liking and sharing the latest industry news and That was followed by steps to invalidate insights from our global team of editors and analysts, join us! patents on diagnosis methods and software algorithms. However, over the past @Medtech_Insight few years, Falcoff says, the courts have

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