Q&A with Scott Whitaker, president and CEO of AdvaMed

by | Mar 3, 2017 | Education, Fogarty Innovation, Mentoring, Thought Leadership

As CEO of AdvaMed, Whitaker is the voice of the medical technology industry. He is widely recognized as a top health care advocate and policy expert with experience across multiple health policy sectors. He has worked successfully with diverse stakeholder groups – including hospital, patient and physician groups, regulators, public and private payers, and global trade organizations – to advance medical technology innovation and timely patient access to next-generation treatments and cures.

Following the release of AdvaMed’s recent report, “A Future at Risk: Economic Performance, Entrepreneurship, and Venture Capital in the U.S, Medical Technology Sector,” which highlights the challenges facing medtech entrepreneurship, we had the pleasure of catching up with Whitaker to discuss some of the report’s key findings and the organization’s plans to foster early-stage innovation.

Q. In your recent report, which findings surprised you and/or concerned you the most?
A. First of all, I just want to stress that I am very optimistic on the future of medtech. We live in an age where everyday science fiction is becoming science fact.

Fundamental advances in knowledge of human biology down to the molecular level and continued progress in a range of disciplines – computing, communications, materials science, physics and engineering – are fueling medtech innovation, and the potential to save and improve patients’ lives is almost limitless.

Coupled with this growth in knowledge and innovation, patient needs and global markets are expanding faster than ever. Aging populations around the world and the explosive growth of the middle class in developing economies are helping to create boundless opportunities to improve peoples’ lives.

With that context, the new Accel report does give us pause and reflects a policy environment that is holding us back from reaching our full potential.

The first takeaway from the report is the decline in new medtech startups, which are often the source of the most cutting-edge innovations. Since the late 1970s and early 1980s, the number of new medtech startups has declined significantly each year, going from around 1,500 annually to a mere 600 in 2012.

While this parallels a broader decline in new startups in the economy overall, the decline in the medtech space is sharper.

Next, we are experiencing what could be called a “graying” of the U.S. medtech industry. More than 30 percent of medtech firms are at least 25 years old and more than half are 16 years or more. Meanwhile less than 20 percent of medtech firms are six years old or younger.

This is in contrast to other high-tech U.S. industries such as information and communications and other biosciences where more than 40 percent and more than 30 percent of firms, respectively, are less than six years old.

This is important because older firms are perceived to be less flexible, less dynamic and less innovative. And this has an impact on an industry’s ability to attract the best and the brightest. There is intense competition for engineering talent in the U.S. and many of these individuals are being drawn to less-regulated industries that may have a better reputation as a “hot” industry.

Looking at the climate for investment in medtech, the AdvaMed Accel report notes that since the early 1990s, VC investment in the industry has gone from about 13 percent of total VC dollars to about four percent in recent years.

Of particular concern, the proportion of those funds devoted to early stage startups – which are dependent on these funds to survive in many cases – have gone from about 10 percent in the early 1990s to only three percent in recent years.

If these early-stage companies fold from lack of funds, the innovations they were working to develop will disappear in most cases. And the real victims are the patients who will never have a chance to benefit from these innovations.

The question is: What can we do to address these trends and to create an environment that allows for a thriving innovation ecosystem for medical technology – an environment that attracts new talent, facilitates startups and draws greater support from the investment community?

Q. Where do you feel the medtech industry has made the strongest strides over the past few years?
A. One area were we’ve definitely seen progress is the industry’s relationship with FDA and working with them to improve efficiency and predictability of the device review process. I think we’ve experience a real turnaround, as compared to FY 2008-2009-2010, when we were seeing historically lengthy times to decisions for both 510(k)s and PMAs.

I believe that progress is directly related to the success of the 2012 MDUFA III agreement, which really was groundbreaking.

For example, under the agreement, FDA and industry were jointly responsible for the shared outcome goal for average total review time to decision. The 2012 agreement also included significantly improved review metrics and a number of process enhancements to improve the consistency and timeliness of the approval process independent of specific time goals.

Thanks to these and other provisions, we have seen a marked improvement in FDA’s performance over the past several years, as FDA decisions on all submission types are meeting performance goals.

I commend Center for Devices and Radiological Health (CDRH) Director Jeff Shuren for the progress made in meeting the performance commitments of the current user fee agreement. Under his leadership, the device center has demonstrated a true willingness to work with the industry in a positive and cooperative manner, while ensuring that safe and effective devices reach those patients who need them most.

This context is important because we’re in the process of reauthorizing the medical device user fee program again, and the latest agreement between FDA and industry builds on the success of the 2012 agreement.

This new agreement continues the progress we’ve seen, with FDA committing to significant improvements for total review time goals and further internal process improvements.

We’re especially excited about the new provision in this agreement calling for greater patient engagement in the regulatory process; for example, by allowing for the voluntary use of publicly available and validated Patient Preference Information (PPI) or Patient Reported Outcomes (PRO) in regulatory submissions.

We think this kind of information can play an important role in fostering medtech innovation and improving patient care.

So all in all, we think this new user fee agreement is a win for patients, who will benefit from more timely access to advanced medical technologies; a win for FDA, which will be better resourced to fulfill its mission to protect the public health while promoting medical advancement; and it’s a win for innovation, as there will be greater efficiency and predictability in the agency’s review processes.

Q. What steps are AdvaMed and AdvaMed Accel taking to re-energize the innovation ecosystem?
A. The Accel report laid out a number of policy solutions to address the challenges to the medtech innovation ecosystem and to the industry’s potential to meet growing patient needs.

These policy solutions include:

  • A more consistent and timely pathway to FDA approval;
  • Coverage, coding and payment processes that recognize the value of medical technology and reward innovation; and
  • Tax and other policy changes that encourage the flow of capital into early- stage and startup companies in particular.

AdvaMed and AdvaMed Accel are working on all these fronts.

I’ve already mentioned the improvements in FDA’s review process that we want to accelerate through the user fee reauthorization process, but we have other efforts on the legislative front as well.

Both the U.S. House (as part of the 21st Century Cures Act) and the Senate HELP Committee have advanced key AdvaMed-supported regulatory provisions aimed at revitalizing the medtech innovation ecosystem, such as improving FDA’s expedited pathway and helping speed patient access to breakthrough technologies.

On the reimbursement front, more and more we are seeing the complexities of Medicare coverage, coding and payment processes as an obstacle to patient access to medtech innovations.

We continue to see many opportunities arising from the ongoing shift from fee-for-service toward value-based care, including an enhanced market for technologies that improve quality and efficiency of care.

Nevertheless, the reimbursement environment is increasingly challenging, as new payment models put more risk on providers, creating incentives for them to reduce spending, which could lead to stinting on patient care and slowing medical progress.

Again, several AdvaMed-supported proposals for Centers for Medicare & Medicaid Services (CMS) policy refinements have been introduced in the House and Senate. For example, there are provisions for a streamlined, seamless path for CMS coverage and payment for FDA-designated breakthrough products, as well as automatic coverage of FDA-approved trials, just to name a few.

Finally on taxes, our main priority is full repeal of the medical device excise tax after it was suspended for two years beginning in 2016.

Our efforts on Capitol Hill have been focused on communicating the positive benefits of suspension, as more resources are being freed up and funneled into R&D, new hiring, infrastructure improvements, etc.

But we need full repeal in order to create the kind of certainty that drives long-term planning and investment.

Aside from the device tax, we would also like to see tax reform that encourages investment in startups in particular, such as an angel investor tax credit, and more competitive rates for knowledge-based, high value-added manufacturing industries like ours.

Taken together, these regulatory, payment and tax reforms will go a long way to reversing some of the trends we see in the Accel report and stimulate increased entrepreneurship and investment in the medtech industry.

Q. What role do organizations like the Fogarty Institute for Innovation play in helping spearhead change in the industry and advancing medtech innovation?
A. Organizations like the Fogarty Institute do so much to spur medtech innovation, from mentoring entrepreneurs with sometimes nothing more than an idea on how to improve patient care to providing the initial financial support that startups often struggle to secure.

Just providing a workspace that allows early-stage companies to focus on their ideas without the distractions of finding and supplying their own space is such a boon. Coupled with the proximity to a world-class hospital that facilitates collaboration with physicians and other health care practitioners, and it’s no wonder that in less than a decade Fogarty Institute already has a great track record in launching new medtech startups.

And of course, having the benefit of the direct oversight and involvement of someone like Dr. Fogarty is invaluable. His experience inventing and commercializing innovative medical technologies is second to none. And of course, it explains why he received the AdvaMed lifetime achievement award for all he has done to help patient care and promote medical advancement.

Dr. Fogarty’s vision of nurturing medical innovation from initial concept to market is a great model for any organization seeking to have an impact in this space.

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