Wednesday, October 26, 2011
New York Times
Venture Capitalists Put Money on Easing Medical Device Rules
Published: October 25, 2011
One afternoon last spring, a little-known congressman from Minnesota made an impassioned plea before a House oversight committee.
Rein in the Food and Drug Administration’s uncertain approval process for new medical devices, urged the Minnesota congressman, Erik Paulsen, or Minnesota and other states stand to lose up to 400,000 jobs because of lost investment in the device industry.
Over the following month, Mr. Paulsen’s campaign committee took in $74,000 from people with a stake in device regulation, much of it from executives affiliated with venture capital funds and their spouses. Now Mr. Paulsen, a two-term Republican, is a sponsor of a bill that would make it easier to bring new medical products to market.
As Congress considers reauthorizing a law that sets the fees for medical device makers, venture capitalists are emerging as a rich and influential ally of device companies eager to remove what they say are regulatory roadblocks in the approval process. The push has alarmed patient advocates and some doctors, who have been calling on the F.D.A. to intensify its oversight of devices, particularly in light of some all-metal artificial hips that are failing prematurely at an unusually high rate.
“They have this unwritten assumption that every new device is innovative,” Dr. Rita Redberg, who is the editor of the Archives of Internal Medicine, said, referring to the venture capital funds. But some devices, she said, “are killing people or causing significant harm.”
People associated with funds that underwrite companies developing new devices and other health products have made more than $3.3 million in political donations to Republicans, Democrats and political action committees over the past five years, according to an analysis of federal contributions by The New York Times.
Though such people donate for many reasons, about 20 percent of the money from the 182 donors identified by The Times went directly to candidates and political action committees supporting a streamlining of F.D.A. policy or other issues of importance to medical products producers. The total contributions from such donors could be much higher; The Times limited its analysis to individuals affiliated with venture capital funds that have joined two lobbying associations.
Investment funds and business groups have also increased their lobbying in Washington and have generated a stream of reports arguing that regulations are crippling innovation and driving away investment.
Simply put, the industry’s champions argue that the F.D.A. suffers from high personnel turnover, an unwieldy bureaucracy and a regimen that forces start-up device companies to run new and costly tests constantly, often duplicating past efforts.
“This is about survival,” said Michael Carusi, a general manager at an investment fund in Palo Alto, Calif., Advanced Technology Ventures, who contributed $1,000 to Mr. Paulsen. “We are deeply concerned about the future.”
Medical devices encompass a wide array of products, such as heart defibrillators, artificial joints and diagnostic equipment.
Lobbying to smooth the approval process has intensified over the last year as Congress prepares to reauthorize the law that requires device producers to pay fees to the F.D.A., fees that are used to pay the agency’s operating costs. Lawmakers have an opportunity to alter the agency’s regulatory procedures for the first time since the law last came up for renewal in 2007.
An industry lobbying group, the National Venture Capital Association, has intensified its focus on device regulation. In 2010, the association, which lobbies on many issues, spent more than $2.5 million, according to data from the nonpartisan Center for Responsive Politics. About $350,000 of that was related to devices, drugs and health care, a figure that is expected to increase to $450,000 this year, said an association spokeswoman, Emily Mendell.
While it is not unusual for businesses to point to regulation as a barrier to economic and job growth, medical device investors have found a particularly receptive audience on Capitol Hill in recent months. In October alone, 10 bills have been introduced by Republicans in the House to speed up the F.D.A. device approval process; in the Senate, similar legislation has been introduced by Amy Klobuchar, a Democrat of Minnesota.
Since February, four House panels have held hearings on the impact of F.D.A. procedures on device approval. At those sessions, 19 of the 26 listed witnesses were investors, entrepreneurs, industry consultants, trade group officials or patients who said that agency delays in approving a device had harmed them or a loved one. The list included no patients injured by a flawed device; one hearing in the Senate had a more varied witness list. Two weeks ago, four Democratic congressmen wrote to their Republican counterparts about the imbalance in the House testimony and suggested the hearings had failed to address potential dangers “if medical devices are not appropriately regulated.”
The letter, signed by Henry A. Waxman of California, Diana DeGette of Colorado, John Dingell of Michigan and Frank Pallone of New Jersey, also urged that hearings be held on the metal hip problem and similar issues.
Venture fund executives like Mr. Carusi and lawmakers like Mr. Paulsen insist that they are equally concerned about safety. However, in their view, a big part of the problem at the F.D.A. is philosophical; top officials, these critics say, have overreacted to recent episodes involving flawed products and become risk-averse. As a result, devices are available first in Europe, they say.
“The key is to strike the right balance,” said Dr. Josh Makower, a device developer and a consultant to New Enterprise Associates, a venture fund in Palo Alto.
F.D.A. officials said they have recently tried to address investors’ concerns by announcing programs to encourage innovation and reduce regulatory burdens. Still, the head of the agency’s device division, Dr. Jeffrey E. Shuren, said that executives like Dr. Makower seemed more interested in politicizing the issue than resolving it through discussion.
“The dialogue has become more political and adversarial,” Dr. Shuren said.
Some medical experts have also questioned recent studies about the negative impact of regulations, calling the reviews flawed in methodology.
William Vodra, a lawyer in Washington who has worked closely with medical device producers, said that investors had legitimate concerns about regulatory speed. That is because the approval of a new device can begin a process in which a start-up company is acquired by a larger manufacturer and early investors profit by cashing out.
But such investors may be less interested in what happens to that device after it reaches the market because they have already moved on, said Mr. Vodra, who served on an Institute of Medicine panel that recently concluded the F.D.A. failed to properly assess the safety and effectiveness of many new devices.
Mr. Paulsen, the Minnesota congressman, did not respond to requests for an interview. But a spokesman, Tom Erickson, said that the lawmaker’s testimony this spring was unrelated to any campaign donations and reflected his long-held view that the F.D.A. was undermining an industry crucial to Minnesota.
“He gave his testimony because he feels these jobs are being threatened by an inconsistent and unpredictable F.D.A.,” Mr. Erickson said. Mr. Paulsen, along with Democrats and Republicans from states that are home to device makers, has also sought to repeal a tax on sales imposed on the industry under the health care overhaul law.
Dr. Makower, the venture fund consultant, has donated $5,000 to Mr. Paulsen, records show.
“I think that he understands this issue,” said Dr. Makower.