Update on FDA’s consideration of of the medical equipment service/refurbishment industry

Here are two items that should grab your attention:

First, the FDA has annouced dates for their public workshop on “Refurbishing, Reconditioning, Rebuilding, Remarketing, Remanufacturing, and Servicing of Medical Devices Performed by Third-Party Entities and Original Equipment Manufacturers”

It will be held on Thursday and Friday, October 27-28, 2016 at the FDA’s White Oak Campus, 10903 New Hampshire Avenue, Silver Spring, Maryland 20993. It wil also be availabe via webcast.

For more information go to : https://www.federalregister.gov/articles/2016/07/18/2016-16887/refurbishing-reconditioning-rebuilding-remarketing-remanufacturing-and-servicing-of-medical-devices?source=govdelivery&utm_medium=email&utm_source=govdelivery

You need to register by Friday, September 23, 2016, by 4:00PM to attend in person or speak. To register go to : http://www.fda.gov/MedicalDevices/NewsEvents/WorkshopsConferences/default.htm?source=govdelivery&utm_medium=email&utm_source=govdelivery

I hope you put this on your calendar to attend either in person or by attending or listening to the proceeding by webcast.

More importantly, I hope that if you belong to a trade association you will check with them about how and if you will be represented. You can be sure that the large OEM’s will be presenting their case to limit the access to markets by “Third-Party Entities”.

Second, in light of the above I thought it was important to pass on this posting by I received from one of my LinkedIn contacts.

He writes, “Looks like the noose might be tightening for owners of used equipment and leasing companies. Has anyone else received a similar letter? The letter reads, ‘It is our understanding that as a broker/dealer of used healthcare equipment you might have occasion to purchase used GE Healthcare equipment from original equipment purchasers. In such cases, the equipment you purchase may contain software that was sub-licensed to the original equipment purchaser and subject to various terms and conditions, including restrictions on the resale or the transfer of certain software licenses. Please be aware, unless otherwise explicitly stated by GE Healthcare in writing, software that is not part of the equipment’s base system standard operating software is non-transferable and only the original equipment purchaser has a non-exclusive, limited license to use such software.’

According to one of my closest friends with over 25 years in the used equipment business, this letter was received by many companies last week. To quote Yogi Berra, “It’s is deja vue all over again”.

My friend said, “someone at GE must have amnesia.” According to a 1998 press announcement by the Department of Justice (https://www.justice.gov/archive/atr/public/press_releases/1998/1828.htm ) GE settled two antitrust lawsuits filed in 1996 and agreed to remove restrictions it had imposed on software licenses with more than 500 hospitals through the country. “The restriction prevented the hospitals from competing with GE to service medical equipment at other hospitals and at clinics. In the second case, GE resolved the competitive concerns raised by its proposed acquisition of InnoServ Technologies, an organization that services medical imaging equipment for hospitals, by agreeing to sell InnoServ’s service software.’The Department’s settlements will restore competition in medical equipment service markets, reduce the prices paid by hospitals and other health care providers, and help to lower health care costs for all consumers,’ said Joel I. Klein, Assistant Attorney General in charge of the Department’s Antitrust Division.”

While these cases may not be directly on point as far as what GE’s letter may be contemplating, it certainly seems like a revisiting of old concerns. Not only does GE’s letter seem to threaten the viability of resellers’ businesses, if enforced, but I would think that initial purchasers, and especially large hospital groups, will have a lot to say. If equipment purchasers do not have the ability to resell their equipment as complete functional units including a warranty that the new buyer has full unlimited use of the software, then much of the residual value of this equipment will have been destroyed. These become merely parts machines with only a fraction of the value they would have as fully operational units.

It is an interesting challenge GE has set and I don’t think the timing between this letter and the FDA workshop is a coincidence.

That reminds me of another great Yogi Berra saying….