[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
HEALTH INFORMATION TECHNOLOGIES: HARNESSING WIRELESS INNOVATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MARCH 19, 2013
__________
Serial No. 113-20
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
_____
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Communications and Technology
GREG WALDEN, Oregon
Chairman
ROBERT E. LATTA, Ohio ANNA G. ESHOO, California
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan DORIS O. MATSUI, California
MARSHA BLACKBURN, Tennessee BRUCE L. BRALEY, Iowa
STEVE SCALISE, Louisiana PETER WELCH, Vermont
LEONARD LANCE, New Jersey BEN RAY LUJAN, New Mexico
BRETT GUTHRIE, Kentucky JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado FRANK PALLONE, Jr., New Jersey
MIKE POMPEO, Kansas BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois DIANA DeGETTE, Colorado
BILLY LONG, Missouri JIM MATHESON, Utah
RENEE L. ELLMERS, North Carolina G.K. BUTTERFIELD, North Carolina
JOE BARTON, Texas HENRY A. WAXMAN, California, ex
FRED UPTON, Michigan, ex officio officio
C O N T E N T S
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Page
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 1
Prepared statement........................................... 3
Hon. Robert E. Latta, a Representative in Congress from the State
of Ohio, opening statement..................................... 3
Hon. Doris O. Matsui, a Representative in Congress from the State
of California, opening statement............................... 4
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 175
Hon. Leonard Lance, a Representative in Congress from the State
of New Jersey, prepared statement.............................. 175
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, prepared statement.............................. 176
Witnesses
Robert Jarrin, Senior Director, Government Affairs, Qualcomm..... 9
Prepared statement........................................... 12
Bradley Merrill Thompson, General Counsel, mHealth Regulatory
Coalition...................................................... 56
Prepared statement........................................... 58
Ben Chodor, Chief Executive Officer, Happtique................... 69
Prepared statement........................................... 71
Jonathan Spalter, Chairman, Mobile Future........................ 104
Prepared statement........................................... 106
T. Forcht Dagi, MD, MPH, DmedSC, Partner, HLM Venture Partners... 123
Prepared statement........................................... 126
George Ford, Chief Economist, Phoenix Center for Advanced Legal
and Economic Public Policy Studies............................. 132
Prepared statement........................................... 134
Submitted Material
Report by the Center on Budget and Policy Priorities, March 11,
2013, submitted by Ms. Matsui.................................. 178
Letter of March 18, 2013, from SDI Diagnostics to the
subcommittee, submitted by Ms. Matsui.......................... 183
Study entitled, ``Diagnostic Inaccuracy of Smartphone
Applications for Melanoma Detection,'' JAMA Dermatology,
January 16, 2013, submitted by Ms. Matsui...................... 185
Letter of March 18, 2013, from CTIA--The Wireless Association to
the subcommittee, submitted by Mr. Walden...................... 189
Letter of March 19, 2013, from Ideomed to the Committee,
submitted by Mr. Walden........................................ 191
HEALTH INFORMATION TECHNOLOGIES: HARNESSING WIRELESS INNOVATION
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TUESDAY, MARCH 19, 2013
House of Representatives,
Subcommittee on Communications and Technology,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:37 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Greg
Walden (chairman of the subcommittee) presiding.
Present: Representatives Walden, Latta, Terry, Shimkus,
Terry, Blackburn, Scalise, Lance, Guthrie, Gardner, Kinzinger,
Long, Ellmers, Matsui, Lujan and Waxman (ex officio).
Staff present: Ray Baum, Senior Policy Advisor/Director of
Coalitions; Matt Bravo, Professional Staff Member; Andy
Duberstein, Deputy Press Secretary; Neil Fried, Chief Counsel,
Communications and Technology; Debbee Hancock, Press Secretary;
Sydne Harwick, Staff Assistant; Brittany Havens, Staff
Assistant; Sean Hayes, Counsel, Oversight and Investigations;
Robert Horne, Professional Staff Member, Health; Andrew
Powaleny, Deputy Press Secretary; David Redl, Counsel, Telecom;
Charlotte Savercool, Executive Assistant, Legislative Clerk;
Roger Sherman, Democratic Chief Counsel; Shawn Chang,
Democratic Senior Counsel; Patrick Donovan, FCC Detailee;
Margaret McCarthy; and Kara van Stralen, Democratic Special
Assistant.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. We are going to call to order the Subcommittee
on Communications and Technology for our hearing on ``Health
Information Technology: Harnessing Wireless Innovation.''
I want to welcome our witnesses and our participants in
today's hearing. It is not every day that the Subcommittee on
Communications and Technology holds a hearing addressing FDA
regulation, but the fact that we are having such a hearing is a
testament to the breadth of innovation using wireless
smartphones and tablets, and all that that is bringing to
nearly every aspect of our lives. There are literally thousands
of apps in the various smartphone and tablet app stores in the
health and wellness categories, actually tens of thousands,
everything from simple calorie counters to complex analytical
tools. The more than 300 million wireless devices we depend on
every day are revolutionizing health and wellness.
If I stopped here, this hearing could be about the success
of bringing the innovation and investment of the wireless
ecosystem to bear on the ever more costly health care system.
And make no mistake about it, that could still be the outcome.
But the specter of costly and time-consuming regulation, to say
nothing of a 2.3 percent excise tax, looms large over this
industry. We have heard from investors, wireless device
manufacturers, and application developers that are concerned
about the uncertainty of a FDA regulatory regime, that may or
may not apply to them, and the possibility of an additional
excise tax that cuts into already thin margins.
The collision of worlds in the mobile health, or mHealth,
is a study in contrasts. The app economy is characterized by
low barriers to entry, quick time to market, and the ability to
adapt to quickly changing user needs. Medical devices, on the
other hand, face a long and costly premarket approval process
at the FDA. Now, we all want to make sure that patient safety
is taken care of first, but why would we treat mobile
applications the same as a dialysis machine? These are the
kinds of questions we need to get answers to about where that
sweet spot is and that fine.
The answer may be that the wireless economy represents a
tempting target for the 2.3 percent excise tax that the
President's health care law placed on medical devices. While
the IRS and the FDA have provided some draft guidance on how
they will apply the medical device definition and the medical
device tax, their analysis is not a poster child of clarity and
it leaves large parts of the economy wondering if they will be
on the hook for what is essentially a tax on innovation, and we
certainly are hearing that from our witnesses and others.
The FCC and the Obama administration have both joined the
wireless industry in trumpeting the virtuous cycle of
innovation and investment in mobile technologies: investment in
wireless networks and devices creates opportunities for app
developers to create new and innovative uses for wireless
services, which in turn spurs further investment in networks
and devices. MHealth is part of this virtuous cycle that is
driving faster speeds, lowering costs, spurring innovation and
creating patient benefits. Given the interconnected nature, we
should be aware that an impact on one segment of this industry
has the potential to slow the entire cycle.
The overbroad application of FDA regulation and the health
care law's medical device tax are not, as some have suggested,
outside the realm of possibility. In a 2012 report by the
Institute of Medicine, one expert author suggested that all
health IT products should be treated as class III medical
devices, which receive the highest level of regulatory scrutiny
and therefore should be subject to the tax. Now, that is just
one person's opinion but it is in the prestigious Institute of
Medicine report.
Luckily, while these are not hypothetical concerns, they
are also by no means foregone conclusions, which is why we are
having a hearing today. Wireless has and can continue to be a
system that brings the mobile revolution to our Nation's health
and wellness sector, but we must ensure that as we bring the
innovation of the wireless economy to health and wellness that
we not place unnecessary hurdles in the way of the developers
and investors that are fueling mHealth.
[The prepared statement of Mr. Walden follows:]
Prepared statement of Hon. Greg Walden
It's not every day that the Subcommittee on Communications
and Technology holds a hearing addressing FDA regulation. The
fact that we are having such a hearing is a testament to the
breadth of innovative uses wireless smartphones and tablets are
bringing to nearly every aspect of our lives. There are
literally thousands of apps in the various smartphone and
tablet app stores in the health and wellness categories--
everything from simple calorie counters to complex analytical
tools. The more than 300 million wireless devices we depend on
every day are revolutionizing health and wellness.
If I stopped here, this hearing could be about the success
of bringing the innovation and investment of the wireless
ecosystem to bear on the ever more costly health care system.
And make no mistake, that could still be the outcome. But the
specter of costly and time-consuming regulation--to say nothing
of a 2.3 percent excise tax--looms large over this industry.
Investors, wireless device manufacturers and application
developers all face the uncertainty of an FDA regulatory regime
that may or may not apply to them and the possibility of an
additional excise tax that cuts into already thin margins.
The collision of worlds in the mobile health--or mHealth--
market is a study in contrasts. The app economy is
characterized by low barriers to entry, quick time to market,
and the ability to adapt to quickly changing user needs.
Medical devices, on the other hand, face a long and costly pre-
market approval process at the FDA. We all want to ensure
patient safety, but why would we treat mobile applications the
same as a dialysis machine?
The answer may be that the wireless economy represents a
tempting target for the 2.3 percent excise tax that the
president's health care law placed on medical devices. While
the IRS and the FDA have provided some draft guidance on how
they will apply the medical device definition and the medical
device tax, their analysis is not a poster child of clarity and
leaves large parts of the economy wondering if they will be on
the hook for what is essentially a tax on innovation.
The FCC and the Obama administration have both joined the
wireless industry in trumpeting the ``virtuous cycle'' of
innovation and investment in mobile technologies: investment in
wireless networks and devices creates opportunities for app
developers to create new and innovative uses for wireless
services, which in turn spurs further investment in networks
and devices. mHealth is part of this virtuous cycle that is
driving faster speeds, lowering costs, spurring innovation and
creating patient benefits. Given their interconnected nature,
we should be aware that an impact on one segment has the
potential to slow the entire cycle.
The overbroad application of FDA regulation and the
Obamacare medical device tax are not, as some have suggested,
outside the realm of possibility. In a 2012 report by the
Institute of Medicine, one expert author suggested that all
health IT products should be treated as Class III medical
devices, which receive the highest level of regulatory scrutiny
and could be subject to the tax.
Luckily, while these are not hypothetical concerns, they
are also by no means foregone conclusions. Wireless has and can
continue to bring the mobile revolution to our nation's health
and wellness sector. But we must ensure that as we bring the
innovation of the wireless economy to health and wellness that
we not place unnecessary hurdles in the way of the developers
and investors that are fueling mHealth.
# # #
Mr. Walden. So I want to thank our witnesses for being
here, and I would now recognize the vice chair of the
subcommittee, Mr. Latta.
OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Latta. I thank the chairman for yielding, and I also
thank our distinguished panel for testifying today.
The mobile application industry is a modern American
economic success story. Just this year alone, mobile apps were
projected to be a $25 billion industry. No one, at least no one
in Washington, could have predicted the incredible growth and
the extraordinary uses for these apps, particularly in the
mobile health world. The health and wellness opportunities for
mobile apps have great potential for our health care delivery
system.
I am concerned that the regulatory uncertainty coming from
the FDA will discourage innovation and investment in mobile
apps and that Americans will lose out on potentially lifesaving
technology. This climate of regulatory uncertainty could also
have adverse effects on the overall wireless ecosystem, which
continues to drive economic growth in this country.
Furthermore, I believe the medical device tax will be extremely
detrimental to our economy. The potential application of the
medical device tax to mobile apps will only further deter
investment and development in the industry.
Mr. Chairman, I look forward to our testimony today and our
witnesses, and I yield back.
Mr. Walden. I thank the gentleman for his comments. We now
recognize the ranking member of the subcommittee today, Ms.
Matsui of California.
OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Matsui. Thank you, Mr. Chairman, and I would like to
thank the witnesses for being here today.
Technology is changing health care as we know it. A smart
spectrum policy that is driving wireless revolution is also
transforming our health care sector. We are seeing the benefits
of health care providers utilizing WiFi and high-quality,
unlicensed spectrum to spur the development of next-generation
patient care monitoring applications that could transmit
patients' vital health data to their doctor or hospital.
Whether it is monitoring diabetes, glucose levels, tracking
blood pressure or providing real-time hydration levels, the
list goes on and on.
We are seeing cloud technologies transforming health IT
through the creation of select community health clouds forming
in regions across the country, enabling hospitals to better
treat patients while ensuring HIPAA-compliant transfers of
secure medical information. It will only become more important
as the mobile app economy continues to drive consumer demand
for smartphones and tablets.
The fact is, the ever-evolving app economy is helping to
transform the health care sector, integrating science, medicine
and technology to provide individuals with real-time access to
vital health information, much of which was previously
unavailable outside of a hospital or a doctor's office. House
calls are becoming a thing of the past. Virtual checkups are
becoming the new digital-age house call. Doctors are using
iPads to issue prescriptions and diagnose patients. Smartphones
are creating new paths of virtual interactions between doctors
and patients. Texting your doctor has become a more common
practice as more Americans, particularly young people, are
finding greater comfort and accessibility in communicating
electronically with their doctors.
The Affordable Care Act also has allowed the health care
industry to become more innovative using technology. I believe
we will see a growing ecosystem of health IT innovation now
that the Affordable Care Act is here to stay.
My home State of California has been a pioneer in ACA
implementation. Our exchange, Covered California, has already
begun using mobile devices to launch online features so
consumers can estimate their monthly premiums and compare
health care options. Physicians and hospitals in my district of
Sacramento are using the exchange to improve their health IT
capabilities. For example, the Live Health Online Initiative
already permits doctors to care for patients through a secure
online visit using laptop Web cams and ultimately through
video-enabled tablets and smartphones regardless of where the
doctor and patient are located.
With more than 50 million additional Americans expected to
obtain health insurance this year due to the law, an efficient
and effective health IT network is even more imperative. In
order to realize the full potential of innovative health
technologies, the regulatory environment must keep pace with
rapidly changing technology.
In 2011, the FDA released draft guidance to provide rules
of the road for medical app developers clarifying which medical
apps would require its attention and which would not. I believe
the draft guidance attempts to strike the appropriate balance
between enabling innovative medical apps and ensuring patient
safety, and I urge the agency to move forward expeditiously.
Now, moving forward, I believe the FDA must be mindful of the
fact that technology continues to evolve at a rapid pace and
the need for them to provide clarity to the marketplace.
Another way to foster greater innovation in the health
sector is through creating a workable federal definition for
telehealth services. I am developing legislation to do just
that. I believe having certainty here would spur innovation and
research in the private sector and in programs like Medicare.
We must continue to chart a technology-friendly course that
promotes better patient care for all Americans.
And Mr. Chairman, I would like to ask unanimous consent to
enter into the record the following three items: a report from
the Center on Budget and Policy Priorities on the medical
device excise tax, a letter from SDI Diagnostics, a small
medical device manufacturer, regarding FDA regulatory oversight
of the medical device market, a study published in the peer-
review journal, JAMA Dermatology, identifying risks and
depending on smartphone apps for diagnosis.
Mr. Walden. Without objection.
[The information appears at the conclusion of the hearing.]
Ms. Matsui. Thank you. And I look forward to working with
my colleagues to continue to promote health IT. I look forward
to hearing from our witnesses today. Thank you. I yield back.
Mr. Walden. The gentlelady yields back the balance of her
time. The Chair now recognizes the gentlewoman from Tennessee,
Ms. Blackburn, for 5 minutes.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman, and I want to
thank our witnesses for being here today. We are deeply
appreciative that you all are here, and we are appreciative of
what you are doing in the industry and in this space in which
you are working.
You know, I was stunned in doing some work on this and
talking with some of the innovators in Nashville. Five hundred
thousand jobs are attributed to your sector, and you are one of
the few areas where there has actually been some job growth
since the misery that was there in 2008 and 2009 and when you
look at mHealth, you are talking about a $27 billion industry
within the next couple of years, so we thank you for this. Not
only is it productive and not only is there opportunity to
profit from your innovations, there is the opportunity to
encourage R&D and to provide better outcomes and better
wellness and maintenance of effort in health to expand the use
of telemedicine and mobile health. So hearing from you where
you think we need to travel with this is going to be helpful
and it is going to be instructive as we look at this entire
space for health care informatics and the opportunities that
exist there.
I think that we are all concerned about what would help
with the medical device tax being applied to this. Of course,
it is muddy as muddy water when you are trying to figure out
where the FDA is actually looking to go. I know there are about
300,000 apps that are available, or 50,000 apps, I think it is,
and 300,000 downloads, that are through the Apple app store. So
people like the convenience of this, and we want to do what we
can to make certain that it remains accessible and affordable
and is not levied with a tax that is going to end up being a
hindrance.
So we appreciate your ability to make way for us in your
schedules to be here, and Mr. Chairman, I yield back.
Mr. Shimkus. Would the gentlelady yield?
Mrs. Blackburn. Yes.
Mr. Shimkus. Thank you. I would just like to weigh in.
The medical device tax is a very pernicious tax by itself.
One of the problems I have is the gross nature, taxing just
gross versus obviously net after costs and expenses. I mean,
where else but in Washington can you dream up such a bad tax
provision? But as was stated earlier by my colleagues, what is
critical for you all in your testimony today is to help us sort
through your concerns, your risks, your level of being able to
capitalize or not, and then where is this line? I mean, it is
very vague, and so when there is uncertainty, there is higher
risk. When there is higher risk, there is more cost of capital
and it could be damaging to any business model that you would
address.
So we really appreciate you being here. We are probably
going to ask some pretty specific questions, especially for
those of you who are in that space innovating and creating
jobs. We thank you for coming.
And with that, I yield back to my colleague.
Mrs. Blackburn. I thank the gentleman for yielding back.
Did Mr. Lance, one of my other colleagues, want any of the
remaining time? OK. Mr. Chairman, I yield back.
Mr. Walden. The gentlelady yields back. The Chair now
recognizes the former chairman of the committee, the gentleman
from California, Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
This is a hearing to look at mobile medical applications,
and this is the first of three hearings on this subject this
week. The high-speed wireless broadband access is creating new
opportunities in consumer services in nearly every segment of
our economy including health care. Mobile medical applications
hold incredible promise for patients and health care providers,
potentially reducing costs, improving health care delivery and
saving lives. That is why we made a significant investment in
medical communications, because this is a really important
area. We all want to see this exciting innovation continue.
At the same time, we have to be cognizant of the need to
protect patient safety. That is why the Food and Drug
Administration has released a draft guidance regarding mobile
medical applications. So their guidance says if it is a dietary
tracking app or a reminder service for medical appointments,
they certainly don't need FDA approval for that. But an app
that purports to diagnose cancer? Well there ought to be some
review and have regulatory scrutiny.
Let me give an example. A group of dermatologists recently
published a study of four apps that claim to be able to
diagnose melanomas. Well, the dermatologists found that three
of the four incorrectly classified 30 percent or more of
melanomas as benign when they were actually malignant. Well, we
can't tell the American people buyer beware when potentially
life-and-death care decisions are at stake.
My Republican colleagues say that FDA is hoping to subject
smartphones and tablets to the medical device tax. Well, that
doesn't really hold up to scrutiny. I think they have their
facts wrong. Allegations that ordinary smartphones and tablets
could be subject to added red tape or new taxes under Obamacare
are absolute myths. In fact, FDA's draft guidance specifically
states that the agency does not intend to regulate distributors
of mobile medical apps like the iTunes store or the makers of
smartphones or tablets like Apple. Smartphones and tablets are
not listed with FDA as medical devices, so they are completely
outside the scope of the medical device tax.
Furthermore, it is my understanding that most mobile
medical apps would also be exempt from the medical device tax
because of the IRS ``retail exemption.'' This provision says
that devices are exempt from the tax if they are regularly
available for purchase and use by ordinary consumers, including
over the Internet, and if they are not primarily intended for
use in a medical institution or by a medical professional.
To go back to the case of the dermatologists, those apps
would not be subject to the medical device tax, but they would
be subject to FDA scrutiny to be sure that the patients are not
being harmed.
There are legitimate concerns that we ought to examine,
instead of using today's hearing to invent new fallacies to
attack the Affordable Care Act. We have already had a number of
hearings this year on a tax on Obamacare. Well, my Republican
colleagues didn't like it. They all voted against it. They
hoped that the Supreme Court would have thrown it out. The
Supreme Court upheld it. They hoped the election would replace
the President so they could have repealed it. The electorate
voted for President Obama. This is all going to go into effect
at the end of this year and it will be fully in place by
January of 2014. We have already seen a lot of improvements in
health care by virtue of the Affordable Care Act.
The Affordable Care Act is going to serve a very important
purpose. It is not going to require mobile apps to be regulated
or to be taxed. FDA released the draft guidance for mobile
medical apps, and we should commend them for this action. Both
industry and consumers would benefit from the clarity of final
guidance. I hope that FDA is working expeditiously toward that
goal.
You have to make distinctions. You don't blur it all to
serve the political point of view to attack the Affordable Care
Act. We have got to look at the law, draw the distinctions, and
make sure that the public is protected while innovation is
still encouraged. And I think that we are looking to a lot of
very important innovation and we want to see that come into
action.
Thank you, Mr. Chairman. Yield back.
Mr. Walden. The gentleman yields back the balance of his
time. The Chair would ask unanimous consent to enter into the
record a letter from the CTIA CEO and former Representative
Steve Largent, raising concerns of the wireless industry, and a
letter from Keith Brophy, CEO of Ideomed from Grand Rapids,
Michigan. It is a medical app device developer, and also has
concerns about the uncertainty, which is why we are having this
hearing today. Without objection.
[The information appears at the conclusion of the hearing.]
Mr. Waxman. Mr. Chairman, I certainly have no objections. I
just wanted to point out to the witnesses that there is another
hearing going on so I will be back and forth, and I apologize
for not being here.
Mr. Walden. No problem. Feel free to take the full time in
the other hearing if you like. No, I am just--we actually have
a little fun together here, so it is fine. Thank you. And we
have got other members that are going to be coming and going.
It is a good reminder, because there is an Energy and Power
Subcommittee meeting as well.
So with that, we welcome our witnesses, and I know Dr.
Dagi's plane was a little delayed getting out of Boston,
apparently a little snow up there, but he has arrived, and he
will be joining us momentarily, but we will go ahead, and
again, we thank you all for being here. I have read through
your testimony. It is most helpful in our efforts to shine some
light on this issue.
So we are going to start with Mr. Robert Jarrin, Senior
Director of Government Affairs for Qualcomm. Mr. Jarrin, we are
delighted to have you here this morning and look forward to
your testimony, sir.
STATEMENTS OF ROBERT JARRIN, SENIOR DIRECTOR, GOVERNMENT
AFFAIRS, QUALCOMM; BRADLEY MERRILL THOMPSON, GENERAL COUNSEL,
MHEALTH REGULATORY COALITION; BEN CHODOR, CHIEF EXECUTIVE
OFFICER, HAPPTIQUE; JONATHAN SPALTER, CHAIRMAN, MOBILE FUTURE;
T. FORCHT DAGI, MD, MPH, DMEDSC, PARTNER, HLM VENTURE PARTNERS;
AND DR. GEORGE FORD, CHIEF ECONOMIST, PHOENIX CENTER FOR
ADVANCED LEGAL AND ECONOMIC PUBLIC POLICY STUDIES
STATEMENT OF ROBERT JARRIN
Mr. Jarrin. Thank you. Good morning, Chairman Walden,
Ranking Member Matsui, and members of the subcommittee. First
and foremost, I would like to thank you for having me
participate as a witness in today's hearing. I have worked in
various capacities over the span of two decades, at times
preparing others to sit before you. Today, I am truly honored
to be the one sitting here.
I will begin by starting with mobile technology. It is the
largest platform in the history of mankind. The population of
the world is approximately 7 billion people, and there are
nearly 6.6 billion mobile connections. In the United States
alone, there are 323 million mobile subscriptions for a
population of 315 million people.
Consumer research suggests that two-thirds of people sleep
with their mobile device next to them, and one-third interact
with their device before they even get out of bed. Those with a
mobile phone tend to check it about 150 times per day, roughly
about once every 6\1/2\ minutes.
Mobile devices are powerful and sophisticated. Today, a
typical smartphone has more computing power than Apollo XI did
when it landed on the moon. Computing devices are now built
around mobile experiences with always-on connectivity, location
awareness, augmented reality and powerful processing. Soon
there will come a day when virtually everyone and everything in
our world will be connected through a ubiquitous wireless
technology.
Let me also share some startling statistics of a different
nature yet related, chronic disease in America. According to
the CDC, about out of every two adults in the United States has
at least one chronic illness. Seven out of 10 deaths among
Americans are due to chronic disease. Obesity, for example,
affects one in three adults as well as one in three children
who are either overweight or obese. Although chronic diseases
are among the most common, they are also the costliest of all
health problems. The CDC states they are also among the most
preventable.
This presents an interesting opportunity. Many Americans
are sick yet more have access to a personal, powerful, mobile
computing device. Hence, it was only a matter of time before
the health care technology innovators would take notice of the
potential to personalize a mobile platform and facilitate the
delivery of affordable health care. Nowhere is this growth more
obvious than in the mobile health applications landscape. Quite
simply, the growth of mobile health apps has skyrocketed.
Approximately 27,000 unique health apps are available. Over
7,000 health apps are specifically intended for use by students
and health care professionals. Five hundred new mobile health
apps launch every month. Interestingly, however, a survey
conducted by MobiHealthNews shows that to date, FDA has only
cleared fewer than 80 mobile medical apps through its 510(k)
process. They further estimate that as little as 5 percent of
all health-related apps could potentially be considered
medical, and possibly subject to FDA regulation.
On July 21, 2011, the FDA issued a draft guidance on mobile
medical applications. The agency went on to receive more than
700 pages of comments from over 100 interested stakeholders.
They also held a 2-day workshop and engaged the public at large
in briefings and events. FDA officials have expressed their
views that the final MMA guidance would be deregulatory. In
fact, it would delineate how the agency would exercise
enforcement discretion to not proactively regulate many low-
level-risk mobile medical apps. However, it is now March 19,
2013, and unfortunately, FDA has yet to release a final MMA
guidance document. Qualcomm and others are concerned that the
failure to release final guidance has created uncertainty among
countless budding entrepreneurs and large corporations that
fear the prospect of facing FDA regulation. Qualcomm offers the
following recommendations for consideration.
First, FDA should promptly finalize the MMA draft guidance
document. Second, the final guidance should offer specific
examples of low-risk regulated mobile medical devices that FDA,
through enforcement discretion, would not regulate. Third,
there should be clarity on intended use in light of ambiguous
and general health claims and terms. Fourth, for apps that do
not warrant listing as low-risk class I medical devices--
rather, that do warrant listing as low-risk class I medical
devices, the agency should consider how it will assess
exemption from Good Manufacturing Practices. Fifth, accessories
should be classified according to their individual level of
risk and not according to the device with the highest
classification level. Sixth, FDA should continue its commitment
to consistency, predictability and transparency by coordinating
internal and external efforts through a single dedicated office
within FDA the agency. Seventh and lastly, the agency would
benefit to utilize external facing resources such as CDRH
Learn, Device Advice and the Division of Small Manufacturers,
International and Consumer Assistance to work with app
developers and their communities.
FDA has a proven and successful policy, regulatory, and
legal framework, that has been formed from over 100 years of
innovation, science and learning, a framework that puts the
patient first and ensures the safety and effectiveness of all
health and medical products in the U.S. marketplace. We
recommend that FDA be given the fullest support it needs to
continue doing its fine work while allowing innovation to drive
the U.S. healthcare system.
In closing, I would like to say a few words about Qualcomm.
Qualcomm, Inc., is the leading supplier of wireless chips,
having shipped worldwide well over 11 billion chips to date.
Qualcomm is the leading developer of 3G, 4G and other next-
generation wireless technologies. In addition, Qualcomm has a
wholly owned medical device subsidiary focused on producing
medical device data systems. We are committed to the health
care space through various public and private efforts as
further described in my written testimony and on Qualcomm's Web
site.
Thank you, and I look forward to answering your questions.
[The prepared statement of Mr. Jarrin follows:]
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Mr. Walden. Mr. Jarrin, thank you for the thought you put
into your testimony and for being here today.
We will now go to Mr. Bradley Merrill Thompson, General
Counsel, mHealth Regulatory Coalition. Mr. Thompson, thank you
for being here today. We look forward to hearing your
testimony.
STATEMENT OF BRADLEY MERRILL THOMPSON
Mr. Thompson. Well, thank you very much for inviting me. As
you can tell from the name of our organization, the topic today
is of very great interest to us.
Our coalition is a very diverse coalition, which is both
fun and challenging. It is fun, because we have a lot of
spirited discussions. It is challenging because it represents a
lot of different points of view. We have folks in there from
the traditional medical device industry, we have app developers
in there, we have the telecommunication firms in there, patient
groups and so forth. And frankly, the way I navigate consensus-
building in our group is to say, look, we only have one rule,
and that is, put the patient first, leave economics at the door
and let us figure out what policy puts the patient first.
In that vein, I have three simple points that I want to
make this morning in my testimony. The first one is that we
would urge FDA to publish its guidance just as soon as possible
and indeed expand on that guidance in the future. I cheated a
little bit, and I read the testimony of my other fellow
witnesses here, and it seems like there is going to be good
agreement on that score. What I would offer, as the nerdy
lawyer maybe among the panel, is that I think that maybe FDA is
delaying because they are going for the complete and final
definitive for-all-time answer to these questions, and it is
really tough because the industry changes on almost a daily
basis. So they write a draft, it goes through a couple of
months of review. By that couple months, the environment has
changed a bit and they want to go back and erase some of what
they wrote previously.
I think what they need to do is get a final version out
there and then use the guidance process to update it
periodically as the environment changes, as the regulatory
issues shift, as the questions shift, simply update the
guidance periodically. We have talked about creating a Web
site, where they would on a more real-time basis, offer some
guidance. There are some tools that are available to them but
bottom line is, I think FDA is struggling a bit with how to get
hits guidance out, and in our opinion, it needs to get out
because there is an awful lot of business that is frozen on the
sidelines waiting to see what that guidance says.
The second point I want to make to you is a bit
counterintuitive probably for someone from industry to say, and
that is, we would like to see more FDA enforcement in this
area, and particularly more balanced FDA enforcement in this
area. And the way I can make this point is best through an
example, and it is an example I read about of a new app just a
few weeks ago announced from India where you can do urinalysis
with your iPhone, and everyone was talking about it on the
Internet because I think a lot of people were trying to figure
exactly where you pee on this thing in order to get the
reading, and it turns out you do a very traditional technique:
you pee in a cup and put a strip in that cup, it changes color,
and then use the camera on the iPhone to more accurately assess
what the color changes were.
And they introduced this thing. It hasn't yet hit the U.S.
market but they have announced their intention to go through
the Apple app store in introducing it. The problem is, FDA has
regulated urinalysis for 30-some years. That is a very
traditional medical device, and the typical one looks about the
size of a cash register, so I got to tell you, doing it on an
iPhone, that is cool, that is really cool, but what they did
is, on the front page, at the bottom of the front page, they
basically said in legalese this is not a medical device. Well,
honestly, if it were that simple, I know a lot of other
companies that would like to do that same thing, right? If you
could avoid FDA by putting a disclaimer at the bottom of your
home page and yet the whole rest of the Web site explains how
it is used in urinalysis, that is a problem.
So this is in part a competitive issue, right? Because
different companies are held to different standards. But it is
a public health issue because this is an important app, and if
it gets the urinalysis reading wrong, people with diabetes,
people with serious conditions could be relying on that app. So
either deregulate it, which would take an act of Congress, I
believe, because it is clearly a medical device, or more evenly
enforce the rules.
The third and final point that I want to make is that we
favor sticking with FDA as the regulator for both the
traditional device industry and the less traditional mHealth
area. There was a rumor circulating, and who knows where these
start, that people wanted to move mobile health regulation away
from FDA. We couldn't support that. We couldn't support it
because it would create two systems where if you do it on an
iPhone system, if you do it on a cash registered-sized machine,
you have a completely different system. To us, that actually
increases the uncertainty and the complexity and the confusion,
and so we have found that FDA has the knowledge that they need.
This is a new technology. We are all learning the technology,
but they have the public health knowledge in order to do this
and to do it right, so we favor sticking with the agency.
Those are the three points I wanted to make this morning,
and I appreciate the time.
[The prepared statement of Mr. Thompson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Walden. Mr. Thompson, thank you for your testimony. We
will now go to Mr. Ben Chodor, who is the Chief Executive
Officer of Happtique, like health app boutique.
Mr. Chodor. Exactly.
Mr. Walden. Everybody with me now. All right, Mr. Chodor,
you are on.
STATEMENT OF BEN CHODOR
Mr. Chodor. Good morning, Mr. Chairman Walden and Ranking
Member Matsui, and members of the subcommittee. My name is Ben
Chodor and I am the CEO of Happtique. It is an honor to testify
today on mobile health technology, which Happtique believes can
change health care delivery systems. My testimony addresses two
important issues in our industry----
Mr. Walden. Will you make sure your microphone is on?
Mr. Chodor. Is that better?
Mr. Walden. There we go.
Mr. Chodor. My testimony addresses two important issues
facing our industry: questions about regulations, and the
applicability of medical device tax to mobile devices.
Happtique is a mobile health solution company whose mission is
to integrate mobile health into patient care and daily life.
Happtique is owned and operated by GNYHA Ventures, a business
arm of Greater New York Hospital Association. GNYHA has a
robust family of companies to assist its members in addressing
business and operational issues. Happtique, the newest member
of the companies, was established in direct response to
members' needs to develop comprehensive mobile health
strategies to support clinicians, facilitate patient engagement
and improve their own operations. Happtique's principle
offerings include individually branded, secure, multiplatform
applications for hospitals, physician and patient: our MRX, it
is our patent pending technology that enables physicians to
actually prescribe apps to their patient, a unique system of
classifying apps in more than 300 categories, and our brand-new
private sector solution to a big problem, we have just launched
our certification program for health apps.
Happtique created these solutions to harness the
unprecedented potential for mobile health technologies. Think
about it: 87 percent of physicians use smartphones or tablets
every day. One out of five smartphone users has at least one
health app on it. There are over 40,000 health apps on the
market and it is growing every day, and there is little to no
barrier of entry for these apps. This has incredible
opportunity for innovation in health care but comes with
certain concerns, namely how credible is this app for myself or
for my patient.
So who should monitor the mobile health industry? Clearly,
the industry needs to balance three things: innovation, safety
and effectiveness. The FDA released its guidelines in 2011,
which Mr. Jarrin went over, and Happtique's belief is that the
FDA is in the best position of any agency to regulate health
apps because of its long health expertise in assuring patient
safety, but we have to say from our point of view, the FDA has
to release these guidelines sooner than later. It is about time
that they come out.
We don't believe the FDA should regulate mHealth products
that are not considered medical devices. The FDA's draft
guidance addressed which mobile apps the FDA does not
anticipate classifying as mobile apps for purpose of
regulation. The industry is pleased that the FDA recognizes its
own limits.
Complementary to the FDA regulatory framework, Happtique,
our company, has created a certification program with industry
stakeholders to offer clinicians and patients a way to identify
technically and validation of an app. Happtique developed a
health app certification standard under the direction of a blue
ribbon panel, and we are reviewing operability, privacy,
security, and content. In the development of the standards, we
consulted with key public-private sector organizations--the
FDA, the FTC, the FCC, the AMA, the AAMC and many, many other
organization. This conducted the certification process. Again,
Happtique is an engaged, well-known security company to ensure
operability, privacy and security, and we are engaging
specialists, so if it is a cardiology app, cardiologists should
review the material. Apps that pass both the technical and
testing content review will be awarded the Happtique
certification seal. Our goal here is that the users will be
reassured that a certified app delivers credible content,
safeguards user data and functions as described.
I would like to switch gears for a second and now talk
about the medical device tax and how it relates to mobile apps
since I know several members of the committee also care a great
deal about this issue. Happtique does not believe that Congress
intended to impose a device tax on iPhones, iPads, Android
phones or tablets, or BlackBerrys, or apps that run on these
devices. If congressional intent is ambiguous, we firmly
believe the retail exemption applies. If the IRS wants to
implement this tax on this technology, Congress needs to pass a
law that specifically states that tax applies. Imposing a
device tax on apps will undoubtedly stifle innovation,
developers and publishers, and frankly, the threat of tax
stifles innovation too.
In closing, thank you for my allotted time, and I would
like to thank the chairman and ranking member and the
subcommittee for asking me to testify today.
[The prepared statement of Mr. Chodor follows:]
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Mr. Walden. Mr. Chodor, thank you for your very good
testimony, and that is why we are having this hearing is to try
and shine some light and bring some clarity.
Mr. Jonathan Spalter is next. He is the Chairman of Mobile
Future. Mr. Spalter, thank you for being here.
STATEMENT OF JONATHAN SPALTER
Mr. Spalter. And thank you, Chairman Walden, and members of
the subcommittee for giving me the opportunity to testify on
behalf of Mobile Future and our member companies. My name is
Jonathan Spalter and I am Chairman of Mobile Future. We
represent innovators across the wireless ecosystem, and I sit
before you, I think, at a very, very hopeful time for our
community.
It is now believed by many scientists that there has
already been a child born in the world who will live to 150
years old. What an exciting notion for our children and our
grandchildren. These leaps and bounds in the quantity and the
quantity of our lives are in no small part due to the
astounding progress we are all witnessing at the nexus that we
are talking about today of health care and mobile innovation.
This morning I would like to very focus very practically my
comments on what mobile innovators need from government to help
us all advance our health. We know that the virtuous cycle of
investment in the mobile ecosystem from networks to devices to
applications provides an unparalleled foundation for health
innovation, and I believe government can help build on it by
providing our mobile health innovators four key and achievable
certainties. First, a clear understanding of where regulation
begins and where it ends. The mobile medical app guidance now
has been pending for 2 years. Clear guidelines and regulatory
certainty are needed now, commonsense and affordable approval
processes that are measured in months, not in years, timely
decisions across government that of course encourages a careful
balance to safeguard patient safety and privacy on the one
hand, which we all care about, without inhibiting the
development and use of mobile medical apps, and finally, basic
fairness when it comes to the taxes we pay, all consumers pay,
on wireless services and applications. Bottom line: Americans
would benefit from clear guidelines on when applications go to
which government agency and for what set of approvals.
But let us also not forget that none of this progress would
be possible without spectrum and without investment, and
therefore it is imperative that the incentive auctions, which
are being designed now at the FCC, are open and inclusive so
that all Americans can take advantage of wireless health
applications, and it is also worth noting that the needed
spectrum is held by government agencies, significantly held by
government agencies, so all of our eyes, all of America's eyes
are on the federal agencies who hold much of this underutilized
spectrum hoping they will make a meaningful contribution.
I know that all of us can personalize this progress that we
are talking about today. My daughter Willa was diagnosed 2
years ago at age 8 with type 1 diabetes. She has been extremely
fortunate that from her very first week with the disease to
have been in a clinical trial at Stanford University that is
pursuing the holy grail of diabetes research: the artificial
pancreas. Even having worked in mobile innovation and
technology myself for years, I wasn't prepared, my family
wasn't prepared, for just how personally and profoundly
relevant mobile innovation would become so quickly to my
daughter. On the first day of her trial, there was her
endocrinologist, Bruce Buckingham, and her research nurse, Jen
Block, explaining the research and the hope that it holds for 3
million Americans who are dealing with this disease. And then
Dr. Buckingham, not really knowing what I do for a living,
spoke about the importance of spectrum as he explained the
wireless sensors that were all around my daughter's hospital
room and the wireless glucose monitor that she now wears in her
body. The medical team included software coders, application
developers, algorithm writers, network engineers, all pushing
together towards what could be and I indeed hope will be
nothing short of a revolution in diabetes management, and this
is the future of American health care. We all have a personal
stake in speeding its process, and ultimately this is not about
government stepping away, rather it is a profound opportunity
for government to lean in and demonstrate that it too can
innovate, that it can act flexibly, that it can move quickly
with common sense and with the understanding that innovation is
born of many, many things including a healthy dose of humility
and restraint when it comes to regulation.
So on behalf of application developers and wireless
innovators across our country, on behalf of my little girl and
the millions of Americans who are managing chronic diseases, I
really thank you for the opportunity to testify about our
Nation's promising mobile future, and I really look forward to
your questions.
[The prepared statement of Mr. Spalter follows:]
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Mr. Walden. Mr. Spalter, thank you for sharing your very
powerful story with us. It really sheds clear light on our task
here, and of course, it also shows that we are the most
important subcommittee in the Congress because we did make
available new spectrum and we are continuing to pursue the
government excess spectrum as we might find.
Mr. Spalter. And that has the added advantage of being
true, Mr. Chairman.
Mr. Walden. Thank you. You are welcome to come back on a
weekly basis. Seriously, thank you very much and thanks for the
work you are doing.
We will now go to Dr. T. Forcht Dagi, I believe, MD, MPH,
DmedSC--I will let you explain all of those things--Partner at
HLM Venture Partners. We are delighted you were able to get
another flight and get down here from Boston. Thank you very
much. Go ahead and push that button in front of you there.
STATEMENT OF T. FORCHT DAGI
Dr. Dagi. Thank you, Mr. Chairman. Chairman Walden, Ranking
Member Eshoo, members of the subcommittee, I am Dr. T. Forcht
Dagi. I am a Partner of HLM Venture Partners based in Boston,
Massachusetts, and San Francisco, California. I am a board-
certified neurosurgeon trained at Johns Hopkins and the
Massachusetts General Hospital and hold or have held leadership
positions in clinical and academic medicine for over 20 years.
I am Chair of the Committee on Perioperative care of the
American College of Surgeons at present, and I hold a
professorial appointment at Harvard Medical School.
On behalf of HLM Venture Partners, the venture industry and
the entrepreneurial community, and also as a physician devoted
to the betterment of health care, it is my privilege to testify
before this committee on the subject of mobile medical apps,
MMAs.
Venture capitalists are committed to the funding of
American's best and most innovative entrepreneurs. They work
closely to transform breakthrough ideas and to emerging growth
companies that drive job creation and economic growth in the
United States.
One of the top priorities for health care and life science
investors is to work and discover innovative solutions that
address unmet medical needs, enhance health care outcomes and
lower overall health care costs while preserving the safety and
the quality of the American health care system.
For investment to grow in the formative stages of emerging
medical mobile applications, there need to be well-defined
regulatory pathways to market. Uncertainties in the regulatory
environment create significant risk for innovative companies
and deter investment in many promising ideas. We believe that
regulatory pathways should be risk based, transparent,
consistent, predictable, and above all, balance the problem of
patient safety and its protection against innovation.
I believe that medical mobile applications will prove to be
a central, important, and potentially critical tool in
optimizing communications among clinicians, and especially
between clinicians and patients. Also, they will help broaden
and sustain shared decision making, which is a critical part of
any type of health care reform. I believe that MMAs will prove
invaluable for patient engagement in education. They can
materially enhance integrated strategies for health care, help
coordinate the management of chronic disease and promote
patient safety while lowering health care costs. Here are some
examples of the critical roles they already play. They are used
to help diabetics follow and refine insulin regimens. Mr.
Spalter, I didn't know you were going to speak to that. Thank
you. They are used to screen for diseases of the retina, for
telemedical consultations, to help patients with congestive
heart failure avoid readmission, to diagnose moles and screen
for cancer, and to coordinate across groups of physicians in
different institutions. They provide a means for sending
sentinel emergency alerts to providers. They also facilitate
home health care and remote monitoring of patients in other
settings like the intensive care unit. They hold tremendous
promise in patient care, and I emphasize, safety.
I would also like to emphasize my concern about the 2.3
percent medical device tax with regard to medical innovation
and U.S. job creation. We also believe Congress did not intend
to burden the emerging MMA companies with this new tax. Their
products are not included in the traditional medical devices.
The 2.3 percent tax on revenue has already started to have
detrimental effects on early-stage medical device companies.
They are regressive and repressive. It creates a major market
inefficiency by increasing the capital intensity of innovation
and discourages venture capitalists from investing in these
companies now and in the future. The tax would be even more
devastating for companies developing MMAs because of their
revenue structure.
The tax of 2.3 percent sounds modest but it is not. This is
a tax on revenue. It is not a tax on profits. The vast majority
of entrepreneurial ventures developing MMAs are very small and
very early. Some of the companies in which we invest may in
fact generate some revenue but very unlikely to generate
profit. Revenues are plowed back into the company for growth,
and therefore the 2.3 percent tax on small startup companies
delays their ability to reach profitability and increases the
amount that must be invested before a company can become cash
flow positive.
Venture capitalists and entrepreneurs stand ready to
participate, along with other public and private stakeholders,
to find solutions that will help move these important
innovations into the health care system. We would like to offer
the following recommendations to help stimulate investment in
this very important sector.
First, promote a regulatory framework that is predictable,
consistent, transparent and risk based. The Food and Drug
Administration issued draft guidance for mobile medical
applications on the 21st of July 2011. This guidance addresses
some regulatory concerns and reduces some regulatory
uncertainty but leaves open questions around enforcement
discretion decisions. The uncertainty must be resolved. Second,
the FDA and other stakeholders are encouraged to collaborate
and formulate alternative oversight frameworks that meet the
goals of patient safety and mobile medical applications, but
also encourage and foster innovation and invention. Third, we
would ask that the FDA solicit very broad input in evaluating
new regulatory frameworks, especially from those at the
forefront of the innovation that promotes health care
transformation. And finally, we would ask that mobile medical
applications that are defined as medical devices be exempted
from the 2.3 percent medical device tax.
Mr. Chairman, Member Eshoo, members of the subcommittee,
thank you for the opportunity to testify. I look forward to
working with you to address these critical issues.
[The prepared statement of Dr. Dagi follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Walden. Dr. Dagi, thank you very much for your very
learned testimony.
We will now go to Dr. George Ford, who is the Chief
Economist, Phoenix Center for Advanced and Legal Economic
Public Policy Studies. Dr. Ford, we are delighted to have you.
Please go ahead with your testimony.
STATEMENT OF GEORGE FORD
Mr. Ford. Chairman Walden, Ranking Member Matsui and
members of the committee, thank you for the invitation to speak
today and appear before this committee again.
At issue in this hearing is the role of FDA oversight in
health-related applications for mobile devices and the
platforms on which they run. MHealth applications are believed
to have great potential to promote better health and improve
the efficiency of the health care system. MHealth can also help
address the documented health in lower-income segments of the
population where the provision of health services and treatment
compliance can be challenging. In my testimony today, I touch
upon a couple of thoughts about the possible regulation of
mobile applications and platforms as medical devices by the
FDA.
First, by its very nature, regulatory intervention into
mHealth by the FDA will have direct implications for the
Nation's mobile communications industry. Mobile applications,
mobile devices and mobile networks are all part of the mobile
communications ecosystem. In a greater or lesser degree, to
touch one, is to touch them all. United States mobile industry
is a true American success story, and the mobile app economy is
said to employ about a half a million persons. Many believe
that the continued growth in the mobile sector, both in size
and innovative capacity, is critical for the U.S. economy. One
study suggests that the diffusion of new technology and mobile
wireless communications supports about 400,000 jobs annually,
and the billions invested annually in mobile and fixed networks
supports and creates hundreds of thousands of jobs.
Accordingly, regulating mobile applications is not only a
health care issue but a much broader economic one. The
difference between a good decision and a bad decision regarding
the FDA's regulation of the mobile sector may have significant
economic impacts. Indeed, economic theory and ample literature
demonstrate that the inevitable and arguably intended effect of
FDA involvement is to raise the cost of innovation, to alter
the trajectory of innovation, to reduce competition and to
favor larger firms that can afford the overhead of dealing with
a federal regulatory agency. In a tradeoff with efficiency and
efficacy and safety, these negative effects may be acceptable.
Gains from improvements in safety and quality may be sufficient
to offset the lost innovation and higher prices from less
competition. Normally, the cost-benefit tradeoff is limited to
the health sectors, but in the mobile ecosystem, the FDA's
intervention could spill over into the entire mobile broadband
industry. The dangers are significant, and I applaud this
committee for taking this matter seriously.
Second, while the scope of the FDA's regulation of mHealth
is a complex issue on its own, the decision is made ever more
complex by the Affordable Health Act's medical device excise
tax. Regulation and taxation are completely different
questions, and there is no reason to believe, and every reason
to suppose, that the proper methodologies for choosing when is
appropriate or not will be quite different in scope and
severity. Taxes may or may not raise revenues, but taxes always
discourage the activity being taxed and play no apparent role
in ensuring the safety of the product being sold. Yet the role
of the FDA in assessing mobile health applications cannot be
treated today as independent of the tax question since defining
applications medical devices may very well lead to the taxation
of such applications under the Affordable Health Act.
In addition, given health disparities for low-income
Americans and given the expectation that mHealth will be
particularly effective with low-income Americans, the medical
device tax may prove to be a regressive tax.
Moreover, the medical device can be described, or what I
describe as, a virtue tax. Normally, the government applies
taxes to items it wants people to consume less of, that is, sin
taxes. The medical device tax, in contrast, applies to items a
government agency has declared to be good for people. If we
want innovation to drive a healthier America, then why tax such
innovation? It doesn't seem to be very good policy, perhaps
doing more harm than good.
Finally, and perhaps most significantly, I believe the
FDA's draft guidance leaves the door wide open for inserting
the FDA into the innovation flow of mobile handsets, tablets
and other devices, or what we refer to as platforms. There are
good reasons to believe that formal role for the FDA in the
mobile handsets and tablets would significantly curtail the
pace of innovation in that sector, an innovative pace that is
rapid and highly beneficial. My written testimony discusses
this concern in detail.
A critical question is: could a regulator or tax collector,
or even an overzealous regulator or tax collector, make a
legally defensible argument that these general purpose devices,
or even the entire mobile network, are medical devices and thus
subject to regulation or the medical device tax? In an
ecosystem like the wireless industry where all the components
are tightly intertwined, where does the line get drawn on what
is and what is not a medical device? Obviously, clarity is
needed, and there needs to be some limitations on the scope of
the FDA's reach, lest regulation and taxation become very broad
in a mobile ecosystem and do significant damage to innovation
in the sector.
Mr. Chairman, thank you again for the invitation to testify
today. I welcome any questions.
[The prepared statement of Mr. Ford follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Walden. Dr. Ford, thank you very much for your
testimony and that of all of our witnesses today. I think it
has helped explain why we are doing this hearing to begin with
because we kept hearing that there is a lot of uncertainty in
the marketplace that may indeed be slowing down, stifling
investment, innovation and new U.S. job growth and
technologies, so that is why we are doing this hearing, and I
know Mr. Waxman, who had to leave, and I understand that we all
have to juggle here, thinks the law is very clear. Obviously,
you all don't, especially when it comes to the FDA's lack of a
final rule in this area. Look, we are all for patient safety,
and there is no separation here. We are all patients
eventually. We want patient safety. We don't want fraudulent
devices on the market. We recognize the importance of
appropriate regulation.
But Dr. Ford, you reminded me of something I always was
told, that if you want less of something, tax it more, and you
really summed it up and basically said, look, you are taking
innovation in health care, don't we want more of that. Is that
not what you were----
Mr. Ford. Yes.
Mr. Walden. And a gross-receipts tax, which could
completely stifle innovation.
Mr. Ford. The gross-receipts tax will significantly deter
involvement of companies in this space. It is a fairly severe
tax, particularly when we are dealing with innovation, new
products, new companies and even hospitals and doctors
themselves have entered into the business to design their own
applications. This virtue-tax issue is an interesting one, and
I think it is weird when you have a government agency say OK,
here is the good stuff and now we want you not to use it so
much.
Mr. Walden. We have run into that in my own State of
Oregon. There was a medical device manufacturer who for various
reasons, but they said including the new gross-receipts tax, I
believe laid off, what a couple hundred people already, and I
am hearing about it around the country.
Dr. Dagi, are you seeing a move to take this offshore in
terms of innovation and development and offshore these jobs and
all that now, or not?
Dr. Dagi. I am, sir, seeing two things. We are seeing that
many companies attempted to take this offshore, and they are
also attempting--they are also thinking about launching
offshore where profits will not be taxed and where the
regulatory path is both simpler and more direct.
Mr. Walden. So is it accurate to say that Obamacare is
driving this sort of medical technology and innovation to other
countries because of this tax?
Mr. Ford. I am not expert enough to say that it is
Obamacare specifically.
Mr. Walden. Well, but the 2.3 percent tax is part of the
President's health care law.
Mr. Ford. Yes, sir.
Mr. Walden. All right. And so Mr. Spalter, what does that
mean, people like your daughter and the innovation that could
come from that? Are you concerned about a reduction in
innovation in this area and that these really smart people who
are probably, I don't know, 14 sitting in a garage somewhere
creating apps, are going to create another Angry Birds as
opposed to something in this area? And I would open that up to
anybody here. That is my concern is that public policy has an
impact. Is it going to have a negative impact here, which is
not what we want.
Mr. Spalter. America's wireless consumers, all of are
actually paying roughly 17 percent of our monthly bill of our
wireless services to taxes. Wireless services are taxed at two
and a half times other goods and services on average across our
country. We are very concerned, Mr. Chairman, that these types
of taxes, if they are applied to mobile medical applications
and devices, will stifle innovation, will tempt entrepreneurs
to pursue, as you suggested, other types of innovation and
apply their genius and their efforts to other parts of the
mobile ecosystem rather than efforts to make our children, our
families, our parents healthier. So there is an impact and we
need to be very, very vigilant and cautious about going down
this path.
Mr. Walden. Mr. Jarrin, in your testimony you mentioned
that as many 5 percent of the 27,000 health-related apps could
be subject to regulation, yet as our data would indicate, fewer
than 80 medical apps have gone through the FDA process. I was a
journalism major, not a math major, but I think that leaves
1,200 apps in a state of regulatory uncertainty, roughly.
Mr. Jarrin. Correct.
Mr. Walden. Is that accurate, and are you concerned about
the time delays and all of that?
Mr. Jarrin. Yes, we are very concerned about the fact that
we haven't found any clear guidance. The draft guidance
document needs to be finalized, and we were hoping that through
that finalized document we would have a better understanding of
whether or not these apps that are on the market should be
regulated or the agency will use their enforcement discretion
to not regulate them. That is a very important thing, because
when you are talking about a device, a medical device will
always be a medical device. It is up to the agency whether or
not they are going to proactively regulate that medical device,
and I am speaking about the very low risk end of devices, not
medium risk or higher risk devices, which I think we all agree
are not the ones that we are discussing. But when we are
talking about a mobile application, a health application, there
is a lot of ambiguity. For example, if I were to use some of
the terms like ``well being'' in my marketing claims or ``heart
health'' or ``sleep deprivation'' or ``patient satisfaction'',
``stress'', even mentioning----
Mr. Walden. Do those trigger FDA?
Mr. Jarrin. Unsure, and that is the kind of clarity that we
are looking for from the agency, and they seemingly were ready
to deliver that clarity. I believe in this very building, less
than a year ago, Dr. Jeffrey Shuren, the center director, spoke
about some of the things they were contemplating to take off
the table, and they spoke about some of the things like
medication adherence software potentially could be off the
table, BMI calculators, I mean body mass index calculators,
drug-drug formula, drug dosing calculators. That would have
been very helpful for the industry.
Mr. Chodor. Can I add something?
Mr. Walden. If you are real quick, because I am over my
time.
Mr. Chodor. Well, we are hearing from developers and
hospitals and docs that a lot of them are waiting on the
sidelines until there is final--when are the guidelines going
to come out, is there going to be a tax until they start
developing in the space.
Mr. Walden. And those are separate issues?
Mr. Chodor. Separate issues, but they are not going forward
because they are waiting.
Mr. Walden. All right. Thank you all, and I thank the
courtesy of the committee, we went over, but we will turn now
to Ms. Matsui for 5 minutes.
Ms. Matsui. Thank you, Mr. Chairman.
Let me just go through this. You know, the Affordable Care
Act was carefully drafted so not to add to the deficit. It
imposes a small tax on a wide range of industries that will
benefit from expansion of health insurance coverage for nearly
30 million Americans under the reform. Now, one such levy is
the 2.3 percent excise tax on medical devices. Now, let me
just--without getting into the merits of the device tax, I
would like to ask some questions to clarify quickly the
applicability to smartphones, tablets and app stores.
Mr. Thompson, is FDA proposing to regulate devices like
smartphones and iPads or app stores like the iTunes store?
Mr. Thompson. I think in the draft guidance, they did about
the best they could to explain no, that they don't want to
regulate those articles if they can avoid it. Admittedly, it is
not the model of crafting but I think their intent came
through.
Ms. Matsui. OK. So if the FDA is not regulating
smartphones, tablets or app stores, would they be subject to
the medical device tax?
Mr. Thompson. So if they are not medical devices, they
would not be subject to the medical device tax.
Ms. Matsui. So Mr. Thompson, it is also my understanding
that IRS looks at something called the retail exemption when
examining the applicability of medical device devices.
Mr. Thompson. Right.
Ms. Matsui. Could you explain that exemption?
Mr. Thompson. Well, the exemption is meant to cover medical
devices that are basically sold at retail for use by laypeople
in managing their health, and so those are exempt from the tax,
and it covers most things other than, for example, the
professional use apps that we have referred to a few times. So
whether it is for reading an ultrasound image for a doctor or
whatever, those apps would be subject to the tax. But stuff
sold to consumers through the app store would not, as I
understand it.
Ms. Matsui. OK. Mr. Chodor, you state in your testimony
that a fair reading of the final regulations implementing the
tax should lead one to conclude that the retail exemption
applies to all smartphones and tablets that are on the market
today. So do you agree with Mr. Thompson that based on current
IRS rules, smartphones and iPads are not subject to the medical
device tax?
Mr. Chodor. Absolutely, Happtique agrees with that.
Ms. Matsui. OK. So from all you have stated then,
smartphones and tablets will not be taxed as medical devices.
Now, I understand the frustration here, and I am frustrated
too regarding the draft of 2011, and I agree the FDA needs to
move swiftly to finalize the mobile medical app guidance. I
understand that. The clarity of the final guidance can improve
confidence for investment and bringing new innovative
applications to the consumer, and I wholly agree with you
there, and I think we really need to encourage that in a very
expeditious manner.
I want to move on to something else here. Spectrum is
something that I am very much involved in, and we are all
involved on this committee. We understand how important that is
and how important it is to free up the federal spectrum. Mr.
Spalter, your testimony discusses the importance of making more
spectrum available to expand mobile broadband, and I couldn't
agree more. Do mHealth applications have particular spectrum
needs? Are hospitals and other health care providers going to
be affected if we do not address the looming spectrum crunch?
Mr. Spalter. I believe profoundly yes. Mobile health
applications are at their nascent stage now. We are expecting
there are going to be extraordinary levels of adoption,
innovation, new products, new services, new applications
brought to the market, and we need to have a predictable and
reliable continuum of access to spectrum for enabling and
deploying these innovations. Similarly, for hospitals, patient
communities, professional health care providers, the need for
secure, reliable, profoundly strong and scalable networks, is
only going to become more important, and that is based on the
availability of spectrum.
Ms. Matsui. Right, exactly, but the unlicensed spectrum is
also necessary for you too, correct?
Mr. Spalter. Both unlicensed and licensed spectrum are
going to be critical to advancing the prospect and the promise
of innovation in America's health care.
Ms. Matsui. So you think that this is going to be the
future, and in essence, as fast as we can do this, the better
it is going to be?
Mr. Spalter. The President has spoken about the fierce
urgency of now for the sake of our patients, for the sake of
our families. Nowhere is that urgency more important than in
the health care of our citizens, and mobile innovation based
and built on spectrum assets and reliable networks is what will
get us there.
Ms. Matsui. Well, thank you very much. I see my time is
exceeded. I yield back. Thank you.
Mrs. Ellmers [presiding]. Thank you. I now turn to Vice
Chairwoman Blackburn for her questions.
Mrs. Blackburn. Thank you, Madam Chairman, and thank you
all again for being here with us.
You know, listening to you all and listening to some of the
questions, I think that we are kind of walking through a period
of the what-ifs, and some of the what-ifs are, well, if it is
light touch, if they stay out of our business, we are going to
do this, and if it is overregulating, talk to me. If the FDA
says we are going to go after all of our mobile devices as well
as go after some of these 80,000 apps, what is that going to
do? Because we are talking about a gross-receipts tax, not a
tax on your profits. So talk to me. If they go heavy-handed on
this, does it stifle all the innovation? Does it shut it off?
Anybody that wants to speak, raise your hand and then I will
recognize you. Go right ahead.
Dr. Dagi. The problem is that there is a risk to developing
any kind of a medical application or medical device. For
investors to come in and to provide the investment capital,
they have to see a reward. Sooner or later, reward is going to
be based on profits, but in the early stages it is going to be
based on gross revenues. If you cut the gross revenues, first
of all, you cut the valuations of the company. They become less
valuable and less likely to be----
Mrs. Blackburn. So it is like anything else? The money is
going to find an easier path?
Dr. Dagi. It will find an easier path.
Mrs. Blackburn. OK. I appreciate that.
Anybody, anything else to add to that? No? OK. I want to--
Mr. Chodor, I think that probably you are the one to go to on
this. I saw the national coordinator's Patient Safety Action
Plan, and of course, with all of your health information
management systems, a lot of that work is done down in my
district in Tennessee, and we appreciate that they are there,
and I know that for the HIMS members, many times with
meaningful use, you have got the private certifications that
are working in that space. Do you think a similar model would
work for the mobile medical apps and have it go through that
process as opposed to a more lengthy regulatory process?
Mr. Chodor. From Happtique's point of view, we don't think
it would be the same because when you take an app, as we were
mentioning earlier today, where it takes a mole and takes a
picture of it and says is it a melanoma or not, and someone is
going to make a clinical decision based on an app, we believe
that is something that should go in the hands of the FDA, an
organization that has done that, and that should be done by the
government as opposed to private sector. Just like Happtique's
certification program, we aren't covering apps that should be
FDA. We think those apps that are really making clinical
decisions should be regulated.
Mrs. Blackburn. OK. Anybody else want to add to that? No?
Nothing else?
OK, Mr. Jarrin. The IOM recommendations, when did you
suggest FDA move forward with its draft guidance?
Mr. Jarrin. When did we suggest?
Mrs. Blackburn. Yes.
Mr. Jarrin. We suggested when we offered comments to the
agency back in October of 2011. The agency released their draft
guidance document in July. They opened up a 90-day comment
period, and I believe they accepted over 700 pages of comments
from over 100 stakeholders in the industry and the public, et
cetera, and we were one of those, meaning Qualcomm
Incorporated. We submitted a document, which I actually
appended to my written statement, so you will find it at the
back of my written statement.
Mrs. Blackburn. OK, then. You and Mr. Thompson, let me ask
you this. Do you think the FDA or Congress should set the
policy on how we move forward with IMS regulation?
Mr. Jarrin. IMS regulation?
Mrs. Blackburn. Yes, with the management systems, health
management systems, the mobile apps. Do you think it should be
us or FDA?
Mr. Jarrin. I think FDA is squarely within its jurisdiction
right now to move and to act, and that is what they had begun
to do. We took a lot of their initial actions as a very
promising indication to the industry at large that they were
willing to work with all of us.
Mrs. Blackburn. OK. Let me get Mr. Thompson in.
Mr. Thompson. I agree with Mr. Jarrin. I think FDA is
taking a fairly measured look at health information technology
and is trying to do in some ways the least that they can do in
the hopes of allowing innovation to flourish as much as
possible, so I am optimistic now. Having said that, I want to
see the document because----
Mrs. Blackburn. Yes, kind of back to Dr. Dagi's point that
if the overreach is there, the money, the VC, the funding
stops.
Mr. Thompson. Right. We need to see the document.
Ms. Blackburn. Thank you. Yield back.
Mrs. Ellmers. I now turn to Mr. Waxman.
Mr. Waxman. Thank you very much, Madam Chair.
First of all, let me say that I agree that innovation is
important, that overregulation can harm public health just as
underregulation can. I think there can be great value in
discussing how to determine the correct balance and how to
achieve it. But when I read the Republican memo for today's
hearing, I got the impression that the only two issues of
interest to my colleagues on the other side of the aisle with
respect to health IT whether the FDA will inhibit innovation
and whether all of our smartphones will be subject to a device
excise tax. I understand Mr. Walden agreed with my earlier
statement that there is a federal interest in ensuring patient
safety, and I very much appreciate that.
I would like to hear from our expert witnesses whether you
think there is a need for any FDA oversight of any mobile
medical apps. In my opening statement, I mentioned the example
of the apps that claim to be able to educate the consumers as
to whether a mole is a sign of a melanoma. Clearly, if such an
app is accurate, it could lower health care costs by minimizing
unnecessary trips to the doctor for the nine moles and could
save lives by encouraging people to go to a doctor when they
might otherwise have ignored a mole that could kill them. On
the other hand, an app that is inaccurate can do just the
opposite.
So Mr. Chodor, do you think such an app warrants going
through an FDA premarket clearance process just as it would
have to do if it were a conventional standalone medical device?
Mr. Chodor. Yes, we believe that any app that is going to
make clinical decisions should go through a FDA type of
program.
Mr. Waxman. Thank you. Mr. Thompson, what do you think?
Mr. Thompson. I agree with that. I think if you look at the
80 apps, for example, that have already been submitted to FDA,
they represent fairly high-risk technologies that should be
reviewed by FDA.
Mr. Waxman. And Mr. Jarrin?
Mr. Jarrin. Yes, I would agree with that assessment as
well.
Mr. Waxman. Mr. Spalter, do you agree?
Mr. Spalter. I do agree. I think that the important issue,
in addition to whether there should be preapproval is, we also
need to keep our eyes and our minds focused on the costs to
application developers who are going through those approval
processes, the time it takes, and the importance of having a
precedential document finally that will set forth the clear
guidance and outline and suggest what the real balance is
between assuring, as we need to, patient privacy and security
at the same time not inhibiting innovation.
Mr. Waxman. Good points. Dr. Dagi, do you agree that there
ought to be an FDA premarket clearance for some of these
devices?
Dr. Dagi. Absolutely. There is a balance between innovation
and patient safety. Patient safety comes first, and the balance
has to be there as well.
Mr. Waxman. And Dr. Ford, do you agree or disagree?
Mr. Ford. Sure. There is a balance that has to be
maintained. I think it depends on perhaps what representations
are made by a particular application, things like that.
Mr. Waxman. To Mr. Thompson, in Mr. Jarrin's testimony, he
stated that 500 new mobile health apps are being launched every
month compared to 400 apps that were being launched every month
just a year ago. Those statistics indicate to me that the
mobile medical app industry is growing at a healthy rate. We
all want to see this pace of innovation in the mobile medical
app market continue and accelerate. Do you think that the
certainty of final guidance from FDA would help the mobile
medical app industry continue to attract investment?
Mr. Thompson. Absolutely. Getting a document out there in
final form will relieve a lot of the uncertainty, and I think
folks who have been sitting on the sidelines will be encouraged
to jump in at that point.
Mr. Waxman. Are the members of your coalition concerned
that FDA has plans to aggressively regulate this industry or do
they just want certainty?
Mr. Thompson. It is a little bit of both, in all honesty.
For the most part, we want certainty. We always live in some
fear of overregulation but we haven't seen any evidence of
that, so as of right now, we feel pretty good about it.
Mr. Waxman. Good. Mr. Chodor, you discussed Happtique's app
certification program and the need for an objective validation
process for mobile medical apps. Do you see Happtique's
certification as a substitute of any and all regulation of
mobile medical apps?
Mr. Chodor. Absolutely not. It is an add-on.
Mr. Waxman. And what types of mobile medical apps should be
subject to FDA oversight?
Mr. Chodor. I think anything that is going to make a
clinical decision, anything a doctor is going to use or patient
is going to use that can lead to surgery or a clinical
decision.
Mr. Waxman. Do you believe an unfettered market creates
incentives to ensure patient safety, and if not, who should
step in to ensure patient safety?
Mr. Chodor. That is a great question. I think it is a
combination. I mean, in that case there is a place for the
government and the federal agencies to participate in that, and
for the public.
Mr. Waxman. Of course, if a patient and a doctor can't
trust the efficacy of a product, that is not going to do much
good.
Mr. Chodor. Exactly.
Mr. Waxman. Thank you very much. I yield back my time.
Mrs. Ellmers. Thank you. I now turn to Mr. Latta for his
questions.
Mr. Latta. Thank you very much, and just following on. I
think that as Chairman Walden said earlier, we want to make
sure that there is a clear line out there for patient safety,
and we also agree that there is the need out there for FDA to
ensure that patients are safe, and we also have to make sure
there is a clear line to make sure that those apps that are out
there that need to be regulated and those that don't have to be
delineated, and I think that is what we are hearing from our
panel today, and I just want to again, as I had mentioned
earlier, thank you all for being here today because again I
think it is an excellent panel and excellent information that
we are receiving here today, and if I can just start, Mr.
Chodor--I would like to go back to what you said a little bit
earlier, saying that there is a clear need for the FDA to be
reviewing these regs sooner than later. Would you want to just
go into that a little bit?
Mr. Chodor. Well, it has been July 2011 that they came out
with their draft guidelines, comment period came back. The
public needs to know, the developers need to know, hospitals
need to know, doctors need to know what is going to be
regulated and what is not going to be regulated. Right now, we
are just sitting in this middle ground and no one knows, and I
think that is the scariest part because the longer it takes,
more apps are going to be developed, and should they be FDA
approved or shouldn't they be FDA approved, nobody knows.
Mr. Latta. Let me go to Dr. Dagi, and thank you very much
for your effort. Many of us know what it is like to be on
planes that are delayed or canceled, so we appreciate you
making the effort to be here today. You know, just following on
to that, when you are looking at the venture capitalist side,
if folks don't have that line out there knowing how fast these
things are going to be approved, what is that going to do for
folks wanting to invest into these apps into the future?
Dr. Dagi. It is going to increase the risk of investment
and venture capitalists will put their money elsewhere.
Mr. Latta. OK. And when you say putting their money
elsewhere, does that mean taking that money offshore to have
these apps developed?
Mr. Dagi. They might.
Mr. Latta. And in your testimony, you were giving some
numbers. How much money are we talking about, do you think,
that these medical device apps would be bringing in for venture
capitalist and they would be investing into in a year's time?
Dr. Dagi. That is a hard number to get a hold of right now
because there are a number of things that may or may not be
medical apps. We don't know whether the extension, for example,
of patient engagement is a communication or whether it is a
medical device. But probably I am sure we are talking about
hundreds of millions of dollars, but I can't give you a
specific number at this point.
Mr. Latta. Well, following up a little bit when you were
just talking about folks wanting to make an investment in this,
what about when they have to look at that 2.3 percent medical
device tax and they have to add that in to the equation? What
does that do to an investor?
Dr. Dagi. If 2.3 percent is taken off the top, you have a
regressive and repressive tax that is going to tell the venture
capitalist the return that you can get investing in this area
will be curtailed at the very early stage, at the very
vulnerable stage of company development. That is the fear: the
risk increases.
Mr. Latta. And Mr. Jarrin, again, thanks for your testimony
today too, and also, I think that Chairman Walden had brought
this up, but it is really looking at, again, on the FDA side,
not getting these things done quickly and slowing down that
development, and we used to talk about slowing down
development, again, as you just have heard from Dr. Dagi and
Mr. Chodor, what does that tell people out there if they want
to get into this or not? I think the chairman had mentioned a
little bit earlier about, does that mean somebody doesn't get
into the mobile medical app side and they go and develop some
type of a game or something like that, what does that mean to
the industry?
Mr. Jarrin. Well, it is really tough on the industry. I
have got a great example. There is a company out in California
called MedCell, which changed to Vocel, that had an application
called the Pill Phone, and they brought it to market, and in
construction with the FDA, they actually pushed the FDA and
said we are thinking about making this app and we hope that you
can help us make this app, and they ended up being a regulated
app. The CEO of that company claims that that was very helpful
to them because it made them make a better product. However,
the FDA has mentioned that those apps potentially may not even
have to undergo regulation. So he ended up spending several
thousands of dollars going into the hundreds of thousands of
dollars, to go through all of the Good Manufacturing Practices
and quality systems to actually ensure that it would really
fall under the FDA guidelines and regulations, and if in fact,
he wouldn't have had to go through that, then that is a major
capital expense that he incurred technically for nothing, so we
can also argue that it was actually better because his product
came out better in the long run. So you would have to weigh
both sides, but I think that is very hard on the industry not
knowing whether or not you are or are not going to be regulated
because you have to take that into consideration.
Mr. Latta. Thank you very much, and Madam Chair, I see my
time is expired and I yield back.
Mrs. Ellmers. Thank you. I now turn to Mr. Lujan for his
questions.
Mr. Lujan. Thank you very much, Madam Chair, and to
everyone that is here today, we really appreciate your time
today.
Mr. Chodor, I think the questions have been asked but I
think just for clarification because of the memo that we
received about today's hearing, I think that is why you are
getting a lot of similar questions just to make sure that we
are able to get answers to these questions. Do you think that
some types of mobile medical apps deserve different levels of
scrutiny than others?
Mr. Chodor. Yes, I do.
Mr. Lujan. And is there anyone on the panel that disagrees
with that? I don't hear anyone. That is good to hear.
For example, some apps might not need any premarket
oversight as you have described. For some apps, consumers and
health professionals might expect a version of a voluntary Good
Housekeeping seal that is adequate like your organization is
providing, and some apps might warrant a little more mandatory
federal oversight. Do you think the FDA's draft guidance
recognizes these distinctions?
Mr. Chodor. I think they do. We can't wait to see the final
guidelines.
Mr. Lujan. Well, and I appreciate the testimony today
because one area where I have seen agreement by the entire
committee today is that we want to push the FDA, we want the
certainty associated with this document to be put into final
form, so that way we are able to move on and work together.
With that being said, Mr. Thompson, you mentioned in your
testimony that there is already 40,000 apps available on
smartphones and tablets under the broad mHealth category, and
we saw them double just last year. Have you seen any slowdown
in mHealth innovation since the passage of the Affordable Care
Act?
Mr. Thompson. I haven't seen any slowdown. I am not in the
best position. I think actually Mr. Jarrin follows those
statistics better than I do, but my impression is that it is
growing quite rapidly.
Mr. Lujan. With that being said, Mr. Jarrin, have you seen
a slowdown?
Mr. Jarrin. No, no slowdown at all. As a matter of fact, it
is almost like a hockey stick. Two years ago when I formed our
comments to the agency, I believe that the figures I was using
were about 13,000 apps in one of the app stores and 10,000 in
the other, and those were not unique apps. When you hear the
current statistics of 40,000 apps, I think it is even higher.
It might be actually 45,000 apps, but some of those are the
same company, just different types of the same app in essence,
so you can't really count them as unique. My understanding from
MobiHealthNews, which is one of the sources for the industry
right now, is that there are 27,000 unique apps, so in 2 years
it has basically doubled, and that is just unique apps, so I
see no slowdown at all. I think that this is a very dynamic,
vibrant space.
Mr. Lujan. I appreciate that, Mr. Jarrin. The memo that we
received today said that the Food and Drug Administration could
potentially classify smartphones and tablets that run the apps
as medical devices. I think that is one of the reasons that we
are here today, and when you look at the FFDCA section 201(h),
it states that if a device addresses the diagnosis of a disease
or other conditions or in the care and mitigation, treatment or
prevention of disease, that it could be subject to one of these
classifications. I just bought these really great pair of Nikes
that have this little chip in them that communicates to my
phone, so do we need to provide clarification that that shoe is
not going to be classified as a medical device?
Mr. Jarrin. Are you speaking to me, sir?
Mr. Lujan. Yes, Mr. Jarrin.
Mr. Jarrin. No, because that is a general health and
fitness type of device.
Mr. Lujan. I appreciate that, and that is the point that I
wanted to make today is, when I ride my mountain bike and I
have a Bluetooth connection to it and it sends some information
to my doctor and he says Ben, you have gotten a little bit
chubby since you have gone to Congress, you need to start
watching what you are eating, you need to start running a
little bit more, and so these other devices that are
communicating to a mobile device, I think what has been clear
today is that there is no evidence even in what the FDA has put
out when we talk about a difference between component
manufacturers and device manufacturers, that there is a concern
there, but we can all agree again that we need to put the FDA
together.
And lastly, Madam Chair, as my time expires, I hope that
there is agreement with the committee and we work with the
chairman and Ranking Member Waxman that we put as much pressure
as we can on the FDA to get this document out, that I heard a
lot of concerns from my Republican colleagues about the 2.3
percent tax, and I completely hear their opposition to this. I
am hoping that they can join me in voting against the Paul Ryan
budget this week because the Republican budget released last
week relies on the revenue generated by the medical device
excise tax to achieve its revenue targets. So, look there are
some ways to talk about this today and some ways to show
opposition, but when it is included in the blueprints
associated with the future of what we are looking at here,
there has to be a better way to do this.
The only good thing I can say today, Madam Chair, is that I
think we have seen some clear agreement in this area, and just
one last thing. When we talk about the apps even in the startup
companies and the concerns associated with the 2.3 percent
excise tax that was included in the Affordable Care Act, there
is one other thing that startups making retail mobile
applications have an explicit retail exemption in the law that
excludes these types of apps along with products like contact
lenses and hearing aids. That is the truth. So we as Members of
Congress also need to be careful with how we create uncertainty
when we are out saying things that sometimes mislead the
public, and I hope that we can work together and make sure I
can join with some of my friends and use those new Nike shoes
and go for a little jog. Thanks, Madam Chair.
Mrs. Ellmers. Thank you, Mr. Lujan, and I would like to say
as far as clarity and factual information, the Ryan budget does
not in fact do that.
I now turn to Mr. Shimkus.
Mr. Shimkus. Yes, it is a nice attempt. We just think it is
important to balance your budget by 10 years and start paying
down debt, so I guess if balancing the budget in 10 years and
not paying down debt is not important to you, then I guess you
go to your processes.
Mr. Lujan. Would the gentleman yield?
Mr. Shimkus. No, actually not. I was going to try to ask
for time, but I think I will use mine on this debate.
Mr. Dagi and Mr. Ford, in follow-up to my colleague's other
questions, talk about that chip in the phone. Does it--I mean,
he is assuming that the whole panel agrees. Where do you stand
on what could happen, Mr. Dagi first and Mr. Ford, with that
example that my colleague just expressed?
Dr. Dagi. It depends on the application, sir. If you have,
for example, chips in shoes that can be used for a runner but
can also be used to look at a child with cerebral palsy and use
it to treat them----
Mr. Shimkus. My colleague is not paying attention to your
answer, and since I would hope that he would do that, go ahead.
Dr. Dagi. The same chip can have multiple applications, and
traditionally, the FDA has regulated applications and clings as
well as devices themselves, so the safety piece of it and the
efficacy is one part. The second part is the application. We
would ask for clarity on the way these are going to be
regulated, and we would ask that the goalpost not be moved in
the process of bringing devices to the market.
Mr. Shimkus. Mr. Ford?
Mr. Ford. Well, I think it is interesting that we keep
asking the FDA for certainty about things and then we make
certain claims about what they will or will not do. It has got
to be one or the other. We either need certainty or we don't.
The other issue with uncertainty that I think is important to
clarify, resolving the uncertainty is not helpful in itself.
What if we become very certain that they intend to regulate
everything very heavily as class III devices and tax mobile
phones and everything else? I don't think that would be very
helpful for innovation. So resolving the certainty/uncertainty
issue depends on what we become certain about and what we
remain uncertain about. So resolving uncertainty is not really
that helpful if we become more certain that the regulation is
going to be very heavy-handed.
Mr. Shimkus. And that is a great segue. Mr. Jarrin, you
talked about the hockey stick, all these new apps. How many of
you actually have apps right now? And what is the approval
process to have an app right now?
Mr. Chodor. None.
Mr. Shimkus. Why do you think we have so many apps? Now, I
have got my iPad here. I have got 21 updates, map updates. If
you had go through--let me ask another question. How often do
you update an app, Mr. Chodor?
Mr. Chodor. I mean, all developers do it differently. Some
developers update it three, four, five times a year. Some
developers are only updating once a year.
Mr. Shimkus. So if you have to go through the same
regulatory regime on approval of the original app and then all
the updates, doesn't that segue back into the uncertainty of
the risk the raising of capital? That is a problem. Would you
agree?
Mr. Chodor. If the app is going to make clinical decisions,
then that is the cost of being in a heavily regulated industry
called health care where we are dealing with patients and
physicians.
Mr. Shimkus. But you are living I a world right now where
you don't have it, right?
Mr. Chodor. Well, we----
Mr. Shimkus. We are in a new world, a new, brave world of
health care delivery that everyone is going to be happy with.
But health apps developed in the absence of Obamacare and they
are plentiful throughout the system, and our concern is, as the
federal government gets involved, it creates uncertainty, it
raises the cost of capital, it slows up the delivery process,
and it could be very problematic for delivering the same care
that we are all espousing.
Mr. Dagi, you are nodding yes. Do you agree with that?
Dr. Dagi. Absolutely. I believe that the medical
application can be seen as a provider extender in some cases,
so we don't have enough primary care physicians, we don't have
enough specialty physicians. This is a way of getting to the
patient.
Mr. Shimkus. So we are all saying FDA should publish final
guidance to clear up confusion. However, Mr. Dagi, you noted
that we should be looking at alternatives to the FDA framework.
I mean, there are some of us that realize government is big,
costly, bureaucratic, slow, the Telecommunications
Subcommittee. The great thing about this sector is it moves
faster than we can regulate, and this is a concern that we are
going to slow it down.
Mr. Dagi, do you believe that the FDA framework is the best
way to balance patient safety and innovation in this space?
Dr. Dagi. They have the credibility and the experience.
They need to take information outside the FDA. It can't be
positivist. It can't be only from the inside. But with the
appropriate inputs, yes.
Mr. Shimkus. And you can bring the technology community in
and be tech savvy, and that would be helpful.
Dr. Dagi. That is correct.
Mr. Shimkus. Thank you, Madam Chairman. I yield back my
time.
Mrs. Ellmers. Thank you. I now turn to my colleague, Mr.
Gardner, for his questions.
Mr. Gardner. Thank you, Madam Chair, and thank you to the
witnesses for joining us today at this hearing.
A couple weeks ago I met with a constituent of mine in
Colorado. He was a software developer in his earlier life,
earlier years, and since has focused his attention on
developing applications for a variety of uses, and one of the
things he was talking about was a recent health care scare that
he had. He had a conversation with a doctor in Colorado where
the doctor was showing him some of the new technologies that he
is able to use today when it comes to medical applications,
apps, software apps, things like that, but also in the near
future things that we will be using, and he described a
scenario where you could walk into your bedroom and you would
have a scale and you would get on the scale and you would check
your weight. That scale would have a Bluetooth connection to
it, to the iPad, and it would send your weight to the iPad, and
then you could actually use the iPad for as little as 100
bucks, I think you said, with a device that was attached to it
where you could check your blood pressure, your heartbeat, your
heart rate, oxygen levels, and that that would be collected
through the iPad as well. There may be some other things in the
room that you could have that would also check your health
status, and then that would send it through Bluetooth to the
iPad, it would collect it and then send it directly to the
doctor's office. At what point then are any of those things an
app that could be subject to regulation, subject to a device
tax? Would the scale qualify at that point as a device, Mr.
Jarrin?
Mr. Jarrin. The scale would qualify as a device if it is a
medical device, if that is the intended use of the device.
There are medical-grade weight scales and there are non-
medical-grade weight scales on the market.
Mr. Gardner. So but just if you had just a scale that was
attached to Bluetooth, then that scale would become a regulated
medical device?
Mr. Jarrin. Not necessarily. You need the intended use from
the manufacturer.
Mr. Gardner. So the intended use would be just you go buy a
scale and the intended use is to check your weight. That is
what a scale is.
Mr. Jarrin. Right.
Mr. Gardner. That weight then gets sent. Is that a medical
device?
Mr. Jarrin. Not necessarily. It depends again on the
intended use by the manufacturer.
Mr. Gardner. So not necessarily but it could be?
Mr. Jarrin. Correct. It could be.
Mr. Gardner. OK. So there is no clarity there.
Mr. Jarrin. Well, it really--what we would need is more
information about what the manufacturer intends with----
Mr. Gardner. Well, it is intended as a scale. It is
intended to check your weight.
Mr. Jarrin. But there are some scales that are just for
informational purposes and there are others that are----
Mr. Gardner. Well, all scales are for informational
purposes.
Mr. Jarrin. Correct, but some make medical claims, and if
that----
Mr. Gardner. A medical claim as in, you weigh 150 pounds,
which clearly I do not.
Mr. Jarrin. But this could be used for medicine.
Mr. Gardner. But aren't scales used for medicine?
Mr. Jarrin. Not all.
Mr. Gardner. Well, why would you check your weight then?
Mr. Jarrin. For informational purposes. You want to lose
weight----
Mr. Gardner. For informational purposes, so it is like
reading a description of a coloring box, this is red, this is
blue, this is yellow. That has nothing to do with the color, it
just is information?
Mr. Jarrin. It is information.
Mr. Gardner. That makes no sense to me. A scale is used to
check your weight.
Dr. Dagi, at what point does everything in your room then,
the Bluetooth connection, the iPad, could it check your oxygen
level? Is the scale a medical device subject to a tax?
Dr. Dagi. You are 72 years old. You have just come out of
the hospital with congestive heart failure. If your weight goes
up 6 pounds, you may be about to go back into the hospital with
another cycle of congestive heart failure. That scale has to be
sufficiently accurate and precise to be able to adjust your
medications, and at that point it becomes a medical device. If
you put a penny in a scale at an arcade, that is not a medical
device.
Mr. Gardner. So is there clarity, though, of whether the
iPad at that point that collects the information from the
scale?
Dr. Dagi. It depends on whether the iPad has a built-in
algorithm that does something with the information. It is not
only the data, it is converting the data into usable
information and how that information will be used.
Mr. Gardner. So I am hearing from several of the panelists
that it depends. It might be, it could be. To me, that is not
clarity. To me, that means that you have an entire room of
iPhones, iPads, BlackBerrys that communicate with each other
but it just depends on whether or not something is used for its
intended purpose.
Dr. Dagi, is there the clarity that we need in this field
to ensure innovation?
Dr. Dagi. We do not have the necessary clarity.
Mr. Gardner. And Mr. Jarrin, would you agree with that at
that point?
Mr. Jarrin. It depends.
Mr. Gardner. It depends? ``It depends'' is not clarity. If
it depends, that doesn't seem to me to give you the kind of
certainty and innovation and funding that we are seeking.
Mr. Jarrin. There is insufficient clarity with low-risk
medical devices or low-risk devices.
Mr. Gardner. But is low risk a scale?
Mr. Jarrin. Yes, it could be, if it is for recreational
purposes.
Mr. Gardner. Mr. Spalter, so is there sufficient clarity in
this realm to know that innovation can continue unfettered?
Mr. Spalter. Clearly not, and we have a group of experts
here that are struggling with this question. Imagine what it
must be like for the members that we represent, the app
developers who are sitting on their laptops in their living
rooms trying to dream up the next innovations. How are they
dealing with this level of uncertainty? What we are asking for
is not necessarily one framework or another. What we are asking
for is let us create that balance, let us find the line, let us
put down on paper where we actually--what we need to
understand, and once we get there, I think the hockey stick
that we talked about, 40,000 medical apps, will become 100,000,
200,000 medical apps. In fact, I would even say that if we had
that clarity, that the smartphone that is enabled to test
urinalysis that we talked about earlier today, there would
already be three or five new apps that have been developed just
this morning.
Mr. Gardner. Madam, if I can just ask one follow-up? So I
mean, the line clearly is in the wrong place at this point, and
we have got to adjust it. Would you agree with that, Mr.
Spalter?
Mr. Spalter. I believe that we need clarity, yes.
Mr. Gardner. Dr. Dagi?
Dr. Dagi. Yes, sir.
Mr. Gardner. Thank you. Madam Chair, thank you for your
indulgence.
Mrs. Ellmers. Thank you. Mr. Lujan, did you have additional
questions or comments that you wanted to make? OK. I will
finish up with my questioning.
Mr. Thompson, I have a question for you. In the wireless
world, most wireless devices are replaced in a 2-year cycle,
and mobile operating systems are replaced in as little as 1
year by their next version. Considering the high rate of
technology advancement that is taking place, in your
experiences with the FDA's regulatory processes, how long does
the premarket approval process take on average for a
noninvasive medical device?
Mr. Thompson. There is quite a range but the range could be
anywhere from about 90 days at the earliest for the actual FDA
review, to up closer to a year and a half would also be
reasonably typical.
Mrs. Ellmers. So basically a year and a half is going to
elapse before some of these very important medical applications
can be put forward.
I would just like to finish by asking all of you to respond
to a couple of questions. Yes or no or unclear, I would like
the response. I think one of the things that this very
important subcommittee hearing has really brought to light is,
one, we all care about patient safety and we want to practice
appropriately. We agree that there is FDA approval and
regulatory processes that need to be in place for certain
levels, especially when we are looking at something as
important as diagnosing a disease. Mr. Spalter, I listened to
your testimony and I have personal experience with diabetes. My
older brother was diagnosed 40 years ago. Where would he be
today had we had some of that innovation in place.
This is one where I would like to start to get a yes, no or
unclear answer. Do you all agree that it is still unclear where
we are with what is a medical device, starting with Mr. Jarrin?
Mr. Jarrin. Yes.
Mr. Thompson. Yes.
Mr. Chodor. Yes.
Mr. Spalter. Yes.
Dr. Dagi. Yes.
Mr. Ford. Yes.
Mrs. Ellmers. The other question that I have for you is
this. FDA regulation and medical device tax, or gross tax are
the two issues that we are really talking about today. In your
opinion, if it is FDA regulated, should the medical device tax
be in place? I guess I should preface that by saying, do you
believe that the medical device tax is going to hamper
innovation? And I would like for each of you to answer that
question first.
Mr. Jarrin. Unclear.
Mr. Thompson. I would say it definitely hampers innovation.
Mr. Chodor. Unclear.
Mr. Spalter. It is still unclear.
Dr. Dagi. Definitely yes.
Mr. Ford. The tax will hamper innovation.
Mrs. Ellmers. In your opinion then, if FDA regulation is in
place, and certainly we have seen the need for FDA regulation.
We need to make sure we are practicing safely and best
practices are being adhered to. Do you believe if the FDA
regulation is in place that a medical device tax for such a
product should be in place as well?
Mr. Jarrin. Unclear.
Mr. Thompson. We oppose the tax.
Mr. Chodor. Unclear.
Mr. Spalter. Unclear.
Dr. Dagi. Separate the tax from the regulation.
Mr. Ford. Two completely different questions.
Mrs. Ellmers. Thank you very much. I truly appreciate the
testimony that all of you have given here today. This really
opens up that door on this discussion that we need to have as
to whether or not this medical device tax is something we need
to move forward with, and of course, all important FDA
regulations, so thank you very much.
This subcommittee hearing is adjourned.
[Whereupon, at 12:24 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Fred Upton
Imagine the potential to improve Americans' wellbeing if we
were to bring wireless innovation to health care. Wireless
carriers invested $25.4 billion in capital expenditures from
mid-2011 to mid-2012, and that investment was made in a poor
fiscal environment. The mobile application business has
experienced explosive growth since its inception a half decade
ago--responsible for the creation of approximately 500,000 jobs
and it is now a projected $25 billion industry for this year.
The 321.7 million connected mobile devices in the United States
as of mid-2012 exceeds the number of citizens, as many
consumers now use a combination of smartphones, tablets, and
laptops. And 60 percent of adults already say they track health
data, seven percent using an ``app'' or other tool on their
wireless device. That figure is only going to continue to rise
as apps become more and more a part of our daily lives. Helping
people take better care of themselves with their mobile devices
can make them healthier while at the same time cutting costs.
The question is: how do we harness this innovation? The
mobile application economy is characterized by low barriers to
entry, quick time to market, inexpensive retail prices, and
rapid upgrade cycles. That will not be sustainable, however, if
we indiscriminately regulate and tax mobile applications,
smartphones, and tablets as if they were artificial hips or
pacemakers. Arbitrarily applying the definition of ``medical
device'' and the medical device tax to the wireless world could
prove disastrous and grind this innovation cycle to a halt.
We certainly want to ensure patient safety, but the
approach we take must be a smart one. My hope today is that our
witnesses can shed light on how the medical device definition
and tax is being applied to mobile devices and applications and
what the impact is. I look forward to their testimony.
# # #
----------
Prepared statement of Hon. Leonard Lance
Thank you Mr. Chairman and thank you to the witnesses who
have all come to share their experience and expertise with us
today.
The mobile app market place is growing at an exponential
pace. We are seeing more innovative new apps on the market
every day that help American consumers with innumerable daily
tasks. This is one space where we are truly seeing fast paced
development and where new, tech savvy entrepreneurs can quickly
make their brainstorm into a reality and bring it to the market
almost immediately upon completion.
There is a significant sector of this market aimed at
helping Americans live healthier lives; this is the mobile
health sector. A simple search for health and fitness apps for
the iPhone produces page after page of options ranging from
heart rate monitors, to calorie counters, to exercise apps and
so much more. These technologies, as well as more advanced
equipment and programs that are being used in doctor's offices
and hospitals every day are helping to improve consumers'
health and well being and in my cases bring down the overall
cost of providing health care in this country.
Unfortunately, the prospect of arduous regulatory
processes, or worse, the prospect of being subject to a poorly
thought out regressive tax loom as potentially chilling
barriers for some new entrants into this market. There rightly
is a role for the FDA to have a regulatory role with many of
these new technologies but they must be clear about what kinds
of apps and devices will be required to undergo their full
regulatory review and what others would be exempt. Some of our
witnesses point out that FDA is still finalizing many of its
regulations that determine what is a ``medical device'' and
what is not and that this final analysis may have a significant
impact on what qualifies under Obamacare's medical device tax.
Uncertainty like this is one of the largest drags on our
nescient economic recovery.
This brings me to the Medical Device Tax itself. I, like
many of my colleagues on both sides of the aisle, view the
imposition of the 2.3% tax on the medical device industry as
arbitrary and wrongheaded. Mr. Ford makes that case pretty
succinctly in his testimony in my opinion. This $20 billion tax
should be repealed as soon as possible. The fact that there is
any question as to whether or not a mobile device like an
iPhone, iPad, or blackberry may be subject to this regressive
tax would be comical if it weren't such a potentially serious
issue.
I have a constituent back home in New Jersey who is working
with companies on the leading edge of some of this innovation.
John Letko is President & CEO of U.S. Healthcare Supply located
in Milford, NJ. His company provides care for roughly 150,000,
most Medicare beneficiaries with diabetes. Mr. Letko is
currently working with another company in development of a new
glucometer that attaches to a smartphone and a corresponding
app to help patients with diabetes monitor and track their
glucose levels and seamlessly share that information with
caregivers or family members. Fortunately for him, recent IRS
guidance appears to put this new device under the so called
retail exemption from the medical device tax and hopefully the
same applies to the app. However, he recently wrote me a letter
expressing serious concerns he has with the medical device
tax's possible effect on his industry. He rightfully points out
that for a company like his, the President's sequester has
already resulted in a 2% cut the provider side of Medicare and
recent cuts to the reimbursement for mail order diabetes
supplies have created a very challenging environment. A further
2.3% tax could be very damaging to the industry.
While my colleagues and I work to finally repeal this
damaging tax provision I would encourage the FDA to carefully
consider how it regulates these new and innovative
technologies. We must ensure safety but should not impede
technological progress unnecessarily. We must find the right
balance between protecting consumers and harnessing the power
of America's innovators to ensure that the U.S. remains at the
forefront of the boom we are seeing in the development of such
technologies.
----------
Prepared statement of Hon. Anna G. Eshoo
Mr. Chairman, today's hearing provides an opportunity to
examine the exciting intersection between mobile technology and
healthcare. Representing Silicon Valley and serving as Co-Chair
of the House Medical Technology Caucus, I see first-hand the
impact that the next generation of mobile health applications
and devices are having on healthcare accessibility and
improvements to care.
In July 2011, the FDA announced it was seeking input with
respect to how the agency should approach oversight of certain
mobile medical apps used on smartphones, tablets and other
mobile devices. In the nearly two years since the FDA sought
comment, there have been over 700 pages of comments, the vast
majority of which support the FDA's draft guidance. The FDA
also conducted a two-day workshop on mobile medical apps which
provided feedback from a variety of stakeholders, including
manufacturers, healthcare providers and app developers.
Unfortunately, in a hearing intended to examine how ``FDA
regulations and taxes could impact innovation in mobile
applications and services,'' we don't have the FDA here to tell
their story.
Also absent from this discussion is the importance of
unlicensed spectrum to hospitals and other healthcare
professionals around the country. For example, in Logan, Ohio,
through the power of unlicensed spectrum below 1 gigahertz, the
Hocking Valley Community Hospital has a robust broadband
solution that is improving the efficiency and quality of care
throughout the hospital. Elsewhere in the country, unlicensed
spectrum is supporting nurse call systems, mobile duress
pendants, as well as fluid pump, respirator and other medical
equipment alarm telemetry.
I understand the desire of innovators to have a predictable
regulatory process for the apps they're developing. But mobile
medical applications are an emerging and exciting new field of
technology and we're still trying to get a handle on what the
landscape looks like. As technology advances, the clear lines
of what's considered a medical device are becoming blurred. We
have to be careful not to lock ourselves into a misguided
pathway without a more complete picture of what these new
technologies are capable of. The FDA's primary goal is to
ensure patient safety and I believe they are working diligently
on final guidance for regulation of mobile health applications.
Despite the FDA's absence from today's hearing, I look
forward to hearing from our witnesses and their enthusiasm for
this emerging field of innovation that could one day transform
our healthcare system. I share this enthusiasm and hope to see
patients and the industry flourish.
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