- Life Science compliance is dominated by pharmaceutical settlements.
- The pharmaceutical regulatory scheme is more established (1938 vs. 1976).
- Medical technology companies have fewer resources overall.
Regardless of the reason, 2 recent cases (Olympus and Invacare) and a McKinsey study clearly demonstrate that med-tech companies can no longer afford the lag.
Olympus Corporation of America (OCA) recently agreed to pay $646 million to settle allegations of paying kickbacks in the U.S. and bribes in Latin America to boost sales of its products. This is the largest settlement levied against a medical device manufacturer. In addition, Olympus signed two agreements with the U.S. Government promising to correct numerous compliance program shortcomings.
Invacare Corporation, a wheelchair manufacturer headquartered near Cleveland, Ohio, has wrestled with quality problems since 2012 when FDA inspections resulted in a company consent decree. For the past 3 years, the company has lost money. The FDA in its latest inspection concluded that Invacare still had quality issues, but worse yet, was not in compliance with its consent decree. That inspection lasted over 5 months and found more than 11 pages of deficiencies despite the CEO’s assurance that creating a strong compliance culture was the company’s top priority.
McKinsey has determined the overall cost of medical device non-compliance. They report that non-routine quality events – major observations, recalls, warning letters, and consent decrees, along with warranties and lawsuits – cost the medical device industry on average $2.5-$5 billion per year. A single event, like a major recall, can cost a company as much as $600 million.
Call for Action
Med-tech companies need to make prudent investments to upgrade their compliance programs. Being prudent means starting with a careful survey before beginning to renovate or build something new. It also means starting now.