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The field of orthobiologics has made substantial progress over the last 25 years, and now enjoys a meaningful revenue stream of $5 billion worldwide, according to ORTHOWORLD estimates.
Through the first half of 2019, orthobiologics revenue reported by public companies grew just under 2%, slightly lagging behind the growth rate of orthopedics overall. Were it not for declining viscosupplement sales, resulting from a combination of AAOS’ controversial recommendation against their use, and the cash sale of alternative products from private companies, orthobiologic revenue growth from public companies would have eclipsed the overall market by several percentage points.
Notwithstanding this ~5% year-over-year decline in viscosupplementation, a handful of products within this category (including injectable hyaluronic acid) still generate outsized revenue contributions (Infuse/BMP-2, SYNVISC, ORTHOVISC). The rest of the segment is characterized by a vast array of lower revenue products which often lack a clear sponsor-defined algorithm regarding when and where to use (e.g., platelet rich plasma, bone marrow concentrate, allogeneic cellular grafts, demineralized bone, synthetic bone graft substitutes).
Our collective scientific understanding and clinical experience with these products continues to evolve; however, the requirements to properly introduce new technologies for market entry and adoption remain high. Companies seeking commercial success would be well-served to abide by FDA guidance and invest in developing high quality indication-specific evidence, and possess the patience to do both.
The “New” Product Development Paradigm
In order to drive the discovery, development and commercialization of therapeutic products into routine clinical practice with greater speed, certainty and financial efficiency, a functional relationship between academic and industrial investigators is essential. Approaches that successfully weave the technology, tools and clinical applications from the laboratory bench to the clinical bedside stand a greater chance of being successful in the marketplace. In the case of new biologic solutions, and human cellular and tissue products (HCT/Ps) in particular, demand grows for not only basic scientific evidence but a demonstration of clinical efficacy to support utilization and reimbursement. While different hurdles exist depending upon the nature of the product (e.g., device vs. HCT/P) and the regulatory burden necessary for market launch (e.g., 510(k), PMA or BLA), it is becoming incumbent on companies to provide ever more compelling evidence of clinical and economic benefit.
Myriad reasons underlie this growing demand for evidence, which stems from 1) the increasing sophistication of, and competition for patients amongst, orthopedic surgeons and non-operative physicians, 2) economic constraints imposed by Medicare and third-party payors, and 3) a growing backlash from our professional societies (e.g., AAOS, NASS, ICRS) noting that high quality studies are necessary to render endorsement.
Unfortunately, in the race to capitalize on patient-driven interest in stem cells, biologic solutions and “regeneration” of a more vital, healthy and functional body, there has been an explosion of offerings that lack scientific controls, validity and meaningful evidence. The opportunistic avarice of companies and physicians in response to patient demand has led to mercenary behavior that has begun to sully the field’s reputation. There are those who believe, however, that new regulatory guardrails, and a return to conscientious management of our precious healthcare resources, will swing the pendulum back to a state of more principled product promotion and patient care.
Clarification of Registration Requirements Designed to Help Industry
In November 2017, FDA issued a series of guidance documents aimed at clarifying the definition, use and regulation of regenerative medicine products and HCT/Ps, including two pathways to accelerate development timelines through early feedback and expedited review. More specifically, HCT/Ps consist of human cells or tissues that are intended for implantation, transplantation, infusion or transfer into a human recipient. Examples of such products include bone, ligament, skin, dura mater, hematopoietic stem/progenitor cells derived from peripheral and cord blood, manipulated autologous chondrocytes, epithelial cells on a synthetic matrix and reproductive tissues. The regulatory framework for HCT/Ps is established in Sections 351 and 361 of the Public Health Service (PHS) Act, and 21 CFR Part 1271.
FDA has been challenged on how to regulate these products and has developed comprehensive guidance documents that expand on the fundamental criteria of minimal manipulation and homologous use. An HCT/P will be regulated as a tissue (i.e. not considered a drug/biologic/device) if it meets certain criteria listed in 21 CFR 1271 for minimal manipulation and homologous use. These tissue products are regulated solely under Section 361 of the PHS Act and, therefore, do not require premarket authorization from FDA, which means that they are not required to demonstrate evidence of safety and efficacy before being sold in the marketplace. Examples of such HCT/Ps often used in orthopedics include certain preparations from bone marrow, adipose tissue, blood, amnion and dermis. To be considered a “361 HCT/P,” the product must meet all of the criteria as outlined in the guidance, and HCT/Ps that do not are regulated as drugs, biologicals or devices, based primarily on the mechanism of action on the body to achieve its intended purpose.
By contrast, HCT/Ps subject to Section 351 of the PHS Act and the applicable 21 CFR regulations must have premarket clearance or approval by FDA, which typically requires long and arduous development, qualification and human clinical trials. Examples of such 351 HCT/Ps include culture-expanded chondrocytes for cartilage repair; ground and lyophilized amniotic membrane for modulating inflammation such as in the case of osteoarthritis; any purified stem cell preparation from fat, marrow, blood or other tissue; and any combination of a tissue with another material. Interpreting and applying these criteria can be challenging, and therefore, it is important to communicate with FDA early in the development process to verify shared understanding of the regulatory requirements.
FDA’s Discretionary Enforcement Period is Ending
Availability of the Section 361 exemption from the far more rigorous requirements of FDA’s device, drug and biologic registration process has spawned a cottage industry of “stem cell and regenerative medicine clinics” that operate somewhere between the fringe of propriety and outright defiance of Federal regulations. It is estimated that there are currently over 1,000 such clinics and even more physician practices using HCT/Ps that do not actually qualify for exemption.
This naturally raises the question as to where the responsibility for such violations of Federal law reside. Do the physicians who practice the art of medicine bear the brunt of this, or do the companies that manufacture and sell products under the grey areas of Section 361 exemption shoulder that burden? What is the liability of physicians and hospitals who use tools and instruments sold by companies to prepare tissues in their facilities that do not fit the criteria for Section 361? As physicians promote their practices online with advertisements that claim to use “stem cells” and other materials capable of regenerating tissue, without scientific evidence or FDA approval to make such claims, who is responsible for the false advertising?
As part of FDA’s formal guidance in November 2017, they stipulated that they would take a “risk-based” approach to enforcing the updated regulations against those in violation through November 2020, with the intent of giving sponsors the opportunity to bring their development and marketing activities into proper specification. A number of orthopedic and tissue repair companies have properly availed themselves to this opportunity, and met with FDA to migrate their development programs into well-defined device, drug, biologic or combination product pathways.
However, a great many firms remain that have continued to launch and promote products inappropriately, placing themselves and their physician customers at risk, along with unsuspecting patients who naively believe their unsubstantiated claims. For example, the indisputable fact that there are no approved “stem cell” products to treat any musculoskeletal condition in the United States has not thwarted some companies and even more doctors from promoting their brand of HCT/Ps as a “regenerative cure” for osteoarthritis, disc degeneration, tendonitis, meniscal injury, torn ACL and many other conditions. This needs to stop, lest we soil our broader community of healthcare providers who seek to do the right thing for our patients and customers.
What Can and Will Happen to “Bad Actors”?
The FDA, FTC and State Medical Boards are authorized to take action against firms and individuals found to be in violation of the laws and regulations governing human medical products. Examples of violations include issues with manufacturing processes, lack of appropriate marketing authorization and advertising products for uses not approved by FDA. This is often discovered during facility inspections and review of company and physician website materials. Specific enforcement activities include actions to correct and prevent violations, removal of “adulterated” products from the market and punishment of offenders. The type of enforcement activity that the authorities use will depend upon the nature of the violation. In the extreme, FDA and FTC can and do work with the federal government to write injunctions and cease and desist orders, and they have the ability to levy financial damages on companies and individuals, as well as criminally prosecute those responsible for the noncompliance. These are serious matters, and neither FDA nor the FTC’s jurisdictional reach should be taken lightly.
In conclusion, as we dive deeper into the Age of Biology with incredibly powerful tools to effect tissue repair and regeneration, we must hold ourselves and our HCP colleagues to exceedingly high standards. We must educate our physician customers in not only the basic and clinical science, but the regulatory framework for proper product promotion and use. In this way, we can effectively manage the expectations of patients, deliver high quality care and allow the high tide of success to raise all well-constructed boats that venture into these turbulent waters.
Dr. Bruder founded the Bruder Consulting and Venture Group in 2015 after 25 years in the industrial sector, serving in the C-suites of Stryker, BD and Johnson & Johnson. In addition to his tenure throughout the industry, Dr. Bruder has maintained an active academic presence, serving as an Adjunct Professor of Biomedical Engineering at Case Western Reserve University since 2011, after 13 years as adjunct faculty in the Department of Orthopaedic Surgery. Currently, he also serves on the Board of Directors of both publicly-held and private equity-backed medical device companies.
