FDA proposes to establish a unique device identification system.
RULE SUMMARY
FDA proposes to establish a unique device identification system. The system established by this rule would require the labeling of medical devices and device packages to include a unique device identifier (UDI), except where the rule provides for alternative placement of the UDI or provides an exception for a particular device or type of device. Each UDI would have to be provided in a plaintext version and in a form that uses automatic identification and data capture (AIDC) technology. The UDI would also be required to be directly marked on the device itself for certain categories of devices for which the labeling requirement may not be sufficient—for example, devices that remain in use for an extended period of time and devices that are likely to become separated from their labeling. The rule would require the submission of information concerning each device to a database that FDA intends to make public, to ensure that the UDI can be used to adequately identify the device through its distribution and use.
COMMENTARY
FDA does not quantify benefits and thus its estimation of the costs of various alternative command-and-control regulations does not provide an in-depth analysis of a problem it argues stems from a market failure. Suppliers who would benefit from greater standardization encounter prohibitive transactions costs in the agency's opinion, but there is no empirical support for the hypothesis—thus calling into question the merit of the proposed rule. Further, no break-even analyses of the five alternatives considered is provided. Without some comparison of expected benefits of the alternatives (or at least a break-even analysis of each), it is not clear how the RIA was used to select the proposed rule. Support for the assumed values in the models should be provided.
MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)
| Dollar Year | 2010 ($millions) | |
| Time Horizon (Years) | 10 years | |
| Discount Rates | 3% | 7% |
| Expected Costs (Annualized) | $66.9 | $68.4 |
| Expected Benefits (Annualized) | Not Reported by Agency | Not Reported by Agency |
| Expected Costs (Total) | $588.6 | $514.0 |
| Expected Benefits (Total) | Not Reported by Agency | Not Reported by Agency |
| Net Benefits (Annualized) | Not Reported by Agency | Not Reported by Agency |
| Net Benefits (Total) | Not Reported by Agency | Not Reported by Agency |
METHODOLOGY
There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.
| Criterion | Score |
|---|---|
Openness | |
| 1. How easily were the RIA , the proposed rule, and any supplementary materials found online? The proposed rule is easily found on regulations.gov, but the RIA is not. The RIA can be found on FDA.gov using its title in the search engine. | 3/5 |
| 2. How verifiable are the data used in the analysis? Data are verifiable but there is little of it. Most values were simply assumed. Of the data discussed, it was well cited; however, these data were not used in empirical analysis, but rather as support for the motivation for the rule. | 3/5 |
| 3. How verifiable are the models and assumptions used in the analysis? Most models and assumptions are discussed, but the RIA contains only 10 reference citations, suggesting little theoretical or empirical support for many of the agency's models and assumptions. | 2/5 |
| 4. Was the analysis comprehensible to an informed layperson? The analysis is comprehensible to an informed layperson. Few abbreviations, equations, or discussions of literature are provided. However, it is not entirely clear how the decision was made to move forward with the proposed regulation | 2/5 |
Analysis | |
| 5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them? | 2/5 |
| Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life? The proposed rule would standardize how medical devices are identified and would contribute to future potential public health benefits from initiatives associated with the increased use of automated systems in health care. | 4/5 |
| Does the analysis identify how these outcomes are to be measured? It is not quantitative, only qualitative. The public health benefits from the UDI would be related to reductions in medical device–related patient injuries and deaths and to more effectively targeted and managed medical device recalls. The agency admits it "lack[s] data on the frequency of device related medical errors." It requests such information from commenters. But it can track the total number of deaths/injuries associated with medical device issues. | 2/5 |
| Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes? Standardization is believed to convey benefits. The proposed rule is believed to allow more accurate reporting, reviewing, and analyzing of adverse event reports so that problem devices can be identified and corrected more quickly. The agency mostly speculate about possible impacts, and, in some instances, admits that the relationships between the UDI system and intended outcomes are difficult to link. The UDI system creates an environment conducive to further automation and linked networks, making the reporting and analysis of device failures more efficient and the distribution of warnings/recalls more effective. | 3/5 |
| Does the analysis present credible empirical support for the theory? Analysis focuses on costs rather than benefits. There is no empirical support for the theory arguing that transactions costs were prohibitive and hence why industry does not solve this "problem" on its own. FDA conducts an "illustrative break-even analysis," which suggests that if 13 to 14 "deaths associated with (although not necessarily caused by) reported adverse medical device[s]" are averted (a 0.5 percent reduction), the benefits will exceed the costs of the regulation. | 1/5 |
| Does the analysis adequately assess uncertainty about the outcomes? Uncertainty is only expressed about costs and not benefits. The illustrative break-even analysis is intended to address this uncertainty to some degree. Given the "associated with" but not "not necessarily caused by" comment, it is not clear that the 0.5 percent reduction in deaths due to medical device failure is reasonably achievable. | 1/5 |
| 6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve? | 2/5 |
| Does the analysis identify a market failure or other systemic problem? They state "the market has failed to establish a standardized UDI system that meets the basic needs of medical device producers and the users of medical devices." | 3/5 |
| Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal? FDA presents two arguments: 1) the entities incurring the costs of establishing a standardized system are not the same as the entities benefiting from such a system, and 2) the transaction costs of bringing the entities together to establish a standardized system are large. The first argument clearly fails to explain any systematic problem, as manufacturers always incur the expense of production while different entities (health care providers) benefit. If an item is of value, providers will pay a higher price in compensation. The second motivation—high transaction costs—is a more reasonable an explanation, although it is not clear these costs could not be overcome without regulation (i.e., it's not clear why this leads to a systemic problem). | 2/5 |
| Does the analysis present credible empirical support for the theory? There is little empirical support for their claims. They present data on the number of injuries/deaths due to medical device errors, but they have no evidence about the frequency of those errors (on either an errors-per-device or an errors-per-patient basis). They also do not discuss how relevant injuries/deaths have varied over time. Without these figures, it is difficult to present empirical support justifying the claims. | 2/5 |
| Does the analysis adequately assess uncertainty about the existence or size of the problem? FDA admits to uncertainty, but there is no obvious assessment of uncertainty about the existence or size of the problem. | 1/5 |
| 7. How well does the analysis assess the effectiveness of alternative approaches? | 2/5 |
| Does the analysis enumerate other alternatives to address the problem? FDA considered alternatives with varied requirements affecting the coverage of devices, the content of the information required to be encoded in a UDI, applying UDI requirements to class III devices only or to class II and III devices only, requiring the UDI to contain only the device identifier across all device classes, and one alternative that required a UDI labeling change without requiring submission of data to the GUDID. | 4/5 |
| Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)? Only command and control policies involving labeling and UDI requirements are suggested as alternatives. The extent of the range involves varying the device class requirements and the requirement of static versus variable information on the labels. | 2/5 |
| Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved? It does not attempt to evaluate the benefits of alternatives. | 0/5 |
| Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future? It does not consider whether industry practices would change without the rule. Baseline "practices" of firms is determined by contacting some medical device facilities and participating in some industry meetings, as well as reviewing the most common industry practices with a variety of industry consultants and vendors of label-printing equipment. | 1/5 |
| 8. How well does the analysis assess costs and benefits? | 2/5 |
| Does the analysis identify and quantify incremental costs of all alternatives considered? Yes. The analysis does estimate incremental costs associated with the other five alternatives. When relevant, the agency is clear to state when the method used is expected to over/underestimate costs for that alternative. | 5/5 |
| Does the analysis identify all expenditures likely to arise as a result of the regulation? It considers the obvious costs of meeting a new rule, including administration, planning, registration, purchasing equipment, marketing, software and data integration, record-keeping, compliance, and enforcement. | 5/5 |
| Does the analysis identify how the regulation would likely affect the prices of goods and services? The RIA does not model whether prices would rise from regulation; it is likely that they will since this is an economically significant regulation placed on mostly small businesses within an industry that FDA argues is competitive. | 0/5 |
| Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation? There is little discussion of this. FDA mentions the possibility of changes in the rate of outsourcing the labeling of devices, and that such changes could impact costs relative to the primary estimate provided (the resulting uncertainty is handled via cost ranges). Costs to consumers, and how they might change consumers' behavior, are not considered. | 2/5 |
| If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis? FDA admits to a large degree of uncertainty. To address uncertainty regarding each categorical cost, ranges are provided: as small as +/- 10% to +/- 80%. | 3/5 |
| Does the analysis identify the alternative that maximizes net benefits? No. Only the costs of each alternative are computed. No discussion of benefits acheivable via proposed rule and five alternatives is considered. It is unclear how the chosen regulation was decided upon. | 0/5 |
| Does the analysis identify the cost-effectiveness of each alternative considered? No. Only the costs of alternatives are considered. Further, for only the proposed regulation is "illustrative break-even" analyis provided. | 1/5 |
| Does the analysis identify all parties who would bear costs and assess the incidence of costs? The majority of the costs are incurred by labelers of medical devices. Others bearing costs are issuing agencies, FDA, and foreign labelers (not quantified). Most labelers are small entities and FDA does differentiate costs across different-sized labeling firms. Also, the cost impact on consumers seems to be left out of the analysis altogether. | 1/5 |
| Does the analysis identify all parties who would receive benefits and assess the incidence of benefits? Benefits are identified but not quantified. FDA claims consumers will benefit through fewer medical device failure deaths and injuries; however, nothing is included to assess the extent of those benefits. Moreover, there is no discussion of the possible impact on cost-savings associated with the possibility of fewer lawsuits against health care producers. | 1/5 |
Use | |
| 9. Does the proposed rule or the RIA present evidence that the agency used the analysis? The rule is responding to a previous provision requiring FDA to establish a unique device identification system. It is unclear how FDA used analysis to justify the proposed rule, given that benefits were not quantified and thus it is impossible to compare the costs of different alternatives with their differing, but unmeasured, benefits. | 1/5 |
| 10. Did the agency maximize net benefits or explain why it chose another alternative? It is not at all clear on what basis the decision is made. FDA acknowledges there is insufficient information to quantify public health gains from the proposed rule, and so it carries out an illustrative break-even analysis to determine the level of effectiveness that would cover the total costs of the proposed rule. | 1/5 |
| 11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future? None are directly discussed, and given that the RIA does not attempt to quantify benefits, it remains problematic to suggest a method that could track the future results—other than perhaps examining whether costs to affected firms fall. But it is reasonable to believe measures might be based on the illustrative break-even analysis that FDA used to track the number of deaths and injuries associated with (although not necessarily caused by) medical device failures, expecting the number to fall over time. However, it is problematic to expect analysis to clearly separate other changes affecting death/injuries from those related to the proposed regulation. | 1/5 |
| 12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so? None are addressed, but FDA might choose to continue tracking deaths and injuries associated with (not necessarily caused by) medical device failures. The number could be compared to break-even analysis. | 1/5 |
| Total | 22 / 60 |
Additional details
- Agency
- Department of Health and Human Services
- Regulatory Identification Number
- 0910–AG31
- Rule Publication Date
- 07/10/2012
- Comment Closing Date
- 11/07/2012
- Dollar Year
- 2010 ($millions)
- Time Horizon (Years)
- 10 years