Over the past decade, the power of physician preference has steadily diminished in the face of hospital and physician consolidation, continuing pricing pressures, and structural changes in payment systems brought about by US healthcare reform. While physicians continue to exert strong influence over health system purchasing decisions, they’re no longer the only game in town — and they’re facing increasingly stiff headwinds.

Example of what a universal device identifier (UDI) would look like on a medical device label. The label contains information about the product name, its expiration date, reference and lot numbers, manufacturer information, bar code, details about the item, and an illustration of the item. (Credit: FDA)
Indicative of growing concern over the extra-clinical roles of physicians, at the end of March the U.S. Department of Health and Human Services Office of Inspector General (OIG) took the extraordinary step of issuing a fraud warning about physician-owned distributorships (PODs), saying that such arrangements are “inherently suspect under the anti-kickback statute.” In its warning, OIG expressed particular concern about POD financial incentives relating to implantable medical devices, “because such devices typically are ‘physician preference items’, meaning that both the choice of brand and the type of device may be made or strongly influenced by the physician,” instead of controlled by the hospital or surgical center where the procedure is performed.

To avoid subjecting their marketing arrangements to OIG scrutiny, manufacturers may have to forgo physician preference status, but they’ll get some help from a new organization spun out from group purchasing organization Novation, Irving, TX. Launched in April, Aptitude LLC is billed as the healthcare industry’s “first online direct contracting market”. In the Aptitude system, member hospitals provide regular reports about their purchasing activities as a basis for the online marketplace. Hospital requests for bids on particular products are forwarded to member device companies. In turn, manufacturers are able to access market size and share data from the hospital, and use the system’s structured contracting options to respond directly to the requesting hospital.

The demise of physician preference may also get a boost from the long-anticipated implementation of a globally harmonized system for unique device identifiers (UDIs), which now appears imminent. At the beginning of April, the European Commission published its recommendations for a medical device UDI system in the European Union. Just a few days later, the UDI working group of the International Medical Device Regulators Forum published an updated guidance document containing rules for a globally harmonized medical device UDI system. And at the end of the month, FDA’s Center for Devices and Radiological Health issued an update on its plans for strengthening the US system for post-market surveillance—including establishing a UDI system and promoting its incorporation into electronic health information (EHI).

According to FDA’s revised plan, the agency expects to release its final UDI regulation, and implement a fully functional and publicly accessible global UDI database, by the end of June. Additional milestones for 2013 will facilitate adoption of the UDI system and its integration with the EHI systems of hospitals and other care delivery sites.

It remains to be seen whether the final version of FDA’s UDI rule will heed a caution from the Medical Device Man - ufacturers Association, Washington, DC, which commented that UDI information “should only be used for safety and efficacy issues and never for contract management purposes.” In the absence of restrictions to this effect, manufacturers may soon discover that a confluence of UDI and other industry trends has formed a fast, slippery, and unwelcome slide into commoditization for many devices.

Steve Halasey is vice president for programs at the Institute for Health Tech nology Studies (InHealth), a 501(c)3 research and educational foundation measuring the value of medical technology innovation. Washington, DC. He has more than 20 years of communications and editorial experience with publications informing industry executives, researchers, and investors in the medical device industry.