Reused Devices Attract Entrepreneurs, Scrutiny

Second of two parts

Horace P. Goodrich was an oilman from a small town in central Texas near Waco. The son of a farmer, "H.P." started working in the oil fields in 1949. Over the next 30-plus years, he looked after rigs for Pennzoil and invested in the business until retiring at age 65. Then, he went looking for a new field to tap. What he found was a novel idea: the reconditioning of single-use medical devices.

"I was looking for some investment, maybe increase my income," he said.

Goodrich had no medical experience, no background in health care. "Nothing, zero," he said. "I knew that bandages came in a box, gauze came in a roll."

Many who followed Goodrich into this fertile field knew little more. The refurbishing of single-use devices -- called reprocessing -- is now a multimillion-dollar industry. The companies clean and sterilize millions of devices annually that are used in medical procedures covering almost every part of a patient's body, from catheters that weave into the heart to biopsy forceps that delve into the abdomen.

Device makers, which are in competition with reprocessors, say they cannot vouch for the safety of their single-use devices when they are reconditioned, but the Food and Drug Administration allows many one-time-use devices to be reused. The FDA said it has made good progress in regulating the business, although it acknowledges that there are shortcomings in its oversight of the industry and those who are in it. The industry has attracted several entrepreneurs, including some who have run afoul of federal authorities.

The largest U.S. reprocessor, Alliance Medical Corp., said it does not have any surgeons or physicians on its senior executive team. It said it has no clinical advisory board, although it did say it has unpaid relationships with surgeons whom it calls for advice. Alliance plans to merge with Vanguard Medical Concepts Inc., another major reprocessor, which said that it does not have any surgeons or physicians among its senior executives but that it retains physicians on an as-needed basis. SterilMed Inc., the other major reprocessor, said that it does have an advisory board of physicians and that its vice president of research and development has a doctorate in biochemistry.

The work of reprocessors does not "primarily call on the expertise of physicians," said Naomi Halpern, an attorney for the Association of Medical Device Reprocessors. What is needed -- and what reprocessors have on staff -- are engineers and biologists, she said. When medical questions come up, the reprocessors will call on various specialists. For example, Vanguard said it employs 19 engineers and microbiologists in its research and development department.

In contrast, the major medical device manufacturers say it is important to have medical expertise on staff and typically retain many doctors and nurses; for example, device maker Tyco Healthcare said it has more than 140 clinicians, including doctors and nurses, from entry-level employees to the senior ranks of management.

Hospitals, looking to cut costs without compromising patient care, have given substantial business to reprocessors. While hospitals do some of their own resterilizing of single-use devices, a recent change in FDA rules that requires more paperwork for reprocessing has prompted many medical facilities to hand over their used devices to outside companies for reconditioning.

Over the past several years, the FDA has occasionally found those reprocessors in violation of good manufacturing practices. But after the FDA barred some reprocessors from the field after repeated violations, the federal regulator was unaware that some of those same players have reentered the business, records and interviews show.

The FDA requires reprocessors to register with it, and the companies must get FDA clearance for each type of device they want to reprocess. The clearance means that the federal agency considers the reprocessed device to be "substantially equivalent" to the new single-use device.