Reused Devices Attract Entrepreneurs, Scrutiny

Asked about Eames, the FDA's Spears said he was not aware that the reprocessor had reentered the business as a consultant.

The Big Three

The FDA is much more familiar with the nation's big three reprocessing companies, which dominate the industry. They have in common executives who come largely from unrelated business backgrounds, which reprocessors say is supplemented by hiring people with the appropriate expertise.

Alliance President Ricardo M. Ferreira was a banker in Canada who entered the medical field when he hatched a business idea with one of his clients, Rocco C. "Rocky" LoFranco, an aggressive and flamboyant personal-injury attorney. In the early 1990s, they created a set of rehabilitation clinics that took advantage of a change in law, providing more rehab services to people injured in car accidents.

As the business expanded, questions of conflicts of interest cropped up. LoFranco was criticized for sending some of his legal clients to the rehab center. LoFranco did not respond to several telephone calls seeking an interview. And when Ferreira sold a controlling interest in the business a few years later to an insurer, some questioned the arrangement because it put the insurer in the position of deciding how much treatment patients in the rehab center received. But Ferreira was quick to note that despite the insurer's control, it had no say in patients' insurance benefits.

Ferreira said he left his post as president of the company around March 1996, a few months before it was so saddled with debt that it was unable to pay its bank loans and was sold. Ferreira said he had not been serving in an operating capacity since the year before.

In 1997, Ferreira joined Alliance as head of one of its subsidiaries; he has been the reprocessor's president since 1998. Since then, the firm has thrived. As a privately held company, it does not disclose its finances publicly, but its officials said revenue has quadrupled in the past five years.

Over that period, FDA inspectors have occasionally taken the company to task. In 2001, for example, Ferreira received a warning letter about Alliance's facility in Spartanburg, S.C. The FDA cited such problems as a failure "to perform risk assessments and design reviews when new devices were selected for reprocessing." Alliance said it inherited the problems when it bought another reprocessor's book of business.

Vanguard has also received an FDA warning letter, citing "serious regulatory problems" with its reprocessing of biopsy forceps. Vanguard said it fixed the problems. Charles A. Masek Jr., Vanguard's president and chief executive, earned a master's degree in clinical microbiology and started his career in medical sales before founding Vanguard.

Brian F. Sullivan, the president and chief executive of SterilMed, the other major reprocessor, started further afield of the medical industry. A Maryland native, he bought the rights to a water-desalination device and in 1986 founded a water-purifying business, Recovery Engineering Inc.

The business did well but in 1998, the attorneys general of Florida, Massachusetts, Michigan, New York and North Carolina accused Recovery Engineering of deceptive marketing practices, saying it charged more for its premium filter product even though it was no different than its regular version.

His company "charged $10 more for a bigger box," New York's attorney general said then.

Sullivan denied wrongdoing but agreed to pay the states' investigative costs and compensate consumers who had paid the higher price. He said the charges were politically motivated. "It was extortion," he said.