For dealers of secondhand medical equipment, the truth can be contained in three simple words: Regulations are coming.

A soon-to-be-levied medical device excise tax and import restrictions are familiar concerns for the reseller market. But some experts think rules governing a new medical device tracking system, involving the unique device identifier, or UDI, might have an effect on the industry, particularly for refurbishers.

"My own personal opinion is that this is the methodology by which regulation will be easy to enforce," said Diana Upton, president of International Association of Medical Equipment Remarketers and Servicers, or IAMERS, an industry lobby, during a recent interview.

Partly in response to congressional pressure, the Food and Drug Administration released its proposed UDI rules in early July. The UDI plan has two main parts: specifications for labeling to appear on devices, and the creation of a database to allow providers or regulators to track products throughout the supply chain.

Patient and consumer advocates have long championed the UDI, as they say it'll enable the FDA to better keep tabs on devices in the market. And supply chain experts also think it could help hospital materials managers organize their inventory and prevent their shelves from getting cluttered with expired products.

But while consumer advocates might like it, the rule's effect on the capital medical equipment reseller market is murky. IAMERS general counsel Robert Kerwin is using the rule's 120-day comment period to discover how it might impact resellers, if at all. One concern is that companies that refurbish devices could have to deal with labeling changes when they swap out parts, depending on how the UDI is implemented.

And remember, increased costs or regulatory challenges for resellers mean some will close down or raise their prices. At the end of the day, this affects providers and hospitals, too, as they might have to spend more, or have fewer options, when buying parts and equipment.

So to find out more about the UDI rule and other regulatory challenges facing dealers, DOTmed spoke with Upton and Casper Uldriks, a man very familiar with the inner working of the FDA. After joining the agency in 1978, Uldriks went on to become associate director for Regulatory Guidance and Government Affairs at the FDA's Center for Devices and Radiological Health. He now practices law with Olsson Frank Weeda Terman Matz PC in Washington, D.C.

Here's an edited account of our talk.

DOTmed News: Why do think the UDI has the potential to be the "open door" that regulations on the medical equipment remarketer industry can come through?

Diana Upton: We don't know what they're going to do in terms of regulation, but this would certainly be their opportunity.

Casper Uldriks: When the whole issue of single use and reuse came up in 1997, one of the things that the agency discussed behind the scenes that we didn't share with anybody was that the easiest way to regulate an industry group like IAMERS is labeling. Anytime you're using labeling it's easy to expand the scope (of regulation). There are two reasons for this. One, the language in the regs is so vague, you can interpret it as you want. Two, it's a matter of enforceability. It's easier to enforce labeling violations.

Why are you concerned about the UDI public database in development, at least for resellers?

Upton: I fear that this (UDI) database is somehow or another going to give market access to larger companies and put them at an unfair advantage. If the data is open to everyone, a larger company would find it easier to analyze the data than a smaller company would. The more personnel you have, the more you can do.

How would a bigger company use the database to its advantage?

Uldriks: Let me give you an example. I had a sister who worked for Kellogg. She recently retired. She developed a worldwide database, she was analyzing what the other cereal companies were doing, and (the analysis) went out on a daily basis. The same capacity is here for large medical manufacturers to create daily updates to know what's going on. Smaller companies can't do that.

Upton: They could know where their competitors' customers are. Think how easy it would be to say, "The XYZ clinic just bought a used MRI from the ABC company, and the product was this old, so we can analyze and determine when they might be in the market again." They gain market access, the ability to know what their completion is doing with their customers, and it also puts them in a position to know where every single piece of gear is.

Uldriks: They can also do regional forecasts. If you understand the regional medical area (such as turnover), you can pretty well predict what else is going on there in the next year or so.

Will the UDI database really be that granular?

Upton: I think it would have to be, to be meaningful.

Uldriks: It wants to know where everything is, and when it gets there. As Diana just said, in terms of confidential commercial information, what a goldmine!

When does all this take effect?

Upton: The implementation of this for Class 2 devices, which is what IAMERS members would be selling, would be 2014 or 2015. That's what Jay Crowley (with the FDA) told me, and it's in that document.

Uldriks: Another thing to keep in mind: when they implement a rule, they use two dates. One is the date the rule becomes effective, or the effective date. The other is the enforcement date. From what I've read, the rule is going to become effective two years from now, but it'll be enforced three years from now, or one year after the effective date. Sometimes...they'll delay the enforcement date. There are two factors in that - the FDA just doesn't have the resources to do it, or there are too many latent problems that suddenly surface. In my mind, the implementation date, the effective date can be very regular, but it's the enforcement date that can create the biggest problems.

I think by now everyone knows that medical device manufacturers are very worried about the 2.3 percent medical device excise tax included in the Affordable Care Act that takes effect next year. But we've been hearing from some secondhand and refurbished dealers who are also worried it will affect them. My understanding is this just applies to manufacturers. Is that the case?

Upton: It's something that our attorney has not completely digested. But based on talking to people in Congress who are involved with this stuff, while it may not apply to pre-owned equipment in the U.S., it'll probably hit European equipment coming in [as the law also applies to those who import equipment]. When you take into consideration that the euro is worth more than the dollar, you're just adding layers of regulation. At some point in time, a European (dealer) is just going to say, it's easier to sell this in the Middle East or someplace rather than in the U.S.

Speaking of imports, India apparently has recently proposed banning the import of capital equipment five years old and older. For now, it would only apply to textile and manufacturing equipment - like shuttleless looms - but people are worried it could spread to CT scanners and the like. Are countries getting tougher on importing used equipment?

Upton: My personal opinion is a lot of these bans are a function of the OEMs working with the countries and setting themselves up as sole source.

Uldriks: Which they've done very well. It's ingrained. I know in one country I was able to find some inroads for conversations at first, but it became very clear very quickly that the brick wall was very solid.

Upton: I've watched this happen in Central America. There were people doing a lot of business down there, but the market is just shrinking and shrinking, and it's all due to OEM influence.

Have any countries tried relaxing their import bans or restrictions?

Upton: Some countries have considered removing the ban, such as Thailand. But they never did anything about it... I think the influence again by the OEMs is so tremendous that the governments are convinced this is the way to go, but I think what has to happen is these markets are going to have to realize they are limiting the care because they've driven the price up.

Do IAMERS or its members try to meet with these officials?

Upton: It's hard for us to have the same boots on the ground, if you will, in South America as we do in the United States.

Uldriks: I think for that kind of stuff, you have to know the individuals involved (in government), and have access to them. If not, you're done before you start.

Upton: (Change) is going to have to come from inside the user base in those places. When the user base realizes because they pay so much on service, they have fewer CT scanners than they'd like to have. It's restricting market access, which is always going to have an influence on the price.