House Republicans Question FDA on Mobile Medical Software: Taxes

Republicans in Congress are probing whether the president’s health-care overhaul will mean higher taxes for companies that sell mobile medical applications.

A House committee decided to hold three days of hearings next week on rules for these products, including the impact of Food and Drug Administration oversight of the industry and the potential for new taxes, Bloomberg BNA reported.

Companies and lawmakers say questions about how the FDA would regulate apps may hold back growth in the market at a time when software developers are writing code to track sugar levels for diabetics on the fly or to transmit data from a patient’s heart monitor to a doctor. They expressed concern about whether mobile devices like smartphones with regulated apps on them would be regulated as medical devices, and if so, whether they would be subject to a tax under the Affordable Care Act.

“Most Americans have no idea that their smartphone, tablet or the mobile apps that have become part of their daily lives could be subject to added red tape or a new tax under Obamacare,” Representative Fred Upton, the Michigan Republican who runs the Energy and Commerce committee, said in a statement.

The FDA in 2011 issued a draft guidance document outlining a proposal to oversee mobile medical applications that were used as an accessory to a medical device or that turned a mobile device like a handset into a medical device.

The hearings come in the wake of a March 1 letter to FDA Commissioner Margaret A. Hamburg by leaders of the committee, asking when guidance on the rules would come, whether FDA has considered the tax consequences for device makers, and specifics on mobile medical apps that have already sought FDA approval.

Seeking Predictability

Health technology developers and vendors are eager to see if the hearings will provide some insight into when and how FDA will issue final guidance, officials told Bloomberg BNA. Software developers and mobile health product vendors are uncertain how future regulations would affect their industry, said Kim Tyrrell-Knott, an attorney with Epstein Becker & Green PC and counsel for the mHealth Regulatory Coalition.

For example, developers and vendors don’t know if phones or other mobile devices using these applications will be considered “accessories” to medical devices and therefore subject to FDA regulation, she said.

“From an industry perspective, we’re definitely eager to know when the final guidance will come out,” Tyrrell-Knott said. “Folks need that predictability.”

Ryan Minarovich, chief executive officer of Tenzing Group, a Santa Clara, California-based company that provides product-specific educational reports to health technology developers on the impact of FDA regulations, said mobile application vendors are discounting the future cost of these regulations in the tools they are developing today.

Deferred Investment

This deferral of investment shows the hesitation many companies have in creating medical applications with unclear regulatory futures, he said.

“A lot of startups are focusing on the immediate and negating a potential future investment, focusing on product development with an eye on FDA regulations,” Minarovich said.

The hearings will begin with a March 19 Communications and Technology Subcommittee hearing on how FDA regulations and taxes could affect the mobile applications industry.

On March 20, the Health Subcommittee will discuss how technological advancements benefit patients and “ways to promote innovations.” On March 21, the Oversight and Investigations Subcommittee will hear directly from FDA and the Department of Health and Human Services on their plans for regulating mobile health applications.

Hearing witnesses have not yet been announced.

The FDA hasn’t determined who will represent the agency in the hearings, spokeswoman Synim Rivers said. The FDA has yet to respond to the March 1 letter, and Rivers said the agency will respond directly to the members.

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