October 2013 Volume 10 Number 2

FDA Applies a Risk-Based Approach to Regulating Mobile Apps

By Catherine Barrett, MITRE Center for Transforming Health, McLean, VA1

AuthorINTRODUCTION

There are thousands of health-related mobile applications (“mobile apps”) from weight-loss trackers to diagnostic tools available for consumers to download onto mobile devices and use. In response to this growing trend, the Food and Drug Administration (“FDA”) began regulating select mobile apps to protect the health and safety of the public. On September 25, 2013, the FDA issued final guidance that clearly indicates the FDA’s intent to exercise enforcement discretion over mobile apps that function as medical devices and “that present a greater risk to patients if they do not work as intended.”2 How the manufacturer labels, promotes or uses the mobile app determines whether it meets the definition of a “device” as outlined by the U.S. Federal Food Drug & Cosmetic Act (“FD&C Act”).3

FDA REGULATES SOME MOBILE APPS

The FDA has the authority to regulate food, drugs, medical devices and cosmetics in the interest of public safety under the FD&C Act.4 According to Section 201(h) of the FD&C Act, if “a product is labeled, promoted or used in a manner that meets” the definition of a medical device, it will be subject to “premarketing and post-marketing regulatory controls.” Under the FD&C Act, a medical device is:

An instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is:

  • recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them,
  • intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or
  • intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.5

Over two years ago, the FDA released draft guidance entitled “Mobile Medical Applications.”6 It is clear that the FDA considered the call for more clarity from the 130 stakeholder comments the agency received in response to the release of the draft guidance in 2011.7 The scope of the draft and final guidance documents are similar and focus “only on a select group of applications and will not regulate the sale or general consumer use of smartphones or tablet apps.”8 Notably, the final guidance offers many specific examples of mobile medical apps that the FDA considers are and are not medical devices.

In the final guidance, the FDA is applying a risk-based approach to regulate mobile medical applications (“mobile medical apps”). A “mobile medical app” is defined as a “medical device” in accordance with Section 201(h) of the FD&C Act and is intended: (1) “to be used as an accessory to a regulated medical device; or (2) to transform a mobile platform into a regulated medical device.”9 The FDA risk-based approach allows regulators to focus on mobile medical apps that present “a greater risk to patients if they do not work as intended.”10 The new FDA guidance will impact developers of mobile medical apps, “which are software programs that run on mobile communication devices and perform the same functions as traditional medical devices.”11 For example, a medical mobile app that, once downloaded onto a smartphone, allows the user to scan his or her iris to determine whether he or she might have a balance disorder would fall within the FDA’s scope of a mobile medical device because the app (1) runs on a mobile platform12 and (2) performs the same function as a traditional medical device. Examples of mobile apps that are the focus of FDA’s regulatory oversight (mobile medical apps) include but are not limited to:13

  • Mobile apps that use a sensor or lead that is connected to a mobile platform:
    • to measure and display the electrical signal produced by the heart (electrocardiograph or ECG);
    • to electronically amplify and “project sounds associated with the heart, arteries and veins and other internal organs” (i.e., an electronic stethoscope);
    • to measure physiological parameters during cardiopulmonary resuscitation (“CPR”) and give feedback about the quality of CPR being delivered;
    • to record, view, or analyze eye movements for use in the diagnosis of balance disorders (i.e., nystagmograph);
    • to produce controlled levels of test tones and signals intended for use in conducting diagnostic hearing evaluations and assisting in the diagnosis of possible otologic disorders (i.e., an audiometer);
    • to measure the degree of tremor caused by certain diseases (i.e., a tremor transducer);
    • to measure physiological parameters (e.g., limb movement or electrical activity of the brain (EEG)) during sleep and are intended for use in diagnosis of specific diseases or conditions such as sleep apnea; and
    • to measure blood oxygen saturation for diagnosis of specific disease or condition.

Importantly, the final guidance also specifies what the FDA does not intend to regulate.14 The FDA does not intend to regulate types of mobile medical apps or mobile apps that do not meet the definition of “medical device” in accordance with the FD&C Act. Examples of mobile apps the FDA does not intend to regulate include but are not limited to:

  • Mobile apps intended to provide access to electronic “copies” of medical textbooks or other reference materials with generic text search capabilities;
  • Mobile apps that are intended for healthcare providers to use as educational tools for medical training or to reinforce training previously received;
  • Mobile apps that are intended for general patient education and facilitate patient access to commonly used reference information;
  • Mobile apps that automate general office operations in a healthcare setting and are not intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease; and
  • Mobile apps that are generic aids or general purpose products (i.e., a mobile app that allows a user to use a mobile platform as a magnifying glass).

FDA REGULATIONS MAY TRIGGER MEDICAL DEVICE TAX

If the FDA chooses to exercise enforcement discretion over mobile apps and finds that they function as medical devices, the Internal Revenue Service (“IRS”) may levy an annual 2.3 percent excise tax on the mobile medical app developers. “Excise taxes are paid at point of purchase or are included in the price of the product for sale.”15 As of January 1st of this year, the IRS began to impose a 2.3 percent excise tax on medical devices as required by Section 1405 of the Patient Protection and Affordable Care Act (“PPACA”).16 The purpose of the 2.3 percent tax is to help offset costs associated with expanding healthcare coverage under PPACA. The Congressional Budget Office estimates that the new tax will generate approximately $20 billion in revenues for the federal government over ten years.

The IRS has the authority to apply the 2.3 percent tax on manufacturers, producers or importers and applies the tax to gross sales of medical devices. “Generally, the manufacturer or importer of a taxable medical device is responsible for filing Form 720, Quarterly Federal Excise Tax Return, and paying the tax to the IRS.”17 Importantly, mobile app developers that create mobile medical apps that are defined by the FDA as medical devices are likely to be subject to this new tax. Thus, companies that develop mobile applications, such as Apple, may be subject to the new tax on the gross sales of medical device apps. “The tax is imposed upon the sale of a taxable medical device by the manufacturer or importer,” not the consumer; therefore, “the manufacturer or importer is responsible for reporting and paying the tax.”18

There are legislative efforts underway in Congress to repeal the medical device tax. The tax is so unpopular that it is currently being discussed as part of the budget negotiation process. Congress is pushing the White House to support repeal of the tax as part of a negotiated budget deal. Opposition to the tax has been steadfast and broad with more than 400 medical device manufacturers joining nonprofit healthcare advocacy groups, such as the Healthcare Leadership Council, and provider organizations, such as the American Association of Neurological Surgeons, in opposition to the tax. Most policy experts, however, note that the White House remains opposed to making substantive changes to PPACA and view repeal of the medical device tax as a substantive change to the financing of PPACA. It is unclear whether or not the medical device tax will be repealed anytime soon.

CONCLUSION

The draft and final guidance documents are very similar in nature and did not seem to surprise industry stakeholders. In general, the software development community appears to be relieved that the FDA released the final guidance after waiting for more than two years, but some remain cautious about how often the FDA may exercise its discretion and regulate a mobile app in accordance with the authority granted under the FD&C Act. The FDA’s move into discretionary regulation of mobile medical apps signals an expansion of FDA authority under the FD&C Act.

As the final guidance notes, when the intent of a mobile app is to diagnose disease or other conditions, or cure, mitigate, treat, or prevent disease, or the app “is intended to affect the structure or any function of the body of man, the mobile app is a device” and falls under the FDA’s regulatory authority.19 The FDA’s risk-based approach to regulate medical mobile apps allows the agency to focuses on apps that present a greater risk to patients if they do not work as intended. Thus, the FDA prioritizes apps that may harm patients if they do not work properly and focus on apps that “are intended to be used as an accessory to a regulated medical device – for example, an application that allows a healthcare professional to make a specific diagnosis by viewing a medical image from a picture archiving and communication system” and (2) “transform a mobile platform into a regulated medical device – for example, an application that turns a smartphone into an electrocardiography.”20 Mobile apps that are intended to be used primarily as an education tool or as a generic aid that allows a user to turn their mobile device into a magnifying glass, for example, as mentioned above are not the FDA's focus.


1Catherine Barrett, Esq. is a Lead Healthcare Consultant with MITRE, a not-for-profit organization chartered to work in the public interest. She received her JD and MBA from the American University Washington College of Law and Kogod School of Business, respectively. She may be reached at cabarrett@mitre.org. The author's affiliation with The MITRE Corporation is provided for identification purposes only, and is not intended to convey or imply MITRE’s concurrence with, or support for, the positions, opinions or viewpoints expressed by the author.
2FDA Press Release, “FDA issues final guidance on mobile medical apps: Tailored approach supports innovation while protecting consumer safety” September 23, 2013 at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm369431.htm.
3FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff” Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
4FDA, Federal Food, Drug, and Cosmetic Act (“FD&C Act”), http://www.fda.gov/regulatoryinformation/legislation/federalfooddrugandcosmeticactfdcact/.
5FDA, “Is the Product a Medical Device,” Last Updated 02/28/2013, at this link.
6Draft Guidance for Industry and Food and Drug Administration; Mobile Medical Applications; Availability, 76 Fed. Reg. 43,689 (July 21, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-07-21/pdf/2011-18537.pdf.
7Julie Tibbets, Paula Stannard and Brendan Carroll, “FDA’s “Mobile Medical Apps” Guidance: What’s In? What’s Out?” Alston & Bird LLC, September 27, 2013 available at http://www.alston.com/Files/Publication/0115ae79-5994-4b9d-af87-15c1346f8e83/Presentation/PublicationAttachment/366b44ff-e0b3-43d3-aeed-1984b5acc804/13-739%20Mobile%20Medical%20Apps.pdf.
8FDA Press Release, “FDA issues final guidance on mobile medical apps: Tailored approach supports innovation while protecting consumer safety,” September 23, 2013 at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm369431.htm.
9FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff” Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
10FDA Press Release, “FDA issues final guidance on mobile medical apps: Tailored approach supports innovation while protecting consumer safety,” September 23, 2013 at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm369431.htm.
11FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff” Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
12The term “mobile platform” is defined as “commercial off-the-shelf (“COTS”) computing platforms, with or without wireless connectivity, that are handheld in nature. Examples of these mobile platforms include mobile computers such as smart phones, tablet computers, or other portable computers.” See FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff” Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
13Appendix C of the final guidance provides examples of mobile apps that are considered medical devices. See FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff”, Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
14Appendix A of the final guidance provides a representative list of mobile app functionalities that are not considered medical devices. See FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff” Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
15Barrett, Catherine, “The IRS could levy a new excise tax on mobile technologies deemed “medical devices” by the FDA”, ABA Health eSource, Volume 8, No. 6, February 2012 available at this link. See also IRS, “Excise Tax” January 12, 2012 at http://www.irs.gov/businesses/small/article/0,,id=99517,00.html.
16Barrett, Catherine, “The IRS could levy a new excise tax on mobile technologies deemed “medical devices” by the FDA”, ABA Health eSource, Volume 8, No. 6, February 2012 available at this link.
17IRS, “Medical Device Excise Tax: Frequently Asked Questions,” available at http://www.irs.gov/uac/Medical-Device-Excise-Tax:-Frequently-Asked-Questions.
18IRS, “Medical Device Excise Tax: Frequently Asked Questions,” available at http://www.irs.gov/uac/Medical-Device-Excise-Tax:-Frequently-Asked-Questions.
19FDA, “Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff” Final Guidance September 25, 2013 at http://www.fda.gov/downloads/MedicalDevices/.../UCM263366.pdf.
20FDA Press Release, “FDA issues final guidance on mobile medical apps: Tailored approach supports innovation while protecting consumer safety,” September 23, 2013 at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm369431.htm.

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