Charging Consulting Fees prior to 510(k) Approval

S

susanb

#1
Greetings! First post here, so please be gentle with me. I have a question that I hope someone out there can answer. I've struck out with all my colleagues in the QA world and my lawyer friends, and I have found nothing pertinent on the FDA website. All my years in QA, and this is the first time someone has put this question to me - and of course, it's the person I'm contracting for.

Let’s say a medical device manufacturer is thinking of doing a beta program with external organizations. The device is a small measurement tool that plugs into a PACS. There is no 510(k) in place yet, so the product can’t be sold. Can the manufacturer charge the beta site anything and not run afoul of FDA regulations? Specifically, can it be reimbursed for travel expenses and/or consulting time? Not being reimbursed for these things makes field validation and feedback rather... cost-prohibitive. Any guidance would be most appreciated.

If there is a link to any actual rule on this, I would appreciate that as well.
 
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Wes Bucey

Quite Involved in Discussions
#2
Greetings! First post here, so please be gentle with me. I have a question that I hope someone out there can answer. I've struck out with all my colleagues in the QA world and my lawyer friends, and I have found nothing pertinent on the FDA website. All my years in QA, and this is the first time someone has put this question to me - and of course, it's the person I'm contracting for.

Let’s say a medical device manufacturer is thinking of doing a beta program with external organizations. The device is a small measurement tool that plugs into a PACS. There is no 510(k) in place yet, so the product can’t be sold. Can the manufacturer charge the beta site anything and not run afoul of FDA regulations? Specifically, can it be reimbursed for travel expenses and/or consulting time? Not being reimbursed for these things makes field validation and feedback rather... cost-prohibitive. Any guidance would be most appreciated.

If there is a link to any actual rule on this, I would appreciate that as well.
I find it incredible that a competent attorney versed in "Agency & Contract" (primary course in year one of law school) could not derive a contract for a consultant/contractor/subcontractor to get paid for producing one or more "prototype models" for beta testing prior to generating a finished model to submit for 510(k). The payment is for the engineering and labor and materials to produce the device, not for the device itself, which is the property of the beta tester paying the fees.
 
S

susanb

#3
Thanks for your reply, Wes, but I think you've misunderstood my question. (Maybe not?) It's not a question of whether the company that I am contracting for could put together a contract that allows me to work on pre-approved prototypes. It's whether we can charge OTHER sites expenses incurred in setting up our prototypes for beta testing. Say we fly to a distant city, are forced to stay in pricey hotels, and then spend long man-hours installing and training users in the system. Can we charge for that?

I was delighted to receive a reply from the DSMA late today - I never expected to hear back! They said:

"To address your inquiry as it pertains to your case, the charge of expenses is not a matter that the FDA regulates and we have no guidelines regarding this circumstance."

I take that to mean we're good to go and can charge for these services. But again, I could be wrong... :)

 
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Wes Bucey

Quite Involved in Discussions
#4
Thanks for your reply, Wes, but I think you've misunderstood my question. (Maybe not?) It's not a question of whether the company that I am contracting for could put together a contract that allows me to work on pre-approved prototypes. It's whether we can charge OTHER sites expenses incurred in setting up our prototypes for beta testing. Say we fly to a distant city, are forced to stay in pricey hotels, and then spend long man-hours installing and training users in the system. Can we charge for that?

I was delighted to receive a reply from the DSMA late today - I never expected to hear back! They said:

"To address your inquiry as it pertains to your case, the charge of expenses is not a matter that the FDA regulates and we have no guidelines regarding this circumstance."

I take that to mean we're good to go and can charge for these services. But again, I could be wrong... :)

Legitimate expenses are legitimate charges. The question is, "To whom will the expense be billed?" The answer is the tried and true mantra of Quality professionals all over the world - Contract Review must be thorough!

I would have bet serious money that no regulator would have said you had to pay all of the expenses up front yourself if otherwise you are able to convince the beta sites [or anybody else] to put up either equity or borrowed/loaned money to fund the beta trials.

This depends, of course, on how eager the beta sites are to be on the cutting edge. If they feel it is a chore, then the designer/manufacturer of the device is probably on the hook for ancillary expenses, but not the direct expenses of the beta site while conducting trials. Ancillary expenses would be the direct cost of the product, shipping, data correlation of the data from all beta sites, creation and review of test protocols, repair/replacement of nonfunctioning devices. My guess is a beta site sees a potential advantage in using the device before it agrees to be a beta. If so, they may be more eager to subsidize the beta program in order to get a head start over competitors.


Here's a negotiating tip:
Tell the ultimate OEM or wholesalers or beta sites the cost to reimburse you once the beta trials are successful [if you fund the expenses] will be DOUBLE OR TRIPLE the actual cost to reimburse you for the entrepreneurial risk plus profit if your organization funds everything. If they won't loosen their purse strings, then there are a variety of sources to pick up venture capital to fund your own project.

Everything, of course, depends on how much control your organization has on design and production of the product - if your organization has none, then you would be fools to fund the trials on any basis.
 
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