June 30, 2008

1. Controlled Drug eRX Coming; Pen and Wite-Out Futures Drop on Junkie Reaction

Facts and Background

The Drug Enforcement Administration proposed regulatory changes on Friday that would clear the way for physician prescribing of controlled drugs electronically, a move that many believe will spur the adoption of e-prescribing.

Opinion

It's not hard to change or forge a paper prescription, so e-prescribing should be at least equally unsecure and more efficient.

Musings

• DEA trusts paper prescriptions too much. The only real barrier to widespread abuse of prescribed controlled substances was drugstore pharmacists who were familiar with doctors and patients, which is hardly the case in high-volume chain drugstores. It's a safe bet that undetected forgeries are already common.
• This change will eliminate one of two big eRX hurdles, the other being the low adoption of EMRs that would make eRX more efficient.
• It will be surprising if DEA doesn't want some kind of real-time monitoring of the electronic data stream to help spot suspicious prescribing since they're pretty gonzo that way.
• FDA wants strong security that ensures that it's the doctor doing the prescribing, but it's often another practice employee. Controlled drugs have higher street value, so doctors will now have to monitor what prescriptions are going out under their names to make sure the financial temptation to forge isn't too great for office staff. However, electronic systems give them the capability to do that auditing, while paper ones didn't, so that's probably a good tradeoff.
• Public comments on the change will be accepted until September 25.

2. Catch a Wave: Dutch Scientists Say RFID Zaps ICU Gadgets

Facts and Background

The current issue of JAMA has an article by Dutch scientists describing tests of RFID devices on hospital ICU medical equipment, with their finding being that significant interference occurs, sometimes with hazardous results.

Opinion

The study certainly raises questions that the industry will need to address, if for no other reason than patients will be alarmed by the media coverage. The end result is likely to be unexciting fine-tuning of standards and mandatory RFID information disclosure by vendors of those systems.

Musings

• This is the best news that vendors of infrared and sonic tracking systems could have hoped for.
• The odds are 99% that FDA will jump in quickly since it doesn't like to be embarrassed by patient-harming issues that it missed. It probably won't regulate RFID devices, but it's likely to announce a study, a moratorium, and possibly mandatory manufacturer disclosure sheets (frequencies, power, test results, etc.).
• RFID was just catching on in patient care areas, so its momentum will likely be lost.
• Surprisingly, passive RFID tags (i.e., unpowered ones) were even more of a problem than active tags.
• Vendors of non-RFID tracking systems actually consider the shorter range and lack of penetrability to be a competitive advantage since local-only tracking allows pinpointing a tag's location down to a few feet or to a specific room. The disadvantage is that more sensors are required.
• It's surprising that nobody did these tests until now.

3. Emageon Lets 17% Shareholder Take Over the Company and Fire Everybody

Facts and Background

Medical imaging system vendor Emageon announced Tuesday that it had settled a proxy fight with Oliver Press Partners, resulting in the removed of Emageon's CEO from the company's board, the surrender of three board seats to Oliver Press Partners, and the authorization to seek a buyer for the company.

Opinion

OPP will probably figure out a way to wring at least short-term shareholder value out of the troubled company, but the end result is likely to be gutting it for parts to bag a quick profit.

Musings

• How could a New York hedge fund that holds only 17% of Emageon's shares exert such influence? Maybe because the company's board and executives held so few. Picture that scene from Wall Street where outside raider Gordon Gekko lambasts the board and management of Teldar Paper in a shareholder meeting: "Today, management has no stake in the company! All together, these men sitting up here own less than three percent of the company." That situation would appear to be very similar to that of Emageon.
• COO Chris Perkins quietly resigned and was not referenced in the announcements.
• CEO Chuck Jett was forced to resign from the company's board, but will continue as CEO "at the discretion of the board." Bye, Chuck.
• OPP principal Augustus Oliver was quoted as saying, "... we expect that the company will be able to pursue a course in the best interests of its customers, employees, and stockholders." OPP is in that last category only, so those in the first two shouldn't get their hopes up that their interests will be equally well represented.
• Emageon looked for alternatives a year ago, but claimed it found none.
• The company's PACS system is #7 of 10 in KLAS.
• Shares are down 86% over the last 18 months, so losing management and board members who watched that happen doesn't seem like an altogether bad thing.

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