[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]







    HEALTH INFORMATION TECHNOLOGIES: HARNESSING WIRELESS INNOVATION

=======================================================================

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON COMMUNICATIONS AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 19, 2013

                               __________

                           Serial No. 113-20



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

80-805                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001













                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
             Subcommittee on Communications and Technology

                          GREG WALDEN, Oregon
                                 Chairman
ROBERT E. LATTA, Ohio                ANNA G. ESHOO, California
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska                  MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan                DORIS O. MATSUI, California
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
STEVE SCALISE, Louisiana             PETER WELCH, Vermont
LEONARD LANCE, New Jersey            BEN RAY LUJAN, New Mexico
BRETT GUTHRIE, Kentucky              JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado               FRANK PALLONE, Jr., New Jersey
MIKE POMPEO, Kansas                  BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois             DIANA DeGETTE, Colorado
BILLY LONG, Missouri                 JIM MATHESON, Utah
RENEE L. ELLMERS, North Carolina     G.K. BUTTERFIELD, North Carolina
JOE BARTON, Texas                    HENRY A. WAXMAN, California, ex 
FRED UPTON, Michigan, ex officio         officio























                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     1
    Prepared statement...........................................     3
Hon. Robert E. Latta, a Representative in Congress from the State 
  of Ohio, opening statement.....................................     3
Hon. Doris O. Matsui, a Representative in Congress from the State 
  of California, opening statement...............................     4
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   175
Hon. Leonard Lance, a Representative in Congress from the State 
  of New Jersey, prepared statement..............................   175
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, prepared statement..............................   176

                               Witnesses

Robert Jarrin, Senior Director, Government Affairs, Qualcomm.....     9
    Prepared statement...........................................    12
Bradley Merrill Thompson, General Counsel, mHealth Regulatory 
  Coalition......................................................    56
    Prepared statement...........................................    58
Ben Chodor, Chief Executive Officer, Happtique...................    69
    Prepared statement...........................................    71
Jonathan Spalter, Chairman, Mobile Future........................   104
    Prepared statement...........................................   106
T. Forcht Dagi, MD, MPH, DmedSC, Partner, HLM Venture Partners...   123
    Prepared statement...........................................   126
George Ford, Chief Economist, Phoenix Center for Advanced Legal 
  and Economic Public Policy Studies.............................   132
    Prepared statement...........................................   134

                           Submitted Material

Report by the Center on Budget and Policy Priorities, March 11, 
  2013, submitted by Ms. Matsui..................................   178
Letter of March 18, 2013, from SDI Diagnostics to the 
  subcommittee, submitted by Ms. Matsui..........................   183
Study entitled, ``Diagnostic Inaccuracy of Smartphone 
  Applications for Melanoma Detection,'' JAMA Dermatology, 
  January 16, 2013, submitted by Ms. Matsui......................   185
Letter of March 18, 2013, from CTIA--The Wireless Association to 
  the subcommittee, submitted by Mr. Walden......................   189
Letter of March 19, 2013, from Ideomed to the Committee, 
  submitted by Mr. Walden........................................   191

 
    HEALTH INFORMATION TECHNOLOGIES: HARNESSING WIRELESS INNOVATION

                              ----------                              


                        TUESDAY, MARCH 19, 2013

                  House of Representatives,
     Subcommittee on Communications and Technology,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:37 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Greg 
Walden (chairman of the subcommittee) presiding.
    Present: Representatives Walden, Latta, Terry, Shimkus, 
Terry, Blackburn, Scalise, Lance, Guthrie, Gardner, Kinzinger, 
Long, Ellmers, Matsui, Lujan and Waxman (ex officio).
    Staff present: Ray Baum, Senior Policy Advisor/Director of 
Coalitions; Matt Bravo, Professional Staff Member; Andy 
Duberstein, Deputy Press Secretary; Neil Fried, Chief Counsel, 
Communications and Technology; Debbee Hancock, Press Secretary; 
Sydne Harwick, Staff Assistant; Brittany Havens, Staff 
Assistant; Sean Hayes, Counsel, Oversight and Investigations; 
Robert Horne, Professional Staff Member, Health; Andrew 
Powaleny, Deputy Press Secretary; David Redl, Counsel, Telecom; 
Charlotte Savercool, Executive Assistant, Legislative Clerk; 
Roger Sherman, Democratic Chief Counsel; Shawn Chang, 
Democratic Senior Counsel; Patrick Donovan, FCC Detailee; 
Margaret McCarthy; and Kara van Stralen, Democratic Special 
Assistant.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. We are going to call to order the Subcommittee 
on Communications and Technology for our hearing on ``Health 
Information Technology: Harnessing Wireless Innovation.''
    I want to welcome our witnesses and our participants in 
today's hearing. It is not every day that the Subcommittee on 
Communications and Technology holds a hearing addressing FDA 
regulation, but the fact that we are having such a hearing is a 
testament to the breadth of innovation using wireless 
smartphones and tablets, and all that that is bringing to 
nearly every aspect of our lives. There are literally thousands 
of apps in the various smartphone and tablet app stores in the 
health and wellness categories, actually tens of thousands, 
everything from simple calorie counters to complex analytical 
tools. The more than 300 million wireless devices we depend on 
every day are revolutionizing health and wellness.
    If I stopped here, this hearing could be about the success 
of bringing the innovation and investment of the wireless 
ecosystem to bear on the ever more costly health care system. 
And make no mistake about it, that could still be the outcome. 
But the specter of costly and time-consuming regulation, to say 
nothing of a 2.3 percent excise tax, looms large over this 
industry. We have heard from investors, wireless device 
manufacturers, and application developers that are concerned 
about the uncertainty of a FDA regulatory regime, that may or 
may not apply to them, and the possibility of an additional 
excise tax that cuts into already thin margins.
    The collision of worlds in the mobile health, or mHealth, 
is a study in contrasts. The app economy is characterized by 
low barriers to entry, quick time to market, and the ability to 
adapt to quickly changing user needs. Medical devices, on the 
other hand, face a long and costly premarket approval process 
at the FDA. Now, we all want to make sure that patient safety 
is taken care of first, but why would we treat mobile 
applications the same as a dialysis machine? These are the 
kinds of questions we need to get answers to about where that 
sweet spot is and that fine.
    The answer may be that the wireless economy represents a 
tempting target for the 2.3 percent excise tax that the 
President's health care law placed on medical devices. While 
the IRS and the FDA have provided some draft guidance on how 
they will apply the medical device definition and the medical 
device tax, their analysis is not a poster child of clarity and 
it leaves large parts of the economy wondering if they will be 
on the hook for what is essentially a tax on innovation, and we 
certainly are hearing that from our witnesses and others.
    The FCC and the Obama administration have both joined the 
wireless industry in trumpeting the virtuous cycle of 
innovation and investment in mobile technologies: investment in 
wireless networks and devices creates opportunities for app 
developers to create new and innovative uses for wireless 
services, which in turn spurs further investment in networks 
and devices. MHealth is part of this virtuous cycle that is 
driving faster speeds, lowering costs, spurring innovation and 
creating patient benefits. Given the interconnected nature, we 
should be aware that an impact on one segment of this industry 
has the potential to slow the entire cycle.
    The overbroad application of FDA regulation and the health 
care law's medical device tax are not, as some have suggested, 
outside the realm of possibility. In a 2012 report by the 
Institute of Medicine, one expert author suggested that all 
health IT products should be treated as class III medical 
devices, which receive the highest level of regulatory scrutiny 
and therefore should be subject to the tax. Now, that is just 
one person's opinion but it is in the prestigious Institute of 
Medicine report.
    Luckily, while these are not hypothetical concerns, they 
are also by no means foregone conclusions, which is why we are 
having a hearing today. Wireless has and can continue to be a 
system that brings the mobile revolution to our Nation's health 
and wellness sector, but we must ensure that as we bring the 
innovation of the wireless economy to health and wellness that 
we not place unnecessary hurdles in the way of the developers 
and investors that are fueling mHealth.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    It's not every day that the Subcommittee on Communications 
and Technology holds a hearing addressing FDA regulation. The 
fact that we are having such a hearing is a testament to the 
breadth of innovative uses wireless smartphones and tablets are 
bringing to nearly every aspect of our lives. There are 
literally thousands of apps in the various smartphone and 
tablet app stores in the health and wellness categories--
everything from simple calorie counters to complex analytical 
tools. The more than 300 million wireless devices we depend on 
every day are revolutionizing health and wellness.
    If I stopped here, this hearing could be about the success 
of bringing the innovation and investment of the wireless 
ecosystem to bear on the ever more costly health care system. 
And make no mistake, that could still be the outcome. But the 
specter of costly and time-consuming regulation--to say nothing 
of a 2.3 percent excise tax--looms large over this industry. 
Investors, wireless device manufacturers and application 
developers all face the uncertainty of an FDA regulatory regime 
that may or may not apply to them and the possibility of an 
additional excise tax that cuts into already thin margins.
    The collision of worlds in the mobile health--or mHealth--
market is a study in contrasts. The app economy is 
characterized by low barriers to entry, quick time to market, 
and the ability to adapt to quickly changing user needs. 
Medical devices, on the other hand, face a long and costly pre-
market approval process at the FDA. We all want to ensure 
patient safety, but why would we treat mobile applications the 
same as a dialysis machine?
    The answer may be that the wireless economy represents a 
tempting target for the 2.3 percent excise tax that the 
president's health care law placed on medical devices. While 
the IRS and the FDA have provided some draft guidance on how 
they will apply the medical device definition and the medical 
device tax, their analysis is not a poster child of clarity and 
leaves large parts of the economy wondering if they will be on 
the hook for what is essentially a tax on innovation.
    The FCC and the Obama administration have both joined the 
wireless industry in trumpeting the ``virtuous cycle'' of 
innovation and investment in mobile technologies: investment in 
wireless networks and devices creates opportunities for app 
developers to create new and innovative uses for wireless 
services, which in turn spurs further investment in networks 
and devices. mHealth is part of this virtuous cycle that is 
driving faster speeds, lowering costs, spurring innovation and 
creating patient benefits. Given their interconnected nature, 
we should be aware that an impact on one segment has the 
potential to slow the entire cycle.
    The overbroad application of FDA regulation and the 
Obamacare medical device tax are not, as some have suggested, 
outside the realm of possibility. In a 2012 report by the 
Institute of Medicine, one expert author suggested that all 
health IT products should be treated as Class III medical 
devices, which receive the highest level of regulatory scrutiny 
and could be subject to the tax.
    Luckily, while these are not hypothetical concerns, they 
are also by no means foregone conclusions. Wireless has and can 
continue to bring the mobile revolution to our nation's health 
and wellness sector. But we must ensure that as we bring the 
innovation of the wireless economy to health and wellness that 
we not place unnecessary hurdles in the way of the developers 
and investors that are fueling mHealth.

                                #  #  #

    Mr. Walden. So I want to thank our witnesses for being 
here, and I would now recognize the vice chair of the 
subcommittee, Mr. Latta.

OPENING STATEMENT OF HON. ROBERT E. LATTA, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Latta. I thank the chairman for yielding, and I also 
thank our distinguished panel for testifying today.
    The mobile application industry is a modern American 
economic success story. Just this year alone, mobile apps were 
projected to be a $25 billion industry. No one, at least no one 
in Washington, could have predicted the incredible growth and 
the extraordinary uses for these apps, particularly in the 
mobile health world. The health and wellness opportunities for 
mobile apps have great potential for our health care delivery 
system.
    I am concerned that the regulatory uncertainty coming from 
the FDA will discourage innovation and investment in mobile 
apps and that Americans will lose out on potentially lifesaving 
technology. This climate of regulatory uncertainty could also 
have adverse effects on the overall wireless ecosystem, which 
continues to drive economic growth in this country. 
Furthermore, I believe the medical device tax will be extremely 
detrimental to our economy. The potential application of the 
medical device tax to mobile apps will only further deter 
investment and development in the industry.
    Mr. Chairman, I look forward to our testimony today and our 
witnesses, and I yield back.
    Mr. Walden. I thank the gentleman for his comments. We now 
recognize the ranking member of the subcommittee today, Ms. 
Matsui of California.

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Matsui. Thank you, Mr. Chairman, and I would like to 
thank the witnesses for being here today.
    Technology is changing health care as we know it. A smart 
spectrum policy that is driving wireless revolution is also 
transforming our health care sector. We are seeing the benefits 
of health care providers utilizing WiFi and high-quality, 
unlicensed spectrum to spur the development of next-generation 
patient care monitoring applications that could transmit 
patients' vital health data to their doctor or hospital. 
Whether it is monitoring diabetes, glucose levels, tracking 
blood pressure or providing real-time hydration levels, the 
list goes on and on.
    We are seeing cloud technologies transforming health IT 
through the creation of select community health clouds forming 
in regions across the country, enabling hospitals to better 
treat patients while ensuring HIPAA-compliant transfers of 
secure medical information. It will only become more important 
as the mobile app economy continues to drive consumer demand 
for smartphones and tablets.
    The fact is, the ever-evolving app economy is helping to 
transform the health care sector, integrating science, medicine 
and technology to provide individuals with real-time access to 
vital health information, much of which was previously 
unavailable outside of a hospital or a doctor's office. House 
calls are becoming a thing of the past. Virtual checkups are 
becoming the new digital-age house call. Doctors are using 
iPads to issue prescriptions and diagnose patients. Smartphones 
are creating new paths of virtual interactions between doctors 
and patients. Texting your doctor has become a more common 
practice as more Americans, particularly young people, are 
finding greater comfort and accessibility in communicating 
electronically with their doctors.
    The Affordable Care Act also has allowed the health care 
industry to become more innovative using technology. I believe 
we will see a growing ecosystem of health IT innovation now 
that the Affordable Care Act is here to stay.
    My home State of California has been a pioneer in ACA 
implementation. Our exchange, Covered California, has already 
begun using mobile devices to launch online features so 
consumers can estimate their monthly premiums and compare 
health care options. Physicians and hospitals in my district of 
Sacramento are using the exchange to improve their health IT 
capabilities. For example, the Live Health Online Initiative 
already permits doctors to care for patients through a secure 
online visit using laptop Web cams and ultimately through 
video-enabled tablets and smartphones regardless of where the 
doctor and patient are located.
    With more than 50 million additional Americans expected to 
obtain health insurance this year due to the law, an efficient 
and effective health IT network is even more imperative. In 
order to realize the full potential of innovative health 
technologies, the regulatory environment must keep pace with 
rapidly changing technology.
    In 2011, the FDA released draft guidance to provide rules 
of the road for medical app developers clarifying which medical 
apps would require its attention and which would not. I believe 
the draft guidance attempts to strike the appropriate balance 
between enabling innovative medical apps and ensuring patient 
safety, and I urge the agency to move forward expeditiously. 
Now, moving forward, I believe the FDA must be mindful of the 
fact that technology continues to evolve at a rapid pace and 
the need for them to provide clarity to the marketplace.
    Another way to foster greater innovation in the health 
sector is through creating a workable federal definition for 
telehealth services. I am developing legislation to do just 
that. I believe having certainty here would spur innovation and 
research in the private sector and in programs like Medicare. 
We must continue to chart a technology-friendly course that 
promotes better patient care for all Americans.
    And Mr. Chairman, I would like to ask unanimous consent to 
enter into the record the following three items: a report from 
the Center on Budget and Policy Priorities on the medical 
device excise tax, a letter from SDI Diagnostics, a small 
medical device manufacturer, regarding FDA regulatory oversight 
of the medical device market, a study published in the peer-
review journal, JAMA Dermatology, identifying risks and 
depending on smartphone apps for diagnosis.
    Mr. Walden. Without objection.
    [The information appears at the conclusion of the hearing.]
    Ms. Matsui. Thank you. And I look forward to working with 
my colleagues to continue to promote health IT. I look forward 
to hearing from our witnesses today. Thank you. I yield back.
    Mr. Walden. The gentlelady yields back the balance of her 
time. The Chair now recognizes the gentlewoman from Tennessee, 
Ms. Blackburn, for 5 minutes.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman, and I want to 
thank our witnesses for being here today. We are deeply 
appreciative that you all are here, and we are appreciative of 
what you are doing in the industry and in this space in which 
you are working.
    You know, I was stunned in doing some work on this and 
talking with some of the innovators in Nashville. Five hundred 
thousand jobs are attributed to your sector, and you are one of 
the few areas where there has actually been some job growth 
since the misery that was there in 2008 and 2009 and when you 
look at mHealth, you are talking about a $27 billion industry 
within the next couple of years, so we thank you for this. Not 
only is it productive and not only is there opportunity to 
profit from your innovations, there is the opportunity to 
encourage R&D and to provide better outcomes and better 
wellness and maintenance of effort in health to expand the use 
of telemedicine and mobile health. So hearing from you where 
you think we need to travel with this is going to be helpful 
and it is going to be instructive as we look at this entire 
space for health care informatics and the opportunities that 
exist there.
    I think that we are all concerned about what would help 
with the medical device tax being applied to this. Of course, 
it is muddy as muddy water when you are trying to figure out 
where the FDA is actually looking to go. I know there are about 
300,000 apps that are available, or 50,000 apps, I think it is, 
and 300,000 downloads, that are through the Apple app store. So 
people like the convenience of this, and we want to do what we 
can to make certain that it remains accessible and affordable 
and is not levied with a tax that is going to end up being a 
hindrance.
    So we appreciate your ability to make way for us in your 
schedules to be here, and Mr. Chairman, I yield back.
    Mr. Shimkus. Would the gentlelady yield?
    Mrs. Blackburn. Yes.
    Mr. Shimkus. Thank you. I would just like to weigh in.
    The medical device tax is a very pernicious tax by itself. 
One of the problems I have is the gross nature, taxing just 
gross versus obviously net after costs and expenses. I mean, 
where else but in Washington can you dream up such a bad tax 
provision? But as was stated earlier by my colleagues, what is 
critical for you all in your testimony today is to help us sort 
through your concerns, your risks, your level of being able to 
capitalize or not, and then where is this line? I mean, it is 
very vague, and so when there is uncertainty, there is higher 
risk. When there is higher risk, there is more cost of capital 
and it could be damaging to any business model that you would 
address.
    So we really appreciate you being here. We are probably 
going to ask some pretty specific questions, especially for 
those of you who are in that space innovating and creating 
jobs. We thank you for coming.
    And with that, I yield back to my colleague.
    Mrs. Blackburn. I thank the gentleman for yielding back. 
Did Mr. Lance, one of my other colleagues, want any of the 
remaining time? OK. Mr. Chairman, I yield back.
    Mr. Walden. The gentlelady yields back. The Chair now 
recognizes the former chairman of the committee, the gentleman 
from California, Mr. Waxman.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman.
    This is a hearing to look at mobile medical applications, 
and this is the first of three hearings on this subject this 
week. The high-speed wireless broadband access is creating new 
opportunities in consumer services in nearly every segment of 
our economy including health care. Mobile medical applications 
hold incredible promise for patients and health care providers, 
potentially reducing costs, improving health care delivery and 
saving lives. That is why we made a significant investment in 
medical communications, because this is a really important 
area. We all want to see this exciting innovation continue.
    At the same time, we have to be cognizant of the need to 
protect patient safety. That is why the Food and Drug 
Administration has released a draft guidance regarding mobile 
medical applications. So their guidance says if it is a dietary 
tracking app or a reminder service for medical appointments, 
they certainly don't need FDA approval for that. But an app 
that purports to diagnose cancer? Well there ought to be some 
review and have regulatory scrutiny.
    Let me give an example. A group of dermatologists recently 
published a study of four apps that claim to be able to 
diagnose melanomas. Well, the dermatologists found that three 
of the four incorrectly classified 30 percent or more of 
melanomas as benign when they were actually malignant. Well, we 
can't tell the American people buyer beware when potentially 
life-and-death care decisions are at stake.
    My Republican colleagues say that FDA is hoping to subject 
smartphones and tablets to the medical device tax. Well, that 
doesn't really hold up to scrutiny. I think they have their 
facts wrong. Allegations that ordinary smartphones and tablets 
could be subject to added red tape or new taxes under Obamacare 
are absolute myths. In fact, FDA's draft guidance specifically 
states that the agency does not intend to regulate distributors 
of mobile medical apps like the iTunes store or the makers of 
smartphones or tablets like Apple. Smartphones and tablets are 
not listed with FDA as medical devices, so they are completely 
outside the scope of the medical device tax.
    Furthermore, it is my understanding that most mobile 
medical apps would also be exempt from the medical device tax 
because of the IRS ``retail exemption.'' This provision says 
that devices are exempt from the tax if they are regularly 
available for purchase and use by ordinary consumers, including 
over the Internet, and if they are not primarily intended for 
use in a medical institution or by a medical professional.
    To go back to the case of the dermatologists, those apps 
would not be subject to the medical device tax, but they would 
be subject to FDA scrutiny to be sure that the patients are not 
being harmed.
    There are legitimate concerns that we ought to examine, 
instead of using today's hearing to invent new fallacies to 
attack the Affordable Care Act. We have already had a number of 
hearings this year on a tax on Obamacare. Well, my Republican 
colleagues didn't like it. They all voted against it. They 
hoped that the Supreme Court would have thrown it out. The 
Supreme Court upheld it. They hoped the election would replace 
the President so they could have repealed it. The electorate 
voted for President Obama. This is all going to go into effect 
at the end of this year and it will be fully in place by 
January of 2014. We have already seen a lot of improvements in 
health care by virtue of the Affordable Care Act.
    The Affordable Care Act is going to serve a very important 
purpose. It is not going to require mobile apps to be regulated 
or to be taxed. FDA released the draft guidance for mobile 
medical apps, and we should commend them for this action. Both 
industry and consumers would benefit from the clarity of final 
guidance. I hope that FDA is working expeditiously toward that 
goal.
    You have to make distinctions. You don't blur it all to 
serve the political point of view to attack the Affordable Care 
Act. We have got to look at the law, draw the distinctions, and 
make sure that the public is protected while innovation is 
still encouraged. And I think that we are looking to a lot of 
very important innovation and we want to see that come into 
action.
    Thank you, Mr. Chairman. Yield back.
    Mr. Walden. The gentleman yields back the balance of his 
time. The Chair would ask unanimous consent to enter into the 
record a letter from the CTIA CEO and former Representative 
Steve Largent, raising concerns of the wireless industry, and a 
letter from Keith Brophy, CEO of Ideomed from Grand Rapids, 
Michigan. It is a medical app device developer, and also has 
concerns about the uncertainty, which is why we are having this 
hearing today. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Waxman. Mr. Chairman, I certainly have no objections. I 
just wanted to point out to the witnesses that there is another 
hearing going on so I will be back and forth, and I apologize 
for not being here.
    Mr. Walden. No problem. Feel free to take the full time in 
the other hearing if you like. No, I am just--we actually have 
a little fun together here, so it is fine. Thank you. And we 
have got other members that are going to be coming and going. 
It is a good reminder, because there is an Energy and Power 
Subcommittee meeting as well.
    So with that, we welcome our witnesses, and I know Dr. 
Dagi's plane was a little delayed getting out of Boston, 
apparently a little snow up there, but he has arrived, and he 
will be joining us momentarily, but we will go ahead, and 
again, we thank you all for being here. I have read through 
your testimony. It is most helpful in our efforts to shine some 
light on this issue.
    So we are going to start with Mr. Robert Jarrin, Senior 
Director of Government Affairs for Qualcomm. Mr. Jarrin, we are 
delighted to have you here this morning and look forward to 
your testimony, sir.

   STATEMENTS OF ROBERT JARRIN, SENIOR DIRECTOR, GOVERNMENT 
 AFFAIRS, QUALCOMM; BRADLEY MERRILL THOMPSON, GENERAL COUNSEL, 
   MHEALTH REGULATORY COALITION; BEN CHODOR, CHIEF EXECUTIVE 
OFFICER, HAPPTIQUE; JONATHAN SPALTER, CHAIRMAN, MOBILE FUTURE; 
T. FORCHT DAGI, MD, MPH, DMEDSC, PARTNER, HLM VENTURE PARTNERS; 
   AND DR. GEORGE FORD, CHIEF ECONOMIST, PHOENIX CENTER FOR 
       ADVANCED LEGAL AND ECONOMIC PUBLIC POLICY STUDIES

                   STATEMENT OF ROBERT JARRIN

    Mr. Jarrin. Thank you. Good morning, Chairman Walden, 
Ranking Member Matsui, and members of the subcommittee. First 
and foremost, I would like to thank you for having me 
participate as a witness in today's hearing. I have worked in 
various capacities over the span of two decades, at times 
preparing others to sit before you. Today, I am truly honored 
to be the one sitting here.
    I will begin by starting with mobile technology. It is the 
largest platform in the history of mankind. The population of 
the world is approximately 7 billion people, and there are 
nearly 6.6 billion mobile connections. In the United States 
alone, there are 323 million mobile subscriptions for a 
population of 315 million people.
    Consumer research suggests that two-thirds of people sleep 
with their mobile device next to them, and one-third interact 
with their device before they even get out of bed. Those with a 
mobile phone tend to check it about 150 times per day, roughly 
about once every 6\1/2\ minutes.
    Mobile devices are powerful and sophisticated. Today, a 
typical smartphone has more computing power than Apollo XI did 
when it landed on the moon. Computing devices are now built 
around mobile experiences with always-on connectivity, location 
awareness, augmented reality and powerful processing. Soon 
there will come a day when virtually everyone and everything in 
our world will be connected through a ubiquitous wireless 
technology.
    Let me also share some startling statistics of a different 
nature yet related, chronic disease in America. According to 
the CDC, about out of every two adults in the United States has 
at least one chronic illness. Seven out of 10 deaths among 
Americans are due to chronic disease. Obesity, for example, 
affects one in three adults as well as one in three children 
who are either overweight or obese. Although chronic diseases 
are among the most common, they are also the costliest of all 
health problems. The CDC states they are also among the most 
preventable.
    This presents an interesting opportunity. Many Americans 
are sick yet more have access to a personal, powerful, mobile 
computing device. Hence, it was only a matter of time before 
the health care technology innovators would take notice of the 
potential to personalize a mobile platform and facilitate the 
delivery of affordable health care. Nowhere is this growth more 
obvious than in the mobile health applications landscape. Quite 
simply, the growth of mobile health apps has skyrocketed. 
Approximately 27,000 unique health apps are available. Over 
7,000 health apps are specifically intended for use by students 
and health care professionals. Five hundred new mobile health 
apps launch every month. Interestingly, however, a survey 
conducted by MobiHealthNews shows that to date, FDA has only 
cleared fewer than 80 mobile medical apps through its 510(k) 
process. They further estimate that as little as 5 percent of 
all health-related apps could potentially be considered 
medical, and possibly subject to FDA regulation.
    On July 21, 2011, the FDA issued a draft guidance on mobile 
medical applications. The agency went on to receive more than 
700 pages of comments from over 100 interested stakeholders. 
They also held a 2-day workshop and engaged the public at large 
in briefings and events. FDA officials have expressed their 
views that the final MMA guidance would be deregulatory. In 
fact, it would delineate how the agency would exercise 
enforcement discretion to not proactively regulate many low-
level-risk mobile medical apps. However, it is now March 19, 
2013, and unfortunately, FDA has yet to release a final MMA 
guidance document. Qualcomm and others are concerned that the 
failure to release final guidance has created uncertainty among 
countless budding entrepreneurs and large corporations that 
fear the prospect of facing FDA regulation. Qualcomm offers the 
following recommendations for consideration.
    First, FDA should promptly finalize the MMA draft guidance 
document. Second, the final guidance should offer specific 
examples of low-risk regulated mobile medical devices that FDA, 
through enforcement discretion, would not regulate. Third, 
there should be clarity on intended use in light of ambiguous 
and general health claims and terms. Fourth, for apps that do 
not warrant listing as low-risk class I medical devices--
rather, that do warrant listing as low-risk class I medical 
devices, the agency should consider how it will assess 
exemption from Good Manufacturing Practices. Fifth, accessories 
should be classified according to their individual level of 
risk and not according to the device with the highest 
classification level. Sixth, FDA should continue its commitment 
to consistency, predictability and transparency by coordinating 
internal and external efforts through a single dedicated office 
within FDA the agency. Seventh and lastly, the agency would 
benefit to utilize external facing resources such as CDRH 
Learn, Device Advice and the Division of Small Manufacturers, 
International and Consumer Assistance to work with app 
developers and their communities.
    FDA has a proven and successful policy, regulatory, and 
legal framework, that has been formed from over 100 years of 
innovation, science and learning, a framework that puts the 
patient first and ensures the safety and effectiveness of all 
health and medical products in the U.S. marketplace. We 
recommend that FDA be given the fullest support it needs to 
continue doing its fine work while allowing innovation to drive 
the U.S. healthcare system.
    In closing, I would like to say a few words about Qualcomm. 
Qualcomm, Inc., is the leading supplier of wireless chips, 
having shipped worldwide well over 11 billion chips to date. 
Qualcomm is the leading developer of 3G, 4G and other next-
generation wireless technologies. In addition, Qualcomm has a 
wholly owned medical device subsidiary focused on producing 
medical device data systems. We are committed to the health 
care space through various public and private efforts as 
further described in my written testimony and on Qualcomm's Web 
site.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Mr. Jarrin follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Walden. Mr. Jarrin, thank you for the thought you put 
into your testimony and for being here today.
    We will now go to Mr. Bradley Merrill Thompson, General 
Counsel, mHealth Regulatory Coalition. Mr. Thompson, thank you 
for being here today. We look forward to hearing your 
testimony.

             STATEMENT OF BRADLEY MERRILL THOMPSON

    Mr. Thompson. Well, thank you very much for inviting me. As 
you can tell from the name of our organization, the topic today 
is of very great interest to us.
    Our coalition is a very diverse coalition, which is both 
fun and challenging. It is fun, because we have a lot of 
spirited discussions. It is challenging because it represents a 
lot of different points of view. We have folks in there from 
the traditional medical device industry, we have app developers 
in there, we have the telecommunication firms in there, patient 
groups and so forth. And frankly, the way I navigate consensus-
building in our group is to say, look, we only have one rule, 
and that is, put the patient first, leave economics at the door 
and let us figure out what policy puts the patient first.
    In that vein, I have three simple points that I want to 
make this morning in my testimony. The first one is that we 
would urge FDA to publish its guidance just as soon as possible 
and indeed expand on that guidance in the future. I cheated a 
little bit, and I read the testimony of my other fellow 
witnesses here, and it seems like there is going to be good 
agreement on that score. What I would offer, as the nerdy 
lawyer maybe among the panel, is that I think that maybe FDA is 
delaying because they are going for the complete and final 
definitive for-all-time answer to these questions, and it is 
really tough because the industry changes on almost a daily 
basis. So they write a draft, it goes through a couple of 
months of review. By that couple months, the environment has 
changed a bit and they want to go back and erase some of what 
they wrote previously.
    I think what they need to do is get a final version out 
there and then use the guidance process to update it 
periodically as the environment changes, as the regulatory 
issues shift, as the questions shift, simply update the 
guidance periodically. We have talked about creating a Web 
site, where they would on a more real-time basis, offer some 
guidance. There are some tools that are available to them but 
bottom line is, I think FDA is struggling a bit with how to get 
hits guidance out, and in our opinion, it needs to get out 
because there is an awful lot of business that is frozen on the 
sidelines waiting to see what that guidance says.
    The second point I want to make to you is a bit 
counterintuitive probably for someone from industry to say, and 
that is, we would like to see more FDA enforcement in this 
area, and particularly more balanced FDA enforcement in this 
area. And the way I can make this point is best through an 
example, and it is an example I read about of a new app just a 
few weeks ago announced from India where you can do urinalysis 
with your iPhone, and everyone was talking about it on the 
Internet because I think a lot of people were trying to figure 
exactly where you pee on this thing in order to get the 
reading, and it turns out you do a very traditional technique: 
you pee in a cup and put a strip in that cup, it changes color, 
and then use the camera on the iPhone to more accurately assess 
what the color changes were.
    And they introduced this thing. It hasn't yet hit the U.S. 
market but they have announced their intention to go through 
the Apple app store in introducing it. The problem is, FDA has 
regulated urinalysis for 30-some years. That is a very 
traditional medical device, and the typical one looks about the 
size of a cash register, so I got to tell you, doing it on an 
iPhone, that is cool, that is really cool, but what they did 
is, on the front page, at the bottom of the front page, they 
basically said in legalese this is not a medical device. Well, 
honestly, if it were that simple, I know a lot of other 
companies that would like to do that same thing, right? If you 
could avoid FDA by putting a disclaimer at the bottom of your 
home page and yet the whole rest of the Web site explains how 
it is used in urinalysis, that is a problem.
    So this is in part a competitive issue, right? Because 
different companies are held to different standards. But it is 
a public health issue because this is an important app, and if 
it gets the urinalysis reading wrong, people with diabetes, 
people with serious conditions could be relying on that app. So 
either deregulate it, which would take an act of Congress, I 
believe, because it is clearly a medical device, or more evenly 
enforce the rules.
    The third and final point that I want to make is that we 
favor sticking with FDA as the regulator for both the 
traditional device industry and the less traditional mHealth 
area. There was a rumor circulating, and who knows where these 
start, that people wanted to move mobile health regulation away 
from FDA. We couldn't support that. We couldn't support it 
because it would create two systems where if you do it on an 
iPhone system, if you do it on a cash registered-sized machine, 
you have a completely different system. To us, that actually 
increases the uncertainty and the complexity and the confusion, 
and so we have found that FDA has the knowledge that they need. 
This is a new technology. We are all learning the technology, 
but they have the public health knowledge in order to do this 
and to do it right, so we favor sticking with the agency.
    Those are the three points I wanted to make this morning, 
and I appreciate the time.
    [The prepared statement of Mr. Thompson follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Walden. Mr. Thompson, thank you for your testimony. We 
will now go to Mr. Ben Chodor, who is the Chief Executive 
Officer of Happtique, like health app boutique.
    Mr. Chodor. Exactly.
    Mr. Walden. Everybody with me now. All right, Mr. Chodor, 
you are on.

                    STATEMENT OF BEN CHODOR

    Mr. Chodor. Good morning, Mr. Chairman Walden and Ranking 
Member Matsui, and members of the subcommittee. My name is Ben 
Chodor and I am the CEO of Happtique. It is an honor to testify 
today on mobile health technology, which Happtique believes can 
change health care delivery systems. My testimony addresses two 
important issues in our industry----
    Mr. Walden. Will you make sure your microphone is on?
    Mr. Chodor. Is that better?
    Mr. Walden. There we go.
    Mr. Chodor. My testimony addresses two important issues 
facing our industry: questions about regulations, and the 
applicability of medical device tax to mobile devices. 
Happtique is a mobile health solution company whose mission is 
to integrate mobile health into patient care and daily life. 
Happtique is owned and operated by GNYHA Ventures, a business 
arm of Greater New York Hospital Association. GNYHA has a 
robust family of companies to assist its members in addressing 
business and operational issues. Happtique, the newest member 
of the companies, was established in direct response to 
members' needs to develop comprehensive mobile health 
strategies to support clinicians, facilitate patient engagement 
and improve their own operations. Happtique's principle 
offerings include individually branded, secure, multiplatform 
applications for hospitals, physician and patient: our MRX, it 
is our patent pending technology that enables physicians to 
actually prescribe apps to their patient, a unique system of 
classifying apps in more than 300 categories, and our brand-new 
private sector solution to a big problem, we have just launched 
our certification program for health apps.
    Happtique created these solutions to harness the 
unprecedented potential for mobile health technologies. Think 
about it: 87 percent of physicians use smartphones or tablets 
every day. One out of five smartphone users has at least one 
health app on it. There are over 40,000 health apps on the 
market and it is growing every day, and there is little to no 
barrier of entry for these apps. This has incredible 
opportunity for innovation in health care but comes with 
certain concerns, namely how credible is this app for myself or 
for my patient.
    So who should monitor the mobile health industry? Clearly, 
the industry needs to balance three things: innovation, safety 
and effectiveness. The FDA released its guidelines in 2011, 
which Mr. Jarrin went over, and Happtique's belief is that the 
FDA is in the best position of any agency to regulate health 
apps because of its long health expertise in assuring patient 
safety, but we have to say from our point of view, the FDA has 
to release these guidelines sooner than later. It is about time 
that they come out.
    We don't believe the FDA should regulate mHealth products 
that are not considered medical devices. The FDA's draft 
guidance addressed which mobile apps the FDA does not 
anticipate classifying as mobile apps for purpose of 
regulation. The industry is pleased that the FDA recognizes its 
own limits.
    Complementary to the FDA regulatory framework, Happtique, 
our company, has created a certification program with industry 
stakeholders to offer clinicians and patients a way to identify 
technically and validation of an app. Happtique developed a 
health app certification standard under the direction of a blue 
ribbon panel, and we are reviewing operability, privacy, 
security, and content. In the development of the standards, we 
consulted with key public-private sector organizations--the 
FDA, the FTC, the FCC, the AMA, the AAMC and many, many other 
organization. This conducted the certification process. Again, 
Happtique is an engaged, well-known security company to ensure 
operability, privacy and security, and we are engaging 
specialists, so if it is a cardiology app, cardiologists should 
review the material. Apps that pass both the technical and 
testing content review will be awarded the Happtique 
certification seal. Our goal here is that the users will be 
reassured that a certified app delivers credible content, 
safeguards user data and functions as described.
    I would like to switch gears for a second and now talk 
about the medical device tax and how it relates to mobile apps 
since I know several members of the committee also care a great 
deal about this issue. Happtique does not believe that Congress 
intended to impose a device tax on iPhones, iPads, Android 
phones or tablets, or BlackBerrys, or apps that run on these 
devices. If congressional intent is ambiguous, we firmly 
believe the retail exemption applies. If the IRS wants to 
implement this tax on this technology, Congress needs to pass a 
law that specifically states that tax applies. Imposing a 
device tax on apps will undoubtedly stifle innovation, 
developers and publishers, and frankly, the threat of tax 
stifles innovation too.
    In closing, thank you for my allotted time, and I would 
like to thank the chairman and ranking member and the 
subcommittee for asking me to testify today.
    [The prepared statement of Mr. Chodor follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Walden. Mr. Chodor, thank you for your very good 
testimony, and that is why we are having this hearing is to try 
and shine some light and bring some clarity.
    Mr. Jonathan Spalter is next. He is the Chairman of Mobile 
Future. Mr. Spalter, thank you for being here.

                 STATEMENT OF JONATHAN SPALTER

    Mr. Spalter. And thank you, Chairman Walden, and members of 
the subcommittee for giving me the opportunity to testify on 
behalf of Mobile Future and our member companies. My name is 
Jonathan Spalter and I am Chairman of Mobile Future. We 
represent innovators across the wireless ecosystem, and I sit 
before you, I think, at a very, very hopeful time for our 
community.
    It is now believed by many scientists that there has 
already been a child born in the world who will live to 150 
years old. What an exciting notion for our children and our 
grandchildren. These leaps and bounds in the quantity and the 
quantity of our lives are in no small part due to the 
astounding progress we are all witnessing at the nexus that we 
are talking about today of health care and mobile innovation.
    This morning I would like to very focus very practically my 
comments on what mobile innovators need from government to help 
us all advance our health. We know that the virtuous cycle of 
investment in the mobile ecosystem from networks to devices to 
applications provides an unparalleled foundation for health 
innovation, and I believe government can help build on it by 
providing our mobile health innovators four key and achievable 
certainties. First, a clear understanding of where regulation 
begins and where it ends. The mobile medical app guidance now 
has been pending for 2 years. Clear guidelines and regulatory 
certainty are needed now, commonsense and affordable approval 
processes that are measured in months, not in years, timely 
decisions across government that of course encourages a careful 
balance to safeguard patient safety and privacy on the one 
hand, which we all care about, without inhibiting the 
development and use of mobile medical apps, and finally, basic 
fairness when it comes to the taxes we pay, all consumers pay, 
on wireless services and applications. Bottom line: Americans 
would benefit from clear guidelines on when applications go to 
which government agency and for what set of approvals.
    But let us also not forget that none of this progress would 
be possible without spectrum and without investment, and 
therefore it is imperative that the incentive auctions, which 
are being designed now at the FCC, are open and inclusive so 
that all Americans can take advantage of wireless health 
applications, and it is also worth noting that the needed 
spectrum is held by government agencies, significantly held by 
government agencies, so all of our eyes, all of America's eyes 
are on the federal agencies who hold much of this underutilized 
spectrum hoping they will make a meaningful contribution.
    I know that all of us can personalize this progress that we 
are talking about today. My daughter Willa was diagnosed 2 
years ago at age 8 with type 1 diabetes. She has been extremely 
fortunate that from her very first week with the disease to 
have been in a clinical trial at Stanford University that is 
pursuing the holy grail of diabetes research: the artificial 
pancreas. Even having worked in mobile innovation and 
technology myself for years, I wasn't prepared, my family 
wasn't prepared, for just how personally and profoundly 
relevant mobile innovation would become so quickly to my 
daughter. On the first day of her trial, there was her 
endocrinologist, Bruce Buckingham, and her research nurse, Jen 
Block, explaining the research and the hope that it holds for 3 
million Americans who are dealing with this disease. And then 
Dr. Buckingham, not really knowing what I do for a living, 
spoke about the importance of spectrum as he explained the 
wireless sensors that were all around my daughter's hospital 
room and the wireless glucose monitor that she now wears in her 
body. The medical team included software coders, application 
developers, algorithm writers, network engineers, all pushing 
together towards what could be and I indeed hope will be 
nothing short of a revolution in diabetes management, and this 
is the future of American health care. We all have a personal 
stake in speeding its process, and ultimately this is not about 
government stepping away, rather it is a profound opportunity 
for government to lean in and demonstrate that it too can 
innovate, that it can act flexibly, that it can move quickly 
with common sense and with the understanding that innovation is 
born of many, many things including a healthy dose of humility 
and restraint when it comes to regulation.
    So on behalf of application developers and wireless 
innovators across our country, on behalf of my little girl and 
the millions of Americans who are managing chronic diseases, I 
really thank you for the opportunity to testify about our 
Nation's promising mobile future, and I really look forward to 
your questions.
    [The prepared statement of Mr. Spalter follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Walden. Mr. Spalter, thank you for sharing your very 
powerful story with us. It really sheds clear light on our task 
here, and of course, it also shows that we are the most 
important subcommittee in the Congress because we did make 
available new spectrum and we are continuing to pursue the 
government excess spectrum as we might find.
    Mr. Spalter. And that has the added advantage of being 
true, Mr. Chairman.
    Mr. Walden. Thank you. You are welcome to come back on a 
weekly basis. Seriously, thank you very much and thanks for the 
work you are doing.
    We will now go to Dr. T. Forcht Dagi, I believe, MD, MPH, 
DmedSC--I will let you explain all of those things--Partner at 
HLM Venture Partners. We are delighted you were able to get 
another flight and get down here from Boston. Thank you very 
much. Go ahead and push that button in front of you there.

                  STATEMENT OF T. FORCHT DAGI

    Dr. Dagi. Thank you, Mr. Chairman. Chairman Walden, Ranking 
Member Eshoo, members of the subcommittee, I am Dr. T. Forcht 
Dagi. I am a Partner of HLM Venture Partners based in Boston, 
Massachusetts, and San Francisco, California. I am a board-
certified neurosurgeon trained at Johns Hopkins and the 
Massachusetts General Hospital and hold or have held leadership 
positions in clinical and academic medicine for over 20 years. 
I am Chair of the Committee on Perioperative care of the 
American College of Surgeons at present, and I hold a 
professorial appointment at Harvard Medical School.
    On behalf of HLM Venture Partners, the venture industry and 
the entrepreneurial community, and also as a physician devoted 
to the betterment of health care, it is my privilege to testify 
before this committee on the subject of mobile medical apps, 
MMAs.
    Venture capitalists are committed to the funding of 
American's best and most innovative entrepreneurs. They work 
closely to transform breakthrough ideas and to emerging growth 
companies that drive job creation and economic growth in the 
United States.
    One of the top priorities for health care and life science 
investors is to work and discover innovative solutions that 
address unmet medical needs, enhance health care outcomes and 
lower overall health care costs while preserving the safety and 
the quality of the American health care system.
    For investment to grow in the formative stages of emerging 
medical mobile applications, there need to be well-defined 
regulatory pathways to market. Uncertainties in the regulatory 
environment create significant risk for innovative companies 
and deter investment in many promising ideas. We believe that 
regulatory pathways should be risk based, transparent, 
consistent, predictable, and above all, balance the problem of 
patient safety and its protection against innovation.
    I believe that medical mobile applications will prove to be 
a central, important, and potentially critical tool in 
optimizing communications among clinicians, and especially 
between clinicians and patients. Also, they will help broaden 
and sustain shared decision making, which is a critical part of 
any type of health care reform. I believe that MMAs will prove 
invaluable for patient engagement in education. They can 
materially enhance integrated strategies for health care, help 
coordinate the management of chronic disease and promote 
patient safety while lowering health care costs. Here are some 
examples of the critical roles they already play. They are used 
to help diabetics follow and refine insulin regimens. Mr. 
Spalter, I didn't know you were going to speak to that. Thank 
you. They are used to screen for diseases of the retina, for 
telemedical consultations, to help patients with congestive 
heart failure avoid readmission, to diagnose moles and screen 
for cancer, and to coordinate across groups of physicians in 
different institutions. They provide a means for sending 
sentinel emergency alerts to providers. They also facilitate 
home health care and remote monitoring of patients in other 
settings like the intensive care unit. They hold tremendous 
promise in patient care, and I emphasize, safety.
    I would also like to emphasize my concern about the 2.3 
percent medical device tax with regard to medical innovation 
and U.S. job creation. We also believe Congress did not intend 
to burden the emerging MMA companies with this new tax. Their 
products are not included in the traditional medical devices. 
The 2.3 percent tax on revenue has already started to have 
detrimental effects on early-stage medical device companies. 
They are regressive and repressive. It creates a major market 
inefficiency by increasing the capital intensity of innovation 
and discourages venture capitalists from investing in these 
companies now and in the future. The tax would be even more 
devastating for companies developing MMAs because of their 
revenue structure.
    The tax of 2.3 percent sounds modest but it is not. This is 
a tax on revenue. It is not a tax on profits. The vast majority 
of entrepreneurial ventures developing MMAs are very small and 
very early. Some of the companies in which we invest may in 
fact generate some revenue but very unlikely to generate 
profit. Revenues are plowed back into the company for growth, 
and therefore the 2.3 percent tax on small startup companies 
delays their ability to reach profitability and increases the 
amount that must be invested before a company can become cash 
flow positive.
    Venture capitalists and entrepreneurs stand ready to 
participate, along with other public and private stakeholders, 
to find solutions that will help move these important 
innovations into the health care system. We would like to offer 
the following recommendations to help stimulate investment in 
this very important sector.
    First, promote a regulatory framework that is predictable, 
consistent, transparent and risk based. The Food and Drug 
Administration issued draft guidance for mobile medical 
applications on the 21st of July 2011. This guidance addresses 
some regulatory concerns and reduces some regulatory 
uncertainty but leaves open questions around enforcement 
discretion decisions. The uncertainty must be resolved. Second, 
the FDA and other stakeholders are encouraged to collaborate 
and formulate alternative oversight frameworks that meet the 
goals of patient safety and mobile medical applications, but 
also encourage and foster innovation and invention. Third, we 
would ask that the FDA solicit very broad input in evaluating 
new regulatory frameworks, especially from those at the 
forefront of the innovation that promotes health care 
transformation. And finally, we would ask that mobile medical 
applications that are defined as medical devices be exempted 
from the 2.3 percent medical device tax.
    Mr. Chairman, Member Eshoo, members of the subcommittee, 
thank you for the opportunity to testify. I look forward to 
working with you to address these critical issues.
    [The prepared statement of Dr. Dagi follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Walden. Dr. Dagi, thank you very much for your very 
learned testimony.
    We will now go to Dr. George Ford, who is the Chief 
Economist, Phoenix Center for Advanced and Legal Economic 
Public Policy Studies. Dr. Ford, we are delighted to have you. 
Please go ahead with your testimony.

                    STATEMENT OF GEORGE FORD

    Mr. Ford. Chairman Walden, Ranking Member Matsui and 
members of the committee, thank you for the invitation to speak 
today and appear before this committee again.
    At issue in this hearing is the role of FDA oversight in 
health-related applications for mobile devices and the 
platforms on which they run. MHealth applications are believed 
to have great potential to promote better health and improve 
the efficiency of the health care system. MHealth can also help 
address the documented health in lower-income segments of the 
population where the provision of health services and treatment 
compliance can be challenging. In my testimony today, I touch 
upon a couple of thoughts about the possible regulation of 
mobile applications and platforms as medical devices by the 
FDA.
    First, by its very nature, regulatory intervention into 
mHealth by the FDA will have direct implications for the 
Nation's mobile communications industry. Mobile applications, 
mobile devices and mobile networks are all part of the mobile 
communications ecosystem. In a greater or lesser degree, to 
touch one, is to touch them all. United States mobile industry 
is a true American success story, and the mobile app economy is 
said to employ about a half a million persons. Many believe 
that the continued growth in the mobile sector, both in size 
and innovative capacity, is critical for the U.S. economy. One 
study suggests that the diffusion of new technology and mobile 
wireless communications supports about 400,000 jobs annually, 
and the billions invested annually in mobile and fixed networks 
supports and creates hundreds of thousands of jobs.
    Accordingly, regulating mobile applications is not only a 
health care issue but a much broader economic one. The 
difference between a good decision and a bad decision regarding 
the FDA's regulation of the mobile sector may have significant 
economic impacts. Indeed, economic theory and ample literature 
demonstrate that the inevitable and arguably intended effect of 
FDA involvement is to raise the cost of innovation, to alter 
the trajectory of innovation, to reduce competition and to 
favor larger firms that can afford the overhead of dealing with 
a federal regulatory agency. In a tradeoff with efficiency and 
efficacy and safety, these negative effects may be acceptable. 
Gains from improvements in safety and quality may be sufficient 
to offset the lost innovation and higher prices from less 
competition. Normally, the cost-benefit tradeoff is limited to 
the health sectors, but in the mobile ecosystem, the FDA's 
intervention could spill over into the entire mobile broadband 
industry. The dangers are significant, and I applaud this 
committee for taking this matter seriously.
    Second, while the scope of the FDA's regulation of mHealth 
is a complex issue on its own, the decision is made ever more 
complex by the Affordable Health Act's medical device excise 
tax. Regulation and taxation are completely different 
questions, and there is no reason to believe, and every reason 
to suppose, that the proper methodologies for choosing when is 
appropriate or not will be quite different in scope and 
severity. Taxes may or may not raise revenues, but taxes always 
discourage the activity being taxed and play no apparent role 
in ensuring the safety of the product being sold. Yet the role 
of the FDA in assessing mobile health applications cannot be 
treated today as independent of the tax question since defining 
applications medical devices may very well lead to the taxation 
of such applications under the Affordable Health Act.
    In addition, given health disparities for low-income 
Americans and given the expectation that mHealth will be 
particularly effective with low-income Americans, the medical 
device tax may prove to be a regressive tax.
    Moreover, the medical device can be described, or what I 
describe as, a virtue tax. Normally, the government applies 
taxes to items it wants people to consume less of, that is, sin 
taxes. The medical device tax, in contrast, applies to items a 
government agency has declared to be good for people. If we 
want innovation to drive a healthier America, then why tax such 
innovation? It doesn't seem to be very good policy, perhaps 
doing more harm than good.
    Finally, and perhaps most significantly, I believe the 
FDA's draft guidance leaves the door wide open for inserting 
the FDA into the innovation flow of mobile handsets, tablets 
and other devices, or what we refer to as platforms. There are 
good reasons to believe that formal role for the FDA in the 
mobile handsets and tablets would significantly curtail the 
pace of innovation in that sector, an innovative pace that is 
rapid and highly beneficial. My written testimony discusses 
this concern in detail.
    A critical question is: could a regulator or tax collector, 
or even an overzealous regulator or tax collector, make a 
legally defensible argument that these general purpose devices, 
or even the entire mobile network, are medical devices and thus 
subject to regulation or the medical device tax? In an 
ecosystem like the wireless industry where all the components 
are tightly intertwined, where does the line get drawn on what 
is and what is not a medical device? Obviously, clarity is 
needed, and there needs to be some limitations on the scope of 
the FDA's reach, lest regulation and taxation become very broad 
in a mobile ecosystem and do significant damage to innovation 
in the sector.
    Mr. Chairman, thank you again for the invitation to testify 
today. I welcome any questions.
    [The prepared statement of Mr. Ford follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Walden. Dr. Ford, thank you very much for your 
testimony and that of all of our witnesses today. I think it 
has helped explain why we are doing this hearing to begin with 
because we kept hearing that there is a lot of uncertainty in 
the marketplace that may indeed be slowing down, stifling 
investment, innovation and new U.S. job growth and 
technologies, so that is why we are doing this hearing, and I 
know Mr. Waxman, who had to leave, and I understand that we all 
have to juggle here, thinks the law is very clear. Obviously, 
you all don't, especially when it comes to the FDA's lack of a 
final rule in this area. Look, we are all for patient safety, 
and there is no separation here. We are all patients 
eventually. We want patient safety. We don't want fraudulent 
devices on the market. We recognize the importance of 
appropriate regulation.
    But Dr. Ford, you reminded me of something I always was 
told, that if you want less of something, tax it more, and you 
really summed it up and basically said, look, you are taking 
innovation in health care, don't we want more of that. Is that 
not what you were----
    Mr. Ford. Yes.
    Mr. Walden. And a gross-receipts tax, which could 
completely stifle innovation.
    Mr. Ford. The gross-receipts tax will significantly deter 
involvement of companies in this space. It is a fairly severe 
tax, particularly when we are dealing with innovation, new 
products, new companies and even hospitals and doctors 
themselves have entered into the business to design their own 
applications. This virtue-tax issue is an interesting one, and 
I think it is weird when you have a government agency say OK, 
here is the good stuff and now we want you not to use it so 
much.
    Mr. Walden. We have run into that in my own State of 
Oregon. There was a medical device manufacturer who for various 
reasons, but they said including the new gross-receipts tax, I 
believe laid off, what a couple hundred people already, and I 
am hearing about it around the country.
    Dr. Dagi, are you seeing a move to take this offshore in 
terms of innovation and development and offshore these jobs and 
all that now, or not?
    Dr. Dagi. I am, sir, seeing two things. We are seeing that 
many companies attempted to take this offshore, and they are 
also attempting--they are also thinking about launching 
offshore where profits will not be taxed and where the 
regulatory path is both simpler and more direct.
    Mr. Walden. So is it accurate to say that Obamacare is 
driving this sort of medical technology and innovation to other 
countries because of this tax?
    Mr. Ford. I am not expert enough to say that it is 
Obamacare specifically.
    Mr. Walden. Well, but the 2.3 percent tax is part of the 
President's health care law.
    Mr. Ford. Yes, sir.
    Mr. Walden. All right. And so Mr. Spalter, what does that 
mean, people like your daughter and the innovation that could 
come from that? Are you concerned about a reduction in 
innovation in this area and that these really smart people who 
are probably, I don't know, 14 sitting in a garage somewhere 
creating apps, are going to create another Angry Birds as 
opposed to something in this area? And I would open that up to 
anybody here. That is my concern is that public policy has an 
impact. Is it going to have a negative impact here, which is 
not what we want.
    Mr. Spalter. America's wireless consumers, all of are 
actually paying roughly 17 percent of our monthly bill of our 
wireless services to taxes. Wireless services are taxed at two 
and a half times other goods and services on average across our 
country. We are very concerned, Mr. Chairman, that these types 
of taxes, if they are applied to mobile medical applications 
and devices, will stifle innovation, will tempt entrepreneurs 
to pursue, as you suggested, other types of innovation and 
apply their genius and their efforts to other parts of the 
mobile ecosystem rather than efforts to make our children, our 
families, our parents healthier. So there is an impact and we 
need to be very, very vigilant and cautious about going down 
this path.
    Mr. Walden. Mr. Jarrin, in your testimony you mentioned 
that as many 5 percent of the 27,000 health-related apps could 
be subject to regulation, yet as our data would indicate, fewer 
than 80 medical apps have gone through the FDA process. I was a 
journalism major, not a math major, but I think that leaves 
1,200 apps in a state of regulatory uncertainty, roughly.
    Mr. Jarrin. Correct.
    Mr. Walden. Is that accurate, and are you concerned about 
the time delays and all of that?
    Mr. Jarrin. Yes, we are very concerned about the fact that 
we haven't found any clear guidance. The draft guidance 
document needs to be finalized, and we were hoping that through 
that finalized document we would have a better understanding of 
whether or not these apps that are on the market should be 
regulated or the agency will use their enforcement discretion 
to not regulate them. That is a very important thing, because 
when you are talking about a device, a medical device will 
always be a medical device. It is up to the agency whether or 
not they are going to proactively regulate that medical device, 
and I am speaking about the very low risk end of devices, not 
medium risk or higher risk devices, which I think we all agree 
are not the ones that we are discussing. But when we are 
talking about a mobile application, a health application, there 
is a lot of ambiguity. For example, if I were to use some of 
the terms like ``well being'' in my marketing claims or ``heart 
health'' or ``sleep deprivation'' or ``patient satisfaction'', 
``stress'', even mentioning----
    Mr. Walden. Do those trigger FDA?
    Mr. Jarrin. Unsure, and that is the kind of clarity that we 
are looking for from the agency, and they seemingly were ready 
to deliver that clarity. I believe in this very building, less 
than a year ago, Dr. Jeffrey Shuren, the center director, spoke 
about some of the things they were contemplating to take off 
the table, and they spoke about some of the things like 
medication adherence software potentially could be off the 
table, BMI calculators, I mean body mass index calculators, 
drug-drug formula, drug dosing calculators. That would have 
been very helpful for the industry.
    Mr. Chodor. Can I add something?
    Mr. Walden. If you are real quick, because I am over my 
time.
    Mr. Chodor. Well, we are hearing from developers and 
hospitals and docs that a lot of them are waiting on the 
sidelines until there is final--when are the guidelines going 
to come out, is there going to be a tax until they start 
developing in the space.
    Mr. Walden. And those are separate issues?
    Mr. Chodor. Separate issues, but they are not going forward 
because they are waiting.
    Mr. Walden. All right. Thank you all, and I thank the 
courtesy of the committee, we went over, but we will turn now 
to Ms. Matsui for 5 minutes.
    Ms. Matsui. Thank you, Mr. Chairman.
    Let me just go through this. You know, the Affordable Care 
Act was carefully drafted so not to add to the deficit. It 
imposes a small tax on a wide range of industries that will 
benefit from expansion of health insurance coverage for nearly 
30 million Americans under the reform. Now, one such levy is 
the 2.3 percent excise tax on medical devices. Now, let me 
just--without getting into the merits of the device tax, I 
would like to ask some questions to clarify quickly the 
applicability to smartphones, tablets and app stores.
    Mr. Thompson, is FDA proposing to regulate devices like 
smartphones and iPads or app stores like the iTunes store?
    Mr. Thompson. I think in the draft guidance, they did about 
the best they could to explain no, that they don't want to 
regulate those articles if they can avoid it. Admittedly, it is 
not the model of crafting but I think their intent came 
through.
    Ms. Matsui. OK. So if the FDA is not regulating 
smartphones, tablets or app stores, would they be subject to 
the medical device tax?
    Mr. Thompson. So if they are not medical devices, they 
would not be subject to the medical device tax.
    Ms. Matsui. So Mr. Thompson, it is also my understanding 
that IRS looks at something called the retail exemption when 
examining the applicability of medical device devices.
    Mr. Thompson. Right.
    Ms. Matsui. Could you explain that exemption?
    Mr. Thompson. Well, the exemption is meant to cover medical 
devices that are basically sold at retail for use by laypeople 
in managing their health, and so those are exempt from the tax, 
and it covers most things other than, for example, the 
professional use apps that we have referred to a few times. So 
whether it is for reading an ultrasound image for a doctor or 
whatever, those apps would be subject to the tax. But stuff 
sold to consumers through the app store would not, as I 
understand it.
    Ms. Matsui. OK. Mr. Chodor, you state in your testimony 
that a fair reading of the final regulations implementing the 
tax should lead one to conclude that the retail exemption 
applies to all smartphones and tablets that are on the market 
today. So do you agree with Mr. Thompson that based on current 
IRS rules, smartphones and iPads are not subject to the medical 
device tax?
    Mr. Chodor. Absolutely, Happtique agrees with that.
    Ms. Matsui. OK. So from all you have stated then, 
smartphones and tablets will not be taxed as medical devices.
    Now, I understand the frustration here, and I am frustrated 
too regarding the draft of 2011, and I agree the FDA needs to 
move swiftly to finalize the mobile medical app guidance. I 
understand that. The clarity of the final guidance can improve 
confidence for investment and bringing new innovative 
applications to the consumer, and I wholly agree with you 
there, and I think we really need to encourage that in a very 
expeditious manner.
    I want to move on to something else here. Spectrum is 
something that I am very much involved in, and we are all 
involved on this committee. We understand how important that is 
and how important it is to free up the federal spectrum. Mr. 
Spalter, your testimony discusses the importance of making more 
spectrum available to expand mobile broadband, and I couldn't 
agree more. Do mHealth applications have particular spectrum 
needs? Are hospitals and other health care providers going to 
be affected if we do not address the looming spectrum crunch?
    Mr. Spalter. I believe profoundly yes. Mobile health 
applications are at their nascent stage now. We are expecting 
there are going to be extraordinary levels of adoption, 
innovation, new products, new services, new applications 
brought to the market, and we need to have a predictable and 
reliable continuum of access to spectrum for enabling and 
deploying these innovations. Similarly, for hospitals, patient 
communities, professional health care providers, the need for 
secure, reliable, profoundly strong and scalable networks, is 
only going to become more important, and that is based on the 
availability of spectrum.
    Ms. Matsui. Right, exactly, but the unlicensed spectrum is 
also necessary for you too, correct?
    Mr. Spalter. Both unlicensed and licensed spectrum are 
going to be critical to advancing the prospect and the promise 
of innovation in America's health care.
    Ms. Matsui. So you think that this is going to be the 
future, and in essence, as fast as we can do this, the better 
it is going to be?
    Mr. Spalter. The President has spoken about the fierce 
urgency of now for the sake of our patients, for the sake of 
our families. Nowhere is that urgency more important than in 
the health care of our citizens, and mobile innovation based 
and built on spectrum assets and reliable networks is what will 
get us there.
    Ms. Matsui. Well, thank you very much. I see my time is 
exceeded. I yield back. Thank you.
    Mrs. Ellmers [presiding]. Thank you. I now turn to Vice 
Chairwoman Blackburn for her questions.
    Mrs. Blackburn. Thank you, Madam Chairman, and thank you 
all again for being here with us.
    You know, listening to you all and listening to some of the 
questions, I think that we are kind of walking through a period 
of the what-ifs, and some of the what-ifs are, well, if it is 
light touch, if they stay out of our business, we are going to 
do this, and if it is overregulating, talk to me. If the FDA 
says we are going to go after all of our mobile devices as well 
as go after some of these 80,000 apps, what is that going to 
do? Because we are talking about a gross-receipts tax, not a 
tax on your profits. So talk to me. If they go heavy-handed on 
this, does it stifle all the innovation? Does it shut it off? 
Anybody that wants to speak, raise your hand and then I will 
recognize you. Go right ahead.
    Dr. Dagi. The problem is that there is a risk to developing 
any kind of a medical application or medical device. For 
investors to come in and to provide the investment capital, 
they have to see a reward. Sooner or later, reward is going to 
be based on profits, but in the early stages it is going to be 
based on gross revenues. If you cut the gross revenues, first 
of all, you cut the valuations of the company. They become less 
valuable and less likely to be----
    Mrs. Blackburn. So it is like anything else? The money is 
going to find an easier path?
    Dr. Dagi. It will find an easier path.
    Mrs. Blackburn. OK. I appreciate that.
    Anybody, anything else to add to that? No? OK. I want to--
Mr. Chodor, I think that probably you are the one to go to on 
this. I saw the national coordinator's Patient Safety Action 
Plan, and of course, with all of your health information 
management systems, a lot of that work is done down in my 
district in Tennessee, and we appreciate that they are there, 
and I know that for the HIMS members, many times with 
meaningful use, you have got the private certifications that 
are working in that space. Do you think a similar model would 
work for the mobile medical apps and have it go through that 
process as opposed to a more lengthy regulatory process?
    Mr. Chodor. From Happtique's point of view, we don't think 
it would be the same because when you take an app, as we were 
mentioning earlier today, where it takes a mole and takes a 
picture of it and says is it a melanoma or not, and someone is 
going to make a clinical decision based on an app, we believe 
that is something that should go in the hands of the FDA, an 
organization that has done that, and that should be done by the 
government as opposed to private sector. Just like Happtique's 
certification program, we aren't covering apps that should be 
FDA. We think those apps that are really making clinical 
decisions should be regulated.
    Mrs. Blackburn. OK. Anybody else want to add to that? No? 
Nothing else?
    OK, Mr. Jarrin. The IOM recommendations, when did you 
suggest FDA move forward with its draft guidance?
    Mr. Jarrin. When did we suggest?
    Mrs. Blackburn. Yes.
    Mr. Jarrin. We suggested when we offered comments to the 
agency back in October of 2011. The agency released their draft 
guidance document in July. They opened up a 90-day comment 
period, and I believe they accepted over 700 pages of comments 
from over 100 stakeholders in the industry and the public, et 
cetera, and we were one of those, meaning Qualcomm 
Incorporated. We submitted a document, which I actually 
appended to my written statement, so you will find it at the 
back of my written statement.
    Mrs. Blackburn. OK, then. You and Mr. Thompson, let me ask 
you this. Do you think the FDA or Congress should set the 
policy on how we move forward with IMS regulation?
    Mr. Jarrin. IMS regulation?
    Mrs. Blackburn. Yes, with the management systems, health 
management systems, the mobile apps. Do you think it should be 
us or FDA?
    Mr. Jarrin. I think FDA is squarely within its jurisdiction 
right now to move and to act, and that is what they had begun 
to do. We took a lot of their initial actions as a very 
promising indication to the industry at large that they were 
willing to work with all of us.
    Mrs. Blackburn. OK. Let me get Mr. Thompson in.
    Mr. Thompson. I agree with Mr. Jarrin. I think FDA is 
taking a fairly measured look at health information technology 
and is trying to do in some ways the least that they can do in 
the hopes of allowing innovation to flourish as much as 
possible, so I am optimistic now. Having said that, I want to 
see the document because----
    Mrs. Blackburn. Yes, kind of back to Dr. Dagi's point that 
if the overreach is there, the money, the VC, the funding 
stops.
    Mr. Thompson. Right. We need to see the document.
    Ms. Blackburn. Thank you. Yield back.
    Mrs. Ellmers. I now turn to Mr. Waxman.
    Mr. Waxman. Thank you very much, Madam Chair.
    First of all, let me say that I agree that innovation is 
important, that overregulation can harm public health just as 
underregulation can. I think there can be great value in 
discussing how to determine the correct balance and how to 
achieve it. But when I read the Republican memo for today's 
hearing, I got the impression that the only two issues of 
interest to my colleagues on the other side of the aisle with 
respect to health IT whether the FDA will inhibit innovation 
and whether all of our smartphones will be subject to a device 
excise tax. I understand Mr. Walden agreed with my earlier 
statement that there is a federal interest in ensuring patient 
safety, and I very much appreciate that.
    I would like to hear from our expert witnesses whether you 
think there is a need for any FDA oversight of any mobile 
medical apps. In my opening statement, I mentioned the example 
of the apps that claim to be able to educate the consumers as 
to whether a mole is a sign of a melanoma. Clearly, if such an 
app is accurate, it could lower health care costs by minimizing 
unnecessary trips to the doctor for the nine moles and could 
save lives by encouraging people to go to a doctor when they 
might otherwise have ignored a mole that could kill them. On 
the other hand, an app that is inaccurate can do just the 
opposite.
    So Mr. Chodor, do you think such an app warrants going 
through an FDA premarket clearance process just as it would 
have to do if it were a conventional standalone medical device?
    Mr. Chodor. Yes, we believe that any app that is going to 
make clinical decisions should go through a FDA type of 
program.
    Mr. Waxman. Thank you. Mr. Thompson, what do you think?
    Mr. Thompson. I agree with that. I think if you look at the 
80 apps, for example, that have already been submitted to FDA, 
they represent fairly high-risk technologies that should be 
reviewed by FDA.
    Mr. Waxman. And Mr. Jarrin?
    Mr. Jarrin. Yes, I would agree with that assessment as 
well.
    Mr. Waxman. Mr. Spalter, do you agree?
    Mr. Spalter. I do agree. I think that the important issue, 
in addition to whether there should be preapproval is, we also 
need to keep our eyes and our minds focused on the costs to 
application developers who are going through those approval 
processes, the time it takes, and the importance of having a 
precedential document finally that will set forth the clear 
guidance and outline and suggest what the real balance is 
between assuring, as we need to, patient privacy and security 
at the same time not inhibiting innovation.
    Mr. Waxman. Good points. Dr. Dagi, do you agree that there 
ought to be an FDA premarket clearance for some of these 
devices?
    Dr. Dagi. Absolutely. There is a balance between innovation 
and patient safety. Patient safety comes first, and the balance 
has to be there as well.
    Mr. Waxman. And Dr. Ford, do you agree or disagree?
    Mr. Ford. Sure. There is a balance that has to be 
maintained. I think it depends on perhaps what representations 
are made by a particular application, things like that.
    Mr. Waxman. To Mr. Thompson, in Mr. Jarrin's testimony, he 
stated that 500 new mobile health apps are being launched every 
month compared to 400 apps that were being launched every month 
just a year ago. Those statistics indicate to me that the 
mobile medical app industry is growing at a healthy rate. We 
all want to see this pace of innovation in the mobile medical 
app market continue and accelerate. Do you think that the 
certainty of final guidance from FDA would help the mobile 
medical app industry continue to attract investment?
    Mr. Thompson. Absolutely. Getting a document out there in 
final form will relieve a lot of the uncertainty, and I think 
folks who have been sitting on the sidelines will be encouraged 
to jump in at that point.
    Mr. Waxman. Are the members of your coalition concerned 
that FDA has plans to aggressively regulate this industry or do 
they just want certainty?
    Mr. Thompson. It is a little bit of both, in all honesty. 
For the most part, we want certainty. We always live in some 
fear of overregulation but we haven't seen any evidence of 
that, so as of right now, we feel pretty good about it.
    Mr. Waxman. Good. Mr. Chodor, you discussed Happtique's app 
certification program and the need for an objective validation 
process for mobile medical apps. Do you see Happtique's 
certification as a substitute of any and all regulation of 
mobile medical apps?
    Mr. Chodor. Absolutely not. It is an add-on.
    Mr. Waxman. And what types of mobile medical apps should be 
subject to FDA oversight?
    Mr. Chodor. I think anything that is going to make a 
clinical decision, anything a doctor is going to use or patient 
is going to use that can lead to surgery or a clinical 
decision.
    Mr. Waxman. Do you believe an unfettered market creates 
incentives to ensure patient safety, and if not, who should 
step in to ensure patient safety?
    Mr. Chodor. That is a great question. I think it is a 
combination. I mean, in that case there is a place for the 
government and the federal agencies to participate in that, and 
for the public.
    Mr. Waxman. Of course, if a patient and a doctor can't 
trust the efficacy of a product, that is not going to do much 
good.
    Mr. Chodor. Exactly.
    Mr. Waxman. Thank you very much. I yield back my time.
    Mrs. Ellmers. Thank you. I now turn to Mr. Latta for his 
questions.
    Mr. Latta. Thank you very much, and just following on. I 
think that as Chairman Walden said earlier, we want to make 
sure that there is a clear line out there for patient safety, 
and we also agree that there is the need out there for FDA to 
ensure that patients are safe, and we also have to make sure 
there is a clear line to make sure that those apps that are out 
there that need to be regulated and those that don't have to be 
delineated, and I think that is what we are hearing from our 
panel today, and I just want to again, as I had mentioned 
earlier, thank you all for being here today because again I 
think it is an excellent panel and excellent information that 
we are receiving here today, and if I can just start, Mr. 
Chodor--I would like to go back to what you said a little bit 
earlier, saying that there is a clear need for the FDA to be 
reviewing these regs sooner than later. Would you want to just 
go into that a little bit?
    Mr. Chodor. Well, it has been July 2011 that they came out 
with their draft guidelines, comment period came back. The 
public needs to know, the developers need to know, hospitals 
need to know, doctors need to know what is going to be 
regulated and what is not going to be regulated. Right now, we 
are just sitting in this middle ground and no one knows, and I 
think that is the scariest part because the longer it takes, 
more apps are going to be developed, and should they be FDA 
approved or shouldn't they be FDA approved, nobody knows.
    Mr. Latta. Let me go to Dr. Dagi, and thank you very much 
for your effort. Many of us know what it is like to be on 
planes that are delayed or canceled, so we appreciate you 
making the effort to be here today. You know, just following on 
to that, when you are looking at the venture capitalist side, 
if folks don't have that line out there knowing how fast these 
things are going to be approved, what is that going to do for 
folks wanting to invest into these apps into the future?
    Dr. Dagi. It is going to increase the risk of investment 
and venture capitalists will put their money elsewhere.
    Mr. Latta. OK. And when you say putting their money 
elsewhere, does that mean taking that money offshore to have 
these apps developed?
    Mr. Dagi. They might.
    Mr. Latta. And in your testimony, you were giving some 
numbers. How much money are we talking about, do you think, 
that these medical device apps would be bringing in for venture 
capitalist and they would be investing into in a year's time?
    Dr. Dagi. That is a hard number to get a hold of right now 
because there are a number of things that may or may not be 
medical apps. We don't know whether the extension, for example, 
of patient engagement is a communication or whether it is a 
medical device. But probably I am sure we are talking about 
hundreds of millions of dollars, but I can't give you a 
specific number at this point.
    Mr. Latta. Well, following up a little bit when you were 
just talking about folks wanting to make an investment in this, 
what about when they have to look at that 2.3 percent medical 
device tax and they have to add that in to the equation? What 
does that do to an investor?
    Dr. Dagi. If 2.3 percent is taken off the top, you have a 
regressive and repressive tax that is going to tell the venture 
capitalist the return that you can get investing in this area 
will be curtailed at the very early stage, at the very 
vulnerable stage of company development. That is the fear: the 
risk increases.
    Mr. Latta. And Mr. Jarrin, again, thanks for your testimony 
today too, and also, I think that Chairman Walden had brought 
this up, but it is really looking at, again, on the FDA side, 
not getting these things done quickly and slowing down that 
development, and we used to talk about slowing down 
development, again, as you just have heard from Dr. Dagi and 
Mr. Chodor, what does that tell people out there if they want 
to get into this or not? I think the chairman had mentioned a 
little bit earlier about, does that mean somebody doesn't get 
into the mobile medical app side and they go and develop some 
type of a game or something like that, what does that mean to 
the industry?
    Mr. Jarrin. Well, it is really tough on the industry. I 
have got a great example. There is a company out in California 
called MedCell, which changed to Vocel, that had an application 
called the Pill Phone, and they brought it to market, and in 
construction with the FDA, they actually pushed the FDA and 
said we are thinking about making this app and we hope that you 
can help us make this app, and they ended up being a regulated 
app. The CEO of that company claims that that was very helpful 
to them because it made them make a better product. However, 
the FDA has mentioned that those apps potentially may not even 
have to undergo regulation. So he ended up spending several 
thousands of dollars going into the hundreds of thousands of 
dollars, to go through all of the Good Manufacturing Practices 
and quality systems to actually ensure that it would really 
fall under the FDA guidelines and regulations, and if in fact, 
he wouldn't have had to go through that, then that is a major 
capital expense that he incurred technically for nothing, so we 
can also argue that it was actually better because his product 
came out better in the long run. So you would have to weigh 
both sides, but I think that is very hard on the industry not 
knowing whether or not you are or are not going to be regulated 
because you have to take that into consideration.
    Mr. Latta. Thank you very much, and Madam Chair, I see my 
time is expired and I yield back.
    Mrs. Ellmers. Thank you. I now turn to Mr. Lujan for his 
questions.
    Mr. Lujan. Thank you very much, Madam Chair, and to 
everyone that is here today, we really appreciate your time 
today.
    Mr. Chodor, I think the questions have been asked but I 
think just for clarification because of the memo that we 
received about today's hearing, I think that is why you are 
getting a lot of similar questions just to make sure that we 
are able to get answers to these questions. Do you think that 
some types of mobile medical apps deserve different levels of 
scrutiny than others?
    Mr. Chodor. Yes, I do.
    Mr. Lujan. And is there anyone on the panel that disagrees 
with that? I don't hear anyone. That is good to hear.
    For example, some apps might not need any premarket 
oversight as you have described. For some apps, consumers and 
health professionals might expect a version of a voluntary Good 
Housekeeping seal that is adequate like your organization is 
providing, and some apps might warrant a little more mandatory 
federal oversight. Do you think the FDA's draft guidance 
recognizes these distinctions?
    Mr. Chodor. I think they do. We can't wait to see the final 
guidelines.
    Mr. Lujan. Well, and I appreciate the testimony today 
because one area where I have seen agreement by the entire 
committee today is that we want to push the FDA, we want the 
certainty associated with this document to be put into final 
form, so that way we are able to move on and work together.
    With that being said, Mr. Thompson, you mentioned in your 
testimony that there is already 40,000 apps available on 
smartphones and tablets under the broad mHealth category, and 
we saw them double just last year. Have you seen any slowdown 
in mHealth innovation since the passage of the Affordable Care 
Act?
    Mr. Thompson. I haven't seen any slowdown. I am not in the 
best position. I think actually Mr. Jarrin follows those 
statistics better than I do, but my impression is that it is 
growing quite rapidly.
    Mr. Lujan. With that being said, Mr. Jarrin, have you seen 
a slowdown?
    Mr. Jarrin. No, no slowdown at all. As a matter of fact, it 
is almost like a hockey stick. Two years ago when I formed our 
comments to the agency, I believe that the figures I was using 
were about 13,000 apps in one of the app stores and 10,000 in 
the other, and those were not unique apps. When you hear the 
current statistics of 40,000 apps, I think it is even higher. 
It might be actually 45,000 apps, but some of those are the 
same company, just different types of the same app in essence, 
so you can't really count them as unique. My understanding from 
MobiHealthNews, which is one of the sources for the industry 
right now, is that there are 27,000 unique apps, so in 2 years 
it has basically doubled, and that is just unique apps, so I 
see no slowdown at all. I think that this is a very dynamic, 
vibrant space.
    Mr. Lujan. I appreciate that, Mr. Jarrin. The memo that we 
received today said that the Food and Drug Administration could 
potentially classify smartphones and tablets that run the apps 
as medical devices. I think that is one of the reasons that we 
are here today, and when you look at the FFDCA section 201(h), 
it states that if a device addresses the diagnosis of a disease 
or other conditions or in the care and mitigation, treatment or 
prevention of disease, that it could be subject to one of these 
classifications. I just bought these really great pair of Nikes 
that have this little chip in them that communicates to my 
phone, so do we need to provide clarification that that shoe is 
not going to be classified as a medical device?
    Mr. Jarrin. Are you speaking to me, sir?
    Mr. Lujan. Yes, Mr. Jarrin.
    Mr. Jarrin. No, because that is a general health and 
fitness type of device.
    Mr. Lujan. I appreciate that, and that is the point that I 
wanted to make today is, when I ride my mountain bike and I 
have a Bluetooth connection to it and it sends some information 
to my doctor and he says Ben, you have gotten a little bit 
chubby since you have gone to Congress, you need to start 
watching what you are eating, you need to start running a 
little bit more, and so these other devices that are 
communicating to a mobile device, I think what has been clear 
today is that there is no evidence even in what the FDA has put 
out when we talk about a difference between component 
manufacturers and device manufacturers, that there is a concern 
there, but we can all agree again that we need to put the FDA 
together.
    And lastly, Madam Chair, as my time expires, I hope that 
there is agreement with the committee and we work with the 
chairman and Ranking Member Waxman that we put as much pressure 
as we can on the FDA to get this document out, that I heard a 
lot of concerns from my Republican colleagues about the 2.3 
percent tax, and I completely hear their opposition to this. I 
am hoping that they can join me in voting against the Paul Ryan 
budget this week because the Republican budget released last 
week relies on the revenue generated by the medical device 
excise tax to achieve its revenue targets. So, look there are 
some ways to talk about this today and some ways to show 
opposition, but when it is included in the blueprints 
associated with the future of what we are looking at here, 
there has to be a better way to do this.
    The only good thing I can say today, Madam Chair, is that I 
think we have seen some clear agreement in this area, and just 
one last thing. When we talk about the apps even in the startup 
companies and the concerns associated with the 2.3 percent 
excise tax that was included in the Affordable Care Act, there 
is one other thing that startups making retail mobile 
applications have an explicit retail exemption in the law that 
excludes these types of apps along with products like contact 
lenses and hearing aids. That is the truth. So we as Members of 
Congress also need to be careful with how we create uncertainty 
when we are out saying things that sometimes mislead the 
public, and I hope that we can work together and make sure I 
can join with some of my friends and use those new Nike shoes 
and go for a little jog. Thanks, Madam Chair.
    Mrs. Ellmers. Thank you, Mr. Lujan, and I would like to say 
as far as clarity and factual information, the Ryan budget does 
not in fact do that.
    I now turn to Mr. Shimkus.
    Mr. Shimkus. Yes, it is a nice attempt. We just think it is 
important to balance your budget by 10 years and start paying 
down debt, so I guess if balancing the budget in 10 years and 
not paying down debt is not important to you, then I guess you 
go to your processes.
    Mr. Lujan. Would the gentleman yield?
    Mr. Shimkus. No, actually not. I was going to try to ask 
for time, but I think I will use mine on this debate.
    Mr. Dagi and Mr. Ford, in follow-up to my colleague's other 
questions, talk about that chip in the phone. Does it--I mean, 
he is assuming that the whole panel agrees. Where do you stand 
on what could happen, Mr. Dagi first and Mr. Ford, with that 
example that my colleague just expressed?
    Dr. Dagi. It depends on the application, sir. If you have, 
for example, chips in shoes that can be used for a runner but 
can also be used to look at a child with cerebral palsy and use 
it to treat them----
    Mr. Shimkus. My colleague is not paying attention to your 
answer, and since I would hope that he would do that, go ahead.
    Dr. Dagi. The same chip can have multiple applications, and 
traditionally, the FDA has regulated applications and clings as 
well as devices themselves, so the safety piece of it and the 
efficacy is one part. The second part is the application. We 
would ask for clarity on the way these are going to be 
regulated, and we would ask that the goalpost not be moved in 
the process of bringing devices to the market.
    Mr. Shimkus. Mr. Ford?
    Mr. Ford. Well, I think it is interesting that we keep 
asking the FDA for certainty about things and then we make 
certain claims about what they will or will not do. It has got 
to be one or the other. We either need certainty or we don't. 
The other issue with uncertainty that I think is important to 
clarify, resolving the uncertainty is not helpful in itself. 
What if we become very certain that they intend to regulate 
everything very heavily as class III devices and tax mobile 
phones and everything else? I don't think that would be very 
helpful for innovation. So resolving the certainty/uncertainty 
issue depends on what we become certain about and what we 
remain uncertain about. So resolving uncertainty is not really 
that helpful if we become more certain that the regulation is 
going to be very heavy-handed.
    Mr. Shimkus. And that is a great segue. Mr. Jarrin, you 
talked about the hockey stick, all these new apps. How many of 
you actually have apps right now? And what is the approval 
process to have an app right now?
    Mr. Chodor. None.
    Mr. Shimkus. Why do you think we have so many apps? Now, I 
have got my iPad here. I have got 21 updates, map updates. If 
you had go through--let me ask another question. How often do 
you update an app, Mr. Chodor?
    Mr. Chodor. I mean, all developers do it differently. Some 
developers update it three, four, five times a year. Some 
developers are only updating once a year.
    Mr. Shimkus. So if you have to go through the same 
regulatory regime on approval of the original app and then all 
the updates, doesn't that segue back into the uncertainty of 
the risk the raising of capital? That is a problem. Would you 
agree?
    Mr. Chodor. If the app is going to make clinical decisions, 
then that is the cost of being in a heavily regulated industry 
called health care where we are dealing with patients and 
physicians.
    Mr. Shimkus. But you are living I a world right now where 
you don't have it, right?
    Mr. Chodor. Well, we----
    Mr. Shimkus. We are in a new world, a new, brave world of 
health care delivery that everyone is going to be happy with. 
But health apps developed in the absence of Obamacare and they 
are plentiful throughout the system, and our concern is, as the 
federal government gets involved, it creates uncertainty, it 
raises the cost of capital, it slows up the delivery process, 
and it could be very problematic for delivering the same care 
that we are all espousing.
    Mr. Dagi, you are nodding yes. Do you agree with that?
    Dr. Dagi. Absolutely. I believe that the medical 
application can be seen as a provider extender in some cases, 
so we don't have enough primary care physicians, we don't have 
enough specialty physicians. This is a way of getting to the 
patient.
    Mr. Shimkus. So we are all saying FDA should publish final 
guidance to clear up confusion. However, Mr. Dagi, you noted 
that we should be looking at alternatives to the FDA framework. 
I mean, there are some of us that realize government is big, 
costly, bureaucratic, slow, the Telecommunications 
Subcommittee. The great thing about this sector is it moves 
faster than we can regulate, and this is a concern that we are 
going to slow it down.
    Mr. Dagi, do you believe that the FDA framework is the best 
way to balance patient safety and innovation in this space?
    Dr. Dagi. They have the credibility and the experience. 
They need to take information outside the FDA. It can't be 
positivist. It can't be only from the inside. But with the 
appropriate inputs, yes.
    Mr. Shimkus. And you can bring the technology community in 
and be tech savvy, and that would be helpful.
    Dr. Dagi. That is correct.
    Mr. Shimkus. Thank you, Madam Chairman. I yield back my 
time.
    Mrs. Ellmers. Thank you. I now turn to my colleague, Mr. 
Gardner, for his questions.
    Mr. Gardner. Thank you, Madam Chair, and thank you to the 
witnesses for joining us today at this hearing.
    A couple weeks ago I met with a constituent of mine in 
Colorado. He was a software developer in his earlier life, 
earlier years, and since has focused his attention on 
developing applications for a variety of uses, and one of the 
things he was talking about was a recent health care scare that 
he had. He had a conversation with a doctor in Colorado where 
the doctor was showing him some of the new technologies that he 
is able to use today when it comes to medical applications, 
apps, software apps, things like that, but also in the near 
future things that we will be using, and he described a 
scenario where you could walk into your bedroom and you would 
have a scale and you would get on the scale and you would check 
your weight. That scale would have a Bluetooth connection to 
it, to the iPad, and it would send your weight to the iPad, and 
then you could actually use the iPad for as little as 100 
bucks, I think you said, with a device that was attached to it 
where you could check your blood pressure, your heartbeat, your 
heart rate, oxygen levels, and that that would be collected 
through the iPad as well. There may be some other things in the 
room that you could have that would also check your health 
status, and then that would send it through Bluetooth to the 
iPad, it would collect it and then send it directly to the 
doctor's office. At what point then are any of those things an 
app that could be subject to regulation, subject to a device 
tax? Would the scale qualify at that point as a device, Mr. 
Jarrin?
    Mr. Jarrin. The scale would qualify as a device if it is a 
medical device, if that is the intended use of the device. 
There are medical-grade weight scales and there are non-
medical-grade weight scales on the market.
    Mr. Gardner. So but just if you had just a scale that was 
attached to Bluetooth, then that scale would become a regulated 
medical device?
    Mr. Jarrin. Not necessarily. You need the intended use from 
the manufacturer.
    Mr. Gardner. So the intended use would be just you go buy a 
scale and the intended use is to check your weight. That is 
what a scale is.
    Mr. Jarrin. Right.
    Mr. Gardner. That weight then gets sent. Is that a medical 
device?
    Mr. Jarrin. Not necessarily. It depends again on the 
intended use by the manufacturer.
    Mr. Gardner. So not necessarily but it could be?
    Mr. Jarrin. Correct. It could be.
    Mr. Gardner. OK. So there is no clarity there.
    Mr. Jarrin. Well, it really--what we would need is more 
information about what the manufacturer intends with----
    Mr. Gardner. Well, it is intended as a scale. It is 
intended to check your weight.
    Mr. Jarrin. But there are some scales that are just for 
informational purposes and there are others that are----
    Mr. Gardner. Well, all scales are for informational 
purposes.
    Mr. Jarrin. Correct, but some make medical claims, and if 
that----
    Mr. Gardner. A medical claim as in, you weigh 150 pounds, 
which clearly I do not.
    Mr. Jarrin. But this could be used for medicine.
    Mr. Gardner. But aren't scales used for medicine?
    Mr. Jarrin. Not all.
    Mr. Gardner. Well, why would you check your weight then?
    Mr. Jarrin. For informational purposes. You want to lose 
weight----
    Mr. Gardner. For informational purposes, so it is like 
reading a description of a coloring box, this is red, this is 
blue, this is yellow. That has nothing to do with the color, it 
just is information?
    Mr. Jarrin. It is information.
    Mr. Gardner. That makes no sense to me. A scale is used to 
check your weight.
    Dr. Dagi, at what point does everything in your room then, 
the Bluetooth connection, the iPad, could it check your oxygen 
level? Is the scale a medical device subject to a tax?
    Dr. Dagi. You are 72 years old. You have just come out of 
the hospital with congestive heart failure. If your weight goes 
up 6 pounds, you may be about to go back into the hospital with 
another cycle of congestive heart failure. That scale has to be 
sufficiently accurate and precise to be able to adjust your 
medications, and at that point it becomes a medical device. If 
you put a penny in a scale at an arcade, that is not a medical 
device.
    Mr. Gardner. So is there clarity, though, of whether the 
iPad at that point that collects the information from the 
scale?
    Dr. Dagi. It depends on whether the iPad has a built-in 
algorithm that does something with the information. It is not 
only the data, it is converting the data into usable 
information and how that information will be used.
    Mr. Gardner. So I am hearing from several of the panelists 
that it depends. It might be, it could be. To me, that is not 
clarity. To me, that means that you have an entire room of 
iPhones, iPads, BlackBerrys that communicate with each other 
but it just depends on whether or not something is used for its 
intended purpose.
    Dr. Dagi, is there the clarity that we need in this field 
to ensure innovation?
    Dr. Dagi. We do not have the necessary clarity.
    Mr. Gardner. And Mr. Jarrin, would you agree with that at 
that point?
    Mr. Jarrin. It depends.
    Mr. Gardner. It depends? ``It depends'' is not clarity. If 
it depends, that doesn't seem to me to give you the kind of 
certainty and innovation and funding that we are seeking.
    Mr. Jarrin. There is insufficient clarity with low-risk 
medical devices or low-risk devices.
    Mr. Gardner. But is low risk a scale?
    Mr. Jarrin. Yes, it could be, if it is for recreational 
purposes.
    Mr. Gardner. Mr. Spalter, so is there sufficient clarity in 
this realm to know that innovation can continue unfettered?
    Mr. Spalter. Clearly not, and we have a group of experts 
here that are struggling with this question. Imagine what it 
must be like for the members that we represent, the app 
developers who are sitting on their laptops in their living 
rooms trying to dream up the next innovations. How are they 
dealing with this level of uncertainty? What we are asking for 
is not necessarily one framework or another. What we are asking 
for is let us create that balance, let us find the line, let us 
put down on paper where we actually--what we need to 
understand, and once we get there, I think the hockey stick 
that we talked about, 40,000 medical apps, will become 100,000, 
200,000 medical apps. In fact, I would even say that if we had 
that clarity, that the smartphone that is enabled to test 
urinalysis that we talked about earlier today, there would 
already be three or five new apps that have been developed just 
this morning.
    Mr. Gardner. Madam, if I can just ask one follow-up? So I 
mean, the line clearly is in the wrong place at this point, and 
we have got to adjust it. Would you agree with that, Mr. 
Spalter?
    Mr. Spalter. I believe that we need clarity, yes.
    Mr. Gardner. Dr. Dagi?
    Dr. Dagi. Yes, sir.
    Mr. Gardner. Thank you. Madam Chair, thank you for your 
indulgence.
    Mrs. Ellmers. Thank you. Mr. Lujan, did you have additional 
questions or comments that you wanted to make? OK. I will 
finish up with my questioning.
    Mr. Thompson, I have a question for you. In the wireless 
world, most wireless devices are replaced in a 2-year cycle, 
and mobile operating systems are replaced in as little as 1 
year by their next version. Considering the high rate of 
technology advancement that is taking place, in your 
experiences with the FDA's regulatory processes, how long does 
the premarket approval process take on average for a 
noninvasive medical device?
    Mr. Thompson. There is quite a range but the range could be 
anywhere from about 90 days at the earliest for the actual FDA 
review, to up closer to a year and a half would also be 
reasonably typical.
    Mrs. Ellmers. So basically a year and a half is going to 
elapse before some of these very important medical applications 
can be put forward.
    I would just like to finish by asking all of you to respond 
to a couple of questions. Yes or no or unclear, I would like 
the response. I think one of the things that this very 
important subcommittee hearing has really brought to light is, 
one, we all care about patient safety and we want to practice 
appropriately. We agree that there is FDA approval and 
regulatory processes that need to be in place for certain 
levels, especially when we are looking at something as 
important as diagnosing a disease. Mr. Spalter, I listened to 
your testimony and I have personal experience with diabetes. My 
older brother was diagnosed 40 years ago. Where would he be 
today had we had some of that innovation in place.
    This is one where I would like to start to get a yes, no or 
unclear answer. Do you all agree that it is still unclear where 
we are with what is a medical device, starting with Mr. Jarrin?
    Mr. Jarrin. Yes.
    Mr. Thompson. Yes.
    Mr. Chodor. Yes.
    Mr. Spalter. Yes.
    Dr. Dagi. Yes.
    Mr. Ford. Yes.
    Mrs. Ellmers. The other question that I have for you is 
this. FDA regulation and medical device tax, or gross tax are 
the two issues that we are really talking about today. In your 
opinion, if it is FDA regulated, should the medical device tax 
be in place? I guess I should preface that by saying, do you 
believe that the medical device tax is going to hamper 
innovation? And I would like for each of you to answer that 
question first.
    Mr. Jarrin. Unclear.
    Mr. Thompson. I would say it definitely hampers innovation.
    Mr. Chodor. Unclear.
    Mr. Spalter. It is still unclear.
    Dr. Dagi. Definitely yes.
    Mr. Ford. The tax will hamper innovation.
    Mrs. Ellmers. In your opinion then, if FDA regulation is in 
place, and certainly we have seen the need for FDA regulation. 
We need to make sure we are practicing safely and best 
practices are being adhered to. Do you believe if the FDA 
regulation is in place that a medical device tax for such a 
product should be in place as well?
    Mr. Jarrin. Unclear.
    Mr. Thompson. We oppose the tax.
    Mr. Chodor. Unclear.
    Mr. Spalter. Unclear.
    Dr. Dagi. Separate the tax from the regulation.
    Mr. Ford. Two completely different questions.
    Mrs. Ellmers. Thank you very much. I truly appreciate the 
testimony that all of you have given here today. This really 
opens up that door on this discussion that we need to have as 
to whether or not this medical device tax is something we need 
to move forward with, and of course, all important FDA 
regulations, so thank you very much.
    This subcommittee hearing is adjourned.
    [Whereupon, at 12:24 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Imagine the potential to improve Americans' wellbeing if we 
were to bring wireless innovation to health care. Wireless 
carriers invested $25.4 billion in capital expenditures from 
mid-2011 to mid-2012, and that investment was made in a poor 
fiscal environment. The mobile application business has 
experienced explosive growth since its inception a half decade 
ago--responsible for the creation of approximately 500,000 jobs 
and it is now a projected $25 billion industry for this year. 
The 321.7 million connected mobile devices in the United States 
as of mid-2012 exceeds the number of citizens, as many 
consumers now use a combination of smartphones, tablets, and 
laptops. And 60 percent of adults already say they track health 
data, seven percent using an ``app'' or other tool on their 
wireless device. That figure is only going to continue to rise 
as apps become more and more a part of our daily lives. Helping 
people take better care of themselves with their mobile devices 
can make them healthier while at the same time cutting costs.
    The question is: how do we harness this innovation? The 
mobile application economy is characterized by low barriers to 
entry, quick time to market, inexpensive retail prices, and 
rapid upgrade cycles. That will not be sustainable, however, if 
we indiscriminately regulate and tax mobile applications, 
smartphones, and tablets as if they were artificial hips or 
pacemakers. Arbitrarily applying the definition of ``medical 
device'' and the medical device tax to the wireless world could 
prove disastrous and grind this innovation cycle to a halt.
    We certainly want to ensure patient safety, but the 
approach we take must be a smart one. My hope today is that our 
witnesses can shed light on how the medical device definition 
and tax is being applied to mobile devices and applications and 
what the impact is. I look forward to their testimony.

                                #  #  #

                              ----------                              


                Prepared statement of Hon. Leonard Lance

    Thank you Mr. Chairman and thank you to the witnesses who 
have all come to share their experience and expertise with us 
today.
    The mobile app market place is growing at an exponential 
pace. We are seeing more innovative new apps on the market 
every day that help American consumers with innumerable daily 
tasks. This is one space where we are truly seeing fast paced 
development and where new, tech savvy entrepreneurs can quickly 
make their brainstorm into a reality and bring it to the market 
almost immediately upon completion.
    There is a significant sector of this market aimed at 
helping Americans live healthier lives; this is the mobile 
health sector. A simple search for health and fitness apps for 
the iPhone produces page after page of options ranging from 
heart rate monitors, to calorie counters, to exercise apps and 
so much more. These technologies, as well as more advanced 
equipment and programs that are being used in doctor's offices 
and hospitals every day are helping to improve consumers' 
health and well being and in my cases bring down the overall 
cost of providing health care in this country.
    Unfortunately, the prospect of arduous regulatory 
processes, or worse, the prospect of being subject to a poorly 
thought out regressive tax loom as potentially chilling 
barriers for some new entrants into this market. There rightly 
is a role for the FDA to have a regulatory role with many of 
these new technologies but they must be clear about what kinds 
of apps and devices will be required to undergo their full 
regulatory review and what others would be exempt. Some of our 
witnesses point out that FDA is still finalizing many of its 
regulations that determine what is a ``medical device'' and 
what is not and that this final analysis may have a significant 
impact on what qualifies under Obamacare's medical device tax. 
Uncertainty like this is one of the largest drags on our 
nescient economic recovery.
    This brings me to the Medical Device Tax itself. I, like 
many of my colleagues on both sides of the aisle, view the 
imposition of the 2.3% tax on the medical device industry as 
arbitrary and wrongheaded. Mr. Ford makes that case pretty 
succinctly in his testimony in my opinion. This $20 billion tax 
should be repealed as soon as possible. The fact that there is 
any question as to whether or not a mobile device like an 
iPhone, iPad, or blackberry may be subject to this regressive 
tax would be comical if it weren't such a potentially serious 
issue.
    I have a constituent back home in New Jersey who is working 
with companies on the leading edge of some of this innovation. 
John Letko is President & CEO of U.S. Healthcare Supply located 
in Milford, NJ. His company provides care for roughly 150,000, 
most Medicare beneficiaries with diabetes. Mr. Letko is 
currently working with another company in development of a new 
glucometer that attaches to a smartphone and a corresponding 
app to help patients with diabetes monitor and track their 
glucose levels and seamlessly share that information with 
caregivers or family members. Fortunately for him, recent IRS 
guidance appears to put this new device under the so called 
retail exemption from the medical device tax and hopefully the 
same applies to the app. However, he recently wrote me a letter 
expressing serious concerns he has with the medical device 
tax's possible effect on his industry. He rightfully points out 
that for a company like his, the President's sequester has 
already resulted in a 2% cut the provider side of Medicare and 
recent cuts to the reimbursement for mail order diabetes 
supplies have created a very challenging environment. A further 
2.3% tax could be very damaging to the industry.
    While my colleagues and I work to finally repeal this 
damaging tax provision I would encourage the FDA to carefully 
consider how it regulates these new and innovative 
technologies. We must ensure safety but should not impede 
technological progress unnecessarily. We must find the right 
balance between protecting consumers and harnessing the power 
of America's innovators to ensure that the U.S. remains at the 
forefront of the boom we are seeing in the development of such 
technologies.
                              ----------                              


                Prepared statement of Hon. Anna G. Eshoo

    Mr. Chairman, today's hearing provides an opportunity to 
examine the exciting intersection between mobile technology and 
healthcare. Representing Silicon Valley and serving as Co-Chair 
of the House Medical Technology Caucus, I see first-hand the 
impact that the next generation of mobile health applications 
and devices are having on healthcare accessibility and 
improvements to care.
    In July 2011, the FDA announced it was seeking input with 
respect to how the agency should approach oversight of certain 
mobile medical apps used on smartphones, tablets and other 
mobile devices. In the nearly two years since the FDA sought 
comment, there have been over 700 pages of comments, the vast 
majority of which support the FDA's draft guidance. The FDA 
also conducted a two-day workshop on mobile medical apps which 
provided feedback from a variety of stakeholders, including 
manufacturers, healthcare providers and app developers. 
Unfortunately, in a hearing intended to examine how ``FDA 
regulations and taxes could impact innovation in mobile 
applications and services,'' we don't have the FDA here to tell 
their story.
    Also absent from this discussion is the importance of 
unlicensed spectrum to hospitals and other healthcare 
professionals around the country. For example, in Logan, Ohio, 
through the power of unlicensed spectrum below 1 gigahertz, the 
Hocking Valley Community Hospital has a robust broadband 
solution that is improving the efficiency and quality of care 
throughout the hospital. Elsewhere in the country, unlicensed 
spectrum is supporting nurse call systems, mobile duress 
pendants, as well as fluid pump, respirator and other medical 
equipment alarm telemetry.
    I understand the desire of innovators to have a predictable 
regulatory process for the apps they're developing. But mobile 
medical applications are an emerging and exciting new field of 
technology and we're still trying to get a handle on what the 
landscape looks like. As technology advances, the clear lines 
of what's considered a medical device are becoming blurred. We 
have to be careful not to lock ourselves into a misguided 
pathway without a more complete picture of what these new 
technologies are capable of. The FDA's primary goal is to 
ensure patient safety and I believe they are working diligently 
on final guidance for regulation of mobile health applications.
    Despite the FDA's absence from today's hearing, I look 
forward to hearing from our witnesses and their enthusiasm for 
this emerging field of innovation that could one day transform 
our healthcare system. I share this enthusiasm and hope to see 
patients and the industry flourish.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                 
