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duced predictable, distressing results within the medical-

device industry.

Indeed, businesses have moved their operations into

foreign nations.  In a June 1994 survey by the American

Electronics Association, 29 percent of the polled firms

indicated that they had shifted investment overseas, 22

percent said they had moved personnel overseas, and 40 per-

cent said they had reduced their U.S. payroll as a result of

FDA delays.42

Internal Reform at the FDA

In 1994, the FDA began to exempt large numbers of Class

I devices from the requirements of the revamped post-SMDA

510(k) process.  Now, large numbers of those lowest-risk

devices reach the market through notification, much as they

would have in the original 510(k) process.  Practically,

that means that incremental advances in the design, or

changes in the manufacture or materials, of such items as

bedpans, Band-Aids, sterile gauze, or tongue depressors are

no longer automatically kept off the market while the FDA

grinds through its review process.  The pervasiveness and

silliness of the problems addressed by SMDA are illuminated

by the fact that the FDA would have automatically blocked

the sale of a manufacturer's tongue depressors because of a

switch from spruce wood to yellow pine.

The FDA's Trial of Third-Party Review

In August 1996, the FDA initiated a feasibility study

of a revised review system for low- to moderate-risk devic-

es.43  As an experiment, FDA accredited outside reviewers to

test the design, performance, and safety of at least 10

categories of devices.  The outside reviewers make recommen-

dations to the FDA about approval or disapproval, and the

FDA makes the final decision.

The FDA's feasibility study, administered through the

Division for Small Manufacturer's Assistance, located in the

Center for Devices and Radiological Health (CDRH), is very

limited in scope.  It is an optional fee-for-service program

in which fees are negotiated between the third-party review

organizations and the manufacturers.  The third parties can

review, but not certify, those Class I products not already

exempt from 510(k) review, and ultimately they will be per-

mitted to review 30 Class II products.  Among the Class I

products the FDA allows third parties to certify are neona-