UPDATE 2-U.S. FDA Balks at Medical Device Shakeup

* Advisers recommend replacing 510(k) approval program

* Say program not adequate to protect patients

* FDA disagrees, will not eliminate accelerated approval

* No dramatic changes seen in near term

(Adds further IOM comments, analyst reaction)

By Andrew Seaman

WASHINGTON (Reuters) - An advisory group said the U.S. fast-track approval process for medical devices is fatally flawed and should be replaced, but the Food and Drug Administration said the recommendation was a non-starter.

The FDA had asked for the Institute of Medicine report as part of a broad agency review of its device unit, an area dogged by high staff turnover, funding woes and major recalls in recent years of devices ranging from artificial hips to heart defibrillators.

The IOM found the fast-track approval process, called 510(k), does not adequately protect patients and recommended a more thorough process that would likely to raise the costs for device makers with pre-market and post-market device reviews.

"What we are recommending is that the 510(k) is fatally flawed in terms of it not evaluating safety and effectiveness of a device," said Dr. David Challoner, chairman of the IOM's committee.

But the finding was swiftly rejected by the FDA's top device official.

"FDA believes that the 510(k) process should not be eliminated, but we are open to additional proposals and approaches for continued improvement of our device review programs," Dr. Jeffrey Shuren, director of the FDA's Center for Devices and Radiological Health, said in a statement.

Wall Street analysts said the report was not a game-changer, at least in the near term. Legislation would be required for any significant changes to the device approval process.

"The 510(k) process was established in 1976 and it was meant to be a temporary stop-gap," said Thomas Gunderson, an analyst with Piper Jaffray. "The process can certainly be improved upon, but at the current pace, I don't see this (IOM report) having any meaningful impact."

Senator Al Franken said the IOM was advocating new burdens for the medical device industry without a clear path to a more effective process.

"Calling for the elimination of the 510(k) process could be very harmful to innovation," said Franken, a member of the Senate's health committee and whose state of Minnesota is home to Medtronic Inc, a major device maker.

The 510(k) program allows medical devices to get to market faster if they are "substantially equivalent" to an existing product.

Critics say the accelerated 510(k) process is too widely used and leads to inadequate testing for some risky devices, but it is defended by the industry as necessary to speed technologies to patients.

The medical device industry has argued for either leaving the 510(k) process as it is or further streamlining the approval process. Most new medical devices -- about 4,000 in 2009 -- are cleared through the accelerated program.

IOM's Challoner said in a briefing on Friday that he recognizes the report is suggesting "a paradigm shift" that could be disquieting to the medical device industry, consumers and regulators.

Another IOM committee member, however, said the current 510(k) system "has been reasonably safe."

"We do not believe that one has to shut down the system tonight. We think it is working adequately in the short term," said William Vodra.

The industry group Advanced Medical Technology Association, or AdvaMed, said Congress and the FDA should not seriously consider the report's conclusions.

"(The report) proposes abandoning efforts to address the serious problems with the administration of the current program by replacing it at some unknown date with an untried, unproven and unspecified new legal structure," AdvaMed's CEO and president Stephen Ubl said. "This would be a disservice to patients and the public health."

Medical devices range from simple bandages to complex implants such as pacemakers, stents and artificial knees. Other than Johnson & Johnson, the largest medical-device makers include Medtronic, Boston Scientific Corp and Abbott Laboratories Inc.

High-profile incidents include a massive recall last year of artificial hips by Johnson & Johnson's DePuy unit.

Some 93,000 patients worldwide had that line of hip implant.[ID:nN26186681]

Automated external defibrillators, used in public places such as airports to revive cardiac arrest victims, have also made up a significant portion of 510(k) recalls in recent years. Health officials are looking at thousands of reports of malfunctions which may have led to patient harm or death. [ID:nN15265576] (Reporting by Andrew Seaman; Additional reporting by Alina Selyukh and Debra Sherman; Editing by Tim Dobbyn)