Medical Device Industry Faces ‘Unprecedented Challenges’ (AAMI)
The United States is the world leader in medical devices, but regulations, taxes, and other factors could knock it off its perch, according to a new study.
“The U.S. medical device industry—known for producing life-saving innovations and creating millions of jobs across the country—is facing unprecedented challenges that could prove catastrophic not only to the industry itself and to the livelihoods of its employees, but to the health of the patients who benefit every day from its technologies,” reads the study, The U.S. Medical Device Industry in 2012: Challenges at Home and Abroad, which appeared in the online edition of the biomedical publication MDDI (Medical Device and Diagnostic Industry) on July 17.
Written by Yair Holtzman, director of Global Life Sciences at the consulting firm WTP Advisors in White Plains, NY, the study analyzes the strengths, weaknesses, and opportunities of the device industry.
It says funding from a strong venture capital infrastructure and talent from top-notch medical schools helped grow the U.S. device market. “U.S.-based companies dominate the roughly $350 billion global device industry,” it reads. “Thirty-two of the 46 medical technology companies with more than $1 billion in annual revenue are based in the United States. As a result, the country serves as approximately 40% of the world market for medical devices and instruments.”
The market can grow, especially with an aging population that could increase demand for healthcare products and services, it says.
The industry does have weaknesses, with the study saying it is “a highly regulated sector of the economy plagued with bureaucracy. The U.S. Food and Drug Administration (FDA) review process is almost twice as long as that of its European counterpart, the European Medicines Agency, for devices not requiring clinical data, and almost three times as long for devices that do.”
FDA officials say they are working to improve review efficiency. The agency’s Center for Devices and Radiological Health has rolled out measures that officials say will strengthen the 510(k) program, the pathway by which most medical devices are cleared for market.
The study says another weakness is a planned tax on device makers installed as part of the Affordable Care Act, which was recently upheld by the U.S. Supreme Court.
“The amount is based on a 2.3% excise tax that will be levied on the total revenues of a company, regardless of whether a company generates a profit,” the study reads. “Many companies will owe more in taxes than they generate from their operations. The result will be devastating to innovation, patient care, and job creation.”
Proponents of the healthcare reform act say it will extend insurance coverage to millions of people, generating more customers for device companies.
“This excise tax is one of several designed so that industries that gain from the coverage expansion will help offset the cost of that expansion,” reads a letter from White House officials in response to legislation to repeal the tax.
The study also lists some key threats to the U.S. device industry’s dominance, such as globalization. “Manufacturers are looking to the worldwide market in search of increased growth opportunities,” it reads. “The Chinese medical device market is predicted to expand about 15% annually during the next five years, while India’s market is expected to expand about 23%.”
Venture capital firms could find these growing markets more attractive, and provide fewer funding for U.S. firms, the study says.
To read it, click here.