Whitney Palmer

Medical Devices: Current & Future Market Challenges

Published in the Sept. 27, 2012, Billian’s HealthDATA/Porter Research Hub e-newsletter

By Whitney L.J. Howell

The cotton swab in the general practitioner’s office. The stent in the cardiac operating suite. The telemedicine system that helps patients meet their own health needs at home. These are disparate products, but they have one thing in common – they’re all part of the $350-billion medical device industry.

Currently, according to World Health Organization statistics, there are more than 1.5 million different medical devices used globally each year. And, over the past five years, this sector has been a stalwart player in the healthcare industry.

Between 2007 and 2009, medical device manufacturers added 80,000 jobs, an employment increase of roughly 20 percent. Investments in research and development have also climbed 9 percent in recent years; U.S.-based manufacturers meet 40 percent of the world’s medical device needs.

Despite these positive numbers, however, the medical device industry is experiencing a paradox, according to Gary Karr, Executive Vice President for Public Affairs for the Advanced Medical Technology Association (AdvaMed). Worldwide demand for medical devices is booming, but U.S.-based medical device manufacturers are facing several challenges that could stringently control their future activities.

“It’s the best and worst of times,” Karr says. “We’re seeing increasing demand across the globe for medical devices and technologies because of what they do for patients’ lives. But the difficult spot is that governments are under pressure to control budgets, and policymakers have the impulse to make cuts that may be short-sighted, and actually hurt the industry and patient care.”

The industry is already feeling the pinch. As medical device manufacturing blooms in emerging markets such as China, concerns over drooping Medicare reimbursement and other financial pressures have spiked domestically. According to global capital advisory firm WTP Advisors, the U.S. medical device market still leads the world, but worries have pushed medical device organizations to consolidate at an annual rate of 5.5 percent, leaving 828 U.S.-based companies.

Federal Challenges
One of the biggest points of contention among medical device manufacturers and healthcare experts is the $20 billion tax levied on the industry as part of the Affordable Care Act (ACA). Set to become effective in 2013, this measure places a 2.3-percent excise tax on a company’s total revenues regardless of its profitability.

Industry analysts say device manufacturers will recoup the money spent on the tax through international sales. However, many manufacturers and their advocates, including the Medical Device Manufacturers Association (MDMA), argue the tax will squelch innovation, deteriorate patient care and erode the United States’ status as a global medical device leader.

According to a previous statement from MDMA President and Chief Executive Officer Mark Leahey, it’s the smaller manufacturers that will bear the brunt of the tax. Plus, he contended, there’s little proof that the impending barrage of newly insured patients under the ACA will help the companies recoup their losses.

“While MDMA and our members still have seen no evidence or reports showing any ‘windfall’ for medical device companies as a result of the ACA, it is clear that this misguided policy has already led to job losses and cuts to research and development,” he said.

In fact, a 2011 AdvaMed report projected the medical device tax could delete 45,000 jobs from the industry.

Medical device manufacturers already face a longer regulatory and approval process through the Food and Drug Administration (FDA) than similar companies abroad. But now they must also consider the FDA’s recent move to directly impact how their products are distributed. The FDA released details in early September about the implementation of its unique device identifier (UDI) system. The report is currently open for public comment. The protocol would affect most medical devices available in the United States, and according to agency officials, would spark several benefits.

“The unique identification system will enhance the flow of information about medical devices, especially adverse events, and as a result, will advance our ability to improve patient safety,” said FDA Commissioner Margaret A. Hamburg, M.D., in a written statement.

The FDA also projected the UDI system could reduce the number of medical errors, make it easier to record device data in electronic health records (EHRs), and help prevent any fraudulent device production or sales.

When implemented, the UDI system will provide a one-of-a-kind numeric or alphanumeric code for each device model, as well as a production identifier that has up-to-date device product information. UDIs for the highest risk devices would be implemented first, and the agency recommends an exemption for over-the-counter, retail devices.

The FDA is also set to change how medical devices are registered this October. Under the FDA Safety and Innovation Act, all registered organizations that handle medical devices must pay an annual registration fee – the fee for fiscal year 2013 is $2,575. This change affects domestic and foreign manufacturers, importers, developers, sterilizers and other affiliated groups.

Medical Devices & Health Information Technology Integration
The medical device tax, however, isn’t the only way the ACA has impacted the industry. Meaningful Use – the requirement that providers and facilities demonstrate they’re using health information technology in an effective manner – extends to medical devices as well.

According to Stuart Long, Chief Strategy Officer for Capsule, a medical device integration company, the U.S. Supreme Court’s support for the ACA makes it more critical than ever that medical devices communicate seamlessly with a facility’s EHR. And, the trend toward that connectivity is growing.

“We’re seeing the evolution of device integration,” he said. “In the past, hospitals were primarily focused on integration in clinical care. Now, more and more hospitals are prioritizing lower acuity areas, such as medical-surgical for integration.”

However, workflow needs in various clinical environments differ, he said, making it difficult for providers to keep track of the necessary patient data. The challenge is finding an integration solution that addresses flexibility, scalability and patient safety concerns while meeting needs across all hospital departments.

Achieving smooth integration could prompt many positive changes. When medical devices and EHRs communicate freely, hospitals save nursing hours, charting errors drop, patient safety and outcomes improve, and provider time spent at the bedside becomes more productive.

Ultimately, integrating medical devices and EHRs will give providers more tools to improve patient care, he said. For example, by pulling patient data from a multitude of medical devices, doctors will be better equipped for diagnoses and better able to predict future patient problems.

One Manufacturer’s Experience
As health information technology continues to advance and the healthcare industry seeks to reduce the number of inpatient stays, more medical device manufacturers are looking to launch mobile devices. In early September, Preventice, a mobile health solutions manufacturer, joined these ranks. The company received FDA approval for its new BodyGuardian Remote Monitoring System™, a non-intrusive, wearable body sensor that lets physicians keep tabs on patient physiological data at all times.

Despite the trend toward mobile devices and systems, navigating the FDA approval procedures was still arduous, said Judy Eastman, Preventice’s Remote Monitor Solutions Director.

“It’s a very daunting process, but from our perspective, the biggest challenge was the documentation,” Eastman said. “We delivered more than 1,700 pages of documentation, and then we held our breath.”

Although Preventice avoided any major stumbling blocks in the approval process, the forthcoming FDA regulation revisions could create problems or snags for other companies, she said. Additional layers of review will slow down the getting-to-market process for any medical devices.

However, as a vendor, Eastman said she anticipates the medical device industry and its regulatory processes will continue their evolution, and recommends companies become familiar with all new requirements associated with healthcare’s major players and the expanding methods of providing patient care.

“Delivering care is becoming a broader rather than a more narrow game, and there’s always the challenge to meet everyone’s needs – regulators, payers, providers,” she said. “As the ones delivering these devices and technologies, we must identify our various connections with institutions or groups and be aware that those relationships and the medical device playing field are shifting.”

To read the article at its original location: http://www.billianshealthdata.com/news/SiteNews/news_items/2012/September/Medical_Device_Feature.html

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