For years, medical-device makers had only one friend and one archnemesis. The ironic part was that they were one and the same: the Food and Drug Administration.
The FDA holds the key to medical-device approvals in the U.S., but significantly tougher safety and efficacy tests lengthen the average approval process domestically to four and a half years. The approval process in Europe and abroad takes considerably less time, causing a select few device makers to begin looking abroad for their future growth -- such as Delcath Systems
Death by excise tax
A decision from the Supreme Court on the whether or not the Affordable Care Act (aka Obamacare) is constitutional is looming in just a matter of days. At stake for medical-device companies is the medical device excise tax (MDET), a 2.3% tax on total revenue, not profit, which goes into effect in 2013 and will pay a portion of the costs associated with the ACA.
If approved, medical-device companies will probably be looking to trim costs according to a survey published in March, whereby the Massachusetts Medical Device Industry Council polled top-level executives at medical device companies. A whopping 44% of those surveyed noted that they would be passing along the MDET costs to the end user, which, in turn, makes medical devices more expensive. Of the 39% that said they would internalize the costs, 50% said they would reduce research and development budgets, 25% responded that they'd lay off workers, and 25% said they'd outsource jobs overseas.
If you think this is fearmongering on my part, then you'd be sorely mistaken, because we've already seen this concern expressed by multiple medical-device CEOs.
Alexis Lukianov, CEO of San Diego-based NuVasive
Perhaps the biggest slap to Obamacare came in late July, when Boston Scientific
The prospect that medical-device companies may move their production overseas and may cut back on research and development expensing is very real. We won't have a definitive answer from the Supreme Court for a few more days, but I can tell you one thing: If Obamacare is upheld, the medical-device sector could see an unprecedented number of layoffs in 2013.
Agree? Disagree? A little bit both? Tell me about it in the comments section below.
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