In today’s rapidly changing business climate, understanding the regulatory and demographic environment of the medical device industry is only part of the challenge. The real struggle for medical device companies is defining the right strategy, particularly with increasing consolidation, heightened regulation, and shifting market demands. Firms that are able to adapt quickly, taking advantage of the transformative nature of the industry, will become inherent market leaders.
We will highlight four trends shaping the medical device industry, providing guidance on how medical device leaders can successfully navigate each.
With the increased involvement of industry stakeholders and consumer advocacy groups, along with widely publicized safety concerns and product recalls, regulatory agencies are being forced to act. Beginning with the Patient Protection and Affordable Care Act, the government’s goal is to shift the focus of US healthcare from quantity to quality. This tenet carries over into the modification of the 510(k) process, the end result of which will more effectively protect patients and promote the health of the public. The recent UDI legislation furthers this protection, ensuring that devices are identifiable and secure at all points within the supply chain.
Patient Protection and Affordable Care Act (ACA)
In 2010, the Patient Protection and Affordable Care Act was signed into law, which included a $20 billion dollar tax on the medical device industry. In 2013, a 2.3 percent excise tax on the total revenue of medical device companies went into effect. With the excise tax on revenue instead of profit, medical device companies are experiencing a significant increase in their overall tax burden. Due to the high cost of R&D at start up, many smaller medical device companies will struggle to survive the taxation. While large medical device companies can rely on a range of products to provide a dependable revenue stream, there is concern that the medical device industry will begin to mirror the pharmaceutical industry’s fondness for mergers and acquisitions.
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