From The Editor | June 4, 2013

5 Powerful Forces That Could Defeat Your Medical Electronics Design

By Jim Pomager
Follow me on Twitter @jpomager

Healthcare Tornado

You’ve worked really hard on the design and development of your latest [insert your medical electronics technology here]. You’ve put in long hours. You’ve invested a ton of intellectual and emotional energy in it. You’ve obsessed over its every detail. You’ve neglected other important priorities: family, friends, pets, health, yard, etc. You’ve done everything in your power to ensure its performance and success.

The sad thing is, it’s not enough. Despite everything you’ve poured into it — and no matter how revolutionary it is — your technology may never make it into the hands of the people who need it, when they need it.

There are forces at work outside of your organization that threaten your ability to bring your new technology to market, to do so in a timely fashion, and reap the rewards of your effort and ingenuity. If you’ve had your head down recently, consumed by your current project, you may not be aware of some or all of them. Continue to ignore them at your own peril.

1. The Medical Device Excise Tax

A component of the U.S. Patient Protection and Affordable Care Act (more commonly known as Obamacare), the Medical Device Excise Tax is a 2.3% tax on the sale price of taxable medical devices for human use.  Designed to raise $20 billion for the federal government over the next 10 years, the tax went into effect in January 2013 and, not surprisingly, has been a lightning rod for controversy ever since (and even before). Device manufacturers have blamed the tax for everything from layoffs to slower-than-expected growth, and have drawn criticism for passing the cost through to their customers.

In March, the U.S. Senate voted in favor of repealing the tax as part of a bipartisan budget resolution. Industry advocacy groups like AdvaMed have been outspoken in their support of the proposed move, saying it would remove a major roadblock to bringing life-saving medical devices to consumers. However, the repeal has stalled in the House of Representatives and faces stiff opposition from the President.  For the foreseeable future, the tax will remain in effect. Market research firm Kalorama Information anticipates the tax will limit venture capital investment and research spending in medical device companies. Will it significantly restrict R&D efforts at your organization?

2. Changes To U.S. Patent Law

Back in September 2011, President Obama signed into law the Leahy-Smith America Invents Act (AIA). The legislation didn’t go into effect until March 2013, at which point the U.S. patent system was effectively transformed from a first-to-invent to a first-to-file model. This means that patents for inventions are granted to the first person who files a patent application, not necessarily the first person who actually invented it. As a result, medical device companies and others have had to rethink their approach to patent filing — often rushing to file much earlier in the development process — in order to protect their intellectual property (IP) and remain competitive.

The effects of this act are manifesting themselves in interesting ways. For example, the University of Wisconsin-Madison is seeking to limit Wisconsin’s open records law in an attempt to withhold research data from the public until it is published or patented.  The university is concerned that the open records law gives competitors early access to its potentially patentable IP, enabling them to win the patent race under the new first-to-file rules. Will you file too late, or even too early?

3. Unique Device Identification (UDI) Requirements

Even before Obama signed the AIA, Congress signed into law the Unique Device Identification (UDI) system, as part of the Food and Drug Administration (FDA) Amendments Act of 2007. The rule calls for the FDA to establish a system of numeric or alphanumeric codes for identifying model and production information for most medical devices distributed in the United States. When it is ultimately implemented, the UDI system will provide more detailed information in medical device adverse event reports, helping the FDA quickly identify product problems, target recalls, and improve patient safety. In parallel, an organization known as the International Medical Device Regulators’ Forum (IMDRF) has been working on a framework for implementing UDI systems that would be interoperable across regulatory systems and supply chains.

However, the FDA regulations have been pushed back numerous times since the law was initially passed. The most recent deadline was set for May 7, but the FDA announced that day that it would be at least another seven weeks before the long-awaited final rule was rolled out. While there could be yet another delay (and another?), the system will be put into place sooner or later. And if your company isn’t preparing now, you could face significant delays in getting your product launched in the U.S. market. Will you be ready?

4. More Rigorous And Lengthy Regulatory Reviews

Many in the industry believe that the FDA's review/approval process for new medical devices is far too long, especially when compared to Europe's current system. According to a June 2012 report by Boston Consulting Group, the most innovative and potentially risky medical devices take almost four years longer to gain approval under the FDA’s so-called Premarket Approval (PMA) process than they do under the EU system. And it’s not only the medical device makers that are frustrated — their end users are, too. According to a Reuters story this week, doctors are growing increasingly exasperated over their lack of access to technologies that are already proving effective in Europe, sometimes recommending their patients go abroad for the latest treatments.

The bad news for medical device manufacturers: It looks like the EU approval process could get longer before the U.S. system gets shorter. The European Parliament and European Commission are discussing proposed changes that would make the CE mark approval process more stringent, in an effort to stem the tide of medical devices whose efficacy and safety is unclear. Are you prepared to usher your design through a more rigorous and protracted process?

5. The Economy

Growth in the global medical device market has slowed in the last year. According to Kalorama Information, the total market reached $331 billion in 2012, only a 3% increase over 2011 and lower than the market research firm had projected. In the United States, spending increases were quite modest from Medicare, Medicaid, and state governments. In Europe, home to 5 of the 10 largest medical device markets in the world, exports have diminished and healthcare reforms have been proposed, thanks largely to the economic crises in Greece, Ireland, Portugal, and Spain. Even some of the emerging BRIC markets (Brazil, Russia, India, and China) have been hampered by the economic downturn in the U.S. and Europe. Will the market for your product be as big as expected — or at least big enough for your firm to recoup its R&D investment?

Are these factors affecting you and your company? What are you doing to overcome them? Are there other significant obstructions in your technology’s path to market?