The Evolving Eco-system of the Medical Device Industry. An analysis prepared by MassDevice.com

Transcription

1 The Evolving Eco-system of the Medical Device Industry An analysis prepared by MassDevice.com Massachusetts Medical Devices Journal LLC, 2008

2 Who we are MassDevice.com Online business journal covering the medical device industry in New England and the mid-west Breaking news, analysis of industry

3 Industry snapshot: Massachusetts Industry snapshot: Massachusetts 400+ medical device firms $5 billion in annual sales 50,000 employees 11% of all Massachusetts exports ($2.5 billion) 2% of Massachusetts GDP Finance and insurance: 5% Professional services: 8% Health care: 8%

4 Challenges Financial How the recession has impacted the industry The winners & losers Healthcare Reform Medical Device Excise Tax Sunshine act Regulatory Changes in the way devices brought to market New leadership brings new priorities

5 Challenges Financial How the recession has impacted the industry The winners & losers Healthcare Reform Medical Device Excise Tax Sunshine act Regulatory Changes in the way devices brought to market New leadership brings new priorities

6 The Global Recession Simple fact: The recession has impacted all American industries, including the once thought to be recession proof healthcare industry.

7 The Global Recession - Impacts on medtech Capital Equipment makers hit hard MRI and Imaging Makers Analogic Corp. CEO calls 2009 Most challenging year in company s history. Sales of medical imaging off 24 percent from year before Hospital spending freeze in H means customers sat on inventory. Some easing towards end of the year. Aesthetic lasers/cosmetic Surgery down Elective orthopedic procedures were down Price pressure exerted on high-competition industries Exception: Intuitive Surgical beats expectations

8 The Global Recession - Impacts on medtech Service industries severely impacted by slowdown in deal flow IPO market significantly impacted over past two years 1 IPO in medtech since 2007 (25 in , according to Morgan stanley) Less exits means more M&A; less product development Service provider industry dependent on bottom-up innovation, rather than industry contraction.

9 The Global Recession - The (almost)winners The rich get richer (for the most part) Cash rich companies got the pick of the litter in shrinking valuations Covidien acquired 5 companies in 2009, and shed several underperforming units. Abbott Medtronic JNJ s medical device unit outdoes Pharma for first time in decades Exception: Boston Scientific sits out of the M&A bonanza

10 Conventional Wisdom for 2010 Conventional wisdom Recovery year, but no big return of dried IPO markets til 2011 M&A market will continue to drive exits for VC s

11 Challenges Financial How the recession has impacted the industry The winners & losers Healthcare Reform Medical Device Excise Tax Sunshine act Regulatory Changes in the way devices brought to market New leadership brings new priorities

12 Healthcare Reform Medical Device Excise Tax 2.3 percent sales tax on all medical devices starts in 2013 Tax deductible No designation for small companies. Based on U.S. sales MassDevice analysis finds if tax was implemented in 09 large companies would carry 85 percent of the total burden. Most damaging to mid-sized companies and companies still posting heavy losses despite sales. Health reform widely unpopular in device sector. More than 58 percent of respondents to MassDevice snap-poll said they hated the bill.

13 Sunshine Act "Physician Payments Sunshine Provision contained in HCR Companies required to report all payments or gifts to physicians over $10 starting in March 2013 Searchable databases of payments will be created from this Stiffer penalties of $1K-$100K for companies in violation Several states had already enacted strict gift ban provisions that were, in part, modeled on the legislation.

14 Challenges Financial How the recession has impacted the industry The winners & losers Healthcare Reform Medical Device Excise Tax Sunshine act Regulatory Changes in the way devices brought to market New leadership brings new priorities

15 A new era of regulation Public safety and transparency Margaret Hamburg takes over FDA in May 2009 promising to take the agency into a new direction Jeffrey Shuren appointed permanent head of CDRH in January A public safety agency that promises to look under the hood First budget is $4 billion, up 23 percent from prior year $100 million earmarked for patient safety Quicker, more public response to safety issues More warning letters to companies found in violation of Better post-market surveillance Hiring spree at agency

16 Examining the 510k process Program by which majority of medical devices go to market is in the crosshairs 510(k) predicate device program clearly under fire Agency has called for two audits. One from the Institute of Medicine due March 2011 Subject to two public hearings Regen Biologics case became the rallying cry for a broken system (fair or not) Impact of change? 3,000 devices cleared by agency using this program in 2009 Quickest, cheapest way to get to market - only need to prove equivalence Fees: $3,693 for a company with sales of over $100 million and $1,847 for smaller firms. PMA s can cost up to $200,000 for large co. $50,000 for small firms (first fee is waived) Alternatives would be to move all Class III devices into PMA

17 A new era of regulation "The 510(k) process was developed in a different era Devices have grown very much in terms of the complexity and in advancement, where we have an obligation to make sure we have a regulatory oversight program that really addresses the needs of the evolving technology and assure we are adequately assessing between safety and effectiveness, and what possible steps could or should be taken. Hamburg interviewed by MassDevice Feb Clearly troubled Hamburg on the CDRH to Reuters in November

18 A new era of regulation More regulation on the plate New guidance on social media and marketing expected in Device makers very unsure as to what they can and can t say. Possible regulation of EMR s being discussed Medical Device identification system forecasted in next three years A central databank that will contain a universal coding system for all devices. More Mobile Health regulation New alliances with academic researchers to create better analytics to track device effectiveness Medical Device User Fee act comes due in 2011 as well. Unlikely that $1800 fee will be reduced

19 Continue to follow the story Visit and sign up for our newsletter 510K reports Insider reports Medical Device tax impact on industry