There are a multitude of complex issues facing the medical device contract manufacturing industry today. Consistent with all businesses in our country, there has been some level of “impact” from the decline of the economy since 2008. There is little benefit of listing the obvious issues, other than to illustrate the negative contribution that Washington has on the industry and the efforts of senior management from the larger medical device companies along with their allies within governmental allies, to try to reverse course.
MEDICAL DEVICE EXCISE TAX: Created in the early days of the Obama administration; this legislation caused the multinational device companies to “apply the brakes” on future developmental efforts. Since many of these large companies outsource device assembly and manufacturing, a slowdown rippled throughout the industry. Currently within both the House and Senate, at least 225 representatives have signed legislation to repeal this tax that would further deter the innovation and development that has been the cornerstone of industry growth.
PATENT REFORM LEGISLATION: The initial objectives for all medical device manufacturers is to make sure they have broad reaching and buttoned up Intellectual Property on all facets of their technology. Patents provide a head start in both commercialization efforts and longer term protection from the copycats. It has been reported by the Medical Device Manufacturing Association (MDMA) that reform legislation was recently signed. The MDMA reports that many of the provisions that would potentially damage medical technology innovators, are not in the “final” versions of the law.
FUNDING FOR STARTUPS: It was recently reported that approximately 40% of Venture Capital Funds, had difficulty raising money since 2008. The reasons include the Wall Street downturn, dissolution of the banking industry and the more stringent FDA regulations, to name a few. These events have all combined to cement a grim forecast for the number of medical device startups who rely heavily upon medical device contract manufacturers for their process development and product assembly. The money that is being allocated to some early stage companies appears to be directed toward products and technologies that provide a “quicker return”, in other words, 510k products vs. PMA.
FDA CULTURE: there appears to be a bottleneck that exists within the FDA that has sent many early stage companies outside the United States (OUS), not only to raise money, but to conduct clinicals and generate revenue, in an attempt to keep their objectives on target and minimize their competitive exposure. In addition, 510k submissions are being scrutinized longer and some converted to PMA’s.
Although many industries have been negatively impacted in this country, The Medical Device Contract Manufacturing Groups are being impacted from many different angles.