Full Circle

In the January/February issue of Medical Product Outsourcing this year, the title of this page was “Out, Damned Tax.” It was the first of seemingly countless column-inches of copy (how’s that for some old-fashioned print-journalism parlance?) devoted to the topic of the much-maligned medical device excise tax that takes effect in January. We may as well end the year as it started (as well as at more than a few points in between). Unfortunately, little has changed in nearly 12 months. While the movement to repeal had a lot of support in the U.S. House of Representatives and more than expected (yet still not enough) in the Senate, the tax remains. Even hopes for a lame duck session repeal are tempered by the likelihood of a White House veto.

So what happens now? Well, a lot and nothing at all. It is, of course, a presidential election year, and the winner (most likely) will be known soon after this issue is mailed. We hope so anyway. (Given the look of the electoral map, a tie at 269 electoral votes —with a 270 majority needed to win—is a very real possibility. But that’s a topic for another time.) What does another four years under the current administration mean? Or what would a new administration hold for the medical device industry?

Traditionally, the November/December issue of MPO includes a look back at the current year in medtech as well as expert predictions about the year to come. This installment is no exception. As part of our annual feature (on page 40), we asked a number of industry insiders of all different stripes to cogitate and postulate. One of the questions, of course, was how the election could shape the medtech sector. For the most part, the response was a resounding yawn.

David Nexon, senior executive vice president of the Advanced Medical Technology Association (AdvaMed), said he doesn’t expect dramatic changes, regardless of election outcome. “Obviously if [Mitt] Romney were to be elected, you’d have a whole different set of people to deal with, but, in general, we feel the fundamentals are going to be pretty similar no matter who gets elected,” Nexon said. “In terms of what affects us in healthcare, leaving aside the device tax for a moment, the biggest thing is the changes in the payment system, reorienting the system toward rewarding people for efficiency and quality and away from fee for service. That’s a good thing, but it can have the unintended consequences that if you’re not careful about where those changes are headed, they can also incentivize people to skimp on care and deny people access to the technologies they need and have a chilling effect on medical innovation.”

Mark Leahey, president and CEO of the Medical Device Manufacturers Association, echoed Nexon’s sentiments.

“Regardless of which party is in control of Congress or the White House, our hope is that we can continue to move toward a more predictable and transparent regulatory framework, and that innovation and improvements to patient care will be valued and encouraged,” Leahey said. “The crucial element that medical technology innovators are looking for is to know the rules of the road, and that they won’t change once they’ve started their respective journeys.”

Josh Makower, M.D., medtech entrepreneur and venture capitalist, took a more philosophical approach, avoiding a path that’s too political (how refreshing).

“It has long been my hope that elections never have any impact on the regulatory environment,” he said. “Science and data should always be the guiding lights of regulation and innovation, whether or not the Republicans or Democrats control Congress or the White House.”

Industry consultant Larry Haimovitch said: “We all know how slowly Washington moves, so it’s hard to imagine that even if Romney is elected that something dramatic can be done in the short term with ‘Obamacare’ and the excise tax. I’d be very surprised if something is done in the short term.”

Joanne Wuensch, medical device industry analyst for BMO Capital Markets in New York, N.Y., said she didn’t expect the outcome of the November elections to have any immediate impact on the industry in 2013. “It’s what you see is what you’ll get,” she said.

For these folks at least, it seems like business as usual for the forseeable future, no matter what the presidential contest brings. And what’s usual? Companies must continue to find ways to innovate and stay competitive—even if the rules of the game continue to change midstream. It would be nice if the “new normal” (forgive the cliché) was at least a little consistent. But the value of the medical device market is still strong. A new report released by AdvaMed claims that “medical devices are a relatively small and very slowly growing share of national health expenditures.”In the report commissioned by the trade group, researchers found that medical device expenditures as a share of national health spending changed little between 1989 and 2010, growing from 5.3 percent of overall costs to 6 percent—and most of the increase occurred prior to 1992.

Statistics such as these demonstrate that the medical device industry is part of the solution to healthcare’s most pressing needs—technologically and cost wise. Now, we just need to
ensure—no matter who resides at 1600 Pennsylvania Avenue—that policy fosters the industry’s ability to problem-solve.

Best wishes for a prosperous 2013.