Over the past several months, there has been a large focus on the American medical device industry and regulatory approval and research process. One of the key factors affecting the medical device industry in the U.S. is a new 2.3% excise tax on device companies that is set to go into effect in 2013.
According to a recent article in the Winston-Salem Journal, written by Stephen L. Ferguson is the chairman of Cook Group Inc., this “unprecedented tax” coupled with “unjustified delays in bringing novel products to the market are crippling the U.S.medical-device industry.” The article also asserted that the tax will “stall new devices, which in turn denies lifesaving benefits to American patients and jeopardizes the well-being of thousands of patients, millions of people worldwide and the health of a sector that is among the most innovative in the world.”
Consequently, while patients and clinicians are seeking the latest advances in bio-pharmaceuticals, bio-medicine and medical devices to treat diseases or conditions,” FDA is trying to balance the safety of these breakthroughs. However, the article noted that regulators rarely ask “What is the human price when breakthrough treatments are delayed? How many lives were lost? How much unnecessary suffering?”
Interestingly, a group of experts recently addressed this issue to discover whether the current FDA regulatory system promoted innovation. Specifically, experts from the California Healthcare Institute (CHI) and The Boston Consulting Group recently “concluded that the FDA was rigged against innovation: more focused on finding reasons to keep beneficial devices off the market than on finding reasons to approve lifesaving devices.”
In fact, researchers found that when the “2010 pace of innovation was compared with 2003-2007, review times for drugs and biologics increased by 28 percent.” The study also noted that, “it’s even worse for devices, as 510(k) clearances slowed by 43 percent while PMA approval times for novel technologies lengthened by 75 percent.”
Discussing the results, David Gollaher, Ph.D., president and CEO of CHI, noted that “patients in the United States ultimately suffer when there are delays in bringing new medical discoveries to the market.” As a result, Dr. Gollaher noted how “patients must travel to Europe, Mexico or India for treatments developed by U.S. companies.” In fact, the new device tax and other unfavorable taxes for medical device companies, “coupled with unwarranted FDA regulations lead companies to abandon the U.S. and turn to Europe, Brazil, India and China to site factories.”
Another problem caused by the current regulatory system is that “as U.S.medical companies shift clinical trials offshore, jobs follow. So, too, do investments in infrastructure and innovative biopharmaceutical and medical technologies.”
Accordingly, “the impact of delays on communities like Winston-Salem, home to Cook Medical’s endoscopy business unit, is missed job growth.” The innovation stalled at the FDA becomes a “bureaucracy tax.” As the article noted, when Cook started in Greater Winston-Salem in 1983, it had just 35 employees, but today, they have 500 on the payroll and had hopes of growing that total in the years to come. Unfortunately, the 2.3 percent medical-device tax, set to go into effect in 2013, will be a “top-line tax on sales for Cook, impacting its profit 15 percent.”
To address this issue, the article noted that there is still time to reverse these changes. Specifically, HR 436, which currently has 108 co-sponsors, will repeal the device excise tax. It’s counterpart, SB 17, which has 13 co-sponsors, would also repeal the tax. In addition, Representative Erik Paulsen (R-MN) also launched a website this week to help medical device company leaders connect with Congress in efforts to repeal a $20 billion tax on their industry.
In the end, the article noted that in addition to repealing the device tax, Americans need a new direction at the FDA, including “predictable paths to product approval.” Specifically, FDA “must stop talking about eliminating regulations and actually unlock the shackles on innovation.”
Ultimately, Mr. Ferguson noted that the medical device industry needs “new challenge to save lives, not new taxes.” And he asserted that the device industry is up for the task, as is the pharmaceutical industry for creating new medicines to cure diseases. As a result, he asserted that Congress should “eliminate this tax and shrink FDA delays so that companies can respond with discoveries that will in turn save lives, preserve families and bring new jobs to America today and for decades to come.”