Posted by Marc Dubreuil on Wed, Jan 06, 2010
For those of us who make our living in the world of medical product development, the future seems very uncertain based on current economic and political trends.
The struggling economy is forcing venture capitalists (VCs) to find and fund products and opportunities that are less risky and farther down the development and commercialization path. VCs are moving away from early-stage medical devices to later stage and energy investments, where returns may be lower but the exit is visible and predictable.
The FDA is undergoing a culture shift and is trying to get a better handle on the appropriate level of clinical data to support safety and efficacy. Recent news suggests that the 510k process will remain largely unchanged; but anyone who's been waiting on 510k decisions knows that it has become a much more arduous process over the last 18 months.
And what effect will the pending Health Care reform have on the ability of the medical device industry to innovate and introduce new products? In a well researched, documented, and written book by T.R. Reid, titled The Healing of America, the subject takes a page from the experiences in Japan. Japan uses a single national fee schedule that sets fixed prices for all procedures. For example, an MRI in the US costs $1,000 to $1,400. The fixed price for an MRI in Japan is $105. So the Japanese service providers turned to the MRI manufacturers and demanded lower cost equipment. The manufacturers responded with machines with more advanced features that cost about one-tenth the cost of US units. Most of the product innovation in Japan comes from small hospitals associated with large medical schools while medical companies are focused on cost out.
As we start to move more plan participants to public options, will Medicare and Medicaid face the same regulated price limitations? Will the development of new life-saving Health Care technologies be strangled by the system? Will our new product development be driven by cost and not effectiveness? Time will tell.