We recently posted some data reflecting that the device industry's growth is slowing as is the FDA's average review times. That post generated a comment from MD+DI moderator Paul Stein that suggests that agency is too readily blamed for the industry's ills. Stein then asks what the affect is of 2011's uptick in mergers and acquisitions could be: "This contracture of the industry has been happening for quite some time, so I wonder if the drive towards mergers and acquisitions might be the major cause of slowed growth," he writes. "With such amazing amounts of cash going for simply buying and selling what already exists, what is left for growth?"

It's undeniable that consolidation has been a big trend in the industry. In 2007, large medtech companies' share of total capital was 31%, according to the Pulse of the Industry report from Ernst & Young. In 2010, that figure was 73%. The report also explains that, before 2008, the VC market was artificially expanded because of the availability of "easy money."

Still, the FDA is not off the hook in relation to medtech's slowdown. The "uncertainty" resulting from the agency's policies and uneven review times has been a complaint of practically everyone who has dealt with the agency lately. Industry veteran Thomas Fogarty, MD told me that he avoids dealing with the agency at all possible, adding that he thinks the agency is directly responsible for the increase in companies taking their devices offshore for regulatory approval before doing so in the United States.

In a recent conversation, device attorney Larry Pilot explained that the agency is mismanaged and that, in his view, the affect that FDA is having on domestic entrepreneurship is tragic. The turnover of reviewers at CDRH is partly to blame, he says. Pilot explained that the tenure of many CDRH reviewers is about six months. He contrasted that with his time at the FDA in the 1970s when morale was high and the agency was viewed as a great place to work and reviewers often held onto their jobs for years.

Implications of Healthcare Reform on Growth

Forbes recently published a piece arguing that the Patient Protection and Affordable Care Act (ACA) of 2010 is expected to have both a positive and negative influence on the medical device industry. Citing a recent report from IBISWorld, the article explains that, on the one hand, the ACA would increase price pressure and increase regulatory costs, but it also would increase the number of insured. As a result, the article states, the industry should expect a net increase in revenues from the reform. The IBISWorld reaches that conclusion while factoring in the 2.3% device tax, which companies would be required to pay regardless of profitability. As the press release for the IBISWorld report suggests: "Revenue [for the device industry] is forecast to increase by 7.4% in 2012, and it is projected to grow by a lower average annual rate of 6.4% to $82.1 billion during the five years to 2016."

In September 2011, a report backed by Advamed was released titled "Employment Effects of the New Excise Tax on the Medical Device Industry." That report suggested that the tax provision of the ACA would likely increase costs to consumers and contribute to significant layoffs. Just recently, Stryker announced a 5% global staff reduction, citing the tax as a primary motive behind the action.   

—Brian Buntz