U.S. Spending Cuts Pose Challenge for Medtech Industry

Sequestration may impact more than just federal programs and bureaucrats. Medical device manufacturers could also experience dampened growth as federal cuts slash the budget of FDA regulators.Nadim Yared is CEO of CVRx (Brooklyn Park, NY). His company is developing a pacemaker-style device that can treat heart failure and high blood pressure. According to Yared, delays in the FDA approval process could impact the viability of his company. Since many startups live off the funds of investors for a few years, a delay in getting a product to market could lead to the failure of a company."If a company like ours is spending, let's say, a million dollars in salaries a month and running a clinical trial for one product, any delay, any question that takes a month to answer, costs the company a million dollars. It's simple math,'' stated Yared.The U.S. Congress is set to resume this September. At that time, lawmakers will hear multiple complaints about the impact of the sequester. In total, sequestration led to $85 billion in cuts for this year and is slated to make similar cuts over the next 10 years.Both FDA regulators and the United States Patent and Trade Office rely on user fees for technology staffing. In total, an estimated $148 million of the agency's budget for improving the patent approval process has disappeared due to sequestration. This fall, lawmakers are unlikely to yield to demands for exemptions from sequestration. In part, lawmakers may feel that a piecemeal restoration of cuts could spur more agencies to pursue their lost funds. However, lawmakers should exempt FDA user fees from sequestration since these fees are voluntarily paid by medical device manufacturers and other medtech manufacturers to ensure efficient regulatory approval.This past Wednesday, FDA regulators announced that sequestration had led to the cancellation of $209 million in funds for the 2013 fiscal year. Out of this amount, $85 million came from user fees that were collected from several different medtech industries. Some groups question if sequestration can legally lock up FDA user funds since these fees are only collected for use by the FDA.It's important to remember that FDA user fees are not tax dollars. Instead, they are voluntary payments. By sequestering these fees, lawmakers hurt regulatory agencies that rely on efficient oversight. In turn, this could lead to job cuts and the delay of life-saving medical products.While the user fee issue is a sensitive subject for FDA regulators. The medical technology industry faces an additional financial penalty of its own. With the Affordable Care Act, medical device manufacturers must pay a 2.3% tax on sales.If the issue isn't remedied soon, future user-fee agreements could also be at risk. Sen. Al Franken is cosponsoring legislation that would shield these user fees from the throes of sequestration. However, gridlock in Congress makes it difficult to pass anything.Republicans and Democrats are both to blame for the current state of the medical device industry. Cost-cutting Republicans damage the FDA's ability to regulate medical devices, while ACA-supporting Democrats burden the industry with a 2.3% tax.