Washington a ‘Wild Card’ for Medical Devices Sector

The medical supplies and devices sector is likely to perform in line with the broader market, but Washington, D.C., is a “wild card” for the industry, with a high potential for turbulence in the upcoming year, industry experts predict.

Analysts at Credit Suisse said the main areas of concern for this sector are:

• The presidential campaigns and prospects for healthcare reform;
• Reform efforts that are already under way, such as efforts to recalibrate Medicare payments;
• Increasing regulatory oversight; and
• Increasing conservatism at the FDA.

The presidential primaries will begin soon, prompting discussions on healthcare reform. Growing concerns about healthcare affordability in general and an increasing focus on medical device implant costs mean the political environment will likely be negative for medical supplies in the next year, the analysts said.

The devices sector also has been under increased scrutiny from Congress and the Justice Department concerning sales and marketing practices. While the recent orthopedic Justice Department investigation has been settled, investigations are continuing for cardiac rhythm management companies. Credit Suisse predicts increasing government oversight and regulations on interactions among devicemakers, their sales forces, distributors and physicians.

Discussion of medical device pricing also is starting to heat up. Sens. Chuck Grassley (R-Iowa) and Arlen Spector (R-Pa.) introduced the Transparency in Medical Device Pricing Act of 2007 Oct. 23, which would require manufacturers to submit data on average and median sales prices for all implantable medical devices used in hospital inpatient and outpatient procedures.

Although Credit Suisse does not expect the bill to pass, it believes the industry will have greater transparency, likely resulting in pricing pressure.