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Print Edition StoriesFriday, December 19, 2008
Looking ahead: Sector by sector surveys of the landscape ahead
Med tech industry sees economic repeat of 2008
By Marc Songini
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The local medical devices market is facing the same dismal economic prospects next year as it did in 2008. However, it also may see some major regulatory and personnel changes at both the state and federal levels that could affect it for both good and bad.
As with other industries, such as biotech, the most difficult obstacle right now is largely the “abysmal” economy, noted Thomas Sommer, president of the Massachusetts Medical Device Industry Council, based in Boston. The lack of investor funding and the poor overall economy have prevented medical devices firms from expanding and has forced them to retrench. In some cases, medical device startups have had to postpone going public, he said.
Aggravating this is the fact that venture capital firms in Massachusetts and on the West Coast are pouring their money into green energy and other ventures instead of devices. “You see some funds shifting into those technologies,” said William Whelan, co-chair of the life sciences practice at Boston-based law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC.
Experts note that the incoming federal administration led by President-elect Barack Obama may make sweeping changes by implementing a comprehensive health-care reform plan and possibly impose pricing controls. Right now, there are a lot of questions about what the effect will be, and much will depend on how much the new president funds research and staffing at the U.S. Food and Drug Administration. Also crucial is whom he appoints to head the agency.
“With Obama, it’s hard to look into the crystal ball,” said Whelan. But he noted Obama’s presidency will probably be more positive than negative for the medical device industry. On one hand, if he passes widespread health-care reform, that could be a driver for more medical device and drug sales. On the other hand, if he imposes price controls, that could have a “possible downward effect” on innovation.
Along with potential fed changes, there are new state rules to contend with. In August, Massachusetts passed the Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Health Care. Among its provisions, due to take effect in July 2009, is a requirement that companies report any payment or gift exceeding $50 to a health-care professional.
This has firms concerned that it will affect the medical device industry adversely. “We personally are not affected by this new limitation, but I do think that it is too limiting,” said Harry McCoy, president and CEO of Beverly-based diagnostics instrumentation provider Thorne Diagnostics Inc. McCoy is also chairman of the North Shore Technology Council’s (NSTC) nonprofit North Shore Life Sciences Accelerator Inc. “We are talking about marketing gifts and branding, not graft,” he said.
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