Trends Affecting the Medical Technology Industry

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Trends Affecting theMedical Technology Industry

• Stephen J. Ubl
• President and CEO, AdvaMed

March 27, 2008
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About AdvaMed

• Worlds largest medical technology association
• 1,600 member companies and subsidiaries

• Members produce 90 of sales in domestic market,
• 50 of sales in global market
• 70 of member companies have less than
• 30 million in annual revenue

• 65 staff with global expertise, bi-partisan
  backgrounds
• 45 member Board of Directors including 5 from
  smaller companies

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AdvaMeds Role
FDA
CMS
Design
Clinical
Review
Coverage
Payment
Coding
Idea through FDA 2-6 yrs
Cov Paymt 0-6
Canada
Korea
Mexico
India
Japan
UK
Germany
China
France
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Think Tanks
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The Policy Environment
Democratic Suspicion of Business
Activist Congress
Critical Media
Budget Driven Policy
Increased Oversight
Health Reform
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• Trends Affecting the
• Medical Technology Industry

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Trend 1

• Medicare evolving into an aggressive purchaser
• Challenges
• Movement toward pay-for-performance
• Commoditization via competitive bidding
• Greater bundling of services

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Trend 1

• Medicare evolving into an aggressive purchaser
• Our Response
• Ensure pay-for-performance promotes quality
  efficiency, not cheapest is best approach
• Work for payments that reflect true cost of care
• Protect patient access to the most appropriate
  therapies

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Trend 2

• Difficult environment for industry reputation
• Challenges
• Increasingly negative press coverage
• Recalls raise questions of safety and efficacy
• Sales marketing practices under fire

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Industry FavorabilityCongress
PHYSICIANS
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Trend 2

• Difficult environment for industry reputation
• Our Response
• Proactive and positive policy proposals
• Build positive industry image through Value of
  Medical Technology program
• Demonstrate continued leadership on ethics
• and compliance

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Trend 3

• FDA credibility under fire
• Challenge
• FDA may become more risk adverse in reaction to
  media congressional scrutiny
• Preemption authority questioned
• FDA resources vs. increasing responsibilities

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Trend 3

• FDA credibility under fire
• Our response
• Focus on appropriate MDUFMA implementation
• Support adequate FDA funding
• Defend FDA preemption authority
• Promote least burdensome regulatory approach (IVD
  proposal)

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Trend 4

• Global race to the bottom
• Challenge
• Growing interest in foreign reference pricing
• Proposed price-driven tendering processes
• Nascent regulatory and pricing systems
• in emerging markets

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Trend 4

• Global race to the bottom
• Our Response
• Provide evidence demonstrating how FRP is
  inappropriate
• Partner with patients, physicians local device
  associations
• Engage early with authorities in key emerging
  markets (China, India)
• Highlight value of technology and industrys
  contributions to economic development

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Trend 5Our Biggest Challenge

• Misperception Technology Drives Health Care
  Costs

The bulk of the long-term rise in health costs
resulted from...new medical services that were
made possible by technological advances... Futu
re increases in spending could be moderated if
costly new medical services were adopted more
selectively...than they have in the past and if
diffusion of existing costly services was
slowed.
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Our ResponseFour-Pronged Approach

• 1. Medical technology reduces health care costs
• Testing hospitalized patients for drug-resistant
  infections 8.3 billion in savings in 2005
• Medical imaging to diagnose treat stroke yields
  savings of 800 million per year
• Total knee replacements save 77,000 per patient
  in lifetime health care costs

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Our ResponseFour-Pronged Approach

• 2. Medical technology generates real economic
  value
• From 1970 to 1998, improvements to life
  expectancy from cardiovascular care advancements
  alone added
• 2.6 trillion per year to U.S. wealth
• Nearly half of GDP for this period

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Our ResponseFour-Pronged Approach

• 3. Focus on the root causes of cost growth
• Fee-for-service systems reward providers for
  delivering more care not better care
• Lack of effective prevention measures
• Costs of chronic disease
• Inefficiency in the health care system

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Our ResponseFour-Pronged Approach

• 4. Quality of life improvements due to
• medical technology are priceless
• Medicare inpatient payment rates FY 2007
• Cochlear implant 8,650
• Knee replacement 9,281
• ICD 28,886

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In closing...

• Push for health care reform budgetary pressures
  continued spotlight on medical technologys
  role in health care
• We intend to have a seat at the table. We will
  fight for a health care system that provides
  access to quality medical care for all.
• Policy decisions over the next 25 months could
  affect the industry for the next 25 years...

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Two roads...

• Static road vs. dynamic road
• Slowed innovation, rationed care, short-term
  price cuts, growing ranks of uninsured, or...
• Emphasis on health promotion/disease prevention,
  focus on quality, more efficient delivery system,
  quality health care for all

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• Questions?

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Trends Affecting theMedical Technology Industry

• Stephen J. Ubl
• President and CEO, AdvaMed

March 27, 2008