Uncle Sam Hearts Drugs, Not Devices. Why?

1/31/11Follow @xconomy

WTF!

You can forgive medical device investors and CEOs if they’ve uttered that not-so-family-friendly acronym during the last year or so.

First, the Food and Drug Administration signals it will likely tighten restrictions on the popular 510(k) regulatory program, which allows device makers to quickly develop new products that are slightly better or different than previous generations. Then Uncle Sam slaps the industry with a 10-year, $20 billion tax to help pay for healthcare reform. Politicians on both the right and left predict Medicare will soon start paying less than it does today for certain medical devices.

Compare this with the relative love the feds have bestowed on the drug industry. On the eve of the State of the Union address, Obama Administration officials announced the creation of a $1 billion drug development center to speed the commercialization of therapies. This comes on top of the $1 billion in tax credits the federal stimulus program gave biotech startups last year.

So what has happened?

It was only a few years ago that the public demonized Big Pharma as greedy institutions that opposed the sale of generic drugs to protect their multi-billion dollar profits. Now the medical device industry seems to be bearing the brunt of rage from Washington DC.

There’s no one simple answer. But the shift in fortunes can be traced to a number of factors, including healthcare reform, the erosion of the business model underpinning Big Pharma, and political ineptitude from the medical device industry.

YOUR TURN—The FDA tends to regulate by crisis. For the medical device industry, that crisis was Sprint Fidelis, the ultra-thin wires that connect implantable cardioverter defibrillators to the heart.

In 2007, Fridley, MN-based Medtronic issued a worldwide recall of … Next Page »

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