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February 04, 2016

3 Medical Device Industry Challenges to Overcome in 2016

We talked about three medical device trends to watch out for in 2016, but what about the challenges this industry faces on its path to greatness? In this article we will address three primary hurdles that must be overcome sooner than later to achieve global success and truly transform the healthcare industry for the better.


1. Cybersecurity Issues

It feels like all we talk about these days is the threat of cybersecurity attacks. That's because this is a real issue – and it needs to be adressed. The FDA actually held a public meeting January 20-21, to discuss this very topic.

While networked devices are poised to revolutionize the healthcare industry, they also pose the threat of subjecting patients and healthcare providers to security breaches and malware infections. One primary concern is whether connected devices can maintain HIPPA compliance in the instance of a security breach.

Consumers may be leery about jumping on the networked medical device train, and they actually have good reason to feel this way as their personal information, medical history and other sensitive data could be exposed. This pales in comparison to the the viable risk of physical harm or death if a malicious hacker takes control of a device like a glucometer, pace maker or ventilator. The risks certainly take on more weight when human life is a factor.

In this 2013 Deloitte report, healthcare information security professionals discussed their concerns on this topic. They identified the following eight areas security leaders should concentrate on:

1 | Read the FDA’s guidance and and related FDA Safety Communication
2 | Understand the organization’s risk
3 | Adopt a formalized risk management framework and implement administrative and functional policies
4 | Enhance vulnerability management
5 | Increase security education and awareness among stakeholders
6 | Leverage the National Health Information Sharing and Analysis Center (NH-ISAC)
7 | Protect vulnerable legacy devices via network segregation
8 | Learn from other industries’ experience

2. Regulatory Compliance

The US Food and Drug Administration (FDA) regulates all medical equipment before and after they reach the marketplace. The after bit of this regulation is major, as continued monitoring of product performance and safety directly affects the wellbeing of subjected patients.

According to the FDA website, regulated devices can range from high-tech, wirelessly connected, artificial organs to something as simple as a tongue depressor. They are classified (Class I, II or III) based on associated risks, from low-risk (dental floss), to medium-risk (condoms), to high-risk (replacement heart valves), respectively. 

Over the years, the FDA has increased its regulatory standards and required more in-depth clinical data to support companies' claims. This has led to higher R+D costs for many companies looking to market their products in the US. A higher volume of 510(k) submissions has also resulted in longer approval wait times. According to the American Action Forum, the approval process went from 90 days in 2005 to 140 days in 2010 – a 55 percent increase. In fact, the wait time as of 2015 now averages about six months.

Interesting fact: According to Emergo Group, third party review companies approve devices in an average of 68 days, but Class III devices don't qualify for this option.

Beyond the US, companies should familiarize themselves with foreign regulations. Particularly tough markets include China and Japan, where domestically manufactured products are favored (which could shut American-made products out of Asian markets entirely). The European Parliament, Council of Ministers and European Commission are currently finalizing new medical device regulations. Negotiations are expected to wrap up in June 2016.

3. Securing Funding

A common challenge among medical equipment companies is securing funding. Why is this so common? The answer is simple. Venture capitalists are wary of investing. They view the industry as risky, expensive and lacking an easy exit strategy if things don't pan out as expected. The long FDA approval process and strict regulations are a turnoff for investors who see better profit potential in other markets. According to a January 2015 Anchan report, venture capital firms allocated only 7 percent of funding to healthcare in 2013, down from 13 percent in 2009. 

Read more: 3 Things Medical Device Companies Must Know about Venture Capital

To make matters worse, back in 2013, the US imposed a 2.3 percent excise tax on US medical device sales. According to the Department of Commerce, 80 percent of med device companies have fewer than 50 employees, while 98 percent have fewer than 500 employees. This means a 2.3 percent tax can have a devastating effect. According to a January 2015 AdvaMed report, as many as 195,000 US jobs were lost as a result of the excise tax.

As the marketplace becomes more saturated and competition grows, increased device complexity means higher R+D and marketing costs. To remain competitive, device manufacturers often end up with reduced profits. Expect to see more emphasis on lowering manufacturing costs to make up for this loss.

3 Med Device Trends to Watch Out for in 2016
3 Tips to Grow an Early Med Device Company

 Free Guide: Medical Device Manufacturing: Where to Start?


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Filed Under: Medical