requests has had the impact of slowing the overall 510(k) ap- proval process.
Cardica, a manufacturer of tools used in heart surgery, has
announced that it plans to pass the entire amount of the cost onto hospitals, raising the specter that patients and payers will ulti- mately bear the burden. Perhaps the largest burden will
be placed on small, innovative start-up companies which face sig- nificant headwinds, such as cash- burn problems, and the lengthen- ing 510(k) clearance timeframe. Tese companies tend to drive the latest innovations in the market, and a 2.3% tax on revenues could be enough to push many towards insolvency. Tus we anticipate a slowing pace of innovation in the years ahead. Clearly, the current set of
circumstances have created an ever-evolving environment for the medical device market.
Another significant market dynamic is the 2.3% medi-
cal device tax (now effective) that accompanied the Patient Protection and Affordable Care Act. Tis tax is applied to top-line revenue, thereby making all medical device manufac- turers subject to the tax, including start-ups and other medical device companies with negative earnings. Many companies are juggling cost structures in order to
absorb the additional cost. Medtronic, which expects to pay $40–$60 million this year on the tax, has moved to offset the additional cost with reduction in capital expenditures. Other large corporations have announced job cuts to fund the added cost, with Zimmer and Stryker cutting 450 and 1000 employ- ees, respectively.
Note: For the purposes of this overview, the medical device
industry covers implants and instruments intended to affect the structure or any function of the human body in a thera- peutic manner. Products not included within the data are devices such as diagnostic tools or imaging, hospital supplies, and healthcare IT.
Industry Overview & Market Players Te medical device industry consists of thousands of
companies, yet it is still concentrated in terms of revenues, with the largest 10 companies generating the majority of the industry’s revenues.