it plans to pass the entire amount of the cost onto hospitals, raising the specter that patients and payers will ultimately bear the burden. Small business and
start-up companies may feel the most impact as a result of the excise tax. Tese companies typically have significant cash- flow constraints, and an extra 2.3% charge against revenues may disrupt existing small companies’ progress, or may deter potential market participants from entering the industry. Moreover, the increasingly burdensome 510(k) ap- proval process places additional timing pressure on smaller companies. Ultimately, this could result in fewer innovative and groundbreaking technologies, as smaller firms tend to take larger risks in advancing technologies, which may slow down overall medical device development going forward.
Regulatory Approvals: A Review As discussed in prior updates, access to the largest medi-
cal device markets requires regulatory approval by specific government agencies. Below is a discussion of (i) the US classification system for medical devices, (ii) the two pathways to receiving clearance in the United States, and (iii) historical device reviewal activity.
exempt if FDA determines that it presents a low risk of illness or injury to patients. Class II—Class II devices are the largest category of medi-
cal devices. Examples range from powered wheelchairs to implants used in knee, hip, or spinal surgery. 43% of medi- cal devices fall under this category. Class II includes devices that pose a moderate risk to patients, and may include new devices for which information or special controls are avail- able to reduce or mitigate risk. Special controls may include labeling requirements, mandatory performance standards, and postmarket surveillance. Currently 15% of all device types classified in Class II are subject to special controls. Although most Class II devices require premarket notification via the 510(k) process, a few are exempt by regulation.
In 2013, venture capital investments in medical devices and equipment represented 7.2% of the total dollars invested—a significant decline from 9.3% in 2012 and 9.8% in 2011.
Class I—Tese devices present minimal potential for
harm to the user and are oſten simpler in design than Class II or Class III devices. Examples include elastic bandages and tongue depressors. 47% of medical devices fall under this category and 95% of these are exempt from the regulatory process. Many Class I devices are exempt from the premarket notification and/or the QSR requirements, though they still have to comply with the other general controls. A device is
Class III—Tese devices usually designed to sustain or sup-
port life, are implanted, or present potentially unreasonable risk of illness or injury. Examples of Class III devices include implantable pacemakers and breast implants. 10% of medi- cal devices fall under this category. New devices that are not classified as Class I or II by another means, are automatically designated as Class III, although the manufacturer may file a request or petition for reclassification.
Medical Manufacturing 2014 15
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