Imagine software that provides orthopedic surgeons with customized solutions for complex clinical problems in joint replacement, a device able to “smell” tuberculosis and other serious illnesses on someone’s breath, a cardiac “patch” to protect children with congenital heart defects or an artificial pancreas that could end diabetes as we know it.
Thanks to such innovations in medical technology, people today are living longer, healthier, more productive and independent lives. Advances ranging from stents and artificial hips to insulin pumps, deep brain stimulators and implantable defibrillators have improved the overall quality of care and lowered health care costs.
A true American success story, more than half of the health care products purchased around the world come from companies based in the United States. The medical device industry is also a significant contributor to the economy in California, providing growing employment opportunities for workers and economic benefits for the regions where the industry is concentrated. In the L.A. area, some of the foremost medical tech employers include Medtronic Diabetes, Boston Scientific Neuromodulation, Advanced Bionics and Second Sight Medical Products. Up-and-comers include Inglewood-based ImaginAb, which the Business Journal reported April 2 has received $12.5 million in Series A funding for its cancer-detection imaging technology.
According to a 2008 presentation of the California Community Colleges’ Business and Workforce Performance Improvement Initiative, California is home to more than 24 percent of the nation’s medical device manufacturers. Additionally, Los Angeles County boasts 24.6 percent of the industry’s statewide employment, with 1,073 companies and each company averaging 23 employees. A recent Lewin report indicates that these jobs have average salaries of greater than $58,000, which is about 40 percent higher than average wages across the economy.
Yet this crown jewel of American industry now faces serious jeopardy. Regulatory and payment uncertainties in the United States are causing venture capital firms to rethink investing in U.S. medical technologies. According to a recent report from PricewaterhouseCoopers, U.S. venture capital funding for the life-sciences sector slipped 18 percent in the third quarter last year. It also found that funding for two of the three medical device subsegments decreased in the third quarter versus the same quarter in 2010. Medical/health products fell 51 percent and medical diagnostics dropped 38 percent in dollars. Current tax policy and potential cuts in reimbursement by payers are additional factors that now threaten to stifle the industry’s next wave of innovation.
Losing ground
Not only is this bad news for the county and California as a whole, the United States could lose its No. 1 spot in the global medical technology market as a result. Worse yet, patients, health care providers and the overall health care system may suffer a range of unintended consequences, including lower quality of care and higher costs. In an effort to contain costs, hospitals are already using reprocessed devices for general surgery in their operating rooms. Similarly, generic implants and instruments are being manufactured for the orthopedic trauma market.
Recently, members of the Advanced Medical Technology Association, a national trade association representing medical device and diagnostics companies, testified before Congress about the various regulatory and economic pressures facing the industry. They pointed out that the leadership advantage American companies have long held over foreign competitors appears to be narrowing. Furthermore, more and more complex medical technology products are first introduced abroad even if the products have been developed by U.S.-based companies.
Yet there is talk in Washington of possibly revamping how the majority of medical devices are reviewed before they become available to patients and physicians – changes that will likely delay and add expense to an already long and expensive process without adding measurable patient benefits. Locally, in addition to the potential for job loss, medical device startup companies, such as those receiving support from local incubator the Pasadena Bioscience Collaborative, will face even greater challenges getting their innovative products to market.
Without sound public policy in place, it is distinctly possible that the United States, instead of remaining the world leader, will fall behind other countries in the development of medical devices and diagnostics. It doesn’t have to be that way.
At issue, then, is whether public policies about medical technology support innovation itself – the development of new treatments and cures that drive medical progress.
As a medical device inventor and industry entrepreneur, I believe that innovation either thrives and evolves or goes extinct. Every policy decision about how health care reform is implemented registers a ripple effect across the delicately balanced landscape in medical technology known as the “innovation ecosystem.”
Only with the right public policy agenda in place can the United States maintain an environment that truly values innovation and its transformative potential. Only then will physicians, inventors and venture capitalists be able to collaborate to bring about the next generation of medical technology. The right policy decisions can keep saving lives, fueling further economic growth and creating more high-paying jobs in Los Angeles, California and communities across the country.
Charlie Chi, Ph.D., is an electrical and computer science engineer. He is president and chief executive of RDI Medical Inc., a startup in Palo Alto, and is the former president, chief executive and co-founder of OtisMed, another medical device company.
