MOUNTAIN VIEW, Calif. Ė The recent U.S. health care reform bill will be a mixed bag for makers of medical electronics devices and IT systems. More people will have health insurance and more doctors will install computer systems, but device makers are concerned the growing market won't offset a new tax and increasing risk factors are driving away venture investments.
Those were some of the conclusion from a panel of experts gathered at a Churchill Club event here Friday (July 23). "I have an ambivalent view of the bill," said David Gollaher, president of the California Healthcare Institute, non-profit group that promotes life sciences companies.
The will extend coverage to as many as 30 million of the 50 million uninsured in the U.S. However, "the bill never addressed the underlying structural problems and drivers [of high health care] costs, and those may have to be addressed in the next few years," Gollaher said.
Medical device companies are concerned about a 2.3 percent excise tax on their revenues starting in 2012, a measure designed to raise $40 billion to help pay for the bill. Drafters thought the tax would be offset by a growing market with more insured patients coming on line, but Thomas Novelli, (below) director of federal affairs at the Medical Device Manufacturers Association (MDMA) challenged that assumption.
"States like Massachusetts that already have universal health care coverage havenít seen much of a [market] uptick," said Novelli.
"We had one member that makes external cardiac defibrillators ask how the bill benefits them," Novelli said. "We donít think cases of sudden cardiac arrest will go up based on this legislation," he quipped.
The MDMA has several members with revenues of about $100 million a year that are still not profitable due to the high costs of bringing medical devices to market, he said. In addition, venture capitalists see the bill's complex provisions as another set of risk factors to weigh before investing in the sector, he added.
"The VC industry has stepped away from medical devices over the last 18 months," due to a variety of factors including the new bill, he said.