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Mark E. Brager
October 17, 2016

AdvaMed Looks to Foster Early-Stage Innovation: New Report Highlights Challenges to Medtech Entrepreneurship

MINNEAPOLIS, MINN. – The Advanced Medical Technology Association (AdvaMed) today affirmed its commitment to advancing a comprehensive set of policy objectives to invigorate the innovation ecosystem for early-stage device and diagnostics companies.

A new report – “A Future at Risk:  Economic Performance, Entrepreneurship, and Venture Capital in the U.S, Medical Technology Sector” – released at the association’s annual meeting, outlines significant warning signs that, if left unaddressed, could hamper long-term growth and entrepreneurship.

Some key signals identified in the report, based on a number of independent sources on medtech industry trends, include:

  • A sharp decline in the number of new medtech start-ups each year, going from around 1,500 annually 30 years ago to around 600 in 2012.
  • The U.S. medtech industry is “graying,” with more than 30 percent of medtech firms at least 25 years old and more than half 16 years old or more.
  • Since the early 1990s venture capital (VC) investment in the industry has gone from about 13 percent of total VC dollars to about 4 percent in recent years.
  • The proportion of VC funds devoted to early stage start-ups – which are dependent on these funds to survive in many cases – has gone from about 10 percent in the early 1990s to only 3 percent in recent years.

“These trends are particularly troubling,” said Nadim Yared, president and CEO, CVRx and AdvaMed chair-elect, “because start-ups are not only the source of so many new treatments and cures, but also drive job growth and provide new avenues of expansion for the larger medtech players through mergers and licensing. Anything that impacts these smaller companies has a ripple effect throughout the entire medtech ecosystem.”

AdvaMed President and CEO Scott Whitaker said, “While the report’s findings are concerning, I remain optimistic about this industry. Ours is an industry of growth and promise.”

Whitaker outlined a number of policy solutions AdvaMed is pursuing to address the pressures facing industry including:

  • A more consistent and timely pathway to FDA approval, through the new Medical Device User Fee Act reauthorization agreement and legislative reforms such as those included in the House 21st Century Cures Act;
  • Coverage, coding and payment processes that recognize the value of medical technology and reward innovation, for example, bringing greater transparency to the local coverage determination process and expedited coverage for breakthrough medical technologies; and 
  • Tax and other policy changes that encourage the flow of capital into early stage and start-up companies in particular – including full repeal of the medical device excise tax.

“The technologies developed by AdvaMed member companies allow people to live longer, healthier, more productive and independent lives,” said AdvaMed Chairman Vince Forlenza, chairman, CEO and president, BD. “In addition, advancements in medical technology yield savings for health care systems and bring value to society. A policy environment that supports a sustainable health innovation ecosystem is required in order to continue to put these tools in the hands of the public.”