Medical device makers may have more difficult time selling in Europe than they'd anticipated as concerns over the economy and costs take hold, according to one analysis.
European Cost Concerns May Impact Devices
Article preview from IN VIVO - July, 2010
Following the lucrative payouts for Ablation Frontiers Inc. (now Medtronic Ablation Frontiers LLC), CoreValve Inc. (now Medtronic CoreValve LLC), Ventor Technologies Ltd. last year (W#200910025) and the success of St. Francis Medical Technologies Inc. a few years earlier, many device venture capitalists shifted gears – again – reviving their strategy of a decade ago, of pushing medical device portfolio companies to launch first in Europe prior to any commercial attempts in the US. The goal was clear: amp up sales in markets where the regulating authorities were much faster in order to help companies defray the increasing costs of dealing with the one regulatory body that was increasingly slower, the US Food and Drug Administration. While no one underestimated the difficulties of building sales in the multiple European markets, the relative ease of regulatory approval and the rate of adoption of new technologies made the continent an enticing target.
But the ongoing economic calamity gripping Europe – and much of the world – is being felt by large cap medical device companies, who count on Europe for nearly one-third of their medical device sales. Investment bank Wells Fargo Securities, which commissioned a study of European reimbursement and sales practices, is predicting that device companies will have a more difficult time selling into Europe over the next two or three years as new technologies are forced to clear higher hurdles to get to market. At the same time, existing technologies face higher than normal price erosion. Larger companies including Medtronic Inc. and Johnson & Johnson are also preparing for rougher seas as they try to stabilize and grow their European businesses. "I think longer-term, we clearly see there being increased pricing pressure," Alex Gorsky, worldwide chairman, medical devices and diagnostics group for Johnson & Johnson told investors during a recent Investors' Day. "And I think as you see their economy being challenged that will flow down into the health care systems."
By Tom Salemi
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