Global markets offer silver lining for device firms stung by U.S. slump

HIMA executive says U.S. has made inroads in Japan

Although the shrinking U.S. market has most diagnostic imagingmanufacturers in the doldrums, opportunities abound for medicaldevice sales in the rest of the world, according to Matthew Gallivan,associate vice president for Europe and the Americas at the HealthIndustry Manufacturers Association (HIMA). Gallivan discussedglobal opportunities for medical device vendors at the DiagnosticImaging industry conference in San Francisco in April.

Emerging markets in Latin America and Asia grew an estimated18% last year, consuming $12.5 billion of medical technology ina total world market of $120 billion, according to HIMA data.A number of developing countries are rapidly becoming sizablemarkets in their own right. China has already hit $1 billion,while Thailand and Chile have the two fastest growing economies.Given the 8% to 10% rates of expansion in many of these markets,there will soon be many $1 billion markets in the developing world.

The U.S. in 1995 enjoyed a trade surplus of $5.7 billion withthe rest of the world for shipments of medical devices and diagnostics,up from $4.9 billion in 1994, according to HIMA. The U.S. devicemarket grew about 7% last year, but exports increased 12%, andexports to Japan mushroomed 23%.

"We're one of the very few industries, apart from largejet aircraft and chemicals, that have a trade surplus in the manufacturingarea," Gallivan said. "Given the very weak overall growththat Japan is experiencing, it's clear that U.S. companies arecutting into the market share of Japanese companies."

In addition, some U.S. firms are finding the regulatory environmentin international markets more amenable than that of the U.S.,where the Food and Drug Administration presides with a heavy hand.HIMA is a sharp critic of the FDA's premarket approval (PMA) and510(k) processes, calling them inefficient and too resource- anddata-intensive. This has resulted in major slowdowns in bringinginnovative new products to market that apply to exports as well:The FDA for years has maintained a policy preventing U.S. companiesfrom exporting devices that have not been cleared for market inthe U.S., regardless of whether those products were approved inthe country in which they were to be sold.

As part of HIMA's FDA reform efforts, the group commissioneda study on approval times in Europe compared with those of theU.S. According to Medical Technology Consultants Europe, high-riskdevices (i.e., those that require a PMA) are approved more thanthree times faster in Europe than in the U.S., for an averageelapsed time of 240 days compared with 773 days. Products thatunderwent a 510(k) review or a similarly less rigorous processin Europe took an average of 120 days to be cleared in that region,compared with 178 days in the U.S.

The FDA has been taking steps to reform its operations, however,and in some cases appears to be moving toward the European model.One of the aspects of the European system that has garnered HIMA'spraise is its use of private, third-party "notified bodies"to carry out product reviews and approvals. The FDA earlier thisyear announced a pilot program to allow third parties to reviewmedical devices (SCAN 4/10/96).

In addition, the FDA has loosened its restrictions on the exportof non-FDA-approved devices, thanks to legislation signed intolaw by President Clinton in April. The legislation allows U.S.vendors to export devices, to a specified list of developed countries,if the device in question has the approval of the local regulatoryagency.

But marketing products in well-established economies isn'tall it's cracked up to be. While developing countries increasetheir standards of living and, consequently, their healthcareexpenditures, Europe and Japan have entered cost-cutting modes.Germany and France are implementing sweeping reforms to decentralizetheir systems, while Japan has rigorous price controls and centralizedtechnology assessments that discriminate against new products.

"Even Canada, which talks a good game about adopting theEuropean device approval system, has a method that looks morelike the FDA's slow and costly internal review model," Gallivansaid.

HIMA is working with Congress to pass legislation this yearthat would clearly define the FDA's mission, and enable timelyreviews, common-sense enforcement, streamlined postmarket controls,and harmonization with foreign countries. In the meantime, systemsmust be developed to efficiently regulate the over 85,000 devicesthat will bombard emerging markets in the coming years. Unfortunately,the initial tendency will be to look to the current state of theFDA as an example, Gallivan said.