A refreshing take on the state of the med-tech industry

March 20, 2013 – 3:12 PM | By Amanda Pedersen | No comments yet

Charles Dickens at his desk in 1858. Dickens’ famous opening line from “A Tale of Two Cities” could easily be applied to the current state of the medical device industry, “It was the best of times, it was the worst of times.”

Here at Medical Device Daily we’ve become accustomed to the doom-and-gloom stories about our industry. The medical device tax provision in the Affordable Care Act and other emerging realities of healthcare reform along with worldwide economic sluggishness, regulatory and reimbursement challenges, consolidation among hospitals and an increase in hospital-employed physicians has created the perfect storm for the medical device industry.

So it was incredibly refreshing to speak with Paul Teitelbaum recently about why he sees medical devices as healthcare’s hottest commodity. Teitelbaum, a managing director with Mesirow Financial’s Investment Banking Practice, pointed out that there is a shift in M&A interest toward medical devices and away from traditional pharmaceuticals and generic drugs.

It’s a trend that began, to some degree, in 2011 and is expected to continue, according to Teitelbaum. Ironically, some of the same industry pressures that have created the doom-and-gloom attitude in med-tech are also responsible for the M&A surge.

Even big pharma companies that have historically had more cash at their disposal than med-tech companies are taking notice of the small-to mid-size companies that have innovative technology just waiting to be acquired by an organization with deeper pockets.

But what are the big-picture implications of this emerging trend? If more big pharma companies start playing ball on the med-tech field, will it end up being a plus or a minus for the industry as a whole? It was a question that Teitelbaum wasn’t able to answer for certain.

One potential implication, he said, is that the current big players on the med-tech side—Medtronic, Boston Scientific, Johnson and Johnson, St. Jude Medical, Covidien—are going to be batting against tougher competitors. On the other hand, Teitelbaum noted, the medical device manufacturing and regulatory process is so different from what the traditional pure-play pharmaceutical companies are used to, it’ll be interesting to see how successful these integrations are over the long term.

My conversation with Teitelbaum reminded me of Charles Dickens’ opening from “A Tale of Two Cities” and how it might be applied to the current state of the med-tech industry. So, borrowing Dickens’ longwinded sentence structure, this is what I came up with:

It was the best of times, it was the worst of times, it was the age of ObamaCare, it was the age of foolish medical device taxes and FDA user fees, it was the epoch of heart lead recalls, it was the epoch of PIP scandals and regulatory overhauls, it was the season of meaningful use, it was the season of comparative effectiveness, it was the spring of innovation, it was the winter of accountable care organizations, we had everything before us, we had nothing before us, we were all going direct to FDA, we were all going direct to M&A- in short, the period was so far like the present period, that some of healthcare’s noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of improved quality and cost effectiveness.

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