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Joe Hage
🔥 Find me at MedicalDevicesGroup.net 🔥
March 2012
Frost & Sullivan: PPACA negatively impacts “anyone in the business of healthcare.”
3 min reading time

Venkat Rajan FrostIf you haven’t attended a Frost & Sullivan event, consider it.

I met Venkat Rajan at this year’s Medical Devices MindXchange. Venkat oversees Frost’s MedTech analyst team in the U.S. and looks at competitive factors and issues impacting the market.

We had the luxury of a poolside chat in San Diego.

Joe Hage: Venkat, you are an “Industry Manager.” Should I think of you as a consultant? What kinds of customers do you attract? How do you help them?

Venkat Rajan: We conduct both independent and proprietary analysis of the market trying to understanding challenges and opportunities in #MedDevice sector. Our clients span across the spectrum of product developers, component manufacturers, entrepreneurs, academics, and investors.

Joe Hage: I appreciated your comments at the MindXchange which is why I tracked you down! You were talking about the #MedDevice tax.

Venkat Rajan: Yes, part of the Patient Protection and Affordable Care Act (PPACA) imposes a 2.3% tax starting 2013 on most #MedDevice products sold in the U.S. The tax has many in the industry concerned about implications to their business outlook.

As reimbursement cuts push pricing down, the tax and other measures are straining the #MedDevice business model.  Many #MedDevice companies have already taken to significant measures including spinning of flat businesses, layoffs, and cuts in R&D spend.

Though the tax cannot be blamed as the sole cause for all of these actions, it seems to have accelerated the need for changes.

Joe Hage: I read Sen. @OrrinHatch of Utah sponsored the Senate bid to do away with the tax. How likely will he succeed?

Venkat Rajan: The #MedDevice industry is definitely hopeful, but given the complexities of the PPACA bill it would take a major legislative push.

Any company assuming repeal is going to find itself in a difficult position come 2013. So you are pessimistic. My belief is that it will come down to repeal of the entire bill and by virtue the tax as well, or if it stands so does the tax.

Joe Hage: Oh my! That’s a tall order. That’s not going to happen on Obama’s watch, surely. Why don’t you see a repeal of just that part being possible?

Venkat Rajan: If the tax alone were extricated, you could have various other players – with lobbies just as strong – asking ‘why not us?’

Joe Hage: Who else “loses” in PPACA?

Venkat Rajan: By intent the bill is ‘patient’ centric. By emphasizing the increase in access of care, the belief was more patients should translate to more business for all.

Most procedures involving a medical device are considered last resorts. I don’t know how much that impact will grow volumes for med tech.

In short PPACA negatively impacts anyone in the 'business' of healthcare.

Joe Hage: Wow. “Anyone in the business of healthcare” is a huge population.

I saw your LinkedIn poll, “Assume the 2.3% tax comes. Which best describes your likely scenario?” Care to predict the outcome?

Venkat Rajan: My bet is “all of the above.” Margin pressure and cost reduction invariably leads to exporting of jobs to lower cost locals.

Joe Hage: In your view, is there anything the #MedDevice community could do to affect the outcome?

Venkat Rajan: The industry needs to hit home to govt how it is one of the few industries that still staffs the majority of its jobs in USA.

Joe Hage: It’s an interesting challenge I’ll take up with the Medical Devices Group. Thanks, @VRaj_MedDev!

See also: Medical Devices Tax conversation with @MassDevice

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Posted by Joe Hage
Asked on March 16, 2012 7:50 am
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