What’s next for emerging companies?

Edition: November 2012 - Vol 20 Number 11
Article#: 4115
Author: Repertoire

If it can survive lawmakers’ efforts to kill it, the 2.3 percent medical device excise tax will hurt big manufacturers. But it may have an even bigger impact on small, emerging medical technology companies, whose profit margins may be slim to non-existent. But rather than get caught up in the fight to get the tax repealed, start-ups should stay focused on their mission, according to one observer.

“You have enough to worry about trying to get your great products successfully through development,” says Amy Siegel, co-founder of Newton, Mass.-based S2N Health, an outsourced business and marketing company for medical device start-ups, speaking to her clientele. “So ignore the tax for now and keep creating products that make a difference.” By doing so, emerging companies will help improve patient care, and they’ll be doing themselves a favor, too. “Big device companies representing your potential exit will feel poorer because of the tax, depending on how much of their revenue is impacted. But they will still need acquisitions to fuel growth.” Small companies with innovative technologies and strong market potential will continue to be attractive investment and acquisition targets.

Nor should start-up companies fear the comparative-effectiveness provisions of the Affordable Care Act, such as the Patient-Centered Outcomes Research Institute, says Siegel. PCORI is intended to fund research that will provide patients, caregivers and clinicians with the evidence-based information needed to make better-informed healthcare decisions.

“For one thing, PCORI will be focused on the most costly treatments affecting the most Americans, which means that novel niche products may never hit its radar,” says Siegel. What’s more, if PCORI fails to establish the clinical effectiveness of the market leader, the start-up may gain an opportunity.

“With or without PCORI, the bar has been raised on clinical evidence required for regulatory approval, reimbursement and adoption of new medical devices,” she says. That holds true for market leaders and start-ups alike.

There are many details yet to be worked out as healthcare reform continues to roll out, says Siegel. But one thing remains certain: “If your technology makes sense today in the care of patients, it will probably make sense in the brave new healthcare world.”