Medical Channel: Impact of Obamacare on the medtech industry (it's not all bad)

07/05/2014

Now that the health insurance exchanges are mostly working and the drumbeat of outrage over the medical device excise tax has dropped a few decibels, this might be a propitious moment to explore how the restructuring of the US healthcare system via the Affordable Care Act (ACA), aka Obamacare, will play out for manufacturers. Nicholas Donoghue, Associate Principal, McKinsey & Co., will speak to this during a session devoted to regulatory affairs at the upcoming Medical Design & Manufacturing East (MD&M East) event in New York, NY, in June. He shared some observations with PlasticsToday.

"There are several levers to how the ACA will change the landscape for medical device manufacturers and their suppliers," Donoghue told PlasticsToday. One fundamental aspect is reimbursement.

"The rallying cry for hospitals is, 'How do we break even on Medicare?'" says Donoghue. It used to be that money would be lost on those procedures but made up for in commercial endeavors, he says. "Going forward, that won't be possible." As hospitals seek cost efficiencies to offset the loss in revenue, medical device manufacturers will feel the squeeze. But this does not have to be a pure negative.

"When you know where [the business model] is headed, you can align your product development structure accordingly," says Donoghue. Companies should see this as an opportunity to differentiate their investments, he adds.

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