Medical Technology Startups In Free Fall As Industry “Grays”

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The number of start-up companies in the U.S. medical technology industry has dropped nearly 70 percent over the last three decades amid regulatory challenges and competition for young talent.

The number of new medical technology and device-making startups plummeted to about 600 in 2012 from nearly 1,500 annually three decades ago, according to a new report from medical device industry lobby,  The Advanced Medical Technology Association (AdvaMed), which represents hundreds of companies including Abbott Laboratories, Johnson & Johnson, Stryker and Medtronic.

“These trends are particularly troubling,” Nadim Yared, chief executive at CVRx, an implantable medical device maker, said at the industry’s annual meeting this week in Minneapolis.

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Medical technology and device makers are receiving a smaller share of “early-stage investing” with the industry receiving just 3% of venture capital dollars compared to 10% of all U.S. venture investment in the early 1990s, the report states.

Yared said device makers are losing out to information technology firms and other industries when it comes to attracting young talent such as engineers. “They are more attracted to less regulated areas,” said Yared, who is AdvaMed’s incoming board chairman.

The medical technology industry is “graying” with more than half of U.S. companies are 16 years or older . Nearly one-third of the companies are at least 25 years old.

The industry blames regulations such as a slow review process for devices and hurdles raised by the Centers for Medicare & Medicaid Services, which has stricter rules on devices it will allow Medicare to pay for, device companies say. The industry was also was hit by a tax imposed in 2013 on medical devices under the Affordable Care Act, though Congress last year temporarily removed it until Jan. 1, 2018.

Device makers are hoping to successfully lobby Congress to repeal the device tax altogether. Since one-third of device makers have 20 or fewer employees, the industry said it has hurt growth and innovation.

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