AdvaMed represents over 800 of the world’s leading medical technology innovators and manufacturers of medical devices, diagnostic products and medical information systems. Our members are devoted to the development of new technologies that allow patients to lead longer, healthier, and more productive lives. Together, our members manufacture nearly 90 percent of the $71 billion in life-enhancing health care technology products purchased annually in the United States, as well as 50 percent of the $165 billion in medical technology products purchased globally. Our industry currently enjoys a trade surplus of $7.1 billion vis-à-vis our trading partners.

Minnesota is home to many of the U.S. medical technology companies, and our sector is a vital employer and contributor to the state’s vibrant economy. We appreciate the Committee’s willingness to go out to a state with one of the largest concentrations of medical device manufacturers to hear directly from them about the importance of international trade to their overall strength and future growth as an industry.

The medical technology industry relies heavily on, and benefits greatly from the ability to compete internationally. International trade opportunities allow U.S. firms to reach patients beyond our borders, where some 96% of the world’s population lives. Many of the jobs at U.S. medical device manufacturers, and certainly most of the new job creation in our sector, are tied to new product development and product introductions outside the United States.

The medical technology industry has historically benefited from U.S. trade policy that strives to open markets around the world. U.S. trade agreements have helped to reduce or eliminate tariff and non-tariff trade barriers; contributed to greater transparency and predictability; and most importantly, have improved patient access to innovative, life-enhancing and cost saving medical technologies in key markets around the globe.

The dynamic pace of innovation in the U.S. medical technology industry, coupled with an effective U.S. trade policy, has created a more than $7 billion trade surplus in our sector with our trading partners.

Innovative medical technologies offer an important solution for industrialized nations, including Japan and European Union members that face serious health care budget constraints and the demands of aging populations. Advanced medical technology can not only save and improve patients’ lives, but also lower health care costs, improve the efficiency of the health care delivery system, and improve productivity by allowing people to return to work sooner.

However, when regulatory policies and payment systems for medical technology are complex, non-transparent, or overly burdensome, they can significantly delay or deny patient access to the latest, state-of-the-art innovations. They can also serve as non-tariff barriers, preventing U.S. products from reaching patients in need of innovative health care treatments.

AdvaMed believes the USTR, Department of Commerce (DOC) and Congress should monitor regulatory, technology assessment and reimbursement policies in foreign health care systems and push for the creation or maintenance of transparent assessment processes and the opportunity for industry participation in decision making. We look to the Administration and Congress to actively oppose excessive regulation, government price controls and arbitrary, across-the-board reimbursement cuts imposed on foreign medical devices and diagnostics.

The industry also supports additional multilateral, regional, and bilateral trade initiatives and agreements to further reduce international barriers to trade, including the World Trade Organization (WTO), Free Trade Area of the Americas (FTAA), the Asia Pacific Economic Cooperation forum (APEC) and the Transatlantic Business Dialogue (TABD). To negotiate future trade agreements, the industry also supports the extension of presidential trade promotion authority. In addition, the Enhanced Initiative with Japan, through which USTR and Commerce are able to address problems for certain industries operating in Japan, is scheduled to expire this spring. It has been an effective tool that the medical technology sector, along with other specific industries, strongly supports. We strongly encourage the U.S. Government to renew this sector specific initiative.

A primary goal of all economies is to provide high quality, cost effective healthcare products and services to all citizens. Another mission is to ensure their citizens have timely access to state-of-the-art, life-saving equipment and that compliance procedures are efficient and effective. To further expand patient access to safe and effective medical devices and ensure cost effective regulatory compliance, USTR should seek to ensure that regulatory agencies around the world make their policies and practices conform to the relevant and appropriate international trading rules established by the WTO.

Toward that end, member economies should agree to make their medical device regulatory regimes conform to these guiding principles:

• Acceptance of International Standards;
• Conformity/Provision of Transparency and National Treatment;
• Use of Harmonized Quality or Good Manufacturing Practice Inspections;
• Recognition of Others Product Approvals (or the Data Used for Those Approvals;)
• Development of Harmonized Auditing and Vigilance Reporting Rules;
• Use of Non-Governmental Accredited Expert Third Parties Bodies for Inspections and Approvals, where possible.

Similarly, many economies require purchases of medical technologies to take place through centralized and/or government-administered insurance reimbursement systems. To ensure timely patient access to advanced medical technologies supplied by foreign as well as domestic sources, member economies should agree to adopt these guiding principles regarding the reimbursement of medical technologies:

• Establish clear and transparent rules for decision-making;
• Develop reasonable time frames for decision-making;
• Data requirements should be sensitive to the medical innovation process;
• Ensure balanced opportunity for the primary suppliers and developers of technology to participate in decision-making, e.g., national treatment.
• Establish meaningful appeals processes.

Efforts to oversee foreign policies impacting the export and sale of US medical devices abroad should primarily focus on our two largest foreign markets, Japan and the European Union (EU). After the U.S., Japan is by far the largest global market for medical technologies ($24 billion) followed by Germany ($16 billion) and France ($7 billion.) US manufacturers annually export over $2 billion to Japan and manufacture another $6.5 billion in the region for the Japanese market. Our trade surplus with Japan is an impressive $1.3 billion. We believe that this statistic is a good indicator our industry's global competitiveness in the field of medical technology and it strongly underscores the importance of critical ongoing efforts with the U.S. government to open the Japanese market further to cost-saving and life-enhancing medical technologies. U.S. manufacturers also export nearly $8 billion annually to the EU and maintain a $3.6 billion trade surplus with the EU.

Japan is the largest market for medical technologies outside the U.S. It is also one of the most challenging for our industry. Access to their market is key for the medical technology industry.

The establishment and rigorous enforcement of medical device trade agreements has lead to a 500% increase in U.S. medical technology exports to Japan between 1987 and 2000. U.S. policy helped turn a $100 million medical technology trade deficit in 1987 to a $1.1 billion trade surplus in 2000!

Continued oversight has been necessary along the way. In 1999, our industry was prepared to file a 301 against Japan, until the U.S. government was able to negotiate an agreement with Japan to allow for the more timely adoption and integration of new medical technologies into their healthcare market.

Recent Japanese government policies and initiatives potentially threaten to undermine U.S. industry access to, and our presence in, the Japanese market. The medical technology sector could greatly benefit from additional oversight and aggressive enforcement of agreements in Japan today. Japan has failed to fulfill some of these important trade agreement commitments to reform its rules for new technology reimbursement and regulation. Rather, the government of Japan has used arbitrary means to reduce technology prices and has slowed the introduction of new products as a means to contain overall expenditures.

In addition, there is an immediate, discriminatory threat in the Japanese government plan to introduce "foreign reference pricing" in the price-setting process. Basing prices in Japan on prices in other markets fails to capture the significant and unique costs of doing business in Japan.

Japan’s average hospital length-of-stay being 30 days (compared to 6 in the U.S.). Failing to adopt new technologies is not only troublesome for U.S. manufacturers, it also hinders greater system-wide efficiency or enhanced quality of care in the Japanese health system. Fully utilizing new medical technology can actually improve the financial health and productivity of their system – especially given their rapidly aging and shrinking population.

Just as in the past, U.S. trade leadership can help address these problems. Enforcement of previous trade agreements can require Japan to take certain agreed upon steps in an expeditious manner, including:

• Reducing the two-plus year delay in access to brand-new technologies by establishing a process and timeframe for granting provisional coverage and pricing, as well as a method for establishing "final" reimbursement listing.
• Establishing clear-cut criteria and processes for creating new reimbursement categories and "final" pricing for next generation products.
• Abiding by the required government-industry consultations process established in the 1986 MOSS trade agreement when proposing major changes to either the reimbursement or regulatory processes.

In the EU, enforcement of current trade agreements is key. The US-EU Mutual Recognition Agreement (MRA) must be fully implemented. Bringing healthcare products to the market faster is an important priority consistent with the protection of public health and the reduction of regulatory costs and redundancy. The European Commission (CEC) should be encouraged to take all proper measures to ensure that the MRA is operational by January 2002, when the current three-year transitional period is scheduled to end.

In addition, European Member States should be encouraged to adopt policies for their health technology assessment (HTA) decisions affecting medical technologies that are transparent and timely, and industry participation should be allowed. US firms, as the leaders in innovative medical technologies, stand to suffer disproportionately from unnecessarily long delays in HTA decisions in Europe. The CEC should ensure that the EU Medical Devices Directives are implemented uniformly by the Member States. Uniform implementation of the Devices Directives is essential to the furtherance of the European Single Market – a concept strongly advocated by the TABD. To the extent that additional regulatory requirements are deemed necessary in Europe, Member State must be advised to consult with industry in advance and to ensure that such requirements are consistent with the objectives of global harmonization.

AdvaMed supports the Safe Harbor agreement struck between the EU and US – an agreement that promises the uninterrupted data flow from the EU to the US. The agreement, reached in response to the 1995 EU Data Privacy Directive, provides additional flexibility (along with specific data privacy contracts or compliance with the actual directive itself) for US firms to continue to receive data from EU-based companies. AdvaMed and its member companies look forward to working with both sides on implementing the agreement in such a way that supports transatlantic business and economic activities and, in particular, supports industry’s efforts to research, develop, and bring to market medical technologies that offer great promise for patients on both sides of the Atlantic.

AdvaMed appreciates the interest of the Committee in our sector, and the many ways in which international trade can benefit it. Our industry can also benefit the international community with products that save and enhance lives, reduce overall health care costs and improve productivity in health care systems. We look forward to working with this Committee, the Congress and the Administration to further reduce barriers to patient access to technology worldwide.