The recent conference by AdvaMed, an organization that lobbies in the interest of device makers, provided a variety of discussions. One was a roundtable that let CEOs sound off on questions posed by editors. The executives included Michael Mussallem from heart-valve manufacturer Edward Lifesciences LLC, James Mazzo from Advanced Medical Optics Inc., and Scott Garrett with lab and test-equipment firm Beckman Coulter Inc. Not surprising, the trio have firm opinions on a range of issues. During the conversation the topics kept coming back to protecting intellectual property in China, slow approvals in Japan, how to keep innovative products coming, and controlling the cost of healthcare.

On protecting IP in China

Advanced Medical Optics' James Mazzo: China is not the only country with IP problems, but it gets the most attention. There are more offenders outside that country than in. We don't see IP theft as a major issue for optical devices, partly because ophthalmology devices are complex and difficult to manufacture. We have a manufacturing facility in China with the highest standards around. So when a recent problem did arise in the eye-care market, a contact-lens-care product turned out to be a badly copied solution, we identified it and authorities closed it down.

Beckman Coulter's Garrett: The Chinese market has matured over the last 10 years. Our facility there makes product for that market. Early on, a lot of other firms did try knocking off our products. One was even marketing under the name Backman Techman. But there have been few in the last five years. The Chinese government has cracked down on them because the reagents for running a diagnostic system were of low quality. It is impossible to knock off many reagents because they are complex and the amount of money needed to do it right would be prohibitive. Still, respect for IP has improved greatly although it has a way to go. The point is that innovation is tough, expensive, and takes a long time.

Edwards Lifescience's Mussallem: There are really two Chinas. One is a private market in which people would like to be treated with high-quality Western products and the public market that cannot afford the latest medical technology. So the threat to IP loss discourages some companies from bringing their best to China for use in the first group. But as the country improves its safeguards around IP, it will open the market to new technology.

Mazzo: I'm more concerned about companies than countries. Generally, we defend IP theft because we want to tell our employees that their ideas are important to us. The action says we support what you have done.

On slow approvals in Japan

Garrett: Japan is by far the most difficult market in the world for the diagnostic industry. It tends to be slow making approvals and it views diagnostics as low on the totem pole when it comes to reimbursements. Labs there have seen their reimbursements cut year after year, so that makes Japan a cost-only competitor.

Mussallem: A recent study by LEK Consulting confirmed the substantial approval time for the introduction of new devices to Japan. It is a great difference, some 28 to 34 months for new device entry into Japan versus the U.S. or Europe. The pharmaceuticals affairs law there was implemented as a way to solve this and other problems. But progress probably went backward because it was a new agency. It was understaffed, slow, and performed poorly in the beginning. They have recently cut about four months off their performance. That's a small dent. They have a long way to go.

Mazzo: If products are approved first in the U.S., Europe sees them about 18 months later, and Japan much later after that. The issue is that we are supporting products for one market when we don't have them anywhere else, and that is a cost issue for us. Slow approvals keep us from providing the latest innovation.

We have seen some progress recently in that the Japanese government has agreed to increase the number of reviewers and put more resources behind the approval effort. That is because of what this device industry has done. Working together with many companies and under the leadership of AdvaMed have let us shorten approval times in Japan.

Mussallem: It's encouraging that the issue has been elevated so it is at least being talked about in the Diet and Ministry. There is a newfound commitment to help Japanese patients access technology at a faster rate. So now we get to think about how the U.S. can develop some of that commitment and reduce the lag time to Europe.

Mazzo: First off, an allegiance with AdvaMed is critical. You use the industry associations, and power of all companies. It's great to have colleagues that include Beckman Coulter and Edwards when we speak to regulators. Then the conversation does not look like its coming from one device segment. What's more, physician groups can also be powerful because no Japanese ophthalmologist is satisfied working with products that were first available on the world market three years ago. Japanese doctors want the latest innovation as well.

Mussallem: The different approval cycles have given the industry staged introductions. What makes the dynamic more interesting is that physicians from around the world go to the same meetings. So they all know what's available and they want it as soon as possible.

There is a positive to this transparent world and it's patient power. When patients are aware of the device lags they ask a good simple question: Why not us?

Mazzo: It's easy to focus on Japan, but we need to improve here in the U.S. as well. We will face challenges in Europe especially if they decide to move away from the CE mark.

On innovations

Mazzo: One way a device firm makes sure it has new products coming is to understand reimbursement and regulatory strategies. For instance, if there is a big gap from one market to another, that is a cost factor carried by device makers, and it impacts technology. Ideally, every country would approve new products to the same terms.

We have to introduce innovative new products about every 18 to 24 months, then improve that technology, and introduce new innovative devices after that. Pharmaceuticals have a longer time frame. We don't have the luxury of a lot of time, so we need constant innovation from our teams. And we need support from regulators for the innovation.

Garrett: The life cycle for lab products is to the point where we could have new generation of instrument systems coming out every couple years. But we have to provide service and spare parts for some devices, sometimes for many years. For instance, Japanese labs are likely to have devices that are a bit older but still capable.

Mussallem: Of course, mature products are in all markets. It's the new stuff, such as a recent technique that can replace a heart valve without open heart surgery, that makes the difference.

On the cost of healthcare

Not surprisingly, all the CEOs agree that their devices are part of a solution that could bring down high healthcare costs.

Garrett: Take the cost of lab services in clinical hospitals, for instance. It has been steadily declining as a percent of the total healthcare bill in the U.S. because recent devices make every lab more productive and less labor intensive. In any episode of healthcare, new tests give physicians more information earlier on. This makes our products part of the solution. It distresses me to read of the cost of healthcare and see comments regarding “unnecessary tests.” It's too casual an observation. The cost of testing probably has more to do with obtaining a sample from the patient than running the tests. Remember, for the last 25 years reimbursement plans have dealt with Diagnostic Related Groups, which means a hospital gets paid the same whether it does one test or 50 different tests for a patient. But once you have a precious sample of blood in the lab, would you not want to get as much information out of it as possible? If it was from your loved one, you'd tell the doctor, ‘Do as much as you can with that sample’. Two points to make here are that you don't want to take more blood than absolutely necessary out of a patient, especially when they don't have much to give. And second, learn something useful. So the incremental cost is low for hospitals that would like to do many easy routine tests. These provide about 85% of the information a doctor needs for a diagnosis. The cost of tests on a total U.S.-healthcare base is about 2% of the total cost. So 85% of the information comes from 2% of the cost.

Mazzo: The problem with healthcare costs is that it comes out of one huge pot. I'd like to separate ourselves from pharmaceutical costs. For instance, AdvaMed is running a campaign called The Value of Technology. It demonstrates instances of what Scott Garrett was talking about. Here's another: A little over 10 years ago, if a patient needed cataract surgery, that person had a three-to-four day stay in the hospital. Then they had to wear glasses, adding another cost. Today, patients come in at 8 am and can be reading to their grandchildren at home by noon. The question to ask is: What can device companies do for patients to make them more productive? We can reduce costs if we get approvals quicker.

Mussallem: Here's another perspective. We have a new heart valve that is a clear winner from the start. It lets us do things in a catheter lab instead of open-heart surgery. It's a no brainer. It saves money. And there is a lot of other technology that if applied now would allow more effective procedures that would avoid medical problems down the road. Applying it seems an intelligent decision. If a hospital has access to the new procedure, it could let a patient go home several days earlier than usual. If new equipment is unavailable, then old technology must be relied on and that drives up healthcare costs, not the new stuff.

Who pays the bills also makes a difference. If a patient and government pay the bill, they might take a long view. But private insurers tend to think: Just do the least expensive procedure.