Changes Are Afoot in U.S. Medical Device Regulations, Morningstar, August 15, 2011

This excellent article by Morningstar reminds us that the Food and Drug Administration (FDA) has been reviewing the regulatory process that allows most medical devices to make their way into the marketplace and the agency plans to have new changes in place by October.

This is sparked by the July release of the Institute of Medicine report (here) that has the medical device industry up in arms. It calls for scrapping the 510(k) clearance process and starting over. While some medical devices such as Class III (high risk) must provide scientific evidence through clinical trials of safety and effectiveness, other manufacturers merely exchange paperwork and claim their device is substantially equivalent to another device, a predicate, already cleared by the FDA.

If the FDA decides as a compromise position to create a moderate risk category with different qualifications for approval it no doubt would slow the entry of new medical devices into the marketplace and increase investment dollars.

Morningstar recently cut the fair value estimates of Stryker and Zimmer by about 5% each due to the increased scrutiny expected from regulators following the IOM recommendations.