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Capitol Correspondence - 10.28.19

Two Medical Device News Items: Impact of Trade Tariffs, Potential Supply Disruption

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Because many of the individuals whom our members support rely on medical devices, we are flagging two Politico Pro articles for the convenience of our readers. The first outlines a potential disruption to medical device supplies, and the second reports on the effect of trade tariffs on device manufacturers.

Potential disruption of medical device supplies due to closure of sterilization plants:

“The FDA warned today that closing medical device-sterilization plants over concerns about leaks of a carcinogenic gas threatens supplies of products employed in a vast array of critical medical procedures.

Uproar over leaks of ethylene oxide gas forced the closure of two large Sterigenics plants in Georgia and Illinois this year, and a Becton Dickinson plant in Georgia may also close. The gas is used to sterilize 20 billion devices a year in the United States. It penetrates hard-to-reach plastic or metal crevices and is employed for half the devices that require sterilization, from surgical instruments to cardiac stents, catheters, tubes and shunts.

[…]

Other ethylene oxide sterilizers operate for now in Indiana, Texas, Missouri, Pennsylvania and New Mexico, but disruptions caused by the closings ‘could result in years of spot or nationwide shortages of critical medical devices,’ [Acting FDA Commisssioner Ned] Sharpless said.

[…]

FDA is working with device manufacturers and health care systems to develop contingency plans, Sharpless said. He urged the manufacturers, hospitals and other providers to assess their inventories for potential shortages but told them to avoid hoarding or making unusually large purchases.

The agency may seek out a foreign company that uses the process to address the shortage, Sharpless said. FDA is holding a Nov. 6-7 hearing to seek novel device sterilization options.”

The effect of trade tariffs on medical devices:

“Not long after Trump hit an initial $34 billion worth of Chinese goods with 25 percent tariffs, USTR opened the process for companies to apply for an exclusion from tariffs on any products not readily available in the United States. But critics like [owner of medical device manufacturing company Klarity Medical Products Peter] Larson complain USTR’s process is difficult to navigate and leads to many rejections.

The medical device industry has been left eating the costs — or passing them along to customers. Altogether, Trump has imposed duties on about $2 billion worth of medical devices and parts made in China, hitting big ticket items like MRIs, electrocardiographs and x-ray equipment as well as diagnostic monitors, laboratory ware, contact lenses, gloves and cotton surgical towels.

For its part, China has slapped retaliatory duties on almost $5 billion worth of U.S. medtech exports, compounding the problems that U.S. companies already face in trying to make sales in the world’s second largest economy.

Earlier this month, Trump announced the United States and China were close to completing a ‘phase one’ trade agreement covering agriculture, currency, financial services and intellectual property. However, until a final more comprehensive deal is reached, tariffs that Trump has already imposed on over $350 billion worth of Chinese goods will remain in place.

Once those duties were imposed, the only avenue for companies to get off the list was to file an exclusion application.”