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MarketScreener Homepage  >  Equities  >  Xetra  >  Fresenius Medical Care AG & Co. KGaA    FME   DE0005785802

FRESENIUS MEDICAL CARE AG & CO. KGAA

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Will Europe's clampdown on faulty medical devices hurt patients?

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06/06/2019 | 02:16am EDT
FILE PHOTO: A medical implant is shown at medical implants maker Zimmer Biomet in Winterthur

BERLIN (Reuters) - When a Californian company founded by a U.S. veteran wounded in Afghanistan sought to register a new medical device this year, it turned to Europe before the United States. The European approvals system had long been quicker, the company said, but the introduction of new rules is changing all that.

"Now it has flipped," said Bill Colone, CEO of San Clemente-based Spinal Singularity, which hopes to launch a 'smart' catheter for men with spinal injuries or disease early next year after squeezing in its application under the old European rules.

Colone is part of a chorus of industry voices warning that a switch to stricter European rules governing medical devices, due to come into force a year from now, will slow or even halt the release of products in Europe that could transform patients' lives.

Defenders of the regulations say they will not significantly complicate the process and are vital to prevent problems like rupturing silicone breast implants and debris from all-metal hip implants damaging tissue and bones.

Many patient advocates say the new rules do not go far enough to reform a European system in which a top U.S. official suggested in 2011 patients may be "guinea pigs". The comment drew a sharp response from the European Union, which still firmly rejects that characterisation.

That transatlantic spat, and the subsequent evolution of medical device certification around the world, are part of a wider global struggle by governments to attract businesses seeking light-touch regulation without scaring off their voters.

The new medical devices rules agreed by the European Union in 2017 will tighten control of devices before they come to market, improve transparency and strengthen surveillance by national authorities, a European Commission spokesperson said.

The new system changes less than some proposals - which envisaged regulation by a public body, along U.S. lines, replacing the existing practice of certification by profit-making private firms.

But players in medical technology - which ranges from surgical implants to scans - say it is too burdensome and is being built too slowly, risking not only hampering innovation but also harming patients by interrupting supplies.

"Immediate action is needed now to avoid severe disruption of product supply to patients and hospitals," seven European Associations said in a joint statement last week.

All 55,000 devices certified under the old directives have to be re-certified along with other products such as reusable scalpels, nasal saline sprays and dental imaging software.

The industry says there are not enough Notified Bodies - the private firms charged with certifying the safety of devices ranging from bandages to pacemakers, and that manufacturers may have to take products off the market or delay new launches.

The situation is further complicated by Brexit, with Britain's BSI one of just two notified bodies to have got the go-ahead to certify devices under the new Medical Devices Regulation (MDR). If Britain leaves the EU in October without a deal, certificates issued by British bodies would be invalid.

CONTINGENCY PLAN?

Germany, home to Europe's biggest medtech sector, is pressing the European Commission to smooth the transition, suggesting three solutions to overcome any Brexit-related supply problems in a March 27 letter to the Commission seen by Reuters.

These include giving firms 12 more months to sell products in the EU in the case of a disorderly Brexit, as long as they plan how to regain compliance, the letter from German Health Minister Jens Spahn said.

Trade groups have suggested delaying implementation of the rules beyond May 2020 or faster designation of notified bodies.

The European Commission rejects the need for contingency plans and said it was focussing on a timely implementation of the regulation, which includes requirements for manufacturers to monitor product safety once devices are on the market.

More than 20 notified bodies could be accredited by the end of the year, it said.

This is around a third of the number of firms currently certified to assess medical products. "That is a massive reduction in capacity when adding a considerable volume of work," said Gary Slack, senior vice president for global medical devices at the notified body BSI.

To hedge against any Brexit risk, BSI has set up a subsidiary in Amsterdam and has transferred most of its clients' certificates there, but is still waiting for its Dutch body to be certified under the MDR.

For Medtech conglomerates with thousands of devices, the bill to meet the new regulations could stretch into the millions of dollars - especially for those that make riskier devices.

Smith and Nephew, which manufacturers hip and knee implants, put its MDR compliance costs at $15-$20 million for 2018 and around $60 million this year.

As a result of the regulation, more than 55 percent of those surveyed by Germany industry association ZVEI said they would reduce the number of products on offer.

The Commission said many products are eligible for a so-called 'grace period' which means they can be sold under the old rules until May 2024 at the latest if certificates are reissued, something BSI said many firms are rushing to do.

But the other certified body, Germany's Tuev-Sued, said many manufacturers had yet to catch on to the regulatory changes. "We are definitely expecting chaotic years," said Bassil Akra, Tuev-Sued's vice president in charge of medtech.

PUBLIC ACCESS

The medical technology industry is worth $129 billion and employs 675,000 people in Europe, according to MedTech Europe.

Experts agree that many new devices are invaluable to patients, but the International Consortium of Investigative Journalists said in November that faulty ones were linked to 1.7 million injuries and nearly 83,000 deaths over the past decade.

A key part of the new regulation is how much access doctors and patients will have to the pan-European Eudamed database, to strengthen surveillance and prevent repeated adverse incidents. A Commission spokesperson said discussions were ongoing with authorities, patient groups and other stakeholders.

While medtech giants like Siemens Healthineers and Germany's Fresenius have the regulatory staff to navigate the new rules, most firms are much smaller and will struggle, said MedTech Europe CEO Serge Bernasconi.

Spinal Singularity said it had managed to apply under the old system by hiring contractors to help it submit all the paperwork to a notified body by May 27 - two months before it had planned. It is hoping for certification by the end of the year, but is dreading renewing it in four years' time because of what he said were many "incredibly burdensome" new requirements.

German surgical instrument maker Asanus said it plans to take around five highly-innovative surgical products off the market and will discontinue several hundred minimally-invasive devices, as well as stop new development in this area.

"If the paperwork costs for the product are five times the amount you can achieve in sales, you simply won't do it anymore," said Chief Executive Armin Schorer, who expects many smaller makers of lower risk devices to shut up shop.

Bernasconi and Colone said start-ups are now looking to launch their products in other markets, like the United States or China first, denying European patients access to innovations.

The U.S. Food and Drug Administration (FDA), the federal body that approves medical devices, is toughening up its own approval process after faulty medical devices harmed patients there too. But Colone noted that was only for some products. His firm plans to file for U.S. approval this autumn.

"Because of the pending new EU MDR, overall the FDA process may even be slightly easier," he said.

Kurt Racke, a medical ethics expert at Bonn University, said he did not think Europe's new regulations would make it harder to win approvals than in the United States. "I think Europe has the most lax market for medical devices," he said. "I don't think so much will change there in principle."

The European Commission rejects suggestions its rules are not tough enough. "The Commission takes patient safety very seriously," a spokesperson said, "and has led various regulatory reforms to ensure the highest possible quality, safety and reliability of medical devices on the EU market."

(Reporting by Caroline Copley; editing by Philippa Fletcher)

By Caroline Copley

Stocks mentioned in the article
ChangeLast1st jan.
FRESENIUS MEDICAL CARE AG & CO. KGAA 1.61% 68.08 Delayed Quote.18.29%
FRESENIUS SE & CO. KGAA 0.76% 45.37 Delayed Quote.6.25%
SIEMENS HEALTHINEERS AG 1.52% 36.325 Delayed Quote.-2.04%
SMITH & NEPHEW 1.07% 1752 Delayed Quote.18.37%
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Financials (USD)
Sales 2019 19 566 M
EBIT 2019 2 621 M
Net income 2019 1 327 M
Debt 2019 8 990 M
Yield 2019 1,71%
P/E ratio 2019 17,3x
P/E ratio 2020 14,4x
EV / Sales2019 1,62x
EV / Sales2020 1,51x
Capitalization 22 723 M
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Number of Analysts 25
Average target price 91,16  $
Last Close Price 75,20  $
Spread / Highest target 48,5%
Spread / Average Target 21,2%
Spread / Lowest Target -34,5%
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Rice Powell Chief Executive Officer
Dieter Schenk Chairman-Supervisory Board
Michael Brosnan Chief Financial Officer
Olaf Schermeier CEO-Global Research & Development
William P. Johnston Member-Supervisory Board
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