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Medtech firms see benefit from Democratic plans

WASHINGTON (Reuters) - Makers of medical devices ranging from diagnostic tests to defibrillators stand to reap big benefits from U.S. health care system reforms backed by the leading Democratic presidential contenders.

While some health care companies fear Democrats’ plans to extend the reach of government’s regulatory hand, that risk is offset for device makers by the prospect of a Democratic president broadening the market by extending insurance coverage to many of the 47 million individuals now without it.

The most likely candidates, Sens. Hillary Clinton or Barack Obama for the Democrats and Sen. John McCain for the Republicans, back major changes that are anathema to the pharmaceutical industry. But device companies are less vulnerable to pricing pressure, a key to many of the candidates’ proposed reforms.

“If you look at the industry at large, it’s not very price-sensitive,” said Stanford Group analyst Jan Wald. “Under the Democratic proposals, there is more coverage and more opportunities to sell products.”

Product sales by the U.S. medical device industry reached an estimated $123 billion in 2006, according to the Advanced Medical Technology Association, or Advamed. The group represents giants like Medtronic Inc MDT.N, whose products include defibrillators to stabilize heart beats, as well as scores of smaller players.

The escalating cost of medical care and increasing number of people without health insurance rank among the top domestic policy issues in recent voter surveys. As the U.S. economy teeters on recession, the issue of broadening coverage is likely to gain even more steam.

McCain, the presumptive Republican nominee, proposes offering tax credits and loosening regulations to make it easier for individuals to buy coverage.

The Democratic hopefuls take a more aggressive approach and attempt to achieve universal insurance coverage. Clinton calls for a mandate that all individuals buy insurance, and both she and Obama want to require employers to contribute to expanding coverage.

“I’m not sure it would be as top a priority for Republicans,” said Advamed President Stephen Ubl.

The trade organization supports requiring individuals to buy coverage, known as an individual mandate. Without it, some say, the healthy may not be willing to buy insurance, leaving sicker patients to skew the risk pool insurers rely on to stabilize rates.

"You need some form of keeping folks insured," said Advamed Chairman Edward Ludwig, who is chief executive of Becton Dickinson & Co BDX.N. "I would not be averse to a concept of mandates if it is done right."

Becton Dickinson’s products include syringes, catheters and diagnostic tests.

DIFFERENT FROM DRUGS

Medical device makers differ from the pharmaceutical industry in several ways. The products they make are not seen as commodities, and insurers don’t buy them in bulk, analysts said.

Device companies may have less to fear from a new administration than pharmaceutical makers do. For example, Obama, Clinton and McCain all back giving the Medicare insurance plan for the elderly the power to negotiate drug prices and speeding approval of cheaper, generic forms of biotech medicines.

To be sure, any increase in government oversight carries some risk, especially because most experts agree that medical technology and its overuse are a major driver of health care costs.

Health care spending has tripled as a percentage of the economy over the past four decades. A Congressional Budget Office report earlier this year said that about half of all long-term health care spending growth can be linked to technological advances.

To address the cost issue, both Democratic presidential contenders want to create an independent body to support comparative effectiveness research. The medical device industry fears that insurers would use research comparing various treatment options to deny payments for pricey technology that may be more effective, especially over the longer term.

"There is the risk of the unknown: What could the government be doing to micromanage?" said Barry Liden, director of government affairs at Edwards Lifesciences EW.N.

But on the whole, he said, “increased access will expand potential sales.”

Editing by Lisa Von Ahn

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