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"The medical device market in the United States is projected to register a CAGR of 4.6% from 2018-2023, with a value of $106.9 billion by 2023, despite an economic slowdown in 2019, as a result of higher tariffs, heightened trade tensions and tightening credit conditions." - Fitch Solutions, 2019
With the United States leading the world as the largest medical device market, there is increasing interest to partner with its manufacturers to expand distribution of medical devices and equipment into Latin America.
Conversely, Latin American manufacturers are looking to establish partnerships with U.S. distributors as a way to expand their presense outside of LATAM. However, many requirements need to be met in order to make these ventures a success.
We are pleased to bring you a tailored report with key information related to medical device imports and exports for the United States, how recently implemented tariffs are affecting the industry, and what requirements manufacturers should be aware of to gain FDA approval for its devices and equipment before importing or exporting.
Fitch Solutions also recently revealed that medicaldevice imports account for approximately 30%of the U.S. medical device market. In 2018, theyincreased by 9.9% to reach a record high of $51.6billion. A significant component of the rise has beena consequence of the relocation of U.S. companies’production facilities to cheaper manufacturinglocations abroad, such as Mexico and Ireland, FitchSolutions said.The largest product area is ‘other medicaldevices’ representing over a quarter of total imports,registering an increase of CAGR 14% in 2018.Diagnostic imaging is the second-largest category,with a fifth of imports, followed by consumables,orthopedics & prosthetics, patient aids and lastly,dental products, which accounts for less than 5% ofthe total medical device imports to the U.S.
Exports to the EU-28 totaled $17.6 billion in 2018, representing 37% of total exports. The EU-28 received over a third of total exports in every sector in 2018. The leading destination was the Netherlands ($6 billion in 2018), followed by Belgium ($3.6 billion), Germany ($3.3 billion) and Switzerland ($1.2 billion).
Japan received 10% of total exports in 2018, valued at $4.9 billion.
Exports to China represented 9.5% of the total, with shipments valued at $4.5 billion. China was the leading destination for diagnostic imaging exports. However, looking forward, U.S. exporters stand to lose out in the ongoing trade tariff dispute with China, as the impact of the tariff hike has been significant for the first batch of products that had tariffs of 25% imposed in 2018. Chinese imports of MRI systems, X-ray equipment, patient monitors and ophthalmic instruments from the fell sharply in the fourth quarter of 2018 and the first half of 2019.
Canada was the fourth-largest individual export market in 2018, with shipments valued at $4 billion and representing 8% of the total. Canada was the leading destination for bandages & dressings, dental products and therapeutic appliances.
Medical device lobbying group AdvaMed has expressed concerns about the effect of the trade war on U.S. medical device manufacturers. The medical device industry has already felt the sting of the trade war between the U.S. and China, contending with tariff rates of up to 25% on both $860 million in Chinese imports to the U.S. and nearly $5 billion in exports to China, per AdvaMed. Further tariffs could undermine the strength of medical device suppliers as the U.S. currently makes up more than 30% of China’s med device and diagnostics imports.
Although U.S. medical device exports are increasing globally, U.S. exporters stand to lose out in the ongoing trade tariff dispute with China, as exports to China fall while imports from China rise. Lower wages in China mean it can produce goods such as medical devices in a less costly way than in the U.S. Tariffs on Chinese goods, which will be paid by the importers upon entry to U.S. customs, mean that the prices of those goods increase at the consumer side to cover the cost.
List of medical devices not subject to the tariffs:
The Food and Drug Administration (FDA) regulates the sale of medical device products (including diagnostic tests) in the U.S. and monitors the safety of all regulated medical products. Before a medical device can be legally sold in the United States, the person or company that wants to sell the device must seek approval from the FDA. To gain approval, they must present evidence that the device is reasonably safe and effective for a particular use.
Under the Medical Device Reporting regulations, an importer is required to report incidents in which a device may have caused or contributed to a death or serious injury as well as certain malfunctions. Meanwhile, under the Medical Device Tracking regulation, certain devices must be tracked through the distribution chain.
All medical devices imported into the U.S. must meet the regulatory requirements of both the U.S. Bureau of Customs and Border Protection (CBP) and the FDA. Any entry for an FDA regulated product that is filed with CBP will also be electronically submitted to FDA for review.
A system called Import Alerts prevents potentially violative products from being distributed in the U.S. They also place the responsibility back on the importer to ensure that the products being imported comply with the FDA’s laws and regulations. Before importing into the U.S., importers should know if their products are subject to the Detention Without Physical Examination (DWPE) of products that appear to violate the FDA’s laws and regulations.