Trends Affecting the Medical Technology Industry

1. Trends Affecting theMedical Technology Industry Stephen J. Ubl President and CEO, AdvaMed March 27, 2008

2. About AdvaMed • World’s largest medical technology association • 1,600+ member companies and subsidiaries • Members produce 90% of sales in domestic market, • 50% of sales in global market • 70%+ of member companies have less than • $30 million in annual revenue • 65 staff with global expertise, bi-partisan backgrounds • 45 member Board of Directors including 5 from smaller companies 2

3. AdvaMed’s Role FDA CMS Design Clinical Review Coverage Payment Coding Idea through FDA: 2-6 yrs Cov & Paymt: 0-6 Canada Korea Mexico India Japan UK Germany China France 3 Think Tanks

4. The Policy Environment ActivistCongress Democratic Suspicion of Business Critical Media Budget Driven Policy Increased Oversight Health Reform 4

5. Trends Affecting the Medical Technology Industry 5

6. Trend #1 Medicare evolving into an aggressive purchaser Challenges: • Movement toward pay-for-performance • Commoditization via competitive bidding • Greater bundling of services

7. Trend #1 Medicare evolving into an aggressive purchaser Our Response: • Ensure pay-for-performance promotes quality & efficiency, not “cheapest is best” approach • Work for payments that reflect true cost of care • Protect patient access to the most appropriate therapies 7

8. Trend #2 Difficult environment for industry reputation Challenges: • Increasingly negative press coverage • Recalls raise questions of safety and efficacy • Sales & marketing practices under fire 8

9. Industry Favorability:Congress PHYSICIANS 9

10. Trend #2 Difficult environment for industry reputation Our Response: • Proactive and positive policy proposals • Build positive industry image through Value of Medical Technology program • Demonstrate continued leadership on ethics and compliance

11. Trend #3 FDA credibility under fire Challenge: • FDA may become more risk adverse in reaction to media & congressional scrutiny • Preemption authority questioned • FDA resources vs. increasing responsibilities 11

12. Trend #3 FDA credibility under fire Our response: • Focus on appropriate MDUFMA implementation • Support adequate FDA funding • Defend FDA preemption authority • Promote least burdensome regulatory approach (IVD proposal) 12

13. Trend #4 Global race to the bottom Challenge: • Growing interest in foreign reference pricing • Proposed price-driven tendering processes • Nascent regulatory and pricing systems in emerging markets 13

14. Trend #4 Global race to the bottom Our Response: • Provide evidence demonstrating how FRP is inappropriate • Partner with patients, physicians & local device associations • Engage early with authorities in key emerging markets (China, India) • Highlight value of technology and industry’s contributions to economic development 14

15. Trend #5Our Biggest Challenge “The bulk of the long-term rise in health costs resulted from...new medical services that were made possible by technological advances...” “Future increases in spending could be moderated if costly new medical services were adopted more selectively...than they have in the past and if diffusion of existing costly services was slowed.” Misperception: Technology Drives Health Care Costs

16. Our Response:Four-Pronged Approach 1. Medical technology reduces health care costs • Testing hospitalized patients for drug-resistant infections = $8.3 billion in savings in 2005 • Medical imaging to diagnose & treat stroke yields savings of $800 million per year • Total knee replacements save $77,000 per patient in lifetime health care costs 16

17. Our Response:Four-Pronged Approach 2. Medical technology generates real economic value • From 1970 to 1998, improvements to life expectancy from cardiovascular care advancements alone added $2.6 trillion per year to U.S. wealth • Nearly half of GDP for this period 17

18. Our Response:Four-Pronged Approach 3. Focus on the root causes of cost growth • Fee-for-service systems reward providers for delivering more care – not better care • Lack of effective prevention measures • Costs of chronic disease • Inefficiency in the health care system 18

19. Our Response:Four-Pronged Approach 4. Quality of life improvements due to medical technology are priceless • Medicare inpatient payment rates FY 2007 • Cochlear implant = $8,650 • Knee replacement = $9,281 • ICD = $28,886 19

20. In closing... • Push for health care reform & budgetary pressures = continued spotlight on medical technology’s role in health care • We intend to have a seat at the table. We will fight for a health care system that provides access to quality medical care for all. • Policy decisions over the next 25 months could affect the industry for the next 25 years... 20

21. Two roads... Static road vs. dynamic road • Slowed innovation, rationed care, short-term price cuts, growing ranks of uninsured, or... • Emphasis on health promotion/disease prevention, focus on quality, more efficient delivery system, quality health care for all 21

22. Questions? 22

23. Trends Affecting theMedical Technology Industry Stephen J. Ubl President and CEO, AdvaMed March 27, 2008