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

About AdvaMed Worlds 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

AdvaMeds Role DesignClinicalReview Idea through FDA: 2-6 yrs CoveragePayment Coding Cov & Paymt: 0-6 Japan Canada UK Korea Germany Mexico China India France Think Tanks 3

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

Trends Affecting the Medical Technology Industry 5

Medicare evolving into an aggressive purchaser Challenges: Movement toward pay-for-performance Commoditization via competitive bidding Greater bundling of services 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 Trend #1 7

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

Industry Favorability: Congress PHYSICIANS 9

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 Trend #2

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 Trend #3 11

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) Trend #3 12

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 Trend #4 13

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 industrys contributions to economic development Trend #4 14

Misperception: Technology Drives Health Care Costs Trend #5 Our 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.

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

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

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

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

In closing... Push for health care reform & budgetary pressures = continued spotlight on medical technologys 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

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

Questions? 22

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