Effects of medical device legislation on innovation within Australian manufacturing companies.

* A supplied list of members of the Design Institute of Australia with experience in medical equipment design www.dia.org.au; and

* Data from the Institution of Engineers Australia online members database with experience in project management www.ieaust.org .au (non-medical equipment manufacturers).

The medical device manufacturers were represented by two groups:

* Manufacturers of higher risk medical devices. Most of these companies had operated under regulation of the Therapeutic Goods Act since 1989 and therefore might be able to predict, with higher accuracy, actual effects of the new MDR 2002 legislation; and

* Manufacturers of goods previously exempt from the regulation, such as rehabilitation equipment. Most of these companies supposedly were familiar with the legislation and mostly completed the compliance process. Therefore, it is important to take into consideration that evaluation of the effects by these companies were mixed in terms of their perception of actual effects and their estimation of future or possible effects.

The study was conducted as a postal survey which included a questionnaire, a cover letter and a prepaid return envelope. While the survey was simple and of ultimate benefit to those approached, it must be recognised that busy work schedules either delayed or prevented feedback from some small businesses.

The questionnaire consisted of 17 questions in relation to:

* The size of the company;

* The implementation process of the TGA legislation by the responding medical device manufacturers;

* The effects of the legislation on the responding medical device companies in the scale from--1 (negative effect) to +1 (positive effect);

* R&D expenditures, revenue from new products and number of patents;

* The contact information of the respondents. The results of the study are presented in the following section of this paper.

Results of the survey

In total, 107 survey forms were sent out and nine of these were returned because of wrong or obsolete addresses. As a result 98 survey forms reached the targets and 25 were completed and returned. This relatively high response rate may be explained by the following factors:

* The minimalist and clear structure of the questionnaire;

* Follow up contacts with the targeted companies; and

* The relevance of the study to the respondents' interests and needs.

The respondents represented mostly small companies; 15 respondents or 60% were from companies with less than 10 employees and 6 respondents or 24% were from companies with from 11 to 50 employees. Medium companies (50-200 employees) were represented by two respondents or 8%; larger companies (more than 200 employees) were also represented by two respondents or 8%. Sixteen respondents represented medical device manufacturers and 12 claimed that they completed the TGA conformance process. Some survey forms were completed by non-medical device manufacturers who were representatives of overseas medical device manufacturers (one response) or were not aware if their products are or are going to be regulated by the TGA (one response) but still preferred to evaluate the effects of the legislation. Distribution of the respondent medical device manufacturers was close to the distribution of all respondents: 8 respondents or 50% were from companies with less than 10 employees; 5 respondents or 31% were from companies with from 11 to 50 employees; 2 respondents or 13% represented companies with 50-200 employees and one completed survey or 6% was from a company with more than 200 employees.

Custom-made devices were produced by 5 respondent companies, Class 1 (with subclasses 1m and 1s) products were manufactured by 13 companies and Class 2 (with subclasses 2a and 2b) medical devices were made by 5 manufacturers.

The survey indicated that the TGA MD legislation had mostly positive effects on Australian medical device manufacturers. These effects were on quality, reliability and the safety of their products, and business success and legal security of their companies. From the medical device manufacturers' point of view the legislation did not affect the novelty of their product designs. However, the manufacturers showed that the legislation negatively affected the delivery time, frequency of development of new products and cost of innovation (see Figure 1).

These results are quite similar to findings of a similar study conducted in Europe by Thumm et al. (2000: 63). After surveying and interviewing approximately 150 of the most innovative medical device manufacturers in Europe, they concluded that the European Medical Device Directives 90/385 EEC and 93/42 EEC (similar to the Australia Medical Device Regulations 2002) had improved conditions for innovation and were especially beneficial for access to the pan-European market, manufacturers' quality assurance systems and the quality and safety of medical devices. However, similarly to the Australian study, effects of the directives on innovation cost and delivery time of new products to market were considered to be less positive by European respondents. The significantly increase of administrative expenditure on compliance requirements was another negative outcome according to Thumm et al. (2000: 66). They also noted that in many cases negative feedback was received mainly from SMEs.

Thumm et al. (2000: 67) explained that some of the negative responses were attributed to the transition period of the legislation. It should therefore be noted that the study was conducted 10 years after 90/385 EEC and 7 years after 93/42 EEC Medical Device Directives were introduced in Europe. Therefore, an equal transition period may be expected for Australian manufacturers to adjust to the TGA MDR requirements.

Comparing the results obtained by the Australian and European studies, it is important to consider that, in addition to the differences in numbers of samples (low scale versus larger scale) and in periods since the introduction of legislation (relatively long term versus the early implementation stage), there was another important difference. Thumm et al. (2000: 60) selected for their research the most innovative medical device manufacturers in Europe. In contrast, all Australian medical device manufacturers listed in the above-mentioned databases were invited to participate in the survey. Therefore presumably a more even distribution of companies by inventiveness was ensured in the Australian study. These differences in the sampling process might have significantly affected results in these two surveys and therefore might also explain why the resulting mean values of some variables, for example, evaluation of respondents of the effect of the legislation on the cost of innovation and delivery time of new products, created a significantly more negative picture in the Australian study.

Another valuable observation derived from our study showed that most of the respondents did not experience any changes in the new product development process in their companies in relation to the introduction of the TGA MDR 2002 legislation. For example, eight manufacturers of custom made products and four manufacturers of Class 1 devices previously exempt from the legislation stated that they had finished the TGA compliance process without changes in their practices. This response was legitimate and expected for higher risk medical device manufacturers that had been under the TGA 1989 legislation or for companies that supplied their products to overseas markets under similar legislation. The TGA MD legislation has very specific requirements for traceability of products, post-market surveillance and documentation. Therefore, it is not clear whether the companies that were new to the legislation had all of these systems and practices in place prior to the inclusion of their products into the new legislation, or whether these companies had only partially completed their TGA conformance process.

The section of the survey relating to R&D expenditure, the number of patents granted and the revenue from newly launched products proved to be the most difficult for the respondents to complete. As a result only a very limited amount of information was collected. This minimalist data provided information that only allowed a conclusion that R&D expenditures varied from AU $0 to yearly R&D expenditures of AU $40 000 000 and depended on the size of a company. Similarly, numbers of patents granted varied from 0 to more than 100 patents granted in 2005 and also depended on the size of a company.

Overall, the majority of the respondents were satisfied with the new product development process in their companies (the mean value was 0.56 when measured in the scale from -1 as not satisfied to +1 as satisfied). They estimated that the new product development processes in their companies were in line with relevant legal requirements (mean value of 0.68) and adequate to customer expectations (mean value of 0.8). It may be argued that conforming to the TGA legislation increases confidence within the medical device companies. This may explain why the mean values for the satisfaction with the new product development process, the compliance with the relevant legal requirements and the satisfaction of customers' expectations were 0.75, 0.81 and 0.81 respectively for the MD manufacturers. A relatively insignificant minority of the respondents felt that the innovation and design process in their companies needed improvement (mean value of 0.12 for both all respondents and for MD manufacturers only).

CONCLUSIONS