November 04, 2008 The Price of Medical Technology: The Industry Perspective David H. Nexon Senior Executive Vice President

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

Technology: the Economic Value Source: William D. Nordhaus, “The Health of Nations: The Contribution of Improved Health to Living Standards,” in Kevin M. Murphy and Robert H. Topel, Measuring the Gains from Medical Research: An Economic Approach, University of Chicago Press, 2003.

Technology: the Human Value Change In Selected Health Indicators [1] Life expectancy increased 3.2 years Disability among the elderly declined 25% (and is saving Medicare $73 billion annually) [2] Mortality from heart attack was cut by 50% Mortality from stroke was cut by one-third Mortality from breast cancer has been cut 20% [1] Medtap, The Value of Investment in Health, [2] Kenneth G. Manton, et al., Journal of Aging Health, 2007; 19; 359.

Medical Devices: A Relatively Low and Constant Share of National Healthcare Expenditure Source: Roland “Guy” King, Estimates of Medical Device Spending in the United States, AdvaMed 2007

Medical Devices: A Price Competitive Industry Source: Roland “Guy” King, Estimates of Medical Device Spending in the United States, AdvaMed 2007

Hospital price increases have outpaced device price increases Source: US Department of Labor, Bureau of Labor Statistics, PPI Industry Data 2003 earliest year available for General and medical surgical hospitals General medical and surgical hospitals Surgical appliance and supplies manufacturing Surgical and medical instrument manufacturing Electromedical apparatus manufacturing

Medical Technology is Not Driving Hospital Costs Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1998 – 2003, for community hospitals; Centers for Medicare and Medicaid Services, Office of the Actuary; Medical Expenditure Panel Survey

Medical Technology is Not Driving Hospital Costs Costs of Goods and Services Purchased: Key Components All Other – 8.0% Prescription Drugs – 3.1% Prof. Liability Insurance – 0.3% Professional Fees – 2.9% Wages & Salaries/Employee Benefits – 37.7% Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1998 – 2003, for community hospitals; Centers for Medicare and Medicaid Services, Office of the Actuary; Medical Expenditure Panel Survey Costs of Goods and Services Purchased 52% ($67 B)

November 04, 2008