Where Industry and Security Intersect
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Generating product recognition and acceptance is critical to sales, especially for AT manufacturers that make products for low-demand niche markets where operating margins and profits can be thin. Compounding the challenge to AT manufacturers is the fact that the AT market currently is relatively small–and that in portions of the AT market customer base nearly 75 percent of consumers are unemployed. This means that the customers for AT products often times have little or no surplus income with which to make purchases.
Companies face additional downward price pressure given that most of the customers with disabilities are dependent on public and private health insurance programs to underwrite much of the cost of AT equipment. These institutions and state agencies place price limits on reimbursements for AT products–and they determine what products are eligible for reimbursement payments.
Among the challenges facing the AT companies operating in the United States, according to industry executives, are to: 1) get state and federal health agencies to accelerate the acceptance process for new AT products; and 2) to expand the range of AT products eligible to be covered under public and private health programs.
Rapid approval of new products is particularly crucial to small companies launching new products, both to achieve sufficient volume to operate economically and to establish a strong market presence. Where the application of state and federal regulations or private insurance policies produce unnecessarily long delays in product introduction, the effect can be to reduce cash flow, damage companies, and to delay or even suppress development of new products.
Federal agencies and programs identified by some survey respondents as having policies that adversely affect the ability of AT companies to develop and market products include: the Centers for Medicare and Medicaid Services (CMS — formerly the Health Care Finance Administration [HFCA]), the National Institute on Safety and Health (NIOSH) and the Food and Drug Administration (FDA). In one instance, a company charged that "HCFA Medicare dictates... purchases of cheap imported goods" over domestic products that may cost more without giving adequate consideration to product performance and quality.
According the reported data, the problems that AT companies encounter and the perceived level of difficulty can vary widely depending on company size and kinds of AT products involved. While 30 percent of respondent companies described the product approval process as having an average to high level of difficulty, about 70 percent of responding firms cited no significant problems with FDA. For these companies, the approval process may run smoothly — or their products may not be subject to FDA approval.
A number of survey participants also stated that their desire to pursue the development and manufacture of AT products is tempered by fears of inadequate protection for their business against product liability claims. Larger firms participating in the survey rated product liability as a moderate problem. The concerns of larger firms focused on the potential for misuse of a product as well as product performance and quality matters. Interestingly, smaller firms, as a whole, did not rate product liability and other legal issues to be a major deterrent. It is also worth noting that AT companies of all sizes expressed concern about on-the-job injury claims brought by their own employees.
Beyond issues of domestic regulation, participants in the AT industry want greater assistance in overcoming regulatory and other legal issues related to exports, trade and foreign standards. Survey data do not show U.S. AT companies to be burdened with trade obstacles of "crisis-like" proportions. Nevertheless, a large number of companies say they face serious trade problems. When asked to rank how tariffs and trade barriers affected their ability to work in foreign markets, 152 of 343 companies responding to the question stated that such practices are difficult to extremely difficult to overcome. A few companies stated that some problems were insurmountable.
In written comments, survey participants asserted that trade opportunities are seriously diminished by a range of market distorting practices. Specifically, U.S. AT companies cited special financing packages, tax incentives, tax reductions, product R&D subsidies to companies, and other subsidies for AT product commercialization and manufacturing provided by the governments of some European (United Kingdom, France, Germany, Sweden) and Asian (China, Taiwan) nations. In some countries, U.S. AT manufacturers claim they are hurt by import duties levied on U.S. AT goods, and damaged by AT product certification rules.
The portfolio of government assistance, incentives and subsidies available to foreign competitors of U.S. AT companies in some Asian and European countries is viewed as providing an unfair advantage. Direct U.S. federal government assistance available to U.S. AT companies is largely limited to competitively awarded Small Business Innovation Research (SBIR), National Science Foundation grants, and other Department of Education funding.
The comments submitted by respondents with respect to the foreign market conditions and trade practices suggest that some actions by the Office of the U.S. Trade Representative and other federal trade agencies may be required. Specifically, companies indicated that what is needed is an intensified effort to get foreign governments to remove trade barriers and roll back market-distorting subsidies that unfairly hinder U.S. AT companies attempting to do business in foreign markets.
It is also apparent in written comments that some AT companies have little or no experience in selling in foreign markets and limited knowledge of regulatory and trade policies. These factors, to some extent, may have shaped complaints about difficulties in marketing overseas. It appears that U.S. AT firms, in some instances, need to expend more effort to learn how to conduct business and sell in international markets.