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U.S. Medtech Industry Makes A Mockery of Capitalism
A New York Times article shows how deeply-entrenched practices of American medical device firms ends up only hurting patients, many of whom can't afford the steep prices of implant procedures.
August 5, 2013
3 Min Read
The medtech industry likes to vaunt itself as the face of American innovation, imbued with the spirit of American capitalism and competitive market dynamics.
A deeper look, as the New York Times cast over the weekend, tears that argument to shreds. In fact the article describes the five top orthopedics companies in the world, four of which are U.S. companies, as a cartel.
The story is fascinating and ironic at the same time. It narrates the tale of Warsaw, Indiana, resident Michael Shopenn who decided to take a trip to Europe for a hip surgery. Doctors at a Belgian hospital implanted Shopenn with a hip made by Zimmer, which also calls Warsaw its home. Warsaw, Indiana, by the way, is known also by a different moniker: Orthopedics Capital of the world, which drives the irony of Shopenn's journey away from it all the more notable. The article also points out how on average U.S. hospitals paid Zimmer more than double the amount for the same model of hip joint than the Belgian hospital implanted in Shopenn.
Here are the reasons that the medtech industry makes a mockery of what is the envy of the world: America's capitalist system and its market dynamics:
Device makers prevent hospitals from disclosing what prices they pay for products. Even the Government Accountability Office found a black hole when it embarked to shed light on the world of medical device pricing.
Artificial joints made by companies are more-or-less similar but companies have developed customized tools and instruments serving as a disincentive for surgeons to get trained on a different device, once they have been trained on one.
Trade policy, patents and a slow regulatory approvals process at the FDA have kept generic joint implants out of the U.S. (and guess who plays a role in trade policy - lobbyists of device firms)
While in other industries, such as the electronics industries, new technological advances and competition generally leads to lower prices - that is the nature of market dynamics - the opposite seems to be true in the medtech world
Meanwhile, critics of the Affordable Care Act may be surprised to learn that American companies are more-than-eager to play in Europe's socialized medical world. In fact, the article notes how U.S. companies jostle to get business in places like Belgium, where the government dictates how much device makers can charge for impalnts.
Like many other countries, Belgium oversees major medical purchases, approving dozens of different types of implants from a selection of manufacturers, and determining the allowed wholesale price for each of them, for example. That price, which is published, currently averages about $3,000, depending on the model, and can be marked up by about $180 per implant. (The Belgian hospital paid about $4,000 for Mr. Shopenn’s high-end Zimmer implant at a time when American hospitals were paying an average of over $8,000 for the same model.)
“The manufacturers do not have the right to sell an implant at a higher rate,” said Philip Boussauw, director of human resources and administration at St. Rembert’s, the hospital where Mr. Shopenn had his surgery. Nonetheless, he said, there was “a lot of competition” among American joint manufacturers to work with Belgian hospitals. “I’m sure they are making money,” he added.
Zimmer did not comment on the New York Times article.
AdvaMed, the trade group that champions the priorities and needs of the U.S. medtech industry, requested time to review the New York Times piece before providing comment. [An updated version will reflect the group's stance, when available]
To be fair, device makers are not the only responsibile party for runaway healthcare spending in the U.S. It's a complex system where hospitals also charge a hefty mark-up. As a result, alternatives to a hospital procedure are cropping up.
Still, device firms need to acknowledge that their practices do not truly reflect a fair, open system. And patients are the ones who pay for this inequity.
[Photo Credit: iStockphoto.com user DNY59]
-- By Arundhati Parmar, Senior Editor, MD+DI
[email protected]
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