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Why Medical Technology Is So Expensive in the United States

As the cost of healthcare in the United States continues to expand at a rapid clip, and medical procedures here can costs anywhere from three to ten times more than they do in other first-world nations. This is leading a growing number of people to attempt to find out why. The Government Accountability Office (GAO) looked into the question last year and found that the lack of transparency in pricing was a big part of the problem--at least for implantable devices. The New York Times has begun a series of articles that seeks to shed light on the issue of healthcare costs and comes to similar conclusions as the GAO. Last week, the paper explained how a surgical center in Oklahoma City could slash the costs of an array of procedures by giving prices up front and having patients pay in advance for them. Another piece in the same paper looks at the skyrocketing costs of orthopedic procedures such as hip- and knee-replacement surgeries. The article recounts the story of Michael Shopenn, who lives in Warsaw, IN, the self-professed Orthopedic Capital of the World, who travels to Europe where high-quality implants cost a fraction of what they do in the United States. While an artificial hip costs about $350 to make in the United States, hospitals here pay $4,500 to $7,500 for the implant. Patients often pay more than $30,000 for the implants in their hospital bill. In addition, the cost of the device continues to increase at a steady rate of 5% annually. Shopenn's entire hospital bill for his stay came to $13,660. Patients' hospital bills for similar care in the United States sometimes top $100,000. The New York Times alleges that the orthopedic device makers are "particularly adept at commanding inflated prices," basing that assertion on the opinion of unnamed health economists. The companies require that purchasers sign nondisclosure agreements about prices, making it difficult for purchasers to negotiate on price. The article adds that the market is countrolled by a handful of players; startups and foreign orthopedic implant makers (with the exception of Smith & Nephew) have not made a dent in the market because of issues ranging from patents to trade policy to the high costs of navigating the FDA from abroad.

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