Studies Counter Recent Medtech Pricing Claims

NEWS TRENDS

A study has found that there has been a slow rate of growth in overall medical technology prices over the past 15 years. This is in contrast to the views of some who cite the costs of new technology as a major driver of escalating healthcare costs.

Medical technology is a relatively small and constant share of total national health expenditures, the study found. The AdvaMed-sponsored study was coauthored by Roland Guy King, a former chief actuary for Medicare and Medicaid, and Gerald Donahoe, a retired economist.

“The report's findings are significant in light of recent comments by some suggesting policies to limit the diffusion of and access to advanced medical technology in response to cost pressures,” said Edward Ludwig, chairman, president, and CEO of Becton, Dickinson and Co. (Franklin Lakes, NJ). He is also board chairman of AdvaMed.

“Simply put, medical technology is part of the solution to managing healthcare expenses. Limiting patient access to lifesaving, life-enhancing technologies compromises patient health and may actually increase costs,” he said.

Many in the medical device sector believe that the innovative and competitive nature of medical technology, which has economic benefits, also helps patients by providing continual improvements in care.

“This study shows that there is also an economic benefit of competition due to the relatively slow rate of growth in overall industry prices,” said Michael Mussallem, chairman and CEO of Edwards Lifesciences. He is AdvaMed's board chairman-elect and chair of AdvaMed's board committee on payment and healthcare delivery.

Spending on medical devices and in vitro diagnostics totaled $112 billion in 2004, which was the latest year studied. This figure represents 6% of total national health expenditures. Over the 15-year period studied, the percentage has stayed relatively constant, the study found.

During the same period, overall medical device prices grew at a slower rate than either the Consumer Price Index (CPI) for medical services or the overall CPI. The study found that medical device prices have increased about 1.2% annually from 1989 through 2004, compared with 5% for the Medical Consumer Price Index and 2.8% for the CPI.

“Medical device prices, on average, have grown at less than half the rate of overall CPI and less than one-quarter the rate of other medical goods and services,” said Stephen Ubl, AdvaMed's president and CEO.

A copy of the study can be accessed at www.advamed.org.

Another study on medical technology pricing has found that mandatory price disclosure for the medical technology sector would likely increase prices. The study examines the potential economic effects of the Transparency in Medical Device Pricing Act of 2007, which was recently introduced in the U.S. Senate.

“We found that mandatory price disclosure, as proposed in S.2221, is unlikely to benefit patients or hospitals,” said Robert Hahn, who co-wrote the study with Criterion Economics president Hal Singer. “Worse, [it] will likely increase costs.” Hahn is executive director of American Enterprise Institute's Center for Regulatory and Market Studies.

The authors used evidence from case studies and other sources to isolate conditions that, if satisfied, would imply that mandatory price disclosure would offer substantial benefits to consumers or other purchasers.

The study determined that for price disclosure to have a favorable effect, large search costs must be substantially reduced, and pricing information disclosed must be current.

The report also found that the industry-specific market conditions necessary for lower prices would require savings to be passed on to end-users, at the expense of purchasers. Currently there is a large variation in the price paid by purchasers and consumers.

“Applying these conditions to the medical device industry, we conclude that mandatory price disclosure would likely increase prices hospitals pay for [medical technology] and provide no tangible benefit to patients,” the authors said.

For more information, including access to the full report, visit www.criterioneconomics.com.

Reports on other compliance-alliance surveys can be viewed on MD &DI's blog.

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