Device Tax, ACA Top PWC's 2013 Top Healthcare Issues List

The Affordable Care Act (ACA) takes its place as the major shaper of 2013 in Pricewaterhouse Cooper’s Health Research Institute’s (HRI) top 10 health industry issues (scroll to the bottom of this article for full list). With 2014 as a significant deadline for changes in the industry due to expanded health coverage, 2013 will be a year to prepare for what is to come.

“The medical device industry has a real opportunity to explore its relevance,” Todd Evans, director on the Health Industry Advisory for Pricewaterhouse Cooper, said. “We have a sizable expansion of the population that’s to be treated coming online. There may be the potential in the growing pie for everyone to benefit, including medical device makers.”

Although the top 10 concerns are diverse and influence a range of stakeholders in the healthcare industry, certain items will particularly affect medical device companies. Firms should should take heed and shape their strategies.

The medical device excise tax has been the subject of intense focus for a few years now. According to HRI, medical device companies should no longer wait for a chance at repeal—the tax is here to stay. Evans believes that medical device companies will have to work harder and perform better to get good results and prevent volatility and disruption in the supply chains. “The executive teams across the industry [should] consider this a chance to restructure the company in a more efficient way to perform at those levels,” he said.

In addition, it’s time to determine who will pay for the tax. PWC believes that passing the tax onto the consumer is not an option, but the report suggests that medical device suppliers could be tapped to take on the cost of the tax. The report notes that the tax poses a threat to smaller companies, which they may owe more in taxes than they can generate in profits. Larger device firms may be able to expand their portfolios by acquiring those smaller companies. The report suggests that ultimately, the device tax could be a boon for the industry, in that it could help spearhead new innovation and make operational recalibration possible.

The transition of hospitals looking to reduce costs will have a tremendous effect on the industry, as hospitals adjust purchasing habits. With 40% of consumers not seeking treatment due to the expense, hospitals will be scrambling to lower costs, which, according to Evans, includes procedures that extend beyond the walls of the hospital to make sure there are fewer cases of 30-day readmission. Hospitals have started with some minimal retooling, but PWC says it’s only the beginning. General cost management will be the most important decision for these facilities, and companies who can provide better outcomes at better cost will be at an advantage.

Comparative effectiveness and value analysis is changing the game for many medical device companies. Their success will not depend on the physicians using their products but on the insurers and large institutions that are willing to cover it. The HRI report references a recent example from Memorial Sloan-Kettering Cancer Center, where the center refused to pay for a colon cancer drug, citing a different drug that cost less and was just as effective. The result was that the company slashed its prices to the same as the competing drug two months after the release of the drug. In terms of medical devices, Evans sees that medical device companies can charge a premium price, but they should have the data to back up evidence that it will be worth the cost. “If there’s no outcome, there’s no income,” he said. “It can be an economic outcome, a clinical outcome, or a quality of life income, but any of those can lead to the other two.”

Finally, population health management is going to be a huge issue, as more companies will be taking it on in partnerships in order to share responsibility for working to prevent medical issues before they happen. PWC expects population health management to require major investments over the next several years, with no determined date of finish, and there will be a lot of trial and error to get effective systems in place. A strong technology base is vital for these collaborations, and systems should have the capabilities to support analytics and strong web data.

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