Paying For Innovation In Medical Technology

Author:Mr Harry Greenspun
Profession:Deloitte
 
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Inspired by my wife Kerry, our 14-year-old son, Luca, has become a serious cyclist. Last May, we bought him a new road bike, complete with clipless pedals and shoes. After riding for a few months, he joined a local team and put hundreds of miles on it each month over the summer. In the fall, road season ended and cyclocross season began. So, we had to buy him a new cyclocross bike, along with shoes and pedals. Last month, with road season upon us, we discovered that he had outgrown his road bike. We had to buy him yet another new road bike and, of course, larger shoes. Having proven he is a strong and committed rider, he has moved to a more intensive training program, which required installing a power meter to assess his effort and progress. That required installing a new crank and bottom bracket, as well as purchasing a new bike computer to record his measurements.

By the end of all of this, we were in a spinning vortex of new needs requiring new devices, those devices creating new needs. While this resulted in better performance, it also led to rapidly escalating costs.

This image was not lost on me as I spoke on a panel at a recent summit of CEOs from medical device manufacturers. Innovative devices are transforming prevention, care, and chronic disease management. Each brings new capabilities and the potential to improve outcomes. Of course, each development also comes at a cost.

The US medical device industry is expected to grow at 7.1 percent annually from 2014 through 2019, reaching $52.9 billion annually.1 Traditional medical device companies and new technology entrants are capitalizing on new technologies, devices, and analytical tools to develop new or improved devices. From artificial pancreases to watch-like biosensors it's clear the industry is showing no signs of slowing down.2 Though the Affordable Care Act (ACA) included a 2.3 percent medical device excise tax in an effort to put pressure on device prices, Congress suspended the tax for two years, giving device makers a reprieve...for now.

But what do we get with those growing costs?

Many medical device and technology (medtech) companies are working with providers and health plans under new value-based care (VBC) arrangements that increase standards for evidence to support product adoption. These new models mean that companies are no longer modifying features of a device and promoting to clinicians or competing on price alone. Rather than working to provide a cheaper but comparable...

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