Medtech is never advanced if it doesn’t address cost

One of the most commonly heard complaints about © 2018, MedMarket Diligence, LLC -- advanced medical technologies is the associated cost.  However, an important consideration is frequently lost in these complaints.  Fundamentally it is the fact that technologies become advanced when they accomplish an endpoint not previously possible.  The technology either enables treatment of a patient not previously treatable (at all) or it enables treatment in a way that is a fundamental “advance” over prior methods — less trauma, fewer complications, longer term results, etc.  Offer a treatment option for a patient who would otherwise die or suffer needlessly and you will understand the challenge in addressing “cost”.  Offer a treatment that gets a patient back on his/her feet sooner, with fewer side effects and a better prognosis than could be accomplished with an older, established technology and you won’t often find cost critics willing to give due credit. 

Anyone who believes today that cost isn’t a factor or that they can sell a new technology without consideration of cost is delusional.   The “benefit” of a new technology must always be judged against its associated cost.  And, despite the worn out arguments, new technology always has considered cost, but cost has simply become a bigger issue, so the complaint is more strident.

The challenge in “cost” is in recognizing the marginal “value” of the advance  — the benefit gained relative to the added cost.  Of course, “value” and “cost” are not so quantitatively assessed in the healthcare system.  Implicit is the fundamental challenge of placing a value on life or quality of life, which create dramatic insensitivity to the question of cost.  When does neonatal healthcare become too expensive?  (Which baby would you let die?)  When is an implant not indicated for a patient?  (Do you put an artificial hip, likely to last 15 years, in an 80 year old?)

In this blog, I don’t extoll the economic benefits of advanced medical technology for its own sake.  (Not sure how a technology can have “economic benefit” without considering the cost/value proposition.)  Having witnessed firsthand the capacity of technology for technology’s sake to be grossly overvalued — the advent and glut of the biotechnology industry in the ’70s and ’80s — I know all too well that the value of scientific and technical advances can be overstated.  The technologies that truly succeed are those that bluntly address the clinical need and provide unquestioned solutions.

Two fundamental examples illustrate the drive behind much medtech development: 

Laparoscopy.   The advance in this was that it could accomplish abdominal surgery (gallbladder removal, appendectomy, hernia repair, etc.) without cutting through the abdominal wall, thereby drastically reducing recovery times.

Stents.  Severe atherosclerotic disease once meant inevitable death.  Then coronary artery bypass emerged, then angioplasty allowed revascularization without splitting open a patient’s sternum, then stents extended the value of angioplasty, then drug-eluting stents made the idea of sternotomy rather barbaric. 

In the 1990s, I witnessed the remarkable response by the medtech industry to the emergence and growth of managed care.  The crux of the issue here was “capitation” — the reimbursement of healthcare based on the sum total of collected premiums, limiting reimbursement per capita.  Limited reimbursement meant healthcare providers (doctors, hospitals) simply could not have limitless options to treat patients.  Proscribed treatment pathways were established, contracts with vendors of medical products were cut back and limited to pre-determined options based on performance of products.  Many manufacturers who could not compete on this new playing field just disappeared.  But at the same time were created hosts of new companies whose new technologies succeeded in the marketplace specifically because they competitively addressed cost.  That is what I found remarkable.

The problem has been that cost has not been made explicit in the healthcare field.  This has been by design, given the “value of life” challenge.  But the issue has already begun to be forced and the rubber has been hitting the road in the medical technology industry for quite some time.  Margins have declined across the board.  Vendors have been limited.  And yes, innovations have emerged that succeed because the cost issue has forced them to succeed.

It’s always convenient to oversimplify a problem, especially if it lets you stick a label on a scapegoat.  Unfortunately, in this case, that’s a label that the medtech industry refuses to let stick.

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