The Affordable Care Act of 2010—a.k.a healthcare reform—may seem like old news, but medical device company leadership is still frozen in a “wait-and-see” mode, according to a panel at the recent AdvaMed 2011 medtech conference being held in Washington, D.C.
In the year since the act was signed into law, industry leaders have expressed concerns about possible decreases in innovation, quality and profitability.Questions remain about changes to Medicare and Medicaid and how those changes would impact reimbursement for the medical device industry.
Panelists included Carol Neubauer, chairman and CEO of B. Braun Medical Inc.; John Bishop, CEO of Cepheid; Mike Mussallem, chairman and CEO of Edwards Lifesciences Corp; and Patrick Morrisey, former deputy staff director and chief health counsel for the House Energy and Commerce Committee, and now a partner with the law firm of King & Spalding.
“This is uncertainty I have to live with,” Neubauer said. “We’re still getting our arms around this.”
Bishop characterized the impact on the industry more dramatically. “We can’t sacrifice quality of care for cost alone,” he said. “It used to be that the United States market was number one. That’s no longer true.Patients are going elsewhere for quality care.”
Mussallem said he’s “scared” about the macro effects. “I know our industry will adapt, but what will the long-term, greater impact be? An aging global population certainly helps to balance things out, but what [healthcare reform] is going to do is make it more difficult to get ‘from the napkin to the patient.’”
Panelists agreed that the cost containment impact of reform activities will have—and already has had—a chilling affect on innovation and new product development in the device space.The “napkin sketch” analogy (i.e., startup medical device companies taking a drawing on the back on a cocktail napkin idea all the way through to commercialization) was cited by more than of the executives on the panel as traditionally being the driver of creative new technology. That model, and eager modes of funding, may be a thing of the future.
“Startups are disappearing,” Neubauer claimed. “We’re seeing more in Europe than the U.S.There’s been a march to Europe. Small companies don’t have the time to wait for approval here. If I were a startup today, I’d start in Europe first.”
Mussallem agreed. He said funding is limited now, and fewer venture capitalists are willing to take a chance on the medical device market—particularly with programs such as comparative effectiveness as part of the healthcare reform law. Comparative effectiveness evaluates different types of care to determine the most effective—clinically and financially—form of care. Governments and payers use it to critically examine the value they are receiving for their healthcare dollar. The industry has likened it to rationing care and that comparative effectiveness programs are difficult to implement and evaluate in this industry due to the iterative nature of product development compared with pharmaceuticals, for example. Lawmakers and lobbyists agree that researchers should compare the clinical merits of different treatments. Whether they should also consider cost is hotly debated.
“I’m very afraid for the small companies. [The medical device industry] is a uniquely American success story. You’re going to have to bring incredible evidence [for product approval and reimbursement] which means more time and money,” Mussallem said.
And those “realities” are “freezing” venture capital markets, Neubauer added.
According to a recent survey of U.S. healthcare consumers conducted by the Deloitte Center for Health Solutions, consumers want reform efforts to address costs, quality and access. They acknowledge that tradeoffs are necessary and hold mixed views on privatization as an approach. More than 4,000 U.S. adults were surveyed in April this year. When evaluating whether healthcare reform is successful, consumers say reducing costs (82 percent), improving quality of care (77 percent), and increasing access to insurance (60 percent) are important. Fifty-five percent believe that it is possible to improve quality and reduce costs simultaneously in the current system of care, while 23 percent agree that increased privatization in the healthcare system would improve the system’s performance. A total of 50 percent are uncertain and 27 percent disagree.