Thomas C. Novelli03.04.09
Change: Healthcare is No Exception
Thomas C. Novelli
The 2008 elections in the United States marked a significant divergence in public opinion in the policy direction of the U.S. Congress and presidency. Barack Obama was elected by a significant majority of the voting public on the basis of his commitment to bring a change in direction of U.S. policy across a broad spectrum of issues.Meanwhile, the Democratic Party gained larger majorities in the House of Representatives as well as the U.S. Senate. With a near assurance that Democratic policy can be executed with minor opposition, the likelihood of significant healthcare reform to take place is great.
While there were many health-related proposals discussed in the president’s campaign, only a few are likely to gain momentum during the first year. Most experts speculate that given the economic downturn, some of the more ambitious goals, such as universal health coverage for every American, likely will take many years to implement.However, shorter term goals, such as expanding health insurance coverage to children, bringing transparency in the drug and device industries, and moving toward evidence-based medicine, are more likely to take place within the first few years.
The device industry in the United States finds itself in a unique position in the current dialog of healthcare reform.The implications of several proposals likely will affect manufacturers domestically and outside of the United States.The policy direction of both the president and Congress on the following policy issues are most likely to have the greatest impact on domestic and international device manufacturers in the short term.
Evidence-based Healthcare
The stimulus plan that Obama signed into law Feb. 17 includes $1.1 billion for re-evaluating government entitlement programs where it is believed modifications can be made in order to create efficiencies and reduce costs. Of particular interest for manufacturers receiving reimbursement under federal health programs is the concept of evidence-based medicine.
The U.S. population receiving benefits under federal health programs are widely diverse. The standard of care, however, is advanced and specified. The U.S. market-based economy allows for the vast development of innovative treatments and products to benefit patients. A criticism that has stemmed from this dynamic, however, is that there are too many redundancies in the system. With a large base of both domestic and international manufacturers participating in the U.S. health system, there is a potential for overlap in treatments.
“Comparative effectiveness” is a concept where competing clinical and therapeutic treatments are studied, compared and analyzed to determine which treatment or treatments are superior to others.
The study methodology can take the format of examining device-intensive procedures against similar procedures, or even a device-intensive procedure against a drug therapy regiment. Device manufacturers may find this troubling, however, due to the unique nature of the evolution of a product. On average, a comparative effectiveness study may last approximately three years.
During this time, clinical evidence may be obtained from controlled clinical trials, randomized clinical trials, cohorts or case-controlled analytical studies. In most cases, comparative effectiveness studies rest upon the assumption that the treatments at the beginning of the study are close to, or are exactly the same clinically as the treatments at the end of the study. The reality exists, however, that medical devices are products of evolution that normally maintain a lifespan of 18 months on average.If studies were to proceed in this matter, many of the technologies under review could be obsolete by the conclusion of the study. In all likelihood, the device may be on the second, or even third, generation.
Apart from the methodological problems of conducting comparative effectiveness studies on devices, the other present concern is about whether cost should be considered part of an effectiveness study. Ultimately, federal health payers will look to the clinical effectiveness of a technology. However, federal resources are strained, and there is potentially an appetite to add a product’s cost into the effectiveness equation.
Manufacturers interacting with national health systems outside of the United States may be more familiar with this concept. Several European Union nations have similar systems in place within their nationalized health systems. Most notably, the United Kingdom’s National Institute for Health and Clinical Excellence (NICE) has received the most attention due to its cost-containment policies.
Within NICE, the cost of treatment, relative to total resources used, are calculated in addition to a treatment’s overall clinical effectiveness.Controversy has arisen in this model and others where critics claim that a patient’s life can essentially be assigned a dollar amount. Most are apprehensive about this approach within the United States due to claims that this action could result in rationing healthcare. As resources become even more restricted, however, the cost effectiveness option becomes more viable.International manufacturers looking to commercialize within the United States should pay close attention to the Obama administration’s healthcare plans as it relates to comparative effectiveness. While the concept is not necessarily novel in the United States (it is regularly practiced by private insurers through technology assessments), it would be a change in direction for federal health programs.
A New Level of Transparency
A reoccurring theme of Obama’s campaign was transparency.The president believes that transparency, whether within the actual framework of the government or within certain government programs, is absent and that a dramatic change is necessary to bring about reform. The president’s healthcare agenda seems to perpetuate this theme by calling for greater transparency within the healthcare system in order to gauge how federal resources are being allocated.Device manufacturers reimbursed by federal health programs, such as Medicare and Medicaid, will likely encounter changes in the way they conduct business.
One of the central issues of interest in the transparency debate will be the relationship between device manufacturers and physicians. In recent years, this important relationship has received greater attention due to several arrangements where physicians were improperly compensated. Device manufacturers often engage physicians in order to gain their expertise while developing products. Many device manufacturers are engineers and lack the clinical expertise necessary to the development of a medical technology.To this end, they will contract with either a physician or surgeon in the development phase to properly design a device before regulatory submission.
Once a product is approved and commercialized, manufacturers still maintain a relationship in order to train surgeons and physicians on how to properly implant a device or modify post-implantation. This may involve bringing the physician or surgeon to the manufacturer’s training facility and compensating them for their time, travel and meals at fair market value.
While the described relationships are legitimate remunerations for a physician’s time and expertise, high-profile federal and congressional investigations have revealed several improper
relationships existing between manufacturers and physicians.
At the center of these investigations was whether manufacturers inappropriately remunerated physicians in order to induce prescriptions of their products. In a highly publicized settlement with the Department of Justice, five orthopedic companies settled and entered into a deferred prosecution agreement with the government over allegations of improper payments to physicians. As part of the settlement, these companies are now required to disclose all of their financial arrangements with physicians.
The underlying theme of the financial relationships between both drug and device manufacturers is that there is a potential correlation between the payments phys-icians and surgeons receive and their prescribing habits. While the vast majority of financial relationships are legitimate and necessary for the development of innovative technologies, there are no present legal requirements that these relationships need be made public (unless ordered by a court).
The Obama administration and the new Congress have indicated that they intend to shed some light into this aspect of the industry by instituting new disclosure laws for domestic and foreign manufacturers conducting business with federal health programs.
The most definitive effort to address this issue is legislation introduced in the U.S. Senate by two prominent lawmakers. The Physician Payment Sunshine Act, introduced by Sen. Chuck Grassley (R-Iowa) and Sen. Herb Kohl (D-Wis.), would compel drug and device manu-facturers to disclose payments to physicians exceeding $100 annually.
The Obama administration’s platform seems to indicate that this proposal would be in line with its priorities for transparency within the healthcare system.
While these disclosure rules would be important in identifying improper relationships in the industry, the legislation needs to be crafted carefully in order not to discourage innovation within the device industry. Manufacturers spend considerable resources working with physicians and surgeons to develop innovative medical technologies. Incorrectly crafted legislation, which could be cost additive and overly burdensome, could have a chilling effect on the innovation process. These concerns need to be balanced with the president’s calls for a government that is transparent.
Looking Ahead
Efforts toward evidenced-based medicine and transparency are the two most likely changes in the new Congress and administration that will have an impact on U.S.-based and foreign manufacturers. Turn to this column in the coming months as these events unfold.
Thomas C. Novelli is director of Federal Affairs for the Medical Device Manufacturers Association in Washington, D.C. From 2003 to 2007, he served on the Senate Committee on Finance, where he worked on several areas directly affecting the medical device and pharmaceutical industries, including reimbursement, drug and device safety and approval and fraud and abuse in the Medicare and Medicaid programs. Novelli received his undergraduate degree in political science from the University of Dayton, and a Master of Arts in policy from the Catholic University of America.