The 2008 elections in the US marked a significant divergence in public opinion in the policy direction of the United States 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 US policy across a broad spectrum of issues.
Meanwhile, the Democratic Party gained larger majorities in the House of Representatives as well as the US Senate. With a near assurance that Democratic policy can be executed with minor opposition, the likelihood of significant healthcare reform taking place is great. The implications of healthcare reform will not be limited to within US borders; it will likely permeate global markets.
While there were many health-related-proposals discussed in the President’s campaign, only a few are likely to gain strong 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, will likely 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 towards evidence-based medicine, are more likely to take place within the first few years. The device industry in the US finds itself in a unique position in the current dialogue of healthcare reform.
The implications of several proposals will likely affect manufacturers domestically and outside of the US. The direction of the President and Congress on certain policy issues are most likely to have the greatest impact on domestic and international device manufacturers in the short term.
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The Obama Administration and many members of Congress are re-evaluating government entitlement programmes where they believe modifications can be made in order to create efficiencies and reduce costs. It is no doubt that device manufacturers will be closely following these actions as the debate develops. Of particular interest for manufacturers receiving reimbursement under Federal Health programmes is the concept of evidence-based medicine.
The US population receiving benefits under Federal Health programmes is diverse. The standard of care, however, is advanced and specified. The US market-based economy allows for the vast development of innovative treatments and products to benefit patients. A criticism that has stemmed from this dynamic is that there are too many redundancies in the system.
With a large base of domestic and international manufacturers participating in the US health system, there is a potential for overlap in treatments. To address this, lawmakers are proposing models where competing treatments will be examined comparatively and coverage decisions may be made based on the most effective treatments.
Comparative effectiveness is a concept where competing clinical and therapeutic treatments are studied, compared and analysed to determine which treatment, or treatments, are superior to the 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 regimen. Device manufacturers may find this troubling due to the unique nature of the evolution of a product.
On average, a comparative effectiveness study may last three years. During this time, clinical evidence may be obtained from controlled clinical trials, randomised clinical trials, cohorts or case-controlled analytical studies. In most cases, comparative effectiveness studies rest on 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, as many in the Administration and Congress are proposing, 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 concern is over whether cost should be considered as part of an effectiveness study. Ultimately, Federal health payers will look to the clinical effectiveness of a technology, should certain legislative proposals be executed.
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 US may be more familiar with this concept. Several EU nations have similar systems in place within their nationalised health systems. Most notably, the UK’s National Institute for Health and Clinical Excellence (NICE) has received the most attention due to its cost-containment policies.
Within NICE, the costs of a 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 US due to claims that this action could result in rationing healthcare. However, as resources become even more restricted, the cost-effectiveness option becomes more viable.
International manufacturers looking to commercialise in the US should pay close attention to the Obama Administration’s healthcare plans as they relate to comparative effectiveness. While the concept is not necessarily novel in the US (it is regularly practised by private insurers through technology assessments), it would cause a change in direction for Federal health programmes.
New level of transparency
A recurring theme of President Obama’s campaign was transparency. The President believes that transparency, whether within the actual framework of the government or within certain government programmes, 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. Foreign and domestic device companies conducting business with Federal health programmes, 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 commercialised, 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 centre of these investigations was whether manufacturers inappropriately remunerated physicians in order to induce prescriptions of their products.
In a highly publicised settlement with the Department of Justice, five orthopaedic 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
The underlying theme of the financial relationships between drug and device manufacturers is that there is a potential correlation between the payments physicians 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 bring light into this aspect of the industry by instituting new disclosure laws for domestic and foreign manufacturers conducting business with Federal health programmes.
The most definitive effort to address this issue is legislation introduced in the US Senate by two prominent lawmakers. The Physician Payment Sunshine Act, introduced by Senator Chuck Grassley (Republican – Iowa) and Senator Herb Kohl (Democrat – Wisconsin), would compel drug and device manufacturers 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. US-based and foreign 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 device manufacturers conducting business within the US. These concerns need to be balanced with the President’s calls for a transparent government.
Efforts towards evidenced-based medicine and transparency are the two most likely changes in the new Congress and Administration that will have an impact on US-based and foreign manufacturers. Given the new dynamics in Washington, it is likely that these measures will be adopted in short order. It is more important than ever for all manufacturers commercialising in the US to be aware of the likely change to come.