Experts believe that in order to ensure a steady stream of U.S.-based innovation in the new healthcare environment, the medical technology industry will need to focus on delivering technology that is better than what exists today and demonstrate its superiority through expanded research and clinical trials.
These were some of the ideas that emerged during “Innovation and Reform: What’s Next for Medical Technology Businesses?,” a special panel session presented on June 8 by the Institute for Health Technology Studies (InHealth) at the Medical Design & Manufacturing (MD&M) East conference.
Representatives from Johnson & Johnson, Deloitte, and the American Enterprise Institute, among others, participated in the panel, which was moderated by Steve Halasey, InHealth’s vice president for programs. The group discussed how reform mandates incorporated into the Patient Protection and Affordable Care Act—such as the medical device excise tax, the Medicare independent payment advisory board, and the physician payment sunshine provisions—will affect medical technology businesses and the patients who rely on them.
“Medtech developers, entrepreneurs, and existing businesses must adapt to the new healthcare economy created under reform,” said Martyn Howgill, InHealth’s executive director. “This panel, appropriately held at a conference devoted to medical design and manufacturing, brought together representatives from industry to examine how the adapting process will lend itself to new opportunities.”
The Medical Device Excise Tax
William Homer, a partner at Deloitte Tax LLP, kicked off the panel by outlining the implications of the medical device excise tax taking effect in 2013. Homer presented the complexity and nuances of regulating such a tax from an accounting perspective, including how to determine which products will be exempt, since some devices––such as drug-eluting stents––combine drug and device components.
Randel E. Richner, BSN, MPH, founder and president of the consulting firm Neocure Group LLC, described the excise tax as misplaced and unfair given the larger cost drivers that are not being taxed, such as group purchasing organizations. In addition, she said, the tax represents a potential impediment to the flow of promising innovations.
Innovation, Evidence, and the Independent Payment Advisory Board
During his presentation, Anthony G. Viscogliosi, founder, chairman, and CEO of Small Bone Innovations Inc., an orthopedic company, suggested that in order for medical device companies to make opportunities out of reform’s imminent challenges, they should consider what is in the patients’ best interests and put forward technology that delivers clinical superiority––not just comparability. This will be essential, he noted, to secure venture capital, which has the potential to decline during the coming period of implementation and increased regulation.
The need to develop products of superior quality was a point expanded upon by Johnson & Johnson’s Susan Reardon, director of medical device and diagnostics government affairs and policy. Under new regulations, she explained, hospitals and physicians will be penalized if they fall short of meeting established quality standards, whether from high rates of readmissions, hospital-acquired infections, or other causes. She noted that opportunities will potentially exist for medtech businesses if they can provide technologies that enable hospitals to meet or exceed quality standards.
Richner added to this point, observing that healthcare reform will expand access to insurance, resulting in the utilization of an increased volume of medical devices and technologies. Such an expansion will require an increase in evidence to prove the value of new and existing technologies––all of which translates into a large investment in research.
Panelists repeatedly underscored the importance of research, particularly as the independent payment advisory board, a U.S. government agency created to rein in Medicare spending, begins to oversee Medicare coverage decisions. Scott Gottlieb, MD, a resident fellow at the American Enterprise Institute, explained that the new board will look to this evidence when deciding which medical devices physicians have access to, as this is a way of accomplishing the difficult task of influencing the behaviors and clinical decision-making of physicians.
Regulating Physician-Industry Relationships
Richner underscored the importance of transparent relationships between industry and physicians, but noted that collaborations on the device side are different from those pertaining to the pharmaceutical industry. Physicians’ testing of devices as they are developed is imperative to ensure proper design and safety of the products, whether they are tools used in the operating room or devices implanted into a patient.
Viscogliosi also discussed the increasing scrutiny and regulation of these relationships. He called on the industry to find a way to work with physicians––especially surgeons––to prove their products are clinically effective, recognizing that FDA approval does not imply reimbursement or guarantee coverage.
All of the panelists agreed that the real challenges of healthcare reform still lie ahead in the form of rulemaking and other tasks needed to implement the nation’s landmark reform legislation, and that much is still subject to change.
The speakers’ presentations are available via the InHealth website at www.inhealth.org.