Can Innovation Solve the Healthcare Economics Crisis? Panel Notes - Reimbursement Strategies for Medical Innovation

July 23, 2019

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Can medical technology innovation solve the healthcare economics crisis? Read summary notes from this MDG Boston panel discussion

Perspectives on Medical Reimbursement

By JR Associates

Recently, our VP of Global Health Policy, Jo Ellen Slurzberg moderated a compelling roundtable discussion at MDG Boston, a leading member-based community for medical device and technology professionals. This session focused on one of the industry’s most formidable issues:

U.S. Healthcare Economics – Innovating Our Way Out of a Crisis

PANEL PARTICIPANTS

• Jeffrey Levin-Scherz, MD, MBA – Assistant Professor Health Policy and Management at Harvard T.H. Chan School of Public Health and National Co-Leader of the Health Management Practice at Willis Towers Watson

• James Wallace, MBA – President AmeriPlus Select Services and Senior Researcher, Harvard Business School

• Wendy Zhong, PhD – Principal Health Economist, Boston Scientific (Watchman)

After the panel concluded, we talked with Jo Ellen one-on-one. She shared the following highlights from the session, as well as top takeaways for life science innovators…

SESSION HIGHLIGHTS

1) What is driving the economic crisis in healthcare?

Healthcare costs continue to rise at a rapid pace. In fact, one source says prices have been increasing nearly 3x faster than inflation. Meanwhile, delivery remains inefficient, with many individuals still struggling to access care.

2) What factors have led to this crisis?

This is a massive issue. It’s one of the most critical challenges of our time. It touches nearly every aspect of modern life – business, technology and government, as well as our personal interests on a national and international scale.

The contributing factors can’t be addressed in a simple sound bite, let alone a one-session medical technology panel. But here’s a quick take:

For 50 years, our system has consistently emphasized acute care, while preventative medicine has played a subordinate role. At first blush, this may seem logical. After all, when people are ill or injured, they’re highly motivated to seek medical help. On the other hand, convincing healthy people to change their behavior so they can avoid negative consequences is much more difficult.

Regardless, the industry’s focus on treatment of acute illness and injury has led to a lack of public awareness and understanding of prevention. Although consumers now have easy access to vast health information resources online, that information is not always valid or useful.

The negative effects can be profound. For example, widespread misinformation about vaccine risks has led parents to avoid vaccinations altogether. As a result, childhood preventable diseases are on the rise.

Similarly, the U.S. is seeing an increase in maternal-infant health complications and deaths. In short, we are moving in the wrong direction – backward, not forward.

But even with a preventive care model, it is important to focus on targeted issues like communicable diseases and infant mortality. In these cases, outcomes can be changed in a clinically beneficial way and will result in a positive economic benefit.

3) What kind of impact is this crisis having on medtech innovation?

It’s extremely difficult for today’s life science innovators to bring products to market and grow their companies. Product development costs are steep and the commercialization process requires multiple funding rounds.

Faced with the pressure of diverse stakeholder demands, many medtech startup founders must make numerous trade-offs while pursuing their product goals and exit strategy.

What’s more, recent consolidation has radically redefined the industry landscape. Medtech companies have grown larger, but the overall competitive pool is smaller. Now, with fewer potential partners, the exit pressure on startups is greater than ever.

4) How much change do you see ahead?

Unfortunately for life science innovators, these industry dynamics aren’t likely to change anytime soon. New ventures will have fewer potential strategic partners and exit opportunities. Plus, there will be fewer payers and providers with whom to do business, and they’ll have greater buying power.

We also expect the rules of coverage, coding and payment to change dramatically if the U.S. makes a serious move toward a single-payer system – or at least a more unified model. But even if that kind of disruption doesn’t occur, the discussion itself is likely to shift the way healthcare business is conducted.

5) What should medtech entrepreneurs keep in mind about this economic environment as they attempt to bring innovative products to market?

Entrepreneurs must plan for commercialization, including various reimbursement scenarios. Too many presume that this work will be picked up by companies that eventually acquire them or become their strategic partners. This mindset is short-sighted.

Strategic timing is critical. Often, new ventures try to execute prematurely on key milestones. Others delay without understanding the potential downstream implications.

It is important to lay an early foundation for reimbursement with sound clinical and economic development. This elevates a company’s positioning as well as its attractiveness as an acquisition target.

6) What are the broader implications for medtech commercialization?

Consumers will continue to be prudent healthcare purchasers, and payers will continue to pursue lower-risk members. The medtech industry must be able to address the questions and concerns of both stakeholder groups.

More than ever, medical technology products will need to demonstrate legitimate value. In the absence of clinical and economic “proof,” the promise of cost savings will not justify inflated prices. Going forward, the most viable innovators will focus on value-based pricing or risk-sharing, gaining payer coverage and assuring patient access.