Assessing Medtech’s Value Proposition

Steve Halasey, Contributing Editor

Over the years, medtech companies have become quite adept at working with clinicians to identify unmet clinical needs, and developing products to address those needs. In both start-ups and established companies, industry investment in product-related research and development has always commanded a significant share of company resources.

(Credit: American Academy of Orthopaedic Surgeons)

However, device companies haven’t always been quite so successful at supporting the value propositions needed to convince payers and providers that such novel technologies are worth adopting. In spite of significant investments in comparative- and cost-effectiveness studies (including a growing body of federally funded research), the value propositions for even well-established technologies are sometimes met with skepticism.

One reason for this difficulty is the relative narrowness of the criteria used to make coverage determinations and purchasing decisions. With assessment criteria focused almost exclusively on shortterm clinical outcomes for individual patients—and sometimes on the sticker price for purchasing the products—it is difficult for payers and providers to incorporate data that demonstrate advanced performance and savings over a longer period, or from a systemwide or societal perspective.

The importance of incorporating broader perspectives is a key lesson of a study commissioned by the American Academy of Orthopaedic Surgeons (AAOS) and published in the August issue of the Journal of Bone and Joint Surgery. “The Direct and Indirect Costs to Society of Treatment for End-Stage Knee Osteoarthritis,” compares costs and benefits of nonsurgical treatments with those of total knee replacement procedures performed in the US in 2009.

For individual patients, the researchers found that surgical procedures increased incremental costs by a mean value of $20,635 over nonsurgical approaches. However, those costs were offset by reduced indirect costs of $39,565, resulting in a lifetime societal net benefit of $18,930 per patient. On a population level, for the more than 600,000 procedures performed in 2009, the researchers estimate that lifetime societal savings totaled approximately $12 billion.

The researchers say their estimate of savings may be conservative, “because we did not account for workplace productivity, depression-related symptoms, cardiovascular health, home modification costs, and nursing home costs.”

The researchers observe that the benefits of total knee replacement “accrue primarily to the patients in the form of additional working years and increased income while in the workforce.” The study found that 85% of savings came from increased employment and earnings, and 15% from fewer missed workdays and lower disability payments.

This isn’t the first study to highlight the importance of taking a societal perspective when assessing the costs and benefits of medical technologies. A University of Pennsylvania study, “Impact of Minimally Invasive Surgery on Medical Spending and Employee Absenteeism,” published in the July issue of JAMA Surgery, conveyed a similar message. In that study, the researchers highlighted 2009 savings of more than $11 billion from the use of minimally invasive techniques in six surgical procedures, and estimated that 20% of cost savings came from reduced absenteeism.

Such novel research methods are raising the possibility that payers and providers might soon have a mechanism for incorporating better measures of the value propositions for technology-intensive procedures. “With the new model we created for this study, we have opened the door to evaluate societal benefit for other types of healthcare services as well,” said AAOS coauthor Lane Koenig, PhD. “These data offer evidence on the societal effects that will add to the conversation people are having about improved, cost-conscious healthcare.”

That could be good news for device companies whose next-generation products are responding to the unmet needs of a future in which patients play a greater role in directing (and paying for) their own healthcare. But in the meantime, payers, providers, and employers still have a long way to go before current health insurance plans embrace a full understanding of the value propositions for medical technologies.

Steve Halasey is vice president for programs at the Institute for Health Technology Studies (InHealth), a 501(c)3 research and educational foundation measuring the value of medical technology innovation. Washington, DC. He has more than 20 years of communications and editorial experience with publications informing industry executives, researchers, and investors in the medical device industry.