The Medical Imaging & Technology Alliance, the Advanced Medical Technology Association (AdvaMed) and the Medical Device Manufacturers Association announced in July that medical device manufacturers have now paid $1 billion to the Internal Revenue Service for the medical device excise tax. Their statement said, “The device tax has denied device manufacturers the resources that would have otherwise been available to invest in research and development, capital investments, and to support good-paying jobs across America.” Those organizations have aggressively battled to have the tax repealed.

Senators and Congressmen have taken note, particularly in states like Minneapolis, Wisconsin, and Indiana with a large constituency of voters who work for medical device companies. On the other hand, the general public may be hearing a different story.

According to a New York Times article published on August 3, “In Need of a New Hip, But Priced Out of the U.S.”, the subject of the article, a patient with severe arthritis, was denied insurance coverage for a hip replacement. He reached out to a friend of a friend at an unnamed medical device manufacturer, who arranged to “provide his local hospital with an implant at what was described as the ‘list price’ of $13,000, with no markup.” In addition, “the hospital’s finance office estimated that the hospital charges would run another $65,000.”

Instead of going that route, he opted for a hip replacement “at a private hospital outside Brussels for $13,660.” That price, the article goes on to explain included not only an American-made Zimmer hip joint, “but also all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.”

The article goes on to state that an “artificial hip, however, costs only about $350 to manufacture in the United States, according to Dr. Blair Rhode, an orthopedist and entrepreneur whose company, [Rhode Orthopedic Group (RoG), Orland Park, IL] is developing generic implants.”

Why the cost difference? The article explains that “In the United States, nearly all hip and knee implants—sterilized pieces of tooled metal, plastic or ceramics— are made by five companies, which some economists describe as a cartel.”

Will it matter that the Times article’s subject went price shopping back in 2007 because his insurance company said his arthritis was considered a preexisting condition, which allowed them to deny coverage? Will readers take into account that the Affordable Care Act now prevents insurance companies from discriminating against pre-existing conditions? Which message are the public and their government representatives going to remember?

I’m looking forward to sessions at the AdvaMed conference later this month to hear from its leaders and company executives how these and other issues will be addressed going forward.

Beth G. Sisk

Editor

Medical Design Briefs Magazine

This article first appeared in the September, 2013 issue of Medical Design Briefs Magazine.

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