Medical Technology: A Key to Health Care Excellence and Cost Saving

Medical Technology: A Key to Health Care Excellence and Cost Saving
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Health care is on the precipice of a new era, when molecular genetics, medical device technology, and sophisticated medical imaging merge to change the face of clinical medicine. Highly accurate, safer diagnostics and more effective, targeted treatments have already moved into clinical practice with remarkable gains and the promise of even more to come.

Even with these extraordinary advances, the need for more innovation is greater than ever. In only one decade, the number of Americans 65 and older has expanded by a full 6 million to over 13 percent of the population. Due to new health insights and innovative medical care, the segment 85 and older, the “oldest old”, has exploded in the past half century, increasing by a factor of 10 from only 500,000 in the 1950’s to today’s 6 million.

Here is the demographic catch: old people harbor the most disabling diseases, including cancer, heart disease, stroke, and dementia - diseases that depend on complex, expensive technology for diagnosis and treatment. Alzheimer’s Disease alone already affects over 5 million Americans, and in 2050, nearly 15 million will have the disease, including 1 in 3 elderly Americans. In that year, America’s direct financial burden of Alzheimer’s alone will exceed $1 trillion, with over $750 billion from Medicare and Medicaid.

Anxiety about rising health care expenditures has led many politicians and health economists, naïve to the essential role of medical technology, to a simplistic misunderstanding that technology utilization should be restricted. Even worse, doctors have done a poor job of demonstrating the value of technology. While awareness of costs and concern about overuse are undeniably important, the reality is that advances in devices and drugs are a key solution to high health care expenses, rather than simply a cause of it.

Top-down efforts to limit expensive tools, especially medical imaging, the poster child of costly health care, would greatly undermine the benefits of modern health care and, ironically, would increase health costs. In the last two decades, CT scanning has revolutionized therapy in stroke, a top cause of death and the number one cause of disability in the US, saving lives and dramatically improving survivors’ quality-of-life while simultaneously leading to cost savings from shorter hospital stays. MRI is a game-changer in most cancers, not only for diagnosis but also in accurately predicting whether surgery will be curative or will fail. Doctors now rely on imaging to detect cancer earlier and tailor therapy in virtually all cases; imaging also often eliminates costly exploratory surgery. Even acute appendicitis, a routine disease but a medical emergency, would be more costly if not for today’s highly accurate imaging, because it would be diagnosed the way it was 40 years ago, when mortality was high and surgical exploration showed the wrong diagnosis in up to 20 percent of cases. From facts like these, it becomes easy to understand why MRI and CT were overwhelmingly identified by more than three-fourths of leading doctors to be the number one most important medical innovation in improving patient care over the prior decade. And now, imaging promises to streamline new drug discoveries and dramatically reduce astronomical drug development costs.

But innovation in medical technology is substantially impacted by regulation and taxation. The Affordable Care Act created over $500 billion of new taxes over 10 years, including heavy taxes directly on manufacturers of medical devices and drugs. America’s 6,500 medtech companies have dominated the world’s medical device market, according to the Department of Commerce. Under Obamacare, data compiled by John Graham in 2014 showed that virtually all of the top medical device companies are suffering the deleterious effects. All of the largest device companies listed by Medical Device & Diagnostic Industry reported poor U.S. sales relative to their international markets, including GE, Medtronic, Baxter, Johnson & Johnson, and others, with indications that the Obamacare tax burden specifically has been harmful. Separately, developing new drugs now averages over 14 years and costs over $2.5 billion – these costs are generally passed on to patients. Simple generic drugs take 42 months on average to come to market.

Bureaucracy has dramatically worsened in the U.S. compared to the rest of the world. From a 2010 survey of 200 medical technology companies, the delays for FDA approvals for new devices are now far longer than equivalent approval times in Europe. Indeed, PWC’s 2011 scorecard for each nation’s medical technology climate demonstrated a significant worsening in the US, while emerging nations like Brazil, India, and China have significantly improved their own environments for innovation and entrepreneurs.

While most health care discussions appropriately focus on Obamacare’s failings or successes, the Trump administration also needs to prioritize the importance of medical technology beyond simplified cost analyses, unrealistic expectations about savings from health IT, and obsolete concepts of primary care-dominated health delivery. The reality is that the vast majority of all health care innovation in in the world comes out of the U.S.: new drugs, including life-saving cancer drugs; new devices for safer diagnosis and treatment; publications in peer-reviewed journals of medical discoveries; medical technology patents; Nobel Prizes in medicine; and on and on.

Specific incentives coupled with common-sense deregulation to facilitate innovation should be a primary pillar of the next president’s health care agenda. This includes:

  1. Stripping back the heavy tax burdens on industries that are passed on to patients and also inhibit innovation, smother risk-taking, and harm American job creation.
  2. Streamlining processes for new device and drug approvals, so that the FDA becomes a favorable environment for life-saving and cost-saving discoveries.
  3. Creating tax-based incentives for private sector corporate R&D investment and high-risk entrepreneurial investment in early-stage companies.
  4.  Supporting public funding through NIH and others, while leaving the science to the scientists without “picking winners.”

America’s health and economy depend on these medical technology reforms.



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