Technology and Health Care in an Era of Limits (1992) / Chapter Skim
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PART VI: IMPLICATIONS FOR INNOVATORS
PART VI: IMPLICATIONS FOR INNOVATORS
Pages 199-246
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Part V} Implications for Innovators
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These practices also lead to new policy issues relating to the growing emphasis on outcomes research and to the increasing restrictions on the dissemination of information about drugs- issues that the United States must address if its pharmaceutical industry is to remain competitive. Three recurrent themes are central to these matters.
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and the limited reimbursement of pharmaceutical charges by institutional payers, the pervasive concerns of such payers about health care costs have nonetheless affected pharmaceutical usage (Grabowski, 1991~.
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pharmaceutical market and the American approach to pharmaceutical cost containment as lucidly described by Grabowski (1991~. Enactment of the Drug Price Competition and Patent Term Restoration Act in 1984 facilitated the transfer of inventors' intellectual property by establishing a regulatory framework to expedite the marketing of generic copies of a drug.
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They include minimization of the value of differential benefits in patient subgroups, exclusion of non-approved uses, incorporation of drug reimbursement in prospectively fixed payments for physician and hospital services, direct drug purchasing using competitive bidding, pharmacy capitation payments, drug utilization review, and, more recently, inhibition of physicians access to new product information from traditional sources. The Unknown Effects of Managed Care Unfortunately, as yet only limited information is available about the effects of managed care gatekeeping on health outcomes, health care innovation, and health care costs.
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MANAGED CARE GATEKEEPING: EFFECTS ON THE PHARMACEUTICAL INDUSTRY AND PHARMACEUTICAL INNOVATION Pressure on Resources for R&D The changes in the U.S. pharmaceutical marketplace that are described above and by Grabowski (1991)
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Therapeutic substitution and step-care protocols present additional barriers to the diffusion of new pharmaceuticals and reduce the economic return to the innovator. Pressure for Products with Well-Defined Costs and Benefits New practices of third-party payers have contributed to the development of a broader conceptualization of outcomes research that is, health and economic outcomes research that systematically assesses the impact of an intervention on such measures as cost, quality of life, functional status, and patient satisfaction.
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Increased Economic Risk for Pharmaceutical Innovation A substantial body of empirical evidence from economic studies of the pharmaceutical industry is entirely consistent with the expected effects of the market forces just described. Particularly striking is Grabowski and Vernon's (1990)
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The economics of pharmaceutical innovation are likely to become increasingly strained as the techniques of managed care become more stringent and are applied more broadly. The implications of this trend for the future of the industry may well be prefigured by the consolidation that has A 1 .
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Scientists' improved understanding of disease mechanisms and processes is opening up new drug discovery approaches to attack diseases and conditions-such as osteoporosis, Alzheimer's disease, memory loss, migraine, and depression that in earlier decades could not be systematically addressed through pharmaceutical research. The l990s are likely to see a blossoming of three major trends in pharmaceutical innovation, the products of which began to emerge in sizable numbers in the 1980s.
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The market environment, which is increasingly influenced by managed care gatekeepers, is already forcing pharmaceutical research managers to evaluate alternative discovery risk options carefully and, in some cases, to shift significantly the balance of their research portfolios in terms of the types of drugs and diseases toward which R&D resources will be directed. Some key considerations in today's discovery research strategies include the following: · New disease targets.
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Discovering and developing a drug of this type, however, requires expensive, highly innovative discovery research that carries the greatest chance of technology failure. When a body of scientific knowledge crystallizes in the scientific community, a number of research groups may independently and simultaneously carry out value-added drug discovery research working from the same base of knowledge, from similar perceptions of medical need, and from a recognition of commercial opportunity.
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In addition, new industry-wide clinical development strategies are emerging to deal with the more complex clinical studies needed to demonstrate outcomes. · Outcomes research.
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provides powerful incentives for management to be more creative and more efficient, and industry is clearly responding. Managed care gatekeeping policies have, however, brought two new problems that must be addressed quite soon if the nation's investment in pharmaceutical innovation is to be maintained.
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175~. Today, many people and groups are interested in outcomes research, and the general expectation is that the pharmaceutical industry will unconditionally underwrite these new, sophisticated, and costly studies that payers increasingly demand as a precondition for a pharmaceutical's general use.
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The second new problem facing the pharmaceutical industry relates to the collection and dissemination of innovation-specific information on medical therapies. Favorable findings from outcomes studies pose some as yet unresolved questions about how to disseminate scientific information to both practitioners and patients.
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1991. European policies influencing pharmaceutical innovation.
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1991. The impact of regulation and reimbursement on pharmaceutical innovation.
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investment over time and concludes with some observations on impediments to continued innovation. PUBLIC POLICY AND MEDICAL DEVICES: 1965-1976 The period from 1965 to 1976 is significant in the development of the medical device industry because of the introduction of the Medicare and Medicaid programs, which stimulated an era of growth.
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The health care system, which was almost entirely one of retrospective, cost-based, fee-for-service payment, directly encouraged the adoption of medical devices by providers. An enormous influx of health care dollars into the economy through Medicare and Medicaid programs provided major support to this system and further stimulated the diffusion of innovative medical devices.
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In the opinion of this author, the lack of change in the market confirms that the medical device amendments essentially codified practices of testing and manufacturing that were already being used by the medical device industry. The introduction of the CON system and of rate regulation in some states did affect the diffusion of some costly medical devices (see the paper by Hillman in this volume)
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In the years before 1983, the primary market for medical devices was the in-patient hospital setting, in which the majority of diagnostic and therapeutic interventions were carried out. Beginning in 1983, however, in response to the changes in payment methods noted above, there was a striking shift in behavior.
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To qualify for payment, manufacturers would have to prove to the satisfaction of a third party that their devices meet these objectives. These changes, in combination with the trends noted above, may have a significant effect on the medical device industry and its R&D strategies.
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~ Ad, _ . ~ ~ _ .~^ ~ _ Another trend patient preferences has begun to exert a stronger influence on R&D than in the past as the medical device industry responds to the growing importance of patient involvement in determining the use of particular diagnostic or therapeutic interventions.
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In sum, the medical device industry has moved from a rather simple marketplace driven by new technologies and new modalities, to one of multiple patient settings, multiple product categories, and multiple motivations to purchase. The product introduction process has been affected by the addition of the government-introduced regulatory "screens" discussed earlier.
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Obviously, a larger company is better able to manage such fees and to survive delays in time to market, but history has shown them to be less likely to produce new technologies. In conclusion, user fees related to PMAs and 510(k~s and the delays that may result in seeking approval for marketing are potentially harmful and could impede the ability of the medical device industry to bring innovation to the marketplace.
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The incremental innovation demonstrated in the above examples is important, however, and payment schemes should not unnecessarily restrict the evolution of medical devices within clinical practice. OBSERVATIONS Recognizing the interplay of these various regulatory and payment interventions, how should the medical device industry respond?
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cat device firm introduces a product, it needs to know what it must do to satisfy government regulations and how long it will take to get approvals. In an uncertain regulatory environment, companies face increased risks with innovation (Health Industry Manufacturers Association, 1991~.
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In conclusion, the device industry has seen dramatic change over the past 27 years, and further policy change seems likely. Despite some financial buffeting, the electromedical device industry remains a profitable enterprise, which produces a $3.2 billion positive balance of trade and employs about 248,000 Americans (Bowles, 1990~.
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In fact, improvement in the safety and efficacy of surgical therapy depends critically on continued evolution of more sophisticated technology and techniques for the diagnosis and treatment of those diseases amenable to operative manipulation. Cost factors, however, that in part relate to successes derived from the application of innovative technologies have generated a critical assessment of therapies that require an extraordinary use of health resources (Showstack et al., 1985~.
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The following treatise relates the day-to-day practice of surgery to the current health care scene. It examines surgical mores and provides an explanation as to why surgical therapies have remained relatively unfettered by bureaucratic regulation.
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The remarkable advances made in surgical therapy during the past several decades are in part a result of the relatively unregulated environment of surgical practice. Indeed, during the early days of the development of modern surgical techniques, the only regulation came from the limits of technology.
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Surgeons appear to be adaptable and have quickly learned to comply with Medicare's prospective payment system and its method of reimbursing
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The current trials of carotid endarterectomy versus medical therapy are a good example of an instance in which subpopulations of patients who might benefit from a surgical approach were identified (North American Symptomatic Carotid Endarterectomy Trial Collaborators, 1991~. Controlled trials have also shown the efficacy of approaches to treating breast cancer that are less morbid than surgery but equally effective (Berte et al., 1988~.
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Portasystemic shunting for the prevention of esophageal hemorrhage from portal hypertension is an example of the complexity involved in applying controlled trials to surgical treatment (Resnick et al., 1974~. The idea certainly had merit: preventing variceal hemorrhage would greatly reduce the morbidity of this serious complication of portal hypertension.
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It appears that the introduction of the prospective payment system, of utilization review and second opinions, and even of managed care has not significantly influenced the types of operations that are performed or the kinds of patients who undergo them. What surgeons do for their patients is governed by the usual process of graduate surgical education, postgraduate courses, journals, and professional meetings.
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Physicians have always been the purveyors of health services for their patients, and only recently have they become sensitive to the limitations of the system they broker. The incremental rise in health expenditures parallels the opportunities for precision in diagnosis and treatment Innovative technology has brought medicine to the point of being able to treat afflictions that previously were thought to be uncorrectable.
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Recent studies, however, have suggested that prevention may not necessarily lead to cost-reducing effects (Russell, 1986~. THE CASE OF GALLSTONES To address more specifically the issue of cost containment and surgical intervention, this section considers the dramatic changes that are occurring in the treatment of gallstones, a common, easily quantifiable disease (Roslyn and DenBesten, 1990~.
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This description should provide sufficient background to understand ~ ~ ~ ~ ~ r ~ ~ ^ -~ A ~ V ~ fur uperauve removal or the gamer Is not without what has happened to these newer, less Invasive therapies and how their use involves interplay with the medical profession, the research establishment (the National Institutes of Health and industry) , regulatory bodies (the Food and Drug Administration and other public agencies)
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For example, surgeons adopted and perfected the laparoscopic approach to cholecystectomy so rapidly that the device industry found itself incapable of satisfying demand for the devices. The public learned of the potential of the procedure through the media before most surgeons were aware that a cholecystectomy could be done in this less invasive way.
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With this new technique, surgical treatment is again the treatment of choice for the majority of patients with symptomatic gallstones. There remains a small group of patients who might benefit from alternative treatments for example, patients who are at risk of associated medical problems if anesthetized.
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For example, the lithotrite has been adapted for use by surgeons to gain stone clearance from the gallbladder during performance of a laparoscopic cholecystectomy. The ultimate worth of this technology will not be known until controlled trials are conducted.
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With regard to innovation and the development of innovative therapies, specialization and its demands for new products are the driving forces behind the development of safer, more effective, and more cost-effective therapies. As outcomes research is further refined and applied to the assessment of surgical results, it is likely that specialized services will be regionalized.
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1990. What is outcomes research?
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Key Terms
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