Report: Prices drop for major medical implants

Updated September 23, 2013, at 6:45 p.m. with comments from AdvaMed chairman David Dvorak.

Report: Prices drop for major medical implants

Hospitals in 2011 paid an average of 34% less for drug-eluting stents than they did in 2007, according to a new report. They also paid 27% less for bare metal stents and 26% less for both pacemakers and cardiac resynchronization therapy defibrillators.

The findings reinforce previous AdvaMed studies, which have found that medical device spending makes up a consistently small percentage of the U.S. healthcare budget and that average device prices have increased at a rate of about 1% per year since 2000.

"What else in health care can you say is going down in terms of price?" AdvaMed president & CEO Stephen Ubl told Bloomberg. "At least in this part of health care, good old fashioned competition works well."

The study raises some questions when paired with other recent reports on the ever-increasing cost of healthcare in the U.S. A New York Times article published last month chided medical device makers for "commanding inflated prices" for implants such as hip and knee replacement systems, noting that many of the same devices cost far less overseas than they do in the U.S.

The article tells the story of a Colorado man who flew to Brussels to have hip replacement surgery for less than $14,000, after being quoted $13,000 for the implant alone and another $65,000 in hospital charges, not including the surgeon’s fee, to have the surgery in the U.S.

The AdvaMed report didn’t provide specific price points for the various devices it analyzed, but it found that artificial hip systems have gone down in price by 23% from 2007 to 2011, or 12% in nominal dollars (not accounting for inflation).

Percentage Change in Reported Average Real Prices by Medical Device Category6

 

The medical device industry has been on the defense, maintaining for years that its technologies are not the cause of skyrocketing costs of care in the U.S. Ubl reiterated that sentiment, touting the industry’s ability to keep prices low, and ever lower, in an increasingly hostile medtech environment.

"Even as innovation and job creation in the industry remain under threat from the medical device tax and repeated reimbursement cuts impacting diagnostic lab tests, imaging services and durable medical equipment in particular, old-fashioned competition continues to ensure the strong value proposition of advanced medical technologies that save lives and improve patients’ quality of life every day," Ubl said in prepared remarks. "These average pricing declines reflect the intensely competitive marketplace for medical technology and underscore the tremendous value devices and diagnostics provide to patients and the overall health care system."

"We look forward to sharing the results of this new study with members of Congress and other policymakers as they consider changes to the health care delivery and payment system," he added.

Harsh pricing pressures have become a stalwart backdrop for the U.S. medtech industry, amid an already stressed environment. AdvaMed chairman David Dvorak said the new pricing report falls roughly in line with what he’s seen as president & CEO of orthopedic device giant Zimmer’s (NYSE:ZMH).

"This is the way of the double jeopardy the industry is placed under," Dvorak told MassDevice.com during AdvaMed’s 2013 industry conference in Washington, D.C. "We have the device tax directly upon us and then customers who are expecting us to absorb a piece of what they’re being asked to take on to finance healthcare reform."

As the Affordable Care Act pushes hospitals to find ways to reduce costs, vendors fall on the chopping block, often because it’s easier to cut budgets than to drive efficiency, Dvorak added.

"More pressure is being put on the hospital to absorb the financing of the healthcare reform and those hospitals turn back around and look for someone to subsidize what they believe they’re putting forth in the way of a funding mechanism," Dvorak said.

The report, commissioned by medical device lobbying group AdvaMed, examined average hospitals prices for cardiac resynchronization therapy defibrillators (CRTDs), implantable cardioverter defibrillators (ICDs), pacemakers, artificial hips, artificial knees, drug eluting stents and bare metal stents. The numbers, adjusted to account for inflation, suggest significant price cuts over the 4-year analysis period.

The researchers examined just the cost of the implantable devices, excluding other medical-device-related costs included in implantation procedures. The study also does not account for average prices of any specific device, looking only at average hospital costs for different categories. That suggests that falling costs may be partly attributable to changes in "product mix" over time, such as hospitals opting to buy cheaper or pricier versions of different implants.

The survey included pricing data from between 153 to 294 hospitals per device category and year that data was available, featuring hospitals that were geographically and institutionally diverse in order to forge results that might be better representative of the nation’s healthcare providers.

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