Robotic surgery becomes latest poster child for over-priced U.S. healthcare

Updated May 1, 2014, with comments from Intuitive Surgical.

Surgical robots are taking one for the team, becoming the latest poster child for over-priced U.S. healthcare.

Without naming names, Forbes contributor Dr. Robert Pearl highlighted robot-assisted surgery as an archetype of over-priced medical devices that he says are gouging payers and patients. He compared laparoscopy to robot prostatectomy, piling onto a debate already rife with accusations against medical device maker Intuitive Surgical (NSDQ:ISRG).

"Laparoscopic surgery was a miracle advancement. Hardly the same story as the prostate surgery robot," Pearl wrote. "This device will drive up health care costs significantly in the future, while clinical outcomes remain relatively unchanged."

Questions about the cost-benefit ratio have helped drag Intuitive, once a Wall Street darling, down some 25% over the last year. Its da Vinci system runs upwards of $1 million up-front, with recurring costs associated with replacement of its disposable instruments, a point that Pearl took particular issue with.

"The company behind the robot designed it with disposable ‘arms’ and built in an obsolescence factor that forces the hospital to replace each arm after 10 uses," he wrote in an editorial published this month. "The motivation isn’t safety. It’s profit. The manufacturer could have built a robot that could complete 100 procedures. But that would reduce profits dramatically."

Intuitive took exception to Pearl’s characterization, telling MassDevice.com that "the assertion that instrument lives are limited unnecessarily is patently false and shows a lack of understanding of how instruments wear."

"The safety and effectiveness of various procedures using the da Vinci Surgical System are well documented in more than 6,000 peer-reviewed medical articles," according to a company statement. "Numerous high-level, peer-reviewed studies also have proven that da Vinci Surgery provides higher levels of safety and better outcomes than open surgery for commonly performed procedures such as prostatectomy."

Intuitive has for months been battling negative headlines about adverse events, recalls, FDA scrutiny, insurance group lawsuits, hospital marketing conflict-of-interest flaps and on. The downward spiral began last March when the American Congress of Obstetricians & Gynecologists released a statement questioning some of the marketed benefits of robot-assisted surgery. The study was accompanied by a letter from ACOG president Dr. James Breeden, who noted that the benefits of robot-assisted surgery may also be achieved through other minimally invasive methods that aren’t as costly as the high-tech procedure.

Intuitive has battled those notions with a slate of studies finding that robotic surgery reduces readmissions and costs associated with hysterectomy, bests open surgery for prostatectomy and more. Earlier this week the company highlighted a pair of studies touting robot-assisted lung surgery over either open or minimally invasive techniques. Nevertheless, sales have dwindled in recent quarters and shares have continued to slide.

ISRG shares closed at $361.70 today, down 3.3% since the start of the week and down 16.9% since the start of the month.

Targeting robotics

Like Pearl’s editorial, Breeden’s letter mentioned Intuitive Surgical by name, but the company is generally perceived as the face of robot-assisted surgery. Other companies have gotten caught in the fray, but have remained largely out of the limelight.

"It’s a different clinical world, but from a healthcare economics standpoint the arguments should be applied to us," Mazor marketing senior vice president Chris Prentice told MassDevice.com today. "Are we bringing value? And what is that value? Are we better?"

The answers depend on individual surgeons, specific procedures and the right technology, he said. Mazor’s devices are used primarily in brain and spine procedures, areas largely untouched by Intuitive, but the companies and others are often perceived, and critiqued, together.

Mazor often finds itself explaining that its Renaissance system differs from the da Vinci robot, playing a different role in surgery. The da Vinci system effectively replaces the surgeon’s hands, which are controlling the robot from a video-enabled console. The Renaissance system provides guidance for surgeons operating directly on a patient.

Prentice maintained that surgical robotics is too broad a field to be generalized in terms of cost and benefits.

"I wouldn’t make the argument that robotic surgery in that broad generalization is good because that’s too broad," he said. "That’s just as bad as trying to damn it in the general sense."

Mazor’s share price has gone up more than 73% since it hit the Nasdaq market late last May.

Targeting medtech

Pricing pressures are an ever-present feature of the medical device environment, and industry lobbying groups have tried to fight the perception that medical device costs are on the rise.

A team of U.S. physicians released a study in November concluding that price-increases are to blame for the rising cost of care, aiming to dispel arguments that costs are increasing along with demand. Annual increases have slowed over the last couple of decades, but growth in healthcare spending remains greater than any other industry, according to a study published in the Journal of the American Medical Assn.

Within the price hikes, drugs and devices accounted for the greatest increase, followed by professional services and hospital care. The rate of growth has slowed, especially since 2002.

Device makers have fought those characterizations, saying the costs of major medical implants have dropped significantly in recent years. Hospitals in 2011 paid an average of 34% less for drug-eluting stents than they did in 2007, according to the report. They also paid 27% less for bare metal stents and 26% less for both pacemakers and cardiac resynchronization therapy defibrillators.

The medtech cost battle is likely to heat up as Medicare just released an unprecedented drove of data on its payouts in 2012. So far the data has raised eyebrows about some physicians who have collecting eyebrow-raising sums for their treatments.