How the U.S. MedTech Industry Shaped Medical Device Innovation

Medical Technology, News & Insights

By Andrew Goddard – Owner & CEO

Medical devices are defined as any “instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is…intended for use in the diagnosis of disease ” or the treatment, cure or mitigation of an ailment (3).

Medical devices according to the FDA’s definition range from very simple to highly complex, yet regardless of complexity these devices must meet certain standards and pass rigorous codes before they are given the stamp of approval for sale and use.

While the lofty goal of medical devices is to save or improve lives, they are hindered by the obsessive focus of curative measures. Curative medicine is geared towards curing or treating patients ONLY after they have become ill or injured.

While this consumerist payment for services rendered model is what the U.S. MedTech industry has typically adopted, it puts both the health and potential innovation of medical device development companies at a huge disadvantage. With a curative focus, we are missing out on preventative care and medical device innovations that have the potential to more efficiently provide a higher standard of living and better overall health care.

Read Goddard's Medical Device Development Brochure

Clear Contrast in Curative Over Preventative Care Budgeting

“…despite the benefit of preventative care, governments allocate a strong majority of their healthcare expenditures for curative measures while neglecting preventative efforts.”6

Numerous studies have found that, despite the benefit of preventative care, governments allocate a strong majority of their healthcare expenditures for curative measures while neglecting preventative efforts (6).

According to a study conducted by the OECD, “despite the reported high burden, and the strong public health argument for increased prevention programs, expenditure on public health and prevention accounts for a small proportion of public health budgets as shown…”

“According to OECD’s most recent figures, the average expenditure on public health and prevention in 2005 was just over 3% of public spending, whereas the average spent on curative care was 57%” (6). The United States is as guilty as the rest of the countries surveyed according to the data (6).

Missed Opportunities in Preventative Medical Device Innovation

The push for curative medical devices leaves much-needed preventative care devices underdeveloped, suppressing innovation, and lowering both health care and quality of life for patients. Having the potential to prevent illness and injury yet allowing those resources to remain untapped creates far-reaching ethical implications and hinders medical science from making strides toward better health.

Medical device companies in the United States are plentiful, and for the most part, are working towards developing the most relevant new technology (7). The purpose of medical device technologies is that of safety, efficiency, and health improvement.

Medical device development companies drive the production of technologies that are aimed to make the lives of doctors and surgeons easier while enabling quicker and safer delivery of care. Ideally, these medical device innovations also improve the health and the living standards of the patients.

Key Players in Medical Device Development & Research

In the complex arena of medical device development and research, there are a few key players:

  1. Medical device companies that develop the devices,
  2. The Food and Drug Administration (FDA) that regulates and approves the devices,
  3. Insurance companies that set the pricing for medical devices,
  4. Hospitals and doctors who choose and work with the devices, and
  5. Patients who benefit from medical devices.

Interestingly, it is the patients who have the least amount of say in the entire process.

Read More: The Medical Device Development Process: Goddard’s Guide

So Why Is Preventative Technology Being Neglected in the MedTech Industry?

In a survey of 253 patients and doctors, the surveyors found the “strongest and most consistently shared value across countries was a general preference for preventive health care over curative care” (5).

The overall sentiment of both doctors and patients was to see more preventative technology developed. So, why are medical device companies not clamoring to fill this market?

Gatekeeping Medical Device Innovation

Doctors can only choose to use certain devices if they are covered by the insurance policies they choose to accept. This leaves insurance companies and medical device manufacturing companies fighting for the top spot in the decision-making process.

Doctors and hospitals are only allowed to purchase devices that will be covered by insurance in order to guarantee a return on their investment. The limits of new technology development are predetermined.

Medical device innovation and forward, out-of-the-box thinking is shelved in order to keep these companies profitable and viable. Inevitably, it is the insurance companies that win out with their ability to manipulate costs for doctors, hospitals, and patients, leaving them essentially in control of the market.

The insurance companies become the gatekeeper, inevitably driving the medical device companies towards certain curative ends.

“Despite being called ‘health’ insurance, this is actually ‘illness’ insurance, which pays some or all of the costs of medical care in case of illness. About 85% of the U.S. population is covered by insurance policies, and insurance now pays the majority of healthcare costs. Insurance pays about 90% of the money spent on hospital care, and 74% of the money paid to doctors” (2).

Medicare accounts for 20% of all healthcare in the United States. Medicare is so pervasive that other private insurance companies look to Medicare to set their own costs.

Slow and Complex Processes Stifle Medical Device Innovation

Medicare prices are set by the Centers for Medicare and Medicaid Services (CMS). Yet, CMS can take between 15 months and 5 years to add new technology to its database for pricing (8). This unreasonable decision time impedes a medical device company’s ability to be innovative and cost-effective – their new technology may become old or obsolete before it is even approved by the insurance companies.

The criteria for approving new medical device technology in order for it to reach the market are both rigorous and strict. Medical devices often must go through pre-market testing and approval as well as post-market surveillance by the FDA. The steps in which devices are approved are often critiqued for stifling innovative breakthroughs (7).

New call-to-action

Regulatory Hurdles Discourage Medical Device Innovation

“Medical device companies… have the challenging decision to either… develop devices that could potentially change the lives of patients or produce familiar technologies that will provide a profit.”

Innovations by forward-thinking companies are burdened by medical device regulations rather than being incentivized. Medical device companies, therefore, have the challenging decision to either break new ground and develop devices that could potentially change the lives of patients or produce familiar technologies that will provide a profit.

Pre-market testing requires medical devices to undergo clinical trials. It is important to note, however, that medical devices that are significantly similar to devices that have already been approved are allowed to go through a streamlined and less expensive approval process (7). This is obviously an incentive for some medical device companies to make devices similar to pre-approved devices, once again stifling innovation.

To further complicate the process, even devices that pass the FDA standards must also meet other qualifying compliance requirements in order to receive a code from The American Medical Association. Insurance companies will not reimburse the cost of medical devices if they have not received a code from the American Medical Association (8). This coding system however can be cumbersome, costly, and time-consuming.

To be assigned a new code, new medical technology must undergo peer-reviewed clinical trials and be in widespread use. The cumbersome and lengthy process of acquiring a new code is stifling in and of itself, but the more subversive problem created by the coding system is that of willful manipulation and discrimination (8).

Learn more: Verification vs. Validation Testing: Product Development Checks & Balances

Medical Device Profitability Bias

The necessity of a code gives insurance companies the power to pick and choose the devices that are put into use. The overall trend is to choose technologies that will provide the most profit which, unfortunately, tends to be curative devices since they are easier to measure and quantify (9).

When discussing insurance’s preference for inpatient care over ambulatory care the authors of Medical Devices found that “similarly, the insurance system tends to reimburse curative or remedial medicine than preventative care” (1). The inherent bias of reimbursement “therefore, places pressure on hospitals to make economic choices about the technologies and services they provide” (8).

The drawbacks of insurance reimbursement coding are three-fold with increased costs, unmanageable time constraints, and oppressive decision-making power. All three of these have similarly detrimental effects on the overwhelming potential that preventative devices could have on the lives of patients.

“Manufacturers must be aware of the reimbursement environment for the new technologies they develop” (8).

Without a mindful awareness of the insurance companies’ expectations and motivations, manufacturers of medical devices could begin making truly innovative technology that could significantly change the landscape of medicine and healthcare. Yet no patient, doctor, or hospital would ever receive benefits from them because insurance companies would not approve them.

“The majority of new medical devices that come to the market each year do not raise billing-code coverage or payment questions. Most of these technologies fit within coding and payment categories that have already been established, or they are similar to existing items for which coverage determinations have already been made” (8).

In an effort to maintain a profit, medical device companies have, for the most part, relied on revamping old technologies that focus on curative health. Only an overhaul to the current system will provide an environment more conducive to preventive care with a more streamlined approval process.

Download the Goddard Medical Device Development Brochure

Shifting Medical Device Innovation From Curative to Preventative

Moving forward, insurance companies need to shift their mindset to incentivize new preventative care technologies. Existing preventative care technology that fought through the red tape into wide usage include vaccines and early detection of common diseases.

According to the CDC, preventative drug care is considered to be amongst the greatest healthcare advancements of the 20th century (9). These technologies and treatments have shown an overwhelmingly positive effect on patients’ overall health as well as a large return on investment.

Cutting-edge technologies and treatments are paving the way for a shift in which the insurance companies can release their choke-hold on medical device development, freeing it to make the best use of creative research and development.

The body of health care research overwhelmingly supports the need for a preventative approach. It is time to take health care technologies in the future. Smart-phones can diagnose your health activities; t-shirts can improve your posture; coffee cups can stir themselves. The potential for life-improving technologies has never been more promising.

Comparative studies have shown the cost to health benefits favors prevention over curative in the long run of a patient’s life (9). Rather than a focus on post-incident care, all of the players in our healthcare system need to start looking at the bigger picture – focus on family histories, a patient’s health behaviors, diet, and everything that may have led to the injury or ailment. Focusing so narrowly on curative care only allows us to put Band-Aids on larger problems.

Instinct should tell us that if we come upon a hive of bees and get stung we should move away from the bees in order to prevent future stings while remedying the stings we already received. Unfortunately, our health care system, as it stands, keeps us amongst the bees trying to keep up with endless stings.

A much-needed cultural paradigm shift towards a broad view of health will create a culture in which preventative health care is valued and the meaning of healthy can be redefined.

Read the Human Factors Engineering White Paper

About Goddard, Inc.

Goddard Inc. is a full-service engineering and product development company specializing in medical device developmentlife sciences and diagnostics, and high-tech consumer and industrial product development.

Drawing from the collective expertise of its experienced designers and engineers, Goddard’s mission is to deliver outstanding solutions that positively impact lives. Our team has contributed to projects ranging across the entire product development spectrum – from conception to production.

We would love to hear about what you’re working on.

Tell us about your project and let’s begin a conversation about creating products with technical precision and elegant design.

Get A Quote For Your Project

References:

  1. Augusto, C. (Ed.). (1983). Medical Devices–Measurements, quality assurance, and standards. Philadelphia: American Society for Testing Materials.
  2. Deitchman, S. (n.d.). Health care systems: An introduction to international comparisons. Retrieved November 1, 2014.
  3. FDA. (2014, September 12). Is the product a medical device? Retrieved November 1, 2014.
  4. Goergen, J. (2011, February 4). American Medical Device Companies Must Simplify & Focus on Consumers. Retrieved November 1, 2014.
  5. Salkeld G, Henry D, Hill S, Lang D, Freemantle N, et al. (2007) What Drives Health-Care Spending Priorities? An International Survey of Health-Care Professionals. PLoS Med 4(2): e94. DOI:10.1371/journal.pmed.0040094
  6. Srivastava, D. (2008). Is prevention better than a cure? a review of the evidence. The London School of Economics and Political Science. Retrieved November 1, 2014, from ec.europa.eu/social/BlobServlet
  7. Tice, J., Helfend, M., & Feldman, M. (2010). Clinical evidence for medical devices: Regulatory processes focussing on Europe and the United States of America. Retrieved November 1, 2014, from http://whqlibdoc.who.int/hq/2010/WHO_HSS_EHT_DIM_10.3_eng.pdf
  8. Ventola, C. (2008). Challenges in evaluating and standardizing medical devices in health care facilities. Pharmacy and Theraputics, 33(7), 348-359. Retrieved November 1, 2014, from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2683611/
  9. De Bekker-Grob, E., Polder, J., & Jan Meerding, W. (2007). Towards a comprehensive estimate of national spending on prevention. BMC Public Health, 7(252). Retrieved November 1, 2014, from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2071917/#__ffn_sectitle

Let's Work Together

Our team of experienced designers and engineers can help bring your vision to life.


Talk to Us