Uncertain Health in an Insecure World - 58

"Device-ive"



The emergence of big health data has experts scrambling for ways to handle its immensity and uncertain predictive value. Data-generating technology abounds, including medical robots, wearable wellness technology, nano-scale drug delivery systems and cognitive machines that learn from the scientific literature.

Market influencers seek to broadly connect these recent advances to meaningful use in post-modern public and private healthcare systems.

Implantable medical devices (above) are not as exciting as digital health gadgets and biotech blockbusters, until you need a new joint, heart valve, cardiac defibrillator, cyber radio-surgery or whole body scan (below). The digital technology being built into hospitals is also amazing, as is the massive amount of structured & unstructured data it generates. Self-sensing 'smart' devices are programmed to know when to shock an arrhythmia or deliver insulin to a patient, averting deadly medical crises.

There are some 7,000 U.S.-based medical device companies, with annual sales of >US$110 billion.  Many of these manufacturers are located California, Massachusetts, New York and Minnesota. In the U.S., this sector employs >400,000 and has a global net trade surplus.

Justifications for high device costs to consumers include the belief that breakthrough technologies (like Medtronic's trans-catheter heart valve, below) will someday trickle down to the deserving poor in developed countries, or somehow raise the boats of the under-served in the less developed world.

Such statements have the smell of snake oil.

In publicly funded fully accessible healthcare systems like Canada’s, the socialized medicine presumption of fairness and the “no line jumping” maxim apply… in theory. Unofficially, Canada’s two-tiered healthcare system allows those who can pay a premium earlier easier access to care, lowering barriers to high technology.

In  healthcare quasi-markets like the U.S., public & private healthcare systems alike participate in the clinical trial validation of novel medical technologies. Resulting approvals permit med-tech industry sales to public healthcare systems for the care of government-insured beneficiaries. It is the promise of such technology market introduction & dissemination at ‘par’ public pricing that assuages the FDA approvers and the Center for Medicare & Medicaid Services (CMS) reimbursers of expensive device use. The uncovered cost of prior med-tech industry R&D and business development has long been shifted to privately insured and self-pay patients.

In 2013, Obamacare imposed a 2.3% excise tax on medical device manufacturers to partially account for these tilted market forces, recouping some of the bald profits being collected from the public healthcare sector by private companies. Ernst & Young reported that in response to the new tax, venture capital investment in medical devices fell 17% in 2013.

This medical device tax, assessed on gross sales revenues, could top US$28 billion over a decade. A similar tax was applied in the state of Massachusetts where Obamacare was originally road-tested; then Senator John Kerry negotiated a reduction in the excise tax from 4.6% to 2.3%.



In 2014, the U.S. Congressional Research Service reported that the tax's impact on medical device company profits would be negligible, based on  the overall steady growth of healthcare demand for devices and numerous over-the-counter direct-to-patient sales "exemptions" (i.e., hearing aids, contact lenses, eyeglasses, wheelchairs, etc.). It is unclear whether wearable tech and other digital health tools will also be exempted, or feel the weight of this new levy.

Let the political games begin.

The Republican-held U.S. Congress is threatening to repeal this part of Obamacare in 2015, to the glee of profit-besieged (?) med-tech giants like St. Jude, Globus and Medtronic. One U.S.  Congressman from the medical device manufacturing state of Minnesota, Erik Paulsen, said "Utilization of medical devices is heavily tipped towards America's aging population... Medicare beneficiaries, both elderly and disabled." Paulsen's Protect Medical Innovation Act passed in the U.S. House of Representatives in June, the first step towards possible repeal.

And what Philistine is against innovation? Too clever...

The White House has threatened to veto any bill repealing the device tax. Washington med-tech lobbyists are working overtime!

If and when this repeal happens, it will make MORE care using standard medical devices and new digital health gizmos LESS affordable for most.

We in the Square can faintly hear the sound of corporate beneficence trickling down upon the device-less masses.

Game, set, match?