The economic ramifications of cures
Most recently, researchers were able to find a cure for the liver disease hepatitis C. How much did it cost? Roughly $4.5 billion according to the Medicare Payment Advisory Commission. This was more than 15 times what Medicare spent the year before on older treatments for the disease.
The extraordinary outlays for these breakthrough drugs, which can cost $1,000 a day or more, will be borne largely by federal taxpayers, who pay for most of Medicare's prescription drug program. But the expenditures will also mean higher deductibles and maximum out-of-pocket costs for many of the program’s 39 million seniors and disabled enrollees, who pay a smaller share of its cost, experts and federal officials told The Washington Post.
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The new hepatitis C drugs have a higher cure rate—90 percent or higher—than previous treatments, as well as fewer harmful side effects. Some studies have shown that, despite their price tag, the drugs justify their cost based on the better quality of life they provide and the health expenses that patients avoid in the future.
Still, the drugs may not save money for Medicare, even in the long run. A recent study in the Annals of Internal Medicine suggested that only about one-quarter of the $65 billion needed to pay for the new drugs for eligible patients (not just those on Medicare) would be offset by avoiding hospitalizations and other treatment costs. The vast majority of patients with hepatitis C don't go on to get liver transplants.
Federal taxpayers cover the preponderance of the cost of treating patients in Part D, but enrollees also have to pick up a share, which can vary based on their drug usage. Once a Medicare enrollee spends $4,700 out of pocket on drugs – in this case, just a few days of a prescription – "catastrophic" coverage kicks in. At that point, Medicare picks up 80 percent of the cost, the health plan pays 15 percent, and the patient pays the remaining five percent.
Some costs probably will be passed along to Medicare beneficiaries who don't have hepatitis C, in the form of higher deductibles and maximum out-of-pocket costs, said Jack Hoadley, a research professor in the Health Policy Institute at Georgetown University.
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For example, next year the standard drug deductible in the program—the amount a patient has to spend before coverage kicks in—will increase to $360 from $320.
The out-of-pocket maximum, at which catastrophic coverage begins, is also going up to $4,800 from $4,700. Beyond that, insurance company premiums may also increase somewhat, though increases could be offset by changes in the use of other drugs. Rates have not yet been announced for 2016.
Is there a solution?
Unsustainable growth in medical spending has sparked interest in the question of whether prevention saves money and could be the answer to the health care crisis. But the question misses the point. What should matter (for both prevention and treatment services) is value – the health benefit per dollar invested.
An option of longstanding interest is prevention –interventions that prevent or delay the occurrence of the very diseases that drive these costs. There are three kinds of prevention.
Primary prevention can be accomplished by modifying unhealthy behaviors (e.g., smoking, physical inactivity), which cause many diseases and account for 38 percent of all deaths in the United States, administering immunizations to prevent infectious diseases, and reducing exposure to harmful environmental factors.
Secondary prevention can reduce the severity of diseases, such as cancer and heart disease, through screening programs that detect the diseases or their risk factors at early stages, before they become symptomatic or disabling.
Tertiary prevention – the effort to avoid or defer the complications of diseases after they have developed – is the current focus of medical care.
The health benefits of prevention are intuitive – it is wiser to prevent a disease than to face its consequences at a more advanced stage – but for many years policymakers, politicians, and professionals have also advanced the economic argument that prevention saves money.
Prevention is seen as the touchstone of a redesigned system focused on improving health outcomes.
Health is a good, and goods –whether they are national security, clean water, or a new car – are not purchased to save money. They are purchased for the nonmonetary benefits they provide.
The proper question for prevention – and, ultimately, for all of health care – is not whether it saves money but whether it offers good value on the dollar. For a given disease, which strategy – prevention, a new diagnostic test, or a better treatment – offers the greatest benefit per unit cost? Finding the best ways to enhance health for the same cost is common sense, and it is common practice in other countries, such as Canada, the United Kingdom, France, and Japan.
Questions about costs are often waived for disease care. The question posed for prevention— will it save money?—is rarely applied to an imaging procedure, a new antibiotic, or a surgical procedure. Although some payers will consider CE studies and eschew coverage when CE is poor, many coverage decisions (and drug approvals by the Food and Drug Administration) occur without consideration of costs.
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Various factors explain how this double standard came to be, but the economic crisis in health care calls for more critical thinking. At a time when the economy and the lives of American families are deeply affected by medical spending, policymakers who ask whether prevention can save money or reduce spending must pose the same questions for disease treatments. For all forms of health spending, they should ask the following questions:
- Is the intervention effective in improving health outcomes, and is it based on sound evidence?
- If it is effective, does it offer good value per dollar spent?
- Can other options achieve better results, the same results at lower cost, or possibly yield net savings?
Across the board, the economic crisis requires a comprehensive examination of how to shift spending from services of dubious economic value to those with high CE or net savings. Whether those services are preventive or otherwise is less the point than the value they provide for the dollars spent.
Driving sustainability in medical device production
Environmental protection and stewardship are rapidly rising to the top of the corporate agenda and medical device businesses are no exception. The healthcare sectors of the United States, Australia, Canada, and England combined emit an estimated 748 million metric tons of greenhouse gases each year, an output greater than the carbon emissions of all but six nations worldwide. In order to curb this situation various European standards have been introduced.
The Waste Electrical and Electronic Equipment (WEEE); Restriction on Hazardous Substances (RoHS); Registration, Evaluation, and Authorisation of Chemicals (REACH) and the Energy Using Products (EuP) regulations have all significantly altered manufacturing processes, specific labelling, compliance with disposal restrictions, and creation of instructions for end-of-life management and recycling.
At the moment many medical devices are currently exempt from these regulations but several directives, including RoHS and WEEE, are in the process of being reviewed and could be applicable in future. This is especially relevant for devices that are ‘connected’ and have a digital monitoring component which then brings them under the regulatory purview of authorities that govern devices with electronic components.
Safety, Usability and Sustainability
While medical device manufacturers have been working to respond to increasing demand for environmental sustainability from the market, they also have to contend with a key element of their mission: to ensure safety and usability to healthcare workers and patients. Parenteral and other invasive devices are strictly regulated to help reduce the risk of Healthcare Acquired Infection which typically runs as high as 5% and 8% in most developed countries, according to the European Centre for Disease Prevention and Control. As a result, they typically contain disposable single-use plastic elements.
At the same time, many hospitals and purchasing organisations have started to recognise that sustainable purchasing practices play a pivotal role in reducing costs over time. Many GPOs have appointed and empowered Senior Directors of Environmentally Preferred Sourcing who are successfully implementing the sustainable purchasing business case. In addition global pharmaceutical companies are increasingly creating senior positions with sustainability objectives as key to the role.
Medical device disposal is a particularly burning issue; generally carried out through incineration in the EU, it typically releases nitrous oxide, as well as known carcinogens including polychlorinated biphenyls, furans and dioxins. Some of the strategies trialled by manufacturers to reduce waste matter destined to incineration include sterilisation and reprocessing.
Sterilisation, however, falls short on the environmental front, and may consume more energy and produce more emissions than incineration itself. In the United States for example, 50% of all sterile medical devices are sterilised with ethylene oxide but since this method releases harmful emissions, the US Food and Drug Administration is now encouraging the development of new methods or technologies. Many other established sterilisation methods use glutaraldehyde that is not only harmful to the environment but also tends to be regulated by strict usage and disposal rules such as COSSH guidelines.
Focus on Recycling
The outlook on recycling is changing significantly thanks to new research and technologies enabling, for example, monomer extraction. Recycled polymers can be broken down to their constituent monomers promoting an almost limitless recyclability of some polymers. In addition to this, Polyvinyl chloride (PVC), renewable polyethylene and polyethylene terephthalate (PET) can be recycled several times without losing critical properties.
Reducing the impact of packaging can also significantly reduce the materials that need to be dealt with through either waste or recycling. Packaging manufacturers are decreasing packaging volume by favouring sealed trays instead of pouches, laser-etching instructions directly on to the tray where regulation permits it, or reducing the number of components required overall. In addition to this, for recycling plans to be successful it important to have a full understanding of the practices surrounding device use and to establish, where possible, closed loop recycling systems that recover the waste materials from hospitals or patients and bring them back into the recycling process.
Sustainable Manufacturing: Technology and Research
Greater employment of fast degrading plastics or material from other sources is a key strategy to reduce harmful pollutants both at production and disposal stage. Bio-based materials can in fact offset the carbon emitted during processing as the monomer source grows, and a growing range of sources for bio based monomers -such as wood pulp or sugar cane- is available. However, when assessing the most suitable material for a part, the entire lifecycle of the product needs to be considered. For example: bio-degradable polymers can contaminate a recycling stream and emit methane when incinerated.
The use of environmentally friendly materials should also be supported by an increase in clean renewable energy sources. Lower energy consumption means fewer carbon emissions but also financial savings, making this an appealing measure for manufacturers. New technologies are proving a major gamechanger on this front, helping manufacturers marry their environmental stewardship with cost savings and efficiency. 3D printing, for example, can help develop optimum product moulds more quickly, refining production parameters to minimise raw materials volumes and maximising output productivity.
Similarly, ‘digital twin’ production software uses inline sensors to create a virtual, real-time mirror of the production environment to enable inline refinements. The objective is to achieve “zero defect”, waste-free manufacturing. In addition to this, LEAN manufacturing methodologies are already helping to optimise inventory management and reduce overproduction.
Sustainability by Design
It is increasingly clear that effective environmental sustainability in the medical device sector cannot exist without a full view of the product life cycle from concept development, material selection, design and engineering to manufacturing, packaging, transportation, sales, use, and end-of-life disposal. These evaluations are typically made for factors such as manufacturing efficiency, time to market, or safety and regulatory compliance, packaging and transportation costs, but should be extended to energy efficiency and environmental impact by means such as life cycle analysis.
In addition to this, with devices rapidly becoming more digitally connected, developers need to be aware that the costs of disposable electronics would simply not be viable, or indeed acceptable in the light of electronics disposal regulations. Design therefore should focus on creating a simple, repeatable interface between the two component sections so as not to impair the functionality or efficacy. As reducing waste and harmful emissions continues to exert businesses and governments globally, the medical devices industry cannot stand by. The environmental but also commercial implications of inaction are too serious and the array of solutions now available is exciting and diverse.