At the recent Stanford Center for Cardiovascular Technology Annual Symposium 2010, hosted by Stanford University's Peter Fitzgerald, MD, PhD, and Alan C. Yeung, MD, one of the newest buzzwords in medical device development was "negative innovation". Increasingly, executives, particularly at big companies, are coming around to the notion that in the future, a product development model that posits that incremental device innovation will continue to be rewarded with premium pricing and wide adoption won't hold anymore. Instead, they argue, in a world in which health care costs are scrutinized ever more closely and initiatives like comparative effectiveness bring cost and quality into the same discussion, the US health care system will begin to favor a new kind of value proposition: devices that reduce costs, while delivering equivalent, and perhaps in some cases even slightly worse, outcomes.
Negative Innovation: Helping Reduce Health Care Technology Costs
By David Cassak
The newest buzzwords in medical device development: negative innovation. Increasingly, executives, particularly at big companies, are coming around to the notion that in the future, a product development model that posits that incremental device innovation will continue to be rewarded with premium pricing and wide adoption won't hold anymore. Instead, they argue, in a world in which health care costs are scrutinized ever more closely and initiatives like comparative effectiveness bring cost and quality into the same discussion, the US health care system will begin to favor a new kind of value proposition: devices that reduce costs, while delivering equivalent, and perhaps in some cases even slightly worse, outcomes.
Some have described the phenomenon as a shift from innovation to value – value expressed here not as clinical value, but in terms of some kind of economic measure. But negative innovation is more than that. Cost-benefit analyses have been around for years, asking the question whether a particular device delivers a clinical value sufficient to justify its economic cost. In that respect, this kind of analysis doesn't diminish the value of innovation, but simply seeks to quantify it.
Negative innovation posits that payers, providers, physicians, and perhaps even patients are now willing to discount the absolute value of innovative technology advances and accept a compromise: equal clinical value in exchange for greater system-wide cost savings. And product companies will have to follow suit, much like health care services companies have taken advantage of opportunities to reduce overall health care costs without reducing quality.
At the recent Stanford Center for Cardiovascular Technology Annual Symposium 2010, hosted by Stanford University's Peter Fitzgerald, MD, PhD, and Alan C. Yeung, MD, Stanford economist Victor Fuchs provided an overview of the troubles of the US health care system today. Growth in the cost of health care, which increased 2.8% last year, is outpacing the growth of GDP, meaning, said Fuchs, that health care expenditures are "bending the curve." He argued that we have to begin to get control of health care spending to make sure it more closely matches increases in GDP.
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