In Medical Devices, Is "Good Enough" Good Enough?

 Article preview from In-Vivo- December 1, 2010

Device companies have historically been rewarded for even incremental technology enhancements with premium pricing by a price-insensitive customer, all in the spirit that no improvement to the clinical episode would go unrewarded. But in a health care system that is trying to balance exploding costs and greater access, such a goal becomes simply unaffordable. Instead, payors, hospitals and even physicians, encouraged by government policy makers, will increasingly look for technology that delivers an acceptable clinical outcome at a better price.

 

In Medical Devices, Is "Good Enough" Good Enough?

Article preview from In-Vivo- December 1, 2010

Add to the multiple challenges that small – and large – medical device companies face today – an increasingly lengthy and expensive regulatory process, a scarcity of capital – venture and otherwise, and a constrained M&A environment – a new dynamic that could even more radically change the nature of the device industry: an insistence by payors, providers, and policy makers that the benefits (and value) of new technology lie less in its ability to enhance existing technologies or procedures, than in its ability to provide adequate clinical solutions at a reduced cost.

The idea is popping up in a number of catch phrases: "negative innovation," "reverse innovation," "good enough" technology. ( See "Negative Innovation: Helping Reduce Health Care Technology Costs," IN VIVO , June 2010 [2010800111].) And the notion is simple: device companies have historically been rewarded for even incremental technology enhancements with premium pricing by a price-insensitive customer, all in the spirit that no improvement to the clinical episode would go unrewarded. But in a health care system that is trying to balance exploding costs and greater access, such a goal becomes simply unaffordable. Instead, payors, hospitals and even physicians, encouraged by government policy makers, will increasingly look for technology that delivers an acceptable clinical outcome at a better price.

The argument isn't just for technology that reduces costs, either in the hospital or more broadly in society. The advent of tools enabling minimally invasive surgery (MIS) two decades ago represented a technological revolution driven in large part by greater economic benefits to the health care system and to society overall – for example in shorter hospital lengths of stay and a quicker return to work for patients, both attractive to payors and employers.

 

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