In an exclusive interview Executive Director of the European Health Technology Institute, Rosanna Tarricone, reveals the challenges of a fragmented device industry and the impact on innovation.
“There are incremental costs, but we should compare these against the incremental benefits in terms of a longer and healthier life of patients”
As an independent research organisation the European Health Technology Institute for Socio-Economic Research (EHTI) is invaluable in developing data and evidence on the social and economic value of medical technology and its impact on the economy and welfare of European countries. Executive Director, Rosanna Tarricone has been at the helm of the research institute since its inception in 2007. The institute was created three years ago to stem the lack of scientific and economic evidence on medical devices, and has been working towards providing a systematic review and analysis of the major reimbursement and security systems in Europe, so as to have a deep and detailed understanding of how medical technology is currently procured and reimbursed, as well as who benefits from investment in medical technology.
"This is something that, until some years ago, many people were not aware of - even at the policy level - because the sector is so diverse that reimbursement and procurement positions are so decentralised throughout Europe, and even within countries themselves, decision makers were not aware of how the system was whole was working," explains Tarricone.
This vital first step in understanding the current system was crucial and has laid a foundation for where the institute currently finds itself - attempting to recognise how healthcare policies implemented by different countries in Europe are actually effecting the consumption of medical devices in the same countries. Indeed, Tarricone stresses that the main improvement the EHTI has brought to the industry has been in terms of knowledge: "We have led a huge improvement in progressing research and building up scientific knowledge in this specific field, firstly for academics and secondly for policy makers themselves."
The industry today is undoubtedly much more aware of how systems are implemented throughout Europe, such as the major differences between various countries and whether they have an impact on the diffusion and uptake of medical technology across the continent. So while the improvement is not something tangible there has been progression. Indeed, Tarricone asserts that the last three years have secured a good foundation of knowledge in which to continue the institute's mission from.
As a cornerstone of the health systems in Europe, innovation is key to understanding more. Tarricone believes that she sees the benefits of innovation on several levels, including the patient, the hospital, the clinicians and the industry itself. "Even within the basic technology side, today we are able to deliver surgical intervention in many invasive ways, that were impossible just a few years ago," she says, before adding, "Instead of opening the chest, for example, we can make a small hole in the chest and insert a medical device that means the patient can go back home and recover much more quickly. We are benefiting the healthcare system and hospitals in that the costs are lower because we are using less intensive equipment and less time is spent in the operating theatre, but we are also providing a better quality of life to the patient as they are less exposed to the risks of major cardiac intervention and anaesthetics."
Tarricone goes on to explain that innovation is benefiting the entire economic system as technologies, approaches and procedures improve and allow increasing opportunities for patients to get back home earlier and get back to their job faster. However, despite technological innovation being crucial to a speedier recovery for patients, there is no doubt that it has recently been tainted with a bad reputation: innovation has been deemed to be at the root of the recent escalation in healthcare costs. Tarricone, however, completely disagrees that innovation is behind rising finances. She points to three studies that were published last year that prove that the rise in healthcare expenditure is due to personnel and other costs as opposed to innovation.
Recent data from Bocconi University that is yet to be published, for example, states that of all the expenditure in Italian hospitals over the last decade - the costs for medical technology and for innovation in general in the field of medical technology - has actually decreased while other cost components such as pharmaceuticals and other healthcare services have increased. "I would like to see the evidence demonstrating that technological innovation is at the root of escalating costs," says Tarricone. "Of course this doesn't mean that innovation hasn't contributed at all to the increase in costs, simply that it is not the most important factor. Obviously technological innovation contributes to higher expenditures, but today - simply because we have the opportunity of treating of making a better diagnosis than in the past. Think of the screening programmes, for vaccinations or genetic tests that weren't available 10-15 years ago. We didn't have the opportunity to make genetic tests helping clinicians target their medication in such a precise way."
Going on to give an example, Tarricone explains that until 2007, the only way to treat patients with severe cardiac problems was by implanting heart valves, which actually translated into a high percentage unable to go through with the procedure because it was too risky. Over the last two years several medical device companies have developed innovative ways to treat these patients and the risk of surgical intervention has been decreased dramatically translating into more eligible patients who go on to survive at least five years longer than in the past. "Surely cost shouldn't even come into this - we are not delivering these new systems or procedures because they are more costly than in the past - although obviously they are - but for the benefits they bring. There are incremental costs, but we should compare these against the incremental benefits in terms of a longer and healthier life of patients," says Tarricone.
And potential cost increases and not the only challenge facing the medical devices sector, the biggest challenge, claims Tarricone, is the very deep lack of knowledge and understanding of the differences between the devices and other technologies, particularly pharmaceuticals. Over the last decade pharmaceuticals have come under heavy regulation from both local governments and international organisations, such as the European Commission. A similar trend has developed as those organisations attempt to regulate the medical devices sector. However, the challenge is that the same individuals who are used to regulating, managing and controlling access of the pharmaceutical industry are looking to use the same principles and methods to regulate access to medical devices. "I can envisage a huge danger in this," warns Tarricone, "there are deep differences in the way medical devices are developed compared to the pharmaceutical industry is managed."
She goes on to explain that the medical device industry is extremely fragmented with around 80 percent of the companies operating in it being SMBs, compared to the pharmaceutical industry, which has a high concentration of super companies used to operating around the world. "There are huge differences in terms of R&D, competitiveness and the lifecycle of medical devices in the two industries," explains Tarricone. "When you have a new molecule for example, normally it will be present for at least 15-20 years until a new one replaces it. A medical device will usually be obsolete after around 18 months."
If policy makers at all levels still fail to understand the key differences between these two industries. There is a risk that the medical devices sector will be regulated with pharmaceutical rules, killing the competitiveness and innovativeness of the sector, says Tarricone. "This translates into a huge responsibility for the EHTI - we need to unveil these differences from a scientific perspective through evidence demonstrating the differences and arguing the case for alternative policies and regulations to the policy makers."
And while policy decision will continue to impact the medical devices industry for some time, there is another challenge on the horizon, namely the aftershocks of the economic downturn. While the medical technology sector has not been directly or heavily affected by the worldwide recession, there has been an impact on other sectors of the industry, such as for instance, diagnostics and preventive medicine. Tarricone says that screening programmes for breast cancer, for example, has seen a heavier impact as patients have started delaying the services because in many countries these services require co-payment from the patient. It seems that patients have started thinking twice of the necessity of performing some diagnostic tests and we have the data proving this."
Tarricone goes on to explain that the economic downturn will probably have a bigger influence in the long run, as the impact is felt by the companies producing these devices. The risk here, of course, is that long-term this downturn has the potential to kill the most dynamic sectors of these companies, which is R&D. This is unfortunate considering that Tarricone believes the big potential for the medical technology industry in Europe is all about R&D and the emergence of breakthrough innovations. "You have to consider that a lot of breakthrough innovations have been developed in Europe but marketed in the US - and that's our weakness. European systems are not very friendly in terms of facilitating, stimulating and welcoming innovativeness in companies within Europe," she says, going on to explain that Europe is wasting a lot of potential in terms of economic return on investment and positioning the region on a higher competitive level with the US and Asia. "I really would like to see many countries, including Italy, become more aware of what they are missing in terms of opportunities and understand the advantages that could be delivered in keeping investment in Europe."
And focusing on opportunity, Tarricone believes that the next three years will be important for the EHTI's research agenda, firstly to understand the impact of healthcare policies onto healthcare systems and the uptake diffusion of medical devices in different European countries, and ultimately to understand whether the different diffusion of medical devices in European countries is affecting the equitable access of patients. Tarricone goes on to stress her previous point that while researchers have always been asked to provide evidence of their findings, policymakers have never been asked to supply the evidence of their work. "Policymakers are struggling with healthcare expenditures and while they are right to understand and try and implement different types of cost containment policies - from procurement to reimbursement - none of them have been called to prove the impact of these policies onto the efficiency of the systems, the effectiveness of the systems and , more importantly, the equity of the systems.
"In modern-based societies health policies must be evidence-based. We are the first European institute that is dealing with this specific field of research in a very structured way, specifically on medical devices, and I think that the output of all this research will be interesting, and in many cases surprising, for many stakeholders." And with Tarricone so determined in her mission to improve these systems I have no doubt that she will succeed.
Along with Michael Drummond at the Centre for Health Economics and Adrian Griffin, Vice President of Strategic Affairs at LifeScan EMEA, Rosanna Tarricone recently released a report, Economic Evaluation For Devices and Drugs, arguing that the economic evaluation of devices raises additional challenges that international guidelines, written with pharmaceuticals in mind, frequently overlook. In the report the authors stress the six reasons why devices are different:
"The first reason is the rather obvious one that many devices are diagnostic. This raises two challenges, the first being that the value of improved diagnosis cannot be separated from the value of the improvement in patient outcome resulting from the subsequent treatment. This problem is not insurmountable, but makes the economic evaluation of some devices much more complicated.
"The second way in which devices are different is in the difficulties in undertaking randomised controlled trials (RCTs). By the time a drug reaches Phase III of clinical development, its dosage and route of administration will typically be set. Therefore, whilst it is well known that the efficacy demonstrated in RCTs does not always translate into practice, the results from trials provide a reasonable basis for conducting an economic evaluation.
"The third reason why devices are different is that the efficacy of a device depends not only on the device itself, but how it is used. Again, this is particularly true for devices used in surgery, as the clinical outcome can depend on the skill or experience of the surgeon. On the other hand, drugs are a classic case of an 'embodied technology'. That is, as long as the drug is given in the right dose, the efficacy relates solely to the drug itself, not the person administering it.
The need to adjust for user characteristics further complicates the design of RCTs and user performance is a potential confounder in the analysis of observational data on the efficacy of devices. Indeed it might be preferable to undertake more multicenter studies than is typical for all but the large Phase III studies of drugs. Whether these studies are randomized or not, the statistical analysis would be more complicated, since it would need to allow for treatment center effects. Taken in conjunction with the points made above, it is clear that the design and analysis of clinical studies of devices can be more challenging than comparable studies of drugs.
"The fourth way in which devices are different from drugs is that implementation of a new therapy involving a device can have wider economic implications. For example, there may be a need for training, or more fundamentally, the local organizational context may be important for harnessing the improved cost-effectiveness of a device.
"The fifth way in which devices are different from drugs is that equivalent clinical evidence may not be available for all products, making comparisons difficult. Those undertaking economic evaluations are often quick to 'genericise' their recommendations, unless there is specific evidence to differentiate products. This position is possibly driven from experience with pharmaceuticals, where there is clinical evidence on each product and where assumptions about class effects are common, unless there is specific head-to-head trial evidence to the contrary. In addition, there are now acceptable methods for making indirect, or mixed treatment comparisons, providing sufficient clinical data are available (Ades et al., 2006).
"The sixth way in which devices are different from drugs is that prices are much more likely to change over time, because of the market entry of new products, or because of the ways in which procurement takes place in many healthcare systems. On the other hand, in many countries, once the price of a drug is negotiated, it is more likely to stay at or near that level until the patent expires."
Extract from: Economic Evaluation For Devices and Drugs by Michael Drummond, Adrian Griffin and Rosanna Tarricone.
An analysis performed by Dr Christian Elsner, Center for Healthcare Management, Leipzig Graduate School of Management on behalf of Eucomed CRM Telemonitoring WG found the following: