Paying the Price

As Congress, the Obama administration, and the American people debate the elements of forthcoming healthcare reform legislation, it seems apparent that reining in costs will be the key challenge that confronts us. And undoubtedly, that constraint will place added pressure on the Centers for Medicare and Medicaid Services to contract payment rates and defer reimbursement decisions for new medical technologies.

This represents a serious challenge, and just maybe an opportunity, for the neurotechnology device industry. At a time when the number of new therapies treating added indications is growing faster for our industry than perhaps any other segment of the medical device marketplace, we must come to grips with the fact that CMS is running out of money. No matter how promising the numerous new therapies emerging from neurotech companies are, if the prospect of Medicare reimbursement is diminished because of an overall lack of funds, it will be much harder for startups to achieve commercial success.

Perhaps the time has come for the nation to consider other payment models for medical technologies. One such model, the concept of pay for performance introduced by former CMS Administrator Mark McClellan, would pay healthcare firms a percentage of the savings realized by the government. This model could be a boon to manufacturers of obesity stimulation devices such as Enteromedics, IntraPace, and Leptos since the indirect healthcare costs associated with America’s obesity epidemic are overwhelming and largely unnecessary.

Of course, if eliminating waste and inefficiency are goals of the administration, the question might be asked why we need two federal bureaucracies, the FDA and CMS, to oversee and approve new medical devices. If medical technology firms only needed to get approval from one federal agency, as is the case with the Ministry of Health and Welfare in Japan, the cost of developing new therapies could be significantly reduced.

While many conservatives shudder at the thought of a powerful government agency making economic decisions, that is exactly the model that exists within the defense industry, without too much complaint from shareholders of Boeing or General Dynamics. If the Pentagon can issue contracts for manufacturers to build and deliver weapon systems to the government, why shouldn’t HHS be able to do the same for a critical medical technology that benefits the nation as a whole? There have been efforts such as DARPA’s advanced prosthetics program, but we think more initiatives like this from the government will help build new companies while expediting the introduction of cost-saving medical technologies.

While it’s too early to predict how healthcare reform will impact the neurotechnology industry, it’s clear that the time has come to at least contemplate alternative means of paying for our products.

James Cavuoto
Editor and Publisher