This post will offend some of my biotech and medtech friends. Sorry.
I firmly believe that we are in the final chapters of “The Great Medical Arms Race.” And unlike the Cold War, I don’t think the United States will be the winner of this arms race. We might feel like we are winning, but in fact, we will end up losing due to the perfect storm of three unsustainable realities: healthcare cost growth, a federal budget crisis, and demographics.
Some of the advances we have made in life expectancy and quality of life due to some of these new technologies is amazing. The US healthcare system has been very good at developing innovative new technologies that improve outcomes and increase costs. Unfortunately, we are also very good at approving new technologies that just increase costs but have little or no effect on medical outcomes.
Lots of people have written about the the vast amounts that Medicare spends on end of life care. In particular, as a society, we spend too much on technology in the last few months of life and too little on basic access to primary care. We spend too much building new heart hospitals and spine surgery centers and too little on hospice care or access to preventive care. In short, we don’t “let go” well as Atul Gawande wrote so eloquently last week in the New Yorker.
I think everyone can agree that despite having the most access to technologically advanced therapies, the US taxpayer is not getting any bang for the buck. A recent study showed that there is little correlation between reduced mortality and increased spending on several major health conditions.
Despite spending 17% of GDP on healthcare, the outcomes are dismal. According to the WHO, amongst developed nations, the US is
-37th in overall health
-34th in life expectancy
-28th in infant mortality
-30th in obesity
In the world of medical technology, one of my favorite examples of questionable bang for the buck is colonoscopy.
-There are 4 million colonoscopies per year in the US. Many adults who need colonoscopies still don’t get them due to fear of the procedure, lack of access to care, etc.
-Yet despite that, there is a growing $1b/yr medical device market for colonoscopes and related equipment in the US alone
-Colonoscopy is the bread-and-butter income for most of the 12,000 GI docs in the US and has aided greatly in the proliferation of GI focused ambulatory surgery centers that doctors often own a financial interest in.
-However, there exists little long term cost-effectiveness data showing that screening average asymptomatic risk populations with colonoscopy every 3 to 5 years is actually cost-effective in the long-run.
-In fact, more and more data shows that colonoscopy is being done way too often on average risk patients. High risk patients should of course be screened with colonoscopy.
-Health Affairs recently published an elegant paper postulating that lower-tech and lower cost screenings (ie, FOBT) for colonoscopy would “would result in more individuals’ getting screened, with more life-years gained”
So how about this crazy idea?
What if an lower-tech therapy or diagnostic had 80% of the effectiveness of a new technology but at 20% of the cost of the new technology? Would society favor the older technology or the newer one? Would patients and families accept that they aren’t getting the absolute latest and greatest?
A totally rational society should choose the older technology and then invest the dollars saved into other areas with higher societal needs (ie, education) and potential benefits. But I fear that without some financial incentive, most individuals would not choose the cheaper technology if given a choice.
My favorite recent paper on this topic reviewed almost 1000 cost-effectiveness studies and concluded that only 0.4% of the interventions in those papers actually reduced cost significantly while only decreasing quality a small amount.
The authors of that study also concluded that “less-expensive, lower-quality innovations are ubiquitous in other economic sectors but have not been described in health care.”
This should frustrate every one of us as consumers of healthcare. It certainly frustrates me as a investor in healthcare technology companies.
I think cost-effectiveness studies should be mandatory for US approval of new medical technologies. If you pitch me a new medical technology company, be prepared to answer what your cost-effectiveness streategy is.
Cost-effectiveness is clearly the holy grail and where healthcare is headed in this country given the two big trends of the next 25 years: massive federal and state budget constraints and inevitable demographics.
Getting this issue right is the only fighting shot the US has at not having rising healthcare costs cripple the economy. I’m really hoping the new government funded Patient Centered Outcomes Research Institute does the right thing here as well.
So, taking off my policy wonk hat and back to venture capital for a second: where is the investment theme here? Better decision support tools for doctors? Generic drugs or “generic” medical devices? Cost transparency services like Castlight?
If you can think of others, please comment below.