The Role of the Medical Device Sector in Transforming American Healthcare June 9, 2004 Blair Childs

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The Role of the Medical Device Sector in
Transforming American Healthcare June 9, 2004
Blair ChildsExecutive Vice President,
Strategic Planning Implementation
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AdvaMed Facts

• Founded in 1974 as the Health Industry
  Manufacturers Association (HIMA)
• Now grown to 1,200 member companies and
  subsidiaries (devices, diagnostics, HIS)
• Members manufacture 90 of the medical
  technologies sold in the US 50 sold overseas
• 17 million budget, 60 staff with global
  expertise
• 45 - member Board of Directors

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Our Goals

• Rapid approval by FDA
• Adequate payment
• Speedy coverage determinations here and abroad
• Access to international markets
• Communicate the Value of Medical Technology

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Todays Presentation

• How Medical Technology is Transforming Healthcare
• Why the future for Innovation has never been
  brighter
• Overcoming the Challenge to Innovation

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What is Medical Technology?

• Devices
• Diagnostics
• Health information systems
• Not
• Drugs
• Medical procedures

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Focus on the Patient But clear economic value as
well
Diagnostic Imaging
Lab Tests
no exploratory surgery, less costly treatment
Preventing disease
Lasers
Productivity
quick recovery
Patient Care
Artificial joints
independence
Health System Efficiency
Minimally invasive surgery
faster return to work
Cardiovascular
shifting care to less expensive settings
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Key Industry Facts

• Short product life-cycles (2/3rds of sales from
  technologies lt 2 years old)
• Sometimes high up front costs, long-term value
• Highly competitive Prices decline over time
• Few stand-alone breakthroughs
• Lengthy time to market, high RD costs
• Small companies big breakthroughs 90 of
  industry have 1-100 employees

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A Technologys EvolutionThe ICD Example
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A Technologys Evolution Spinal Fusion Surgery
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A Technologys Evolution Total Joint Replacement
Cost data based on Medicare charges (include
outliers). Total charges calculated assuming a
50 cost to charge ratio and adjusted for
inflation. Today values are 2002 data.
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Transformative Impact of Medical Technology

• Faster recovery
• Faster, more accurate diagnosis
• Improved provider productivity
• Improved job productivity
• Increased societal wealth

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Faster Patient Recovery

• Earlier diagnosis and treatment
• Safer and less invasive surgeries

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Faster Recovery
Inpatient Surgeries
Outpatient Surgeries
Source The Lewin Group analysis of American
Hospital Association Survey data 1980 - 2001
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Faster, More Accurate Diagnosis Early Breast
Cancer Detection Lower Treatment Costs
Early Detection Survival Early
Detection Lower Costs
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Improving Provider Productivity
Shapiro, Shapiro, Wilcox. March 1999
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Increasing Workplace Productivity
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Putting A Focus on Value

• Value Group Collaboration
• AdvaMed
• American College of Cardiology
• American Hospital Association
• Federation of American Hospitals
• Healthcare Leadership Council
• National Pharmaceutical Council
• PhRMA

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Overall Value of Innovation, Findings

• Since 1980, per capita expenses are up 2,254,
  but
• Overall death rate is down 16
• Life expectancy from birth is up by 3.2 years
• Disability rates are down 25 for people over 65
• 56 fewer days are spent in the hospital

Health gains of 2.40 to 3.00 per dollar
invested
Value of this improvement not quantified.
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Value of Innovation
470,000 more deaths
470,000 more deaths
Where would we be in 2000 without innovations
since 1980?
2.3 million more disabled persons
2254 per capita in savings
206 million more days in hospital
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Heart AttackImprovement in Outcomes
Death Rate Due to Heart Attack (Age-adjusted,
per 100,000)

• Mortality cut nearly in half
• Death within 30 days cut from 1 in 4 to 1 in 8
• 1.10 back in value for every 1 spent in Medicare

Source www.cdc.gov/nchs
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StrokeImprovement in Outcomes
Death Rate Due to Stroke (Age-adjusted, per
100,000)

• Mortality cut by 37 percent
• Stroke-related disability after 3 months reduced
• 1.55 back in value for every 1 spent in
  Medicare

Source www.cdc.gov/nchs
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Breast CancerImprovement in Outcomes
Death Rate Due to Breast Cancer (Age-adjusted,
per 100,000)

• Mortality cut by 21 percent
• Five-year overall survival rates increased from
  76.9 to 86.6
• Risk of developing metastatic disease declined
  from 40 to 15
• 4.80 back in value for every 1 spent in
  Medicare

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Why A Bright Future?

• Increasing demand
• Building blocks of Innovation are in place
• Significant policy progress

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Increasing Demand Percent of Population Age 60
2000
Under 5.0
12.5 to 20
Source U.S. Census Bureau, 1999
5.0 to 12.4
Above 20
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Increasing Demand, Percent of Population Age 60
2025
Under 5.0
12.5 to 20
5.0 to 12.4
Above 20
Source U.S. Census Bureau, 1999
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US Discretionary Income
10,000 8,000 6,000 4,000 2,000 0
Source The Conference Board, 1999
Per Capita By Age Group
lt25 25-29 30-34 35-39 40-44 45-49 50-54
55-59 60-64 65-69 70-74 75
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Building Blocks of Innovation
Competitive Market Competitive Companies
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FDA Product Approval Accelerating

• Medical Devices User Fee and Modernization Act of
  2002
• Stemmed the staffing and resource decline in CDRH
• Clear performance goals
• Office of Combination Products
• Regulation of reuse of single use devices
• Third party inspections

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Major Reimbursement Reforms Hold Real Promise

• Medicare Modernization Act, 14 provisions
  impacting Medical Technology, valued at over 1
  billion
• New technology DRGs and add-on payments
• National Coverage deadlines
• Clinical trial coverage for breakthrough
  technologies
• Maintenance of the local coverage system
• Chronic care improvement demo
• Council for technology and Innovation
• Reforms to Accelerate Health Information
  Technology

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What Stands in the Way of Continued Progress?

• Cost pressures
• Limited health care budgets
• Increasing focus on evidence standards, coverage
  restrictions, payment levels
• Inadequate recognition of the value of innovation

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• Thank You

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