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Device prices plunge as hospitals pay less to fix hearts, hips

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Prices paid in the United States for medical devices, including those that regulate the heart’s rhythm and replacements for hips and knees, have plunged as much as one-third since 2007 as hospitals clamped down on spending.

The average inflation-adjusted prices for seven of the largest categories of medical devices fell through 2011, according to a study released Monday from the Advanced Medical Technology Association.

Drug-coated stents used to prop open arteries sold by Boston Scientific Corp., Abbott Laboratories and Medtronic Inc. had a 34-percent decline. Artificial knees from Johnson & Johnson, Indiana-based Zimmer Holdings Inc. and Stryker Corp. fell the least at 17 percent.

The results suggest medical technology isn’t responsible for driving up health-care costs in the U.S., where prices for devices have risen at less than half the pace of goods in the U.S. economy for two decades, said Stephen Ubl, chief executive officer of the industry group known as AdvaMed. The open market works for medical devices, he said.

“It’s an incredible value story to talk about price declines against the backdrop of public health gains,” Ubl said in a telephone interview. “What else in health care can you say is going down in terms of price? At least in this part of health care, good old fashioned competition works well.”

The competition can be fierce. J&J, the world’s biggest seller of health-care products, in 2011 stopped marketing drug-coated stents, an area it pioneered less than a decade earlier. The New Brunswick, N.J.-based company generated $627 million from stents in 2010 compared with $2.62 billion in 2006 before it lost share to rival products from Natick, Mass.-based Boston Scientific and Abbott Park, Ill.-based Abbott.

The pricing pressure is no surprise to medical technology investors. The Standard and Poor’s 500 Health Care Equipment & Services Index fell 11 percent from 2007 to 2011. The index has gained since then, rising 37 percent through Sept. 20, as company executives said plunging prices and demand for their devices have begun to stabilize.

The study presented at AdvaMed’s meeting in Washington, D.C., was based on pricing data gathered from almost 300 hospitals by Millennium Research Group, which tracks the industry.

Costs covered the average selling price for devices in seven categories, including pacemakers and joint implants, after taking into account discounts and rebates. The survey didn’t distinguish between more advanced products and simpler versions, nor did it take into account the number used.

Industry leaders and AdvaMed executives may use the findings to lobby for a repeal of the 2.3-percent medical device excise tax that went into effect this year to help pay for the Affordable Care Act. The tax and payment cuts for laboratory tests, imaging services and durable medical equipment, are threatening innovation and job creation in the industry, Ubl said.

The results shouldn’t dissuade investors from putting money into the industry, the group said. Increasing demand for devices from aging populations worldwide, and the rising ability of people in emerging markets to pay for the products, bodes well for the future of the industry, said David Nexon, AdvaMed’s senior executive vice president. The dynamics of the industry will fuel innovation, he said.

“There is tremendous pressure to make money by producing a better product so people are willing to pay for it,” he said. “In this industry, that advantage doesn’t last very long, which keeps pricing very low. It’s been historically a tremendous engine to improve quality of care.”

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  • Cheaper Overseas
    All of the medical devices sold and used in the United States can be obtained in state-of-the-art foreign hospitals that charge 60-70% less for the devices and the surgical procedure. While most people are reluctant to travel abroad for elective surgery, the ones who have elected to travel overseas for hip and/or knee replacements are pleased with outcomes, prices, and overall savings. I continue to wonder why US Hospitals bill at rates three to four times higher than foreign medical centers that also rate as Centers of Excellence.
  • Mfg Price Declines Does Not Mean Lower Consumer Prices
    My wife had a medical device installed ... cost for the physician, facility and device was $2100. I asked them when the last time they raised prices and was informed it had been years. I asked for the medical device manufacturer's part number and in checking found it could be acquired for $209. Based on this story it appears that device has gone down in price, meaning that the doctor/facility portion of the pie has increased. BTW, the 2.3% excise tax on $209 would be $4.81 ... I see no reason to repeal the MDET ... especially, since the story acknowledges that "Costs covered the average selling price for devices in seven categories, including pacemakers and joint implants, after taking into account discounts and rebates." I did not get a rebate ... if the 2.3% MDET is so harsh, just change the rebate program.
  • Bloated healthcare
    Cost cutting is a good thing. And since most of the hospitals in central Indiana have laid off so many workers at Community Hospital East, St. Vincent, St. Francis, IU and so on they are leaner and meaner, right? Right!!!! Just understaffed!!!
  • Clear as mud
    "The results suggest medical technology isn’t responsible for driving up health-care costs in the U.S., where prices for devices have risen at less than half the pace of goods in the U.S. economy". I'm not sure you could determine this, as price decreases might include volume discounts or rebates, or money for co-marketing campaigns with hospitals. In any event, I believe folks in IBJ forums and elsewhere make it clear any price decreases could not be deduced from hospital price lists, or billing statements.
  • Damn you Obamacare!
    How dare force prices down by pushing price transparency and fostering competition...

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