Connections : Join the Conversation - The blog of Biomet CEO Jeffrey R. Binder

Conjuring demons in the healthcare debate

It is now obvious to any dispassionate observer that a concerted effort to demonize medical device manufacturers is underway. A recent example of this is an opinion piece disguised as analysis by Barry Meier in the November 5, 2009 edition of The New York Times, which is available here:
http://www.nytimes.com/2009/11/05/business/05device.html?_r=1

The article discusses, among other things, medical devices and device registries. Its premise is that surgeons who use devices choose them capriciously because they have no data with which to compare device performance. Meier suggests that device registries could help provide the necessary data, but the medical device industry has resisted efforts to develop registries in order to preserve profit margins.

Meier's article is breathtaking in its factual sloppiness and lack of balance. Perhaps most ironically, his article criticizing the lack of data in orthopedics relies on ... drum roll please...virtually no data!

What follows is a point-by-point response to statements made in that article.
The headline kicks off Meier's parade of distortions: "Costs surge for medical devices, but benefits are opaque." Neither part of that sentence is true.

Statement #1: Costs surge for medical devices

These are the facts regarding medical device prices:

• Between 1989 and 2006, the average annual price increase for medical devices was 1.1% per year. During this same period, the Medical Services Consumer Price Index increased 5.2% per year, and the Consumer Price Index increased 2.9% per year.¹ In other words, the cost of medical devices has grown at an annual rate below that of general inflation.
• Since 1989, medical devices have comprised a relatively small proportion of healthcare spending—between 5.4% and 6.2%.¹
• From 1992-2007, implant cost per procedure for hip and knee replacement surgery increased at an average annual rate of 3.3%, driven in significant measure by surgeons electing higher demand technology to address an increasingly younger patient population.²
• In 1992, 54% of total hip implants were classified as "high demand." In 2007, surgeons chose high demand hips for 85% of surgeries.²
• From 2007-2008, hip/knee implant cost per procedure declined .4%.³
• The American Hospital Association does not even list medical devices as a significant source of spending growth. Devices are lumped into the "other" category.⁴

Statement #2: Benefits are opaque

For the record, we lift the opacity below.

• Duke University studies have reported significant reductions in disability and significant improvements in function following hip and knee replacement surgery.^5,6
• Mobasheri et al. have shown that nearly all total hip replacement patients return to work, and nearly half of those who did not work preoperatively regain employment.⁷
• Ries, et al., reported that patients who receive hip and knee replacements improve their cardiovascular fitness, and that untreated patients showed continued deterioration in cardiovascular fitness.^8,9
• Numerous studies have shown 92-98% survivorship for hip and knee replacement at 20+ years.^10-12
• Elderly patients undergoing lumbar spine surgery for spinal stenosis have greater life expectancy compared to the corresponding general population.¹³
• Surgery for lumbar spinal stenosis and lumbar disk herniation delivers significantly greater improvement in function and pain relief than non-surgical treatment.^14,15

Statement #3: Doctors and patients have no way of knowing which devices work

This statement demonstrates Meier's lack of knowledge of the efforts of independent researchers to publish clinical performance data.

A PubMed search of papers with "results" and "arthroplasty" in the title produced 510 published papers between 1999 and 2009. We found these papers by conducting a relatively rudimentary search of a publicly available database. The results do not include the numerous poster and scientific exhibits and podium presentations that inform surgeons about the clinical outcomes of devices and techniques. Meier's statement reveals a lack of effort expended in researching his article.

Statement #4: Outlays on implanted devices are rising faster than the cost of drugs

Meier actually provides one of his rare citations for this statement. The McKinsey group does in fact state that drug expenditures grew at a slower rate than "the six highest cost medical devices." That statement is misleading, however, because McKinsey did not look at individual devices, but rather categories of devices. The reported expenditure increases are driven by greater patient volume and by surgeons electing more advanced and thus more expensive technology—not just prices. The McKinsey comparison includes all drugs, including generics, but does not include all devices—only the most advanced and expensive device categories.¹⁶ This is hardly an equitable comparison.

Statement #5: Implant decisions can be "skewed" by a doctor's relationship to a company

Outside observers frequently underestimate the importance of orthopedic companies' day-to-day contribution to the delivery of orthopedic care. Orthopedic representatives are more than simply sales people—they work with hospital staff to ensure that the proper inventory and instruments are on hand and to provide valuable expertise to help surgeries progress smoothly. Additionally, they provide essential in-service training to hospital staff. Because O.R. teams may change from one surgery to the next, it's often the case that the orthopedic representative and the surgeon are the individuals in the O.R. most familiar with the implant system being used.

It is important to surgeons which company and which representative provide implants. Surgeons have every right to consider the quality of service, reliability, responsiveness, scientific integrity, clinical performance, and any other factor—including price—when deciding which implant to use. That's their right and obligation as patient advocates. Surgeons also have the right to resist switching from implant systems with which they are familiar and achieve good results simply because there are cheaper alternatives available.

We address below the suggestion that relationships with companies can improperly influence surgeons' implant choice.

Statement #6: In an effort to slow federal spending, the Senate proposes raising taxes

Meier's statement refers to the medical device excise tax in the Senate health reform bill. It's interesting that he believes that the purpose of increasing taxes is to reduce government spending.

Statement #7: "Many doctors are unlikely to shop around [for devices] because they have been trained on a particular maker's devices or because they have financial ties to the company."

Apparently it is inconceivable to Meier that surgeons choose devices that they believe are best for their patients. Training is an important part of the implant decision process. Indeed, training is essential to the proper use of implant technology. Would Meier have surgeons use implants they are NOT trained to use?

As far as the impact of financial relationships between surgeons and companies, the U.S. Attorney's Office fully vetted this issue in its investigation of the orthopedic industry. It stated its belief that financial relationships with surgeons did not adversely affect patient outcomes, and that the vast majority of these relationships are legitimate.^{22, 23} Since that time, all companies investigated have implemented improved compliance programs and have been released from Deferred Prosecution Agreements or Non-Prosecution Agreements.

Financial relationships with surgeons are essential to ongoing innovation and product improvement. For example, the industry relies on surgeons to populate clinical trials and provide input on instrument and implant design.

Additionally, surgeons contribute valuable intellectual property.
Physicians accounted for 20% of medical device patents filed in the U.S. between 1990 and 1996.¹⁷ Orthopedic surgeons filed more patents than any other specialty.¹⁷

The mere fact of a financial relationship does not mean that surgeons are not choosing what they believe is best for each patient. Characteristically, Meier provides no evidence for his assertions.

Statement #8: Hospitals are hampered in their ability to negotiate prices with implant manufacturers due to confidentiality agreements.

The article states that, because of confidentiality agreements with manufacturers, hospitals have no information on what they should pay for implants. This statement is inaccurate. Every year, Orthopedic Network News publishes average selling prices for orthopedic implants. A subscription costs about $250.

Manufacturers do not force hospitals to sign confidentiality agreements. Hospitals willingly do so, because the agreements help them negotiate better prices. In any event, pricing information tends to be highly asymmetrical in favor of the hospitals—they know far more about manufacturers' selling prices than manufacturers know about prices that hospitals pay to other vendors.

Manufacturers are willing to negotiate prices (see #2 above); however, if a manufacturer believes that public disclosure of a discount to one hospital will result in pressure to match that price in all hospitals, it will be less willing to reduce prices. Eliminating confidentiality agreements will remove an effective tool hospitals use to negotiate favorable prices.

Statement #9: The medical device industry has not embraced the use of device registries

This is simply false in the case of the orthopedic industry, which has actively supported the American Academy of Orthopedic Surgeons (AAOS) efforts to develop a total joint registry. Biomet has taken a leadership position among manufacturers in this regard. The industry has also agreed to contribute funding to launch the registry. Meier sneers at the industry's initial contribution of $500,000, calling it a "pittance." He presumes to know better than AAOS what the appropriate amount of funding should be, and further implies that the $500,000 is ALL that industry will contribute. Tellingly, not a single representative of AAOS or the orthopedic industry was quoted in his article.

Statement #10: Because the U.S. has no total joint replacement registry, the U.S. total joint revision rate is twice as high as countries like Australia that have registries.

Another false statement. The U.S. total joint revision burden (the proportion of revision procedures expressed as a percentage of primary procedures) was 11.2% in 2007, the most recent available data.¹⁸ In Australia, the revision burden in 2007 was 12%.¹⁹ Indeed, the U.S. revision burden is in line with that of other countries that have registries.^18-20 It is ironic that Meier claims there is no way for doctors to gauge product performance without a registry, but is comfortable making a direct comparison without supporting data.

Statement #11: "Experts say it's naïve to expect industry to underwrite registries because it's not in industry's interest to see its products compared against those made by the competition."

To support this statement, Meier quotes one of his experts, cardiologist William Maisel, who asks, "Why would you build a better light bulb that lasts longer if it is going to reduce your profits?"

The answer is simple: to meet the expectations of our customers and their patients. We must continually improve our products' performance to stay in business. Dr. Maisel's comment shows a lack of understanding of how competitive markets work. Profits are determined by what customers are willing to pay based on the differentiated value of the product. In fact, devices deliver improved value today as compared with years past. The total joint revision burden in the U.S. has improved significantly since 1997, decreasing from 14.2% to 11.2%, even as the proportion of younger, more demanding patients receiving total joints has increased.¹⁸

In fact, we welcome a total joint registry because it will show the tremendous success that joint replacement delivers over the long term. In Biomet's case, our products are supported by published long-term results that show excellent survivorship. We are happy to compare our results with those of our competitors.

Conclusion: Agenda-driven distortions debase the healthcare discussion

One influential U.S. senator told me in a closed-door meeting that "a lot of people up here think you're the bad guys." I objected strongly to that statement. Over 7,000 Biomet team members go to work every day with the mission of improving patients' lives.. Every year, nearly 1 million total joint patients are restored to productive living. Without the innovations made possible by thriving companies, these patients would face ongoing disability and the resultant costs of treating those disabilities in a temporizing fashion.

It seems that the big problem that Meier and others have with the medical device industry is its profitability—next to his article was a chart showing the profitability of various device companies.

Orthopedic companies are profitable, and there is no reason to apologize for that. From a U.S. public policy perspective, the medical technology arena is one of the last remaining successful American manufacturing sectors, with a trade surplus of $5.4 billion in 2007.²¹ Those profits attract investments and generate cash that allow us to build facilities, create jobs, and develop longer-lasting implants and minimally-invasive techniques designed to reduce trauma and length of stay. Those profits also fuel research into promising technologies that may displace today's technology. Without those profits, innovation and competition in the orthopedic industry will evaporate.

Certainly, our industry is not perfect. And we are grown-ups with very thick skins. However, none of us should sit idly by as orthopedic companies and orthopedic surgeons are slandered by agenda-driven critics who do not bother to base their arguments on actual data. Distortions and misstatements debase and obfuscate the important debate regarding the future direction of healthcare in the United States.