Innovation needs cost benefit treatment
“Technological change is the predominant reason for medical cost increases in the past half-century,” says David Cutler of Harvard University, an expert in the field. “Studies of aggregate medical spending, and of particular medical conditions, show that at least half of all cost growth is a result of increased use of technology.”
For Mark Sculpher, professor of health economics at York University, what counts is cost-effectiveness. “It may be appropriate to devote considerable additional resources to new technology if it is good value,” he says.
Joe Hogan, head of GE Healthcare, one of the world’s leading diagnostics and imaging companies, says: “I scratch my head when people say technology adds costs. It’s not the way economics works. In what other industry in the world has it not increased efficacy and efficiency?”
He highlights the surge in the power of diagnostic devices and the extraordinary accompanying drop in costs of scanners in recent years. “There will be an increase in capacity and an unbelievable decrease in costs,” he says.
That view is shared by a group frequently demonised by those who excoriate rising healthcare costs: drug manufacturers. Asked how he responds to fears that the medicines bill will rise too high, Chris Brinsmead, president of the Association of the British Pharmaceutical Industry, the UK trade body, says bluntly: “The evidence points otherwise.”
While the prices of some new drugs – notably for cancer and certain extremely rare diseases – have risen sharply in recent years, he says that the overall proportion of the UK National Health Service budget spent on medicines is not only modest, at less than 10 per cent, but has declined.
That is partly explained by generic competition once patents expire for drugs such as proton pump inhibitors, which have all but eliminated expensive ulcer surgery, and statins, which have helped ease cardiovascular problems.
Most academic attempts to measure cost-effectiveness of new technology conclude that it more than pays for its keep. Last year, for instance, Prof Cutler published an extensive study of “revascularisation” (bypass surgery or angioplasty) to restore blood flow after a heart attack. Analysing 17 years of data, he concluded that the procedure was associated with more than a year of extra life expectancy at a cost of about £20,000 – making it “highly cost-effective”.
But it is important to use technology sparingly rather than seeing it as a panacea that can be indiscriminately applied to all patients. The majority of technology is cost-effective and valuable, according to Paul Ginsburg, president of the Centre for Studying Health System Change in Washington. “But the benefits are diminished when the technology is applied beyond those patients most likely to benefit from it,” he says. “We have a tendency to apply new technologies to too many people.”
For example, “arthroscopic”, keyhole operations on the knee were a boon for the original patients, who had a clear-cut requirement for such surgery, but it was extended too far, to people who did not really need it.
In the same way, the painkiller Vioxx undoubtedly benefited many patients with arthritis but Merck withdrew it from the market in 2004 after side-effects emerged when it was used by a far larger number of patients to whom, critics argued, it should never have been marketed.
Booz Allen Hamilton, a consultancy, found “substantial evidence that overutilisation and misuse of technology is leading to spending that exceeds its value for patients”.
If the technology is available, there is a propensity to use it as extensively as possible. Diagnostic imaging, a £50bn business, is a good example of increases in spending being “driven to a large extent by the growth in the number of machines installed in hospitals, as well as in doctors’ offices and at imaging centres”, the consultants said.
The result, according to Booz Allen, is a strong incentive for doctors to prescribe unnecessary scans that provide little help in getting closer to a diagnosis.
“Healthcare is littered with examples of technologies that have not delivered on their initial promise,” says Prof Sculpher. Even in the more restrained UK environment, there are doubts that imaging technology is being used cost-effectively.
Health systems throughout the world are facing up to the need for better evaluation of the costs and benefits of new technologies before they are introduced on a large scale.
“There is great potential in developing a lot more information about effectiveness,” says Dr Ginsburg.