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(HealthNewsDigest.com) – Innovation is the engine that drives human progress. But like any engine, it can be brought to a rapid halt by cutting off either fuel or spark or by mixing sand with the oil needed to lubricate the engine. Having had a career exclusively dedicated to innovation, more specifically medical innovation, and having developed a number of cardiovascular devices, it is gratifying to know that many of these developments have proven to be life-saving for countless numbers of people. However, as CEO, I also run a business and in so doing seek to understand, on a daily basis, the core competencies of my business and how to execute on these competencies to assure the company’s success. This is not always easy. Clearly, the US is not the lowest-cost provider, due in large part to our higher labor costs and also to well intended but often times misguided regulatory constraints. However, even with those impediments, the US has retained its leadership in innovation but that position will not likely be held if innovators are restricted by unnecessary encumbrances which disincentives rather than encourages innovation.
In the storm of controversy surrounding the current administration’s attempts to enact legislation designed to try and cut through the “Gordian Knot” of healthcare, medical innovation must not be shoved aside nor left without a voice. To the contrary, it is something to which we must all pay heed. To do otherwise, we will do at our own peril. There are sound reasons, certainly first among those reasons is that innovation, or the lack thereof, will dramatically impact both the availability and quality of future healthcare. Equally important is the fact that innovation is the indicator of things to come in other areas of our industry. Obviously, given my responsibility of leading an emerging medical technology company, I pay close attention to industry trends and sense that a “Perfect Storm” may be brewing, one which overwhelms and sinks innovative companies that may be charting courses to yet undiscovered lands of opportunity to improved health for millions of people in the future.
Innovation is extremely important to the United States. This is something that the founding fathers had the prescience and foresight to appreciate. They knew that innovation would fuel growth and development and made incentivized innovation, in the form of patents and the protection they provide, an integral part of the US Constitution. We at Minnow Medical share in those beliefs and have made innovation the cornerstone of our company. We are not unique, but we are different. Innovators are a special breed of risk takers. They are the ones who are just crazy enough to be willing to try and shape the future into something better rather than to simply wait to see what develops. They are not always right and not always successful, but they are always willing to learn from mistakes and make improvements. It is not easy but innovators are motivated by challenge. The nation owes a debt of gratitude to those special few who are willing to try to see beyond the horizon to what might be.
However vibrant innovation may be, it is also delicate. It can be easily stifled or undercut by small, seemingly insignificant actions. Personal experience has taught me that even subtle changes in action or attitude can have a dramatic effect on creativity. At Minnow Medical we appreciate this and make a conscious effort to nurture the spirit of innovation with tangible rewards to encourage our inventors to continue to look for ways to improve and advance the development of our products. However, we have also seen that even small, seemingly insignificant impediments to the process can cause invention disclosures to drop dramatically. With this experience in mind, and when I see changes in the US policies that effect innovation, I give my full attention to the matter.
With that in mind, let’s take a look at three important facts: investment climate, political climate and an aging population.
First, the investment climate is decidedly poor at present. Risk capital is hard to get today and this will likely continue for the immediate future. Risk capital is the life blood of innovation and yet it is being discouraged by the current discussion of the elimination of capital gains, higher individual tax rates and even , if it can be believed, a medical industry tax. Taxes admittedly serve a societal role but as tax rates climb the real return is diminished in the long run. Clearly one effect on the medical industry of such a tax will be higher device costs, which is exactly the opposite of the intended effect. One should not have to be asked nor need to be prodded to remember that an individual investor is free to place their money anywhere they choose on a global basis. Even though we clearly favor the idea of supporting homeland technology developments and believe in the US’ technological prowess, the US is still but one option among many in today’s highly competitive global economy.
The second point is the current political climate, which seems to be headed toward socialized medicine. One is challenged to find a single example of the successful implementation of socialized medicine. The two examples trotted out for show most often are Canada and United Kingdom . These systems are far from flawless and their peoples are among the last to get access to new technologies and therapies (I know from experience as a device manufacturer) because in those counties, the profit margin is, unfortunately, the smallest due to the high cost of doing business. We in the medical device community develop solutions to improve or restore health in large part because we desire to help others but it should not be considered an act of charity. We understand, as fellow human beings, the importance and value of good health, and realize that we may become beneficiaries of our own efforts at some point in the future as well. Oscar Wild once described a cynic as one who “knows the price of everything and the value of nothing”. We in the medical device development community are in no way cynics. We understand the value but we are confronted too often by those whose only concern is price.
Combined with this dour investment climate, we in development must also contend with uncertainty in the FDA which makes device commercialization unpredictable. Personally, I happen to think the FDA has done an outstanding job of encouraging innovation and development while minimizing risk to the consumer. Certainly the US has a slower approval process than the European Union but is not intolerable given the more litigious nature of our society. Still, imagine if the time to market of new products in the US doubled. The thought of getting 10 year old healthcare technology in the US makes no sense to a reasonable person. Equally important, it is not difficult to predict what would happen to investment capital if it were to take 10 or more years to get a return (if any). What reasonable investor would place a bet under those onerous circumstances?
Presently, there is a strong push to demonstrate cost-effectiveness. In theory, this idea makes terrific sense and it should be a factor in reimbursement. However in reality, if such additional studies are required up front, that is before commercialization, yet another development cost is added on. Combine that to the expensive cost of risk capital and the unpredictability of the FDA and it is inevitable that this increased cost will have to be passed through to the consumer. Once again, this is the exact opposite of the intended outcome.
The third and most undeniable point is that the US population is rapidly aging. US Census data shows a doubling of the population over age 55 between the years 2000 to 2030. If we simply do nothing, our healthcare costs will double. Or viewed another way, if overall cost remains the same there will actually be a 50% reduction in per-patient cost. With history as a guide, it is not difficult to anticipate that healthcare services utilization will actually increase as we get older, thus this will not likely be a doubling, but more likely a quadrupling of costs. It seems abundantly evident that we are entering an era of difficult choices, one that, in that future, if we continue on the current course, may no longer involve the “best available technology” but rather cold financial decisions which analyze the relative cost of actively sustaining a life or letting nature and disease take its own course and the “brave new world” will have arrived.
Are there possible solutions? While we are in a difficult situation, that future has not yet arrived and we still have time to act intelligently and responsibly. Most business operators will be quick to say that there are seemingly never enough resources to do everything they need and want to do. We in the US have had a vibrant and growing economy with readily available capital for so long that we have forgotten the practice of proper planning and budgeting. In that regard we have too often mirrored the actions of our government.
One big easy fix would be nice, but there is no such solution. However, there are smaller ones that we can be working on. First among them is tort reform. This is absolutely necessary. Presently, about 10% of healthcare dollars are dedicated to “defensive medicine”. With all the pressure to reduce medical costs, it seems unreasonable that tort reform isn’t given an equally high priority. This is low hanging fruit. Imagine saving 10% with the stroke of a pen. Unfortunately, if this is affected soon, we will likely see key service providers – including physicians – walk away from their practices in large numbers, as their incomes are slashed from increasing malpractice insurance payments and litigation costs. In contrast, the European Union’s system seems to work pretty well. They specify payouts depending on disability or injury. Is it perfect? Will it always be fair? Perhaps not, but neither is life. But it at least caps the astronomical litigation taking place today.
Another simple fix would be accessible and standardized patient information. This could easily save another 10%. It is unknown how many tests are duplicated by a hospital because they didn’t know that the test was already performed, or how often a medication has been prescribed. We have been taking small, halting, even timorous steps forward because of the complexity of entering into the system, but what we really need to do is make bold leaps. Fortunately, this appears to be an area of focus for the current administration. However, we must stay true to the goal of accessible and standardized patient information throughout our lives, not just at time of treatment, for this to be truly beneficial in the long run.
In summary, I am both confident and hopeful that American ingenuity will provide the solutions to the big challenges we have ahead of us. My greatest concern is whether the necessary changes in the system will happen fast enough for the US to remain solvent both in the near and long terms.
I hope so.
Tom Steinke has been developing cardiovascular devices for 25 years. He currently is CEO and President of Minnow Medical, Inc., developing an improved treatment for atherosclerosis that is faster, cheaper, and better, so he is living the current healthcare environment daily.
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