University of Minnesota
Medical Technology Evaluation
and Market Research
Department of Healthcare Management
Course: MILI/PUBH 6589
Spring Semester, 2012
Stephen T. Parente, Ph.D.$
$Carlson
School of Management, Department of Finance
Class # 1
Medical Technology Evaluation
Overview
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Why a Course in Med Tech?
Course Objectives
Med Tech Evaluation Overview
Med Tech Evaluation Clients
Logistics: Readings, Labs, Exams & WWW
Who is this course designed for?
• Future managers
– Provider
– Insurer
– Manufacturing
• Clinicians intending to develop or evaluate new medical
technologies
• Entrepreneurs seeking a skill set to identify prospective
technologies to achieve return on investment.
• Financial analysts assessing the value of new medical
innovations.
New Market Forces in Medical
Technology Development
• Emphasis on getting maximum return on
investment in healthcare.
• Double digit cost increases (again).
• New technology’s double blade sword
– It works better than status quo
– It can be more expensive than status quo
• Informed consumers demand own innovation
• Highly regulated marketplace
How Real is this Type of Research?
How Real are the Consequences of Doing (or
not) Doing Market Research?
If you were Merck of Pfizer, would you pay Ingenix
for a national study identifying health risk factors?
Who cares about Medical
Technology Evaluation?
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Fortune 500 Businesses
Venture Capitalists
Managed care & insurers
Providers
Government
Researchers
Consumers (future patients)
Why a Course in Medical
Technology Evaluation?
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New technology development has high risk.
But the payoff can be huge.
Many eyes on these analyses.
Used for:
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FDA approval
Pricing
Insurance reimbursement coverage
Medical specialization
Disease management to reign in costs
<90% Income Federal
Government
Courts
Insurers
Congress
Physicians
Main Street
Biotechnology
Big Business
99% Income
Hospitals
91-99% Income
Wouldn’t a General Marketing &
Strategy Course Do?
• Isn’t it just another application of new
product pricing exercise?
• Can’t I just set up a focus group, assess
willingness to pay, calculate a price and go.
• Aren’t there people I can just hire to do this
stuff?
No, No, Yes (but it will cost you)
• Medical technology evaluation and
pharmacoeconomics are interdisciplinary
products combining several fields:
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Molecular Biology
Pharmacy
Physics
Computer Science
Electrical Engineering
Medicine, Nursing and Allied Health
Management & finance
Risk and insurance
Economics, Epidemiology & Statistics
How Many New Product Development
Conditions are Subject to:
• National and international regulatory agencies that
demand, separate molecular, animal, human,
economic and safety analyses.
• Revenue generation dependent upon the approval
for payment demanding on a handful of firms
commanding a >16% of GDP.
• Exclusive patent time window includes a period
where more than half of the period is for research
& development.
• Constant Federal oversight for safety with a high
degree of surveillance.
Additional Marketplace Issues
• Clients (patients) without full information
about what they want to buy, why they want
it and how they will pay for it.
• Production adoption dependent upon
individual providers at the top of the social
and political spectrum able to ‘craft’
products specific to each client.
So You Want to Contract out Your
Medical Technology Assessment, Eh?
• How do you know what your buying?
• How will you know whether your consultant is
using the ‘right’ data to assess the question at
hand?
• What FDA issues will you need to consider to
avoid delay of product launch and once launched,
avoidance of a warning letter from the FDA?
• What ‘products’ do you want from the evaluation
at the end of the day?
Fundamental Aims of Course
• Know the Players in Game: Who Needs to
Sanction the Product and Who Will Provide
Revenue?
• Be Data Driven: Know how to estimate the
demand for your product.
• Make Cost/Effectiveness Drive Pricing Decisions:
If you can’t ‘trust’ your estimate of the value of
the innovation, inevitably you will have a market
position waiting to be exploiting by a competitor.
Primary Course Topics – 1
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COMPARATIVE EFFECTIVENESS
Who Demands Cost-effectiveness Studies?
Market Research with Claims Data
Estimating Costs
Estimating Effectiveness
Primary Course Topics – 2
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Insurance Payment & Reimbursement
Accounting for Time & Preferences
Anatomy of a Cost-effectiveness Study
Pricing New Products
Marketing the New Technology
Skill Set Provided by Course -1
• Identify a population to be served by a
medical technology.
• Use existing health care data to evaluate a
medical technology.
• Inventory the costs of using a new medical
technology and its alternative(s).
• Complete a meta-analysis of an emerging
medical technology.
Skill Set Provided by Course -2
• Understand the core components of a costeffectiveness evaluation.
• Complete an industry-wide ‘sponsored’
analysis of a core medical technology issue.
• Describe the strategy for medical
technology results dissemination and
marketing.
Skill Set Provided by Course -3
• Understand reimbursement systems
financing medical technology use.
• Understand the role of government and
regulatory agencies in the development and
use of new medical technologies.
The Medical Technology
Evaluation Short Course
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Know your technology/compound
Identify opportunities for economic data from a clinical trial.
Know when you need primary data.
Know how to use secondary data to approximate demand
based on disease prevalence and use of possible substitute
and complement products.
Obtain input prices and production process.
Estimate costs
Estimate outcomes and effectiveness
Build flexible economic model for publication and pricing
decisions
Disseminate findings and start again.
Meet the Medical
Technology Clients –1
• Providers: Physicians, hospitals, nurses and
allied health professionals who be your
primary customer and technology adopter.
• Manufacturers: Pharmaceutical, biotechnology
and medical device manufacturers who need
will fund clinical trials and cost-effectiveness
evaluations to develop a revenue stream for
their new innivation.
Meet the Medical
Technology Clients –2
• Insurers & health plans: Public and private
insurers who ultimately be considered the ‘purse’
you need to persuade to open based on costeffectiveness evaluations in peer-reviewed
literature.
• Government, researchers & consultants: The labor
force that reviews and creates the science of
technology assessment, often swapping roles
throughout their careers.
• Consumers: The purchaser, usually at least two to
three parties removed.
A Quick Overview of the Sector
Health Care Expenditures
• Understanding Medical Technology is
important
• Healthcare is a huge part of the economy
– In 2009, US health care expenditures were $2.6
trillion, or $8,400 per person
– Growing fast – 8.5% growth in 2006
• 2004: 7.9%
• 2002: 8.8%
– Accounts for 17.0% of GDP in 2010
– In 2000, health care was 13.3% of GDP
What Do We Spend it on?
Category
1993
2006
Hospitals
36%
31%
Physician
23%
21%
Prescription
Drugs
Health
Insurance
Admin
6%
10%
5%
7%
What Accounts for the Growth in
Health Care Expenditures?
Category
Growth Rate
Hospitals
7.0%
Physicians
5.9%
Drugs
8.5%
Health Insurance Admin
8.8%
Who Pays for Health Care?
Category
Share
Government
40%
(Medicare, Medicaid, other)
Businesses
25%
Households
31%
(premiums, Medicare taxes, out-ofpocket)
Other
4%
Health Policy under Obama
• Expansion of health insurance coverage by
subsidizing health insurance for those with
low income
• IT Investments
• Medicare payment reforms
• Comparative Effectiveness Institute
The Impact of Medical Technology
on Health Care Expenditures
• Is investment in medical technology costsaving?
• Is investment in medical technology worth
it?
• Examples: Birth Technology, Heart Attacks
Causes and Consequences of
Increasing Health Care Expenditures
• Increases in Health Care costs are mostly driven
by changes in technology
– A bit more complicated than that, really
• Higher uninsurance rates
– 17% of Americans are uninsured
– Why is that relevant to medical technology?
• Value Based Insurance Design
– Insurance pays for cost-effective treatments
– Private and Medicare initiatives
Birth Technology
• Examples of changes in technology that increase costs but
also affect health
• Lifetime spending on low birth weight babies increased by
$40,000 per birth between 1950 and 1990.
• Infant mortality rates fell by 72 percent
• Considering both length and quality of life, the rate of
return for care of low birth weight infants at over 500
percent
Heart Attacks
• Between 1984 and 1991, life expectancy
after a heart attack rose by eight months
• The cost of treating heart attack patients
rose from about $11,000 to about $15,000
• We spend $4,000 for eight extra months of
life!
US versus the World
• Most Medical devices/pharmaceuticals are
sold overseas
• How do other counties organize and
purchase health care?
• How are coverage decisions made there?
Method of Evaluation
• In class Final exam:
30%
• Final project:
40%
• In class mid-term exam:
20%
• Class participation:
10%
Final Assignment
• Teams of no more than four students will choose a medical
technology/disease for evaluation before the midterm.
• The topic choices will be suggested by consultation with
three of Minnesota’s Healthcare Market National Players:
United Healthcare, Medtronic and the Mayo Clinic.
• Teams will develop a written report regarding the new
products in the pipeline to be produced from this compound
of technology.
• Teams will include in their report a market research plan
using a patient-level de-identified health insurance data
warehouse provided by the course instructors.
• Team presentation will conclude the course.
Office Hours
• Parente: Room 3-279, CSOM, Wednesday AM
and by appointment
• Town: By appointment
• e-mail info:
– sparente@umn.edu
The Course Readings
• Three sources for readings:
– The course web site:
• http://ehealthecon.hsinetwork.com/medtech_um_2012.html
• Links to online articles are provided.
– Handouts
• Readings are vital to discussion and exams.
Course Notes
• Available from the course web site:
– http://ehealthecon.hsinetwork.com/medtech_um_2012.html
• Click on lecture to download PDF of notes (made
with Adobe Acrobat 6.0+)
• We will try to make notes available one day
before lecture and will be somewhat abridged to
keep file size down.