Study: Med tech price increases lag

Medical devices account for a small, relatively consistent portion of U.S. healthcare spending. The price increases med tech garners are below those of other medical segments as well as the broader economy. That's according to an analysis extending over 23 years in an updated study from the Advanced Medical Technology Association (AdvaMed).

The industry association seeks to use this data to further make the case with legislators that the med tech industry is not a major driver of healthcare cost increases. The U.S. medical device excise tax of 2.3% kicked in last year and still weighs on the industry.

Medical devices accounted for 5.9% of total national health expenditures, or $159.4 billion, in 2011, according to the most recent Census Bureau data. That portion increased to about 6% by 1992 and has remained relatively stable since. Since 1992, medical device spending has increased at an annual rate of 6.1%, compared to 6.2% for overall national healthcare expenditures.

The broad Consumer Price Index (CPI), which measures prices over time for a variety of goods, has outpaced increases in medical device and diagnostics prices. From 1989 to 2011, the CPI increased at an average annual rate of 2.7%, while the Medical Care CPI added 4.6% a year. In 2011, med tech prices rose only 0.7%.

AdvaMed Senior EVP David Nexon

"If price competition worked as well in healthcare [as it does in med tech], the overall system costs would be far less," observed David Nexon, senior executive vice president of AdvaMed, on a conference call.

For context, U.S. retail prescription drug spending was $263.3 billion in 2012, or about 9% of total U.S. healthcare expenditures. That was an increase of only 0.4% over 2011 due to increasing generic prescription use, according to data from the Centers for Medicare & Medicaid Services (CMS). Medical devices are not broken out separately in this national health expenditure data; the AdvaMed study is meant to be compatible with the methodology used by CMS.

"The study makes the case that medical technology is not the driver of healthcare costs as some critics have wrongly claimed and that competition is working in the device industry to keep prices low while driving innovation into patient care," AdvaMed EVP for payment and healthcare delivery policy Don May said.

The research was conducted on behalf of AdvaMed by Roland "Guy" King, the former chief actuary at the Health Care Financing Administration (now the Centers for Medicare & Medicaid Services), and Gerald Donahoe, a former U.S. Commerce Department economist. The initial iteration of the study, which covered from 2007 to 2011, was released in September 2013.

- here is the full AdvaMed study and the press release
- and here is the CMS national health expenditures data

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