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Presenting Data to Show Product Cost Effectiveness

Numerous shifts in the healthcare marketplace are driving a need for new forms of data for the commercialization of orthopaedic technologies. Companies need to adapt their clinical assessments to incorporate patient-reported data about the impact of their treatments in order to support the launch and future sales of new technologies and products in a competitive market. Clinical data has evolved from a nice to have tool to a need to have corporate asset.

Two Cautionary Tales
The DePuy ASR XL Acetabular Cup System hip implant received 510(k) clearance from FDA in July 2008 without a pre-approval dedicated clinical study. In September 2008, the Australian Orthopaedic Association National Joint Replacement Registry reported a high rate of revision surgeries for this device. In 2010, the National Joint Registry for England, Wales and Northern Ireland reported a revision rate that was more than four times higher than expected. DePuy voluntarily recalled the implant in late 2010. Tens of thousands of patients received this faulty implant, and to date more than 10,000 lawsuits are pending across the country. The ASR story illustrates the clinical and the product liability risks of bringing devices to market without sufficient clinical data on safety and efficacy. It also shows the growing influence of patient data registries in regulatory and health policy decisions.

A second example from oncology offers additional lessons for the orthopaedic sector. By law, Medicare must cover every FDA-approved cancer drug at the price charged by the manufacturer. The cost of cancer drugs has risen precipitously from an average of $4,500 per month a decade ago to around $10,000 per month today. The burden of this cost is increasingly borne by patients. A new drug, ZALTRAP, was approved last August for colorectal cancer. It was shown to offer the same survival benefit as Avastin, the current care standard. However, ZALTRAP was to be sold at twice the cost. The side effects of the two drugs are roughly equal. With Medicare’s 20 percent copay, this would mean $2,200 per month in out-of-pocket cost— more than the monthly income of more than half of Medicare recipients.

Memorial Sloan-Kettering Cancer Center, one of the premier cancer hospitals in the country, decided not to offer this new drug on its formulary purely based on cost considerations (since the efficacy was the same). The fact that a decision impacting hundreds of patients would be made on the basis of cost alone generated controversy. Sloan Kettering’s medical directors published an op-ed in The New York Times expressing their surprise that this seemingly straightforward decision received such attention, noting that, “In most industries something that offers no advantage over its competitors and yet sells for twice the price would never even get on the market.”

The lesson for the orthopaedic sector is that there is growing price sensitivity, even in specialty hospitals that want to offer cutting-edge therapies. Unless you can show the added value for the additional cost of a new therapy, you may be shut out of hospital formularies or passed over by increasingly price-sensitive patients.

Changes in the Marketplace Impact the Need for Data
Several shifts in the marketplace are driving the need for additional data to support new products. The first of these is the Affordable Care Act that goes into full effect in 2014. Some of the Act’s provisions include increased competition among insurers through healthcare exchanges. There will also be greater Federal oversight of premium increases, as well as payment reform that will bundle payments for episodes of care. Finally, healthcare reform also provides ongoing funding for comparative effectiveness research that compares the efficacy and safety of different treatments for the same condition.

The upshot of these changes under the Affordable Care Act is that there will be stronger limits on healthcare spending overall, as well as for individual procedures. With bundled payments, hospitals will be less willing to carve out payments for costly new implants. This hesitancy will be especially strong if these newer products are not shown to provide better outcomes through comparative effectiveness studies.