By Lisabeth Buelt and Michael Ciarametaro
December 17, 2020 at 5:00 am ET
The COVID-19 pandemic has led to historic social and financial disruption across the globe, and several leading health care experts have predicted that a return to normalcy will largely depend on the availability of a vaccine. As life sciences companies mobilize to develop innovative treatments and vaccines to quell the pandemic, it’s important to consider the broader policy landscape that surrounds this effort and explore key questions related to health care innovation and affordability.
For example, how do innovative health care technologies affect overall health care costs and quality in the United States, and what are the existing market and policy incentives for developing new health care treatments and services? As we navigate a changing health care environment, it’s critical that we have a health system that both incentivizes innovation and curbs wasteful, low-value spending to help ensure that access to innovative treatments is affordable.
Innovation improves patient health outcomes
Innovative health care technologies such as new diagnostic instruments, robot-assisted surgeries, stem-cell treatments and innovative biopharmaceuticals, have led to remarkable improvements in patient outcomes across the globe. In the United States, a recent analysis found that innovative treatment interventions contributed to improvements in morbidity and mortality for the most prevalent diseases when looking over a 20-year timeframe.
Moreover, innovation was found to be cost-effective over time for several conditions. Improvements in patient outcomes afford an undeniable societal benefit, as improved population health contributes to increased productivity and prosperity.
This has become even more clear during the current COVID-19 pandemic. Given the value that health care innovation contributes directly to the health system, but also the social and economic functions of society more broadly, it’s important to understand the incentives and funding streams that underlie the development of new health care technologies and how these technologies entering the market affect overall health care spending and affordability.
Paying for innovation is challenging
Typically, new innovative health care technologies and devices (e.g., proton beam therapy used to treat certain cancers, new curative therapies for Hepatitis C) are predominantly funded by annual increases in insurance premiums. But as health care spending has continued to rise, outpacing annual wage increases and negatively affecting the economic performance of U.S. employers, health care consumers and employers are becoming increasingly concerned about the affordability of their premiums and many report that they are reaching a financial breaking point.
Prior to the onset of the pandemic, the National Pharmaceutical Council surveyed health care consumers and employers about their willingness to pay for innovative new treatments for common adult conditions, rare diseases, as well as conditions that affect geriatric or pediatric populations. Overall, most respondents reported that they were not willing to pay a 5 percent increase in premiums (which ranged from $2-$30 per person for month for consumers and $8-$90 per employee per month for employers) to support access to new health care technologies associated with significant improvements in survival and/or quality of life.
Do these results mean that consumers and patients want to limit the rate of medical breakthroughs and curative treatments in the United States in order to decrease health spending? Not likely. Instead, these results are reflective of an environment where patients and employers are feeling financially tapped out and are therefore hesitant to endure continued premium increases that may eventually become unaffordable.
While the pandemic is likely to exacerbate concerns about affordability, it also underscores the value of health care innovation. So where do we go from here? As the health care system grapples with the short and long-term consequences of the pandemic, it will be critically important that policy solutions include the following components.
Protect incentives for innovation
The pandemic highlights the critical role of health care technology innovation. A resumption of normal social and economic activities largely depends on the development of new treatments and a vaccine. As health science companies work to discover treatments for COVID-19, it’s important to recognize how existing incentives for innovation have afforded the infrastructure for researchers to be able to respond quickly. Absent such incentives and infrastructure, we run the risk of being unprepared in the face of global health risks.
This is a scenario playing out in real time with antibiotic resistance. Due to the high cost of development, high risk of failure, and the narrow market opportunity, many pharmaceutical companies have ceased development of new antibiotics. This underscores the need to protect incentives for developing innovative health care technologies.
Furthermore, survey respondents in the National Pharmaceutical Council analysis were willing to pay significantly more for new medical technologies for common adult conditions versus those developed for smaller, pediatric or older patient populations. This finding highlights the need for policies that protect incentives for development of new and innovative treatments as well as to ensure equity and fairness for vulnerable or disenfranchised populations.
Focus on reducing low-value care
Post-pandemic, policymakers will likely resume the decadeslong conversation about how much the United States should be spending on health care. While there is no one-size-fits-all approach to addressing health spending, we must take steps to ensure the health care market reflects consumer priorities and reduces wasteful spending.
Mechanisms to eliminate low-value care in our system should be a main goal of policymakers. Reducing spending on low value care would allow us to reallocate funds to other worthwhile initiatives, like medical technologies, ensuring that innovation in the American health care system remains intact and consumers are not bearing the financial brunt of it.
Innovative health care technologies are often a source of substantial value creation for the health system. Therefore, it’s important that health care decision makers ensure incentives for innovation are maintained and efforts aimed at reducing costly low-value care are widely implemented to make access to innovation more affordable.
Lisabeth Buelt is a consultant with the National Pharmaceutical Council and Michael Ciarametaro is the vice president of research at the National Pharmaceutical Council.
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