New Technology is Driving up Healthcare Costs
Our nation should consider reforming the patent system so monopolies cannot be created
The relentless progression of new and expensive medical technology, combined with entitlement programs like Medicare and Medicaid, further compounded by an aging population, have created a "perfect storm" of costs that will consume well over half of all federal spending between now and the turn of the mid-century.
Efforts to reign in entitlements have been met with public skepticism and we lack the political will to change the status quo. Nevertheless, the current path is unsustainable.
Polling reveals that the public is very concerned about inadequate access and higher out-of-pocket costs. Furthermore, people who don’t have a government subsidy are fearful of losing their insurance altogether. Proposed cutbacks have been met with accusations of "unplugging grandma." All of this has led to a legislative stalemate, while our economic situation continues to deteriorate.
A constant stream of breakthrough technology that can save lives is an expectation in our society. But in America we also have a patent system that’s part of the U.S. Constitution (Article 1, Section 8).
Therefore, if you need a patented lifesaving drug or treatment, you must, by law, pay whatever price is demanded by the patent holder. Your need, even in a life or death situation, doesn’t entitle you to have that drug or treatment unless you can negotiate mutually acceptable payment terms. Neither your insurer, nor the government, has very much leverage to lower the cost of patented technology.
The Kaiser Family Foundation study concluded that the only measures that are likely to control health care inflation over the long term are either the delay or prevention of new medical technology. In other words, restricting new technology and outright rationing are the only two options that offer sustainable solutions. Virtually all other less objectionable strategies to control healthcare inflation, are likely to result in only "short term savings,” according to the study.
Therefore, as an alternative to outright rationing of services, our nation should consider reforming the U.S. patent system as it applies to new medical technology. This must be done at the patent level so a monopoly cannot be created and to ensure that any new technology faces competition in the marketplace.
New technology without a patent cannot command an inflationary price for long. Clearly this strategy could be expected to dramatically slow the development of new lifesaving treatments that we simply cannot afford as an entitlement.
No doubt this reform strategy would face very stiff opposition from the lobbyists who represent the drug and medical equipment manufacturers. And by challenging the patent system, this issue could wind up before the U.S. Supreme Court at some point. Still such a change in patent law could withstand a legal challenge if the court can be convinced the decision is in the best interest of the nation. Similarly, the military can, and does take control of any new technology that might be of national security interest, so there’s a precedent for such exceptions when patents are granted.
We need to ask ourselves whether we should deploy new technology that could cost billions of dollars before the patents run out while 45-50 million Americans have absolutely no coverage. A recent study by Harvard University estimates that 45,000 people will die needlessly because they can’t get basic medical care.
The need to control exploding health care costs is dire and worsening.
The effect of healthcare cost inflation on the U.S. economy cannot be overstated. Health care costs are driving massive deficits for decades to come in our national budget.
The best studies show that only two strategies are likely to control costs over the long term. Now it’s up to the public to decide whether we should ration medical treatments or call a halt to new technology that holds the promise of even more miracle cures in the future. Only one or the other, or some of both, will save America from economic ruin.
Dr. Benton is an ENT, head and neck surgeon whose been practicing full time in Corvallis, Oregon for the past 18 years. He also holds two U.S. patents.
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Comments
Dr Nick Benton,
I'd like to write a book about this subject. It is very fascinating indeed , and my experience and perspective similar to one having a patent, and being a doctor,
would perhaps explain the issue conclusively.
I actually discovered the details of the visual system and an alternative theory
( confirmed by medical tests ) for vision . ( another alternative to ecology theory or
other existing theories ) .
After 14 years or so after filing the patent - which is now considered a 'trade secret',
I would not manufacture the system, even though it could theoretically 'compete'
with existing treatments, laser, lenses etc.
The basic reason is that it could create inflation.
It could also create technology breakthroughs , similar to those of the seventies,
but the ethical questions that are raised, would it be a benefit to society or a curse,
create significant dilemmas. I would have truly loved to have introduced a novel and radical system to society, but could it have benefitted society or created wars that is one of the major issues.
The issue of inflation or deflation is a remarkable one. Would the introduction of a novel optical system to society been akin to lens theory in the early 1900's or
laser introduction in the later 1900's.
Would introduction of such a breakthrough prevent war or bring it on.
The possibillity of the latter occurring through prevention of introduction of such a breakthrough , may prompt us to explore the issue further.
Dr Robin Grudenich-Dix
To my colleague right up the road in Salem, I would say that your emphasis on competition is directly in line with what I am advocating for.
New medical technology/drugs that are patented, are given a monopoly by law. By not allowing patents, you increase competition, by definition.
In other countries, as you mentioned, the patent system is entirely different. Also, if you live in a country with national health care, they simply will not pay the asking price of a patented drug or technology. They will say no, and the patients will have to do without that drug or treatment. By saying no to a patented treatment, you force them to lower their price.
Imagine if there were a great new, very expensive treatment called the Heart Mate II, that could keep patients with severe heart failure alive much longer and with better quality of life. Now imagine that this technology is patented, and the cost for the impant was $125,000, take it or leave it. Now further imagine that a 90 year old woman needs the device. Who is the person at Medicare that is going to tell that elderly woman she can't have it? No one, that's who. No one in Washington is going to deny that expensive treatment to someone's grandmother. We all know it.
Well you aren't going to have to imagine such a scenario, because the Heart Mate II was recently approved by the FDA. And if renal dialysis is any example, it won't be too long before every Medicare patient with severe heart failure will be demanding it. It is estimated that 5 million mostly elderly people in America, could benefit from the Heart mate II. If you do the math, that's $625 Billion, just to get the devices implanted. This is why patented medical technology and drugs are driving the economy to ruin.
The Author
Blaming technology is too simplistic. In other markets, advancing technology, with or without patent protection, lowers cost while increasing the value delivered. What is different in the healthcare marketplace?
I believe the available literature supports the idea that the pricing mechanism is at fault. Healthcare has very little price competition by design. Professional services are paid based on a formula and hospitals compete based on a glitzy facilities that include lots of whiz bang technology (and glass, steel, expensive art). As an employer I have no real choices.
Non-competitive environments produce high prices. For years we have tried to reduce access to technology in order to reduce cost. As a medical director, it was my job to evaluate the necessity of procedures. It is hard to know what was gained and what was lost in terms of the ultimate cost.
Artificial scarcity isn't a useful economic tool to control prices or cost. Rather, it is a tool that supports the existing price structures.
The cost of technology is a huge problem but it is a symptom and not the disease.
Michael Rohwer MD
Salem
Some of my colleagues are already asking me why I believe that new medical technology deserves less patent protection than any other new technology. I believe this because new technology aimed at the health care marketplace, does not really have to compete in the free and open market.
If I build a better mousetrap and get a patent, I can sell it in the open market, and the customer can either take out her purse and pay the price I ask, or go without. If my price is too high, people will simply use the old mouse trap they have.
If I come up with a new drug that gets FDA approval and a patent, I can now launch a marketing campaign to the public, touting all of the benefits of my new drug which may in fact be no better or marginally better than generic. Patients then are motivated to ask for my newer more expensive drug, and even demand it. But patients, by in large, don't pull out their purses and personally pay the much higher cost for my new patented drug. They make their insurance company, or Medicare pay for it instead. Many new medical innovations would not be successful in the market place if patients had to pay with their own money.
If one sector of the economy can enjoy a reprieve from market forces, then it be can logically, and fairly argued that they do not deserve patent protection, or at least not as much patent protection for their innovation. Right now, the medical technology and drug industries essentially have their cake, and eat it too. The burden of that unfair advantage falls upon the economy hard.
The Author
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