4.1.2 Medical Device Evolution

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From the course by University of Minnesota

Healthcare Marketplace

328 ratings

University of Minnesota

Healthcare Marketplace

328 ratings

Course 1 of 5 in the Specialization Healthcare Marketplace

In this course in the Healthcare Marketplace specialization you will identify, define, and describe potential business and public policy solutions to the challenges facing society’s growing demand for health services. Students will master a body of knowledge on the health care sectors major components through reading and reflection. Healthcare has many different cultural components that will be discussed as historic trends as well as future demographic challenges. You will understand diverse philosophies and cultures within and across societies as they relate to healthcare. This outcome is particularly critical because of the tradeoffs needed to be assessed as medical technology advances faster than budgets and perhaps cultures are sometimes willing to tolerate. At the end of the day, you will gain an appreciation for the role of creativity, innovation, discovery, and expression across disciplines in the development of new medical care solutions through and examination of the physician, medical technology and financing sub-sectors of the health economy.

From the lesson

MEDICAL TECHNOLOGY MARKETS

In this module you will learn about the medical technology market. This will provide an excellent overview for the in depth look at this in Course 3 of this specialization. The focus is on the medical device and pharmaceutical market. The take-away messages from this module are medical technology prices are costly because high regulatory and development burden to get to market. In addition, the pathways to payment for medical devices are pharmaceuticals are distinct but share more in common than are dissimilar. The skills gained from this module are an understanding of the regulatory burden of securing intellectual property rights as well as getting the technology clear for use from a safety and effectiveness perspective. Learners will under the key ingredient of technology dossier required for sales and marketing of a product on a global scale.

Module 4 Overview2:14

4.1.1 What is a Device? What is a Drug?2:43

4.1.2 Medical Device Evolution7:56

4.1.3 Medical Devices Today5:10

4.1.4 Vision 2010 Case11:14

Meet the Instructors

Stephen T Parente
Professor
Carlson School of Management, Department of Finance

This is the Healthcare Marketplace Specialization,

Healthcare Marketplace Overview.

I'm Steve Parente and this is Module 4.1.2, Medical Device Evolution.

So when we think about medical devices, it's been a long history.

Most of the real innovation has occurred in the last 100 years or so.

Prior to the start of the 20th century, we have an era of essentially what,

the best describe is entrepreneurial tinkerers.

These mostly are positions, which is really any entrepreneur.

They would build or patent a device in quotes and

sold it really unregulated market.

There were no insurance reimbursement programs,

there's no government intervention.

Now some university initiatives, but generally not nearly as much.

When we get to a different era, the 1900s to 1940,

we have a whole different world that has happened.

We have the birth of the Food and Drug Administration,

otherwise, known as the FDA.

We have the National Institutes of Health, NIH and then the notion of industrial

labs, which are really coming out of corporations, such as General Electric.

So at 1906, we see the start of the FDA.

Basically, a pure Food Drug Act in response to a notion of medical quackery.

Give you an example of that in a second.

We see also in 1910, General Electric's first real Industrial Research Laboratory.

Set up under Thomas Edison,

General Electric's founder to develop X-ray market at first as a loss-leaders.

Hoping that folks would get to that market space.

In 1928, we actually see for a call for

private sector to develop new innovations, but not much response from industry.

Folks were still doing pretty well in the roaring 20s before the crash.

When we get into the start of Depression after 1929, the crash,

we do find the National Institutes of Health being formed.

This actually happens in the Hoover administration not Roosevelt.

They're later a huge player, but at first,

it's a very small institution launched in DC focused on basic public health issues.

Now an example of Medical Quackery, this was one of my favorite pictures

of this professor Wilson's the academics are involved.

Magneto conservative garments.

What I think is really great about this is like all the things that it can cure.

It can cure very important things like nervous prostration, kidney disease,

liver disease, lung trouble, rheumatism, gout stiff joints, paralysis, writer's

cramp, very important, loss of memory and this is really key it can cure giddiness,

because we know the world is going to go to hell with giddiness and varicose veins.

And then of course, if that doesn't really satisfy you,

every other form of disease is covered.

And so even better, it actually price by different pieces.

So we have the throat protector, we have the nerve and the body invigorator.

I think that's there, the body belt.

I'm not sure where that is, maybe that's that.

The sciatic alliance, which scares me.

The knee cap very important, as well as the leg appliance.

Anklets and insoles also available.

So this is very typical of just things that might be out there.

And actually, you can see stuff today that is not quite as quackery oriented but

you'd see things in the back of magazines, even things like the Smithsonian that

sort of like talk about how great things will happen if you just take this other

medication or device, but you have to start somewhere and entrepreneurship has

always been associated with the medical technology market.

So when we go beyond World War II,

we see that NIH acts as a catalyst and private industry takes off.

Recall in our previous modules with health insurance.

The US made a conscious decision not to invest in national health insurance, but

instead politically went in the direction to invest in science,

particularly through the NIH and going into universities.

And so, essentially wartime research provides a model and

a catalyst to establish a template for the future.

And the biggest example of this is the development of the nuclear bomb through

the Manhattan project, which really as much as the government was

engaged it lost almost to develop and then later to drop the bomb.

Obviously, the military, it was a civilian administration that looked over it.

It was a partnership with academics with the University of Chicago, Berkeley

the birth of Lawrence Livermore Labs tied to Berkeley with Robert Oppenheimer and

then a whole variety of academics from the East Coast as well as the Midwest to pull

it all together.

It was funded by government, but

researchers worked generally in their own institutions And

this became really the model for how NIH was to fund medical science.

And we see at that point, universities changed dramatically both in buildings and

structures and funding as a result of this area.

And lots of things get spent when off of that can later be owned by

the inventors at the universities that are academics or

the folks who are funding those academics to turn them into private enterprises.

Then we go from say that we're really looking at Medicare,

but also medical inflation.

Once Medicare comes into play, Medicare as we call it is a public insurance program

targeted primarily at the elderly, but also there's disabled population.

But because it's being reimbursed on a cost plus basis and

there's no fixed payments we see that healthcare costs start to really rocket,

but also so does innovation.

Managed care comes in in the form of HMOs to try to put a gatekeeper

apparatus on meaning a primary care physician will get

essentially permission to use more technologies.

But what really happens is as the Medicaid Program begins,

it acts as the rocket fuel for a low tech device industry, wheel chairs,

crutches and other pieces out there.

Improvised dollars for a new elderly consumer.

To start controlling that medical cost inflation in the Nixon administration,

there is a Certificate of Need Act that is passed that creates the notion of

these local health planning agencies, which are basically a network of 274

agencies across the United States that will grant

locally hospitals the permission to build or acquire a new piece of technology.

That law is later repealed.

In the 80s, but it was very powerful at first.

NASA, obviously, a major role in providing significant resources for

basic science, the goal for Kennedy to get us to the Moon.

There's a lot of material science that comes into that,

that directly aides medical devices.

When we get to the 1970s,

NIH shifts their funds away from basic science due to budget constraints and

that leads universities to start looking for more private sector partnerships.

There are many places, whether it be Minnesota, the Silicon Valley area as

the technological revolution and computer technology looks for

other entrepreneurs to put dollars in that are examples of that.

So in the 1980s then, NIH encourages technology transfer,

that is to go from basic science and technology development,

recognizing that that's really an economic driver.

The Reagan administration actually then goes and

repeals this Certificate of Need Act in 1974, leaving individual states

to determine what their medical technology cost and what inflation will be.

Now partly, why that doesn't explode everything is that there's new

reimbursement schemes for hospitals where now they're being

paid by admission rather than per day and that helps keep some of the cost in line.

Medicare also cracks down on low medical device fraud and

creates much stricter reimbursement guidelines, such as perspective

payment and we also see that managed care and Medicare started using technology

assessment committees based on proven cost-effectiveness through the academic

literature to decide whether they were going to pay for a new device or not.

This concludes this module on medical technology development for

the Healthcare Marketplace Specialization.

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