Private Healthcare Australia’s Director of Policy and Research Ben Harris says the medical device industry requires the same rigorous regulatory regime as the pharmaceutical industry. The association will shortly release a draft policy paper.
Medical devices overwhelmingly improve quality of life, but not always.
As demonstrated by pelvic meshes and ASR hip joints, implanted devices can also cause significant physical harm. They also harm our wallets – medical devices in Australia are a lot more expensive than they should be. Both these harms can be avoided and there is a solution.
The transparency and disclosure regime for medical devices in Australia is woefully inadequate. Luckily, there is a ready-made solution – the regime already in place for the Pharmaceutical Benefits Scheme. It is time that medical devices undergo the same rigorous safety checks and pricing transparency as pharmaceuticals.
The risks of medical prostheses can be higher than for pharmaceuticals – a prosthesis is permanently implanted into the body, while you can stop taking a drug – yet the transparency and disclosure regime is significantly weaker.
Medical devices driving up premiums
The highest growing area of expenditure for health funds – and thus the most important driver of premium increases – are prostheses. The cost of these medical devices are growing by about 8% a year, while surgery is growing at less than 1% a year.
Health funds must pay for items on a government-mandated Prostheses List regardless of quality, efficacy, cost-effectiveness or even safety. There are more than 11,000 items on the list, and each of them has a listed price that funds must pay. Professor Stephen Duckett has described this process as ‘a protection racket’ – there are no free market forces, and Australians pay thousands of dollars more for common items than in the United Kingdom, France, New Zealand and even the United States.
The current arrangements between medical device companies, hospitals and doctors mean that consumers and health funders are at significant financial and in some cases clinical risk.
Transparency and disclosures
There is no transparency to consumers and funders about commercial arrangements that could affect decisions on the use of prostheses. Hospitals and other providers can receive significant benefits without these being disclosed to patients and funders.
It is often alleged in the industry and reported in the media that private hospitals and medical device companies charge health funds the full cost of a prosthesis in accordance with the Prostheses List, then the manufacturer pays a rebate to the hospital that purchases that prosthesis and/or medical practitioner that chooses that prosthesis to be implanted on their patient.
The medical device industry has described this practice as “standard commercial arrangements that apply across all markets in our economy.” Gifts, kickbacks, hidden rebates and commissions are wrong and antithetical to the proper operation of markets. The general public would be astonished that these rebate agreements are kept secret under "commercial-in-confidence" arrangements and not disclosed to funds and members.
Health funds want stricter transparency on the support and other benefits provided by manufacturers and suppliers to providers, and also transparency on the use of sales representatives, particularly their presence in operating theatres without patient consent, and their use in training surgeons and staff.
Introducing a reporting system, not unlike that operating in relation to pharmaceuticals (Pharmaceuticals Benefits Scheme) where any support, incentives and other benefits provided to prescribing doctors is disclosed on a public register, is essential. Shining a spotlight on behaviour ensures that we can all have confidence that decisions are made in the best interests of patients.
It makes no sense that Australia has a rigorous system for disclosure of benefits paid to providers by multinational pharmaceutical companies, but not medical device companies. A patient can stop taking a medicine that is harming them, but once a medical device is implanted in the body it can be difficult or impossible to remove.
Public v private
Public hospitals pay much less for prostheses as they are not restricted to paying the Prostheses List prices. They are able to run tenders between manufacturers and obtain competitive price, enjoying a competitive advantage in purchasing prostheses at a lower cost and thereby able to operate at a lower cost base. Meanwhile, private health funds and patients are paying the full, inflated Prostheses List price.
It's ridiculous that Australia’s public health system is better at using standard commercial arrangements to promote competition than our private system.
Time for action
The economic and social dislocation we are experiencing during the current pandemic is causing shockwaves that have not been seen in a generation. It’s been more than 80 years since we’ve seen an economic contraction like what we are expecting over the coming year. In the current environment, there is no room for waste or anti-competitive behaviour. It is time for the Australian Government to review the anti-competitive nature of the Prostheses List regime and introduce transparency reforms to ensure the medical device industry aligns with the practices of Australia’s pharmaceutical sector.
Sunlight is good for health – shining a bright light into the dark corners of the device industry will help ensure that Australians paying private health insurance premiums can receive the best possible medical devices at a reasonable price, improving care for all.