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The imperative of investing in diagnostic technologies.

Posted: May 03, 2017 by Instinctif Partners

On 5 April 2017 the European Parliament adopted 2 new Regulations on medical and in-vitro diagnostic medical devices proposed by the Commission in 2012 which will help to ensure that all medical devices - from heart valves to sticking plasters to artificial hips – are safe and perform well. The new rules aim to improve market surveillance and traceability as well as make sure that all medical and in vitro diagnostic devices are designed to reflect the latest scientific and technological state-of-the art. These new regulations should provide more transparency and legal certainty for producers, manufacturers, importers and patients as well as to strengthen international competitiveness and innovation in this strategic sector. Currently over 500 000 medical and in vitro diagnostic devices are on the market. The sector employs over 500 000 people in about 25 000 companies, most of which are micro, small and medium sized enterprises. They generate nearly €100 billion in annual sales in the European market. Furthermore, about 6-8% of medical devices annual sales and 10% of in vitro devices annual sales is re-invested in research every year.

Since the first ‘modern’ diagnostic technologies were developed in the 1970s and 1980s, advances in device technology have altered significantly the practical aspects of diagnosis, giving clinicians tools to visualise and probe the human condition at anatomical, functional and molecular levels. Patients have benefited from these technologies, as much as it has altered the practice of medicine.

Diagnostic technologies matter in healthcare systems largely because diagnosis is the point at which clinical decision-making determines whether further clinical activity is needed. Treatment depends on a reliable diagnosis. From a patient’s perspective diagnosis is a critical moment that can change his/her life.

Technological innovations in the healthcare industry continue to provide physicians with new ways to improve the quality of care delivered to their patients and improve the state of global healthcare. Through technology’s integration with areas like disease prevention, surgical procedures, better access to information, and medical telecommunications, the medical industry and patients around the world continue to benefit. So innovations such as at-home remote monitoring tools for cardiac health can vastly improve the capability of health systems to diagnose at risk patients and support them before a cardiac event. If babies born with Severe Combined Immunodeficiencies (SCID) are not diagnosed and effectively treated in time, they will die within the first year of life after undergoing recurring severe infections. However, if they are tested at birth and given proper treatment within 3 months, these children can live normal lives. Early detection of SCID could reduce the cost of treatment by €50,000-100,000 per case. Assuming a €5 unit cost per test, the incidence required to break even is 1:20,000; however, if the survival advantage of before 3 months is confirmed, universal screening is likely to be cost-effective. Rapid diagnostic technologies have the potential to create a situation where antimicrobials are prescribe based on diagnosis, not simply on presentation and clinical experience. Fast and effective diagnostic testing can contribute to tackle AMR by improving patient treatment by getting the right drug to the right patient quickly; making current existing drugs go further and last longer. Every year in the EU, it is estimated that 4.1 million people are affected by HAIs. This results in 37,000 deaths and adds estimated costs of over €6 billion, according to the European Centre for Disease Prevention and Control (ECDC). In vitro diagnostics (IVDs) can accurately diagnose patients with drug-resistant infections so that they can be appropriately managed. Healthcare institutions can also use this diagnostic information to reduce the risk of other patients being infected.

Why is those medical technologies that have proven to be cost-effective in the long term, are not invested in the short term?

Despite the value of diagnostic technologies, there is general lack of investment and economic incentives to foster innovation in the healthcare sector. Using innovative technologies is simply more expensive in the short term. Since healthcare systems have not been able to assess value of technological innovations, government are still struggling to justify investment in modern diagnostic technologies. Furthermore, improve healthcare through innovative solutions does not mean reducing costs and bringing enough savings, but it is an investment for long term efficiency and sustainability. Budget silos are reported to be a major challenge for managers to introduce new medical technologies. Bringing technologies into care pathways will require an integrated approach including both the social and health sectors that incentivizes the appropriate uptake of innovative technology among them all. Furthermore, existing reimbursement structures and healthcare management rules often provide disincentives to the uptake of new technology. Diagnosis Related Groups (DRG) are a widely used mechanism for reimbursement of public hospitals across Europe. As opposed to a fee-for-service reimbursement model that is based on volume of inputs (in this case, testing), under a DRG system, hospitals are paid on the basis of the number and type of DRGs that they produce. Diagnostic devices pose unique challenges to economic assessment, in particular to the formulation of informative cost–effectiveness models. The entry and the uptake of novel diagnostic technologies is link to their ability to demonstrate their clinical value and their cost benefit. Comparing the effectiveness of diagnostic devices will require new models that incorporate an in-depth knowledge of how these diagnoses will be used to inform treatment decisions. Appropriate analysis must include a sufficiently long timeline to see the impact of more appropriate prescribing on antibiotic resistance and the incorporation of both societal benefits and cost offsets accrued in that time. Moreover, by the time of dissemination this analysis, the evidence base used for this will have moved on.

So what can be done to incentivize investment in proven innovations?

Some suggestions included a multi-incentive system including a combination of pulling and pushing finding, alternative reimbursement models for diagnostic technologies, and horizontal scanning services to measure cost-efficiency.

Creating a diagnostic market stimulus in the form of a funding pot could the potential to incentivise the purchase and uptake of diagnostics technology. Companies would sign up to the funding pot and sell their products under certain conditions, such as at affordable prices. Every time a product was sold, a payment would be made from the pot, until it ran out. This payment/refunding system would guarantee that firms would still need their product to be adopted and face competition with other products to make sure that firms would be incentivize to devote resources to innovation. The greatest advantage of this system is that it allows multiple companies to come up with useful products, and lets health professionals decide which is the most useful. Researchers are incentivized to undertake development with the promise of monetary reward if they are successful. Payment are only awarded on delivery of specified outcomes; the product developer assumes the risk of development. Subsidies to targeted research or development activities should be available. Push incentives focus on removing barriers to developer entry largely by affecting the marginal cost of funds to the developer for investments in R&D and tend to impact the earlier stages of the development process. These kind of funding represents an opportunity for general used to remove barriers to entry for small and media enterprises to invest in research and innovation as well as to support research with high risk of failure which prevent the private sector to invest on them. Grants are provided to co-finance research, development and demonstration projects, and funding is allocated on the basis of calls for proposals and a highly competitive peer review process. Almost any type of organization, including academia, SMEs, civil society and corporations can apply for funding. Encouraging public–private partnerships can leverage the different types of expertise among the partners. Given the novel techniques and technologies being used, no one organization has all of the necessary capabilities. The academic partners offer clinical expertise, samples, laboratory capabilities and knowledge of innovative technologies. SMEs offer knowledge of innovative approaches and bring a flexible attitude, while larger companies offer expertise in clinical development, regulatory affairs, communication, samples and laboratory capabilities. Researchers are incentivized to undertake development with the promise of monetary reward if they are successful.

It is possible to build in explicit mechanisms within a DRG system to capture the product`s value and encourage uptake of a particular drug or device that is seen as desirable on a system-wide basis. This can be done through the creation of new DRG codes that reflect the costs and utilization of new technology. In many European countries the uptake of particularly innovative technology may be reimbursed outside of the DRG system at least in some circumstances, in acknowledgement of the barriers to uptake the DRG system may otherwise present.

For health systems to adopt new technology, clinical value and cost benefit must be demonstrate. The best way to do this is through large controlled trials to demonstrate clinical effectiveness, and cost benefit studies to demonstrate economic value to regulators and healthcare providers. It would seem logical to have an ongoing horizon scanning service to identify new diagnostic technologies with most potential in primary and secondary care and prioritise those with greatest health impact; An horizon scanning service can hugely reduce the cost of testing a diagnostic. If testing diagnostics is common practice, then there can be one standard process that new tests can be dropped into, rather than creating one for every test. This can include things like having a template contract and price for doing the trial, which will again reduce the trial time and cost to each trial. Finally, because it will be so much easier to set up test sites and have the diagnostics tested, patients could be tested more easily and this will significantly reduce the time that it takes to run a full trial. Reducing the time and cost of trials, should not only improve uptake, but it will hopefully improve the diagnostics themselves. If diagnostic companies are able to get back reliable information quickly on their products’ accuracy and sensitivity, they will be able to more easily tweak their products and re-test them under the current system.