Week in DC: Great insight into the healthcare industry as a whole

Wailan YipAs a future Medtronic employee, I was excited to the Vice President of Government Affairs for Medtronic on the agenda for the Week in DC trip.  He is responsible for understanding the health policies within the United States and globally.  I found it particularly interesting that his role has recently shifted more towards evaluating strategic partnerships globally rather than the typical activities on Capitol Hill.

He opened his talk with news that shook the entire Medtronic organization earlier that morning. Medtronic’s new renal denervation device had failed its primary efficacy endpoint in its most recent United States clinical trial; however, the new device had passed its safety endpoints. Medtronic had purchases this technology for $800 million just three years prior. He went on to discuss how the device is approved in many countries globally and how the senior leadership at Medtronic will need to carefully plan out and execute the next steps for this technology both in the US and abroad.

Additionally, the results of this trial were not only a blow to Medtronic, but it was also a blow to the FDA. The device was enrolled as the cornerstone device in Parallel Review program. This program would allow a device company to seek FDA approval for the marketing and sale of the device in parallel with CMS approval for reimbursement. Prior to the Parallel Review process, there often existed a lag between these two approvals. With the failure of the Medtronic clinical trial, the FDA will now need to review the program and how to it will incentivize other companies to join in the future.

The efficacy failure in the US trial highlights a couple of differently things to me. First, it shows that a behemoth organization, with all the necessary tools and resources, can still fail at developing a product, even after investing nearly a billion dollars into the technology. Thus, nobody has a crystal ball into predicting how a medical device will perform once implanted into the human body. Second, the Medtronic device highlights how the rules are different in the United States versus globally. The renal denervation device had received the CE Mark and thus has been and is being sold in Europe. This is significant since it is unclear if the device will ever be approved by the FDA and thus will ever be sold in the United States.

After discussing the clinical trial, he went on to discuss “wrap-around” services and how healthcare is shifting from volume to quality. In the past, companies such as Medtronic, have been able to charge premium pricing for iterative improvement. However, in this new environment of cost containment, this will no longer be able to occur. There is significant downward pricing on not only medical devices, but also on healthcare as a whole. As more products and services begin to be commoditized, I believe we will see a shift to where the customer will now be the economic buyer and where price will be the dominate variable in determining whom to purchase from. Furthermore, as these trends continue, I would suspect that more companies will follow Medtronic’s example of playing additional roles throughout the continuum of care.

Overall he provided great insight into not only Medtronic and the medical device industry but also the healthcare industry as a whole. As regulations continue to be evolve and become more stringent and as quality comes to the forefront, the ability to understand health policy will be absolutely critical for any healthcare company to survive.