Leading Despite Legislative Limbo
Halloran’s Brian Scogland sat down with Marie Thibault of MD+DI to discuss what healthcare reform means for medical device makers. ‘Leading Despite Legislative Limbo’ was originally published by MD+DI. Click here to read the original article.
By Marie Thibault, MD+DI
What does healthcare reform mean for medical device makers and how can companies best position themselves for an uncertain future?
It’s been the summer of healthcare reform, and while the latest attempts in the Senate to craft viable legislation have failed again, the motivation to institute change to the healthcare system remains. That means uncertainty for patients, physicians, and the healthcare industry isn’t going anywhere.
“The uncertainty I think is—it’s tangible, at least in the medical device space—and I would imagine across the entire spectrum of healthcare,” Brian Scogland, senior consultant at Halloran Consulting Group, told MD+DI in an interview earlier this year.
What should medical technology companies be doing to prepare and manage the unpredictable situation as lawmakers do battle?
Johnson & Johnson’s CEO Alex Gorsky is emblematic of one way medtech executives can stay involved in the policy process. He has been a visible presence, meeting with officials to discuss the issues that would impact healthcare businesses. “We’ve been monitoring the ongoing development of the AHCA with great interest and think that as our political leaders bring the new healthcare bills through Congress, it is important that they consider how these efforts will ensure stability within the system, while enhancing the competitive market and fostering continued innovation for new treatments and cures,” Gorsky told analysts on the company’s July 18 earnings call, according to a Seeking Alpha transcript.
A few well-known medtech CEOs, including Gorsky, are members of the Business Roundtable policy advocacy group. Other members include Miles White from Abbott, Timothy Ring from C.R. Bard, and Medtronic’s Omar Ishrak. The group focuses on several policy issues, including healthcare and taxation.
For those medtech executives who don’t have a front row seat to the healthcare reform proceedings, Scogland suggests working with industry advocacy groups like AdvaMed to ensure their views are considered. “Those letters from organizations like AdvaMed . . . they are taken into consideration. That’s what I would certainly recommend—find an advocacy group and have your voice heard that way rather than trying to advocate individually,” he said.
Consider the Potential Impact
The latest analysis of healthcare reform legislation by the Congressional Budget Office has estimated that the number of uninsured people would increase by 32 million by 2026. That increase in the uninsured population may influence procedure volumes, capital equipment sales, and use of medical devices. What the exact effect will be is unknown and likely will vary for each company, but medtech executives can carefully consider what various scenarios might mean for their businesses.
In a May 17 research note, Larry Biegelsen, senior analyst at Wells Fargo, wrote that an increase in uninsured people could have a small impact on medtech volume. “Our analysis suggests that if the original AHCA bill were to become law, medtech volume in the US would be negatively impacted by 0.5% in 2018E with the pure play spine names most impacted,” Biegelsen wrote. At the time of his note, the CBO had evaluated the House’s American Health Care Act (AHCA) and estimated that the number of uninsured would increase by 24 million by 2026.
Earlier this year, medtech executives downplayed concerns about possible market impact from reform. Medtronic’s Ishrak told analysts that new products were more impactful to the business than market dynamics. JNJ’s Gorsky pointed out that the Affordable Care Act hadn’t led to a major increase in procedure volumes.
Still, medtech leaders will want to determine what change might mean for their own companies. Biegelsen wrote, “At this point, we see the potential impact of AHCA on medtech volumes as a small potential headwind for the sector in 2018 but one that should be monitored.”
Consider What’s Known
As the last couple months have shown, there are a lot of unknowns about what final legislation might look like. So, one strategy is to spend time considering changes that are expected to be implemented because of the 21st Century Cures Act.
In an interview earlier this year, Terrence Norchi, MD, president and CEO of Arch Therapeutics, told MD+DI the Cures Act is meaningful for smaller companies like Arch Therapeutics. “The most important stuff for companies like ours, anything that makes it faster and more efficient, less red tape, and fewer surprises, is a good thing . . . A little extra money up front to save a month or two of that burn can be a tremendous investment for a company.”
Norchi pointed to the potential for a reduction in paperwork, streamlined communication of clinical information for physicians, and priority review of devices as some of the positives of the Cures Act for his company and the industry.
“With healthcare reform being an unknown, I think it’s best to really focus on what’s out there currently,” Scogland said. “The 21st Century Cures [Act] has been passed . . . That’s where we’re really guiding our clients . . . on keep[ing] an eye out for the implementation, the guidances that are expected coming out from the 21st Century Cures [Act].”