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Pricing transparency at point of care
Veronika Valdova • January 20, 2020
Pricing transparency at point of care
July 2017
Medical innovation, increasing the complexity of care, and the relationships between stakeholders gradually lead to the increase in prices of healthcare for consumers. Lack of transparency affects the cost of premiums as well as out-of-pocket expenses. Policymakers in their considerations need to include more indicators than just insurance coverage that, without other measures, will not curb soaring healthcare expenses. Delayed care is a public health concern because of the risk of disability and under-treatment of otherwise treatable conditions. The presentation of data to non-technical audiences, including decision-makers, has to be understandable to convey the information reliably. Systems modeling techniques should be considered to estimate stakeholder behavior in a dynamic system accurately. Currently, many instances of abuse exist within the system. As an example, chargemaster fees apply to uninsured or out-of-network patients. Hospital fees are, however, tackled by state laws rather than at the federal level. Consumers in health care tend to behave differently than in other industries and often think less about the costs involved. Physicians’ education should include the delivery of cost-conscious care to prevent financial harm to their patients. Transparency of cost is one of the most effective mechanisms that enable patients and providers to make informed choices.
Pricing transparency
Medical innovation improves patient outcomes but also considerably increases healthcare costs. Patients were directly responsible for payments to physicians until the end of the 19th century. With the gradual adoption of aseptic techniques, many procedures moved from home settings to the controlled environment in hospitals. Increased complexity of care and the introduction of third-party payers led to decreased transparency of the cost of care for patients. Financial toxicity as a byproduct of otherwise effective treatment first emerged as an important topic in connection with modern cancer therapies. Economic harms inflicted by care are becoming an increasingly important topic in healthcare. The escalating costs of care cannot be tolerated indefinitely (Gupta, Tsay & Fogerty, 2015).
The introduction of the Affordable Care Act was met with high expectations in regards to access to quality healthcare care covered by an insurance policy. In reality, health insurance coverage did not reduce the total medical debt; some individuals and families suffered. The problem got worse due to the high cost of premiums for the most vulnerable groups, high copay, and lack of transparency of the cost of care.
Defining the policy issue
The cost of care and its affordability has long been a hot topic exploited for political purposes. While the Affordable Care Act sought to decrease the number of uninsured, who were among the most affected by excessive medical bills, insurance alone is not going to solve the problem of soaring costs in U.S. healthcare. Confusion over coverage, convoluted insurance coverage plans, out-of-network fees, and other traps are among the causes of exorbitant costs of healthcare in the U.S.
Delayed care as a public health concern
Galbraith et al. (2013) argue that high copay and the complexity of insurance plans lead to underuse and delays in the use of needed care. The inability of providers to foresee these issues compounds the problem. The example of the Massachusetts health insurance exchange showed that the majority of enrollees who did not qualify for subsidies chose bronze or silver plans with high deductibles. Unsurprisingly, the financial burden affected most families with more children and lower incomes and those with more complex health needs. Transparency of pricing and the ability to estimate the cost of care accurately turned out to be a significant problem. The authors concluded that policymakers should focus their attention on the development of cost calculators and price transparency tools (Galbraith et al., 2013).
Insurance does not solve the problem of cost
The reluctance of lower-income population to enroll in mandatory insurance is not driven by the lack of desire for healthcare. The reasons are more complex and depend on the amount of copay, the ability of people to make informed choices about the care they receive, and their ability to navigate the complex U.S. healthcare system. The fact that a drug is new and FDA-approved is not a guarantee that it is always better than therapies that are much less costly. A thorough understanding of treatment cost-effectiveness is a challenge even for seasoned professionals. Policymakers at all levels would need the information to be presented to them in a form that is accessible and understandable.
Presentation of data
The presentation of complex economic evaluations to non-technical audiences can be a challenge in itself. Many guidelines on economic evaluations include standard reporting templates and formats, mostly in the form of tables and graphs. Sullivan et al. (2015) analyzed thirty-one guidelines for instructions on how to present economic analyses to non-technical audiences. In healthcare, common elements include clinical outcomes and quality-adjusted life years (QALY) and disability-adjusted-life-years (DALY), and the effect of delayed or inappropriate care on these attributes. Communication of cost-effectiveness to non-technical audiences such as policymakers and patients may be a tough thing to do. Conveying uncertainties and limitations of science to stakeholders within healthcare is essential to maintain credibility and consistency (Sullivan, Wells & Coyle, 2015).
Modeling of complex systems requires an understanding of the system as a whole. While systems modeling software is available and routinely utilized in many other industries, it seems that healthcare is still more dependent on decisions made by people whose main qualification is an opinion driven by ideology. The use of modeling of stakeholder behavior and cost-effectiveness analyses for individual protocols and procedures needs to become a norm rather than an exception.
Considering the context
In 1933, the Committee on the Costs of Medical Care argued that increased need for healthcare leads to costs that are becoming burdensome for individual families that suddenly had to pay for childbirth and other medical care. In 1954, expectant mothers would have received the cost of their care and board upfront. This transparency vanished with the increasing complexity of care and the introduction of provider-payer-patient relationships (Gupta, Tsay & Fogerty, 2015).
Social and health implications
Patients’ decision to delay or forgo needed care because of the cost may not be evident to providers who rarely discuss the cost of care with their patients. Such avoidance of financial issues leads to non-adherence to prescribed treatment and improper management of otherwise treatable conditions (Galbraith et al., 2013). Under-treatment of chronic diseases such as high blood pressure and diabetes leads to earlier onset of complications, disability, and premature death.
Chargemaster
Price transparency is the key to preventing billing disputes for out-of-network care. A variety of approaches is used to remediate out-of-network billing disputes over overcharged care. Richman et al. (2017), in their review of potential legal remedies, concluded that contract law, if appropriately applied, including price lists, should prevent many if not most of the current billing disputes, and should also provide sufficient incentives for transparent pricing. Inflated charges for out of network care are the primary driver of increasing financial burden to patients, especially those who have to seek urgent unavoidable care. The abuse of vulnerable patients by providers who unilaterally set prices and charge exorbitant amounts for out-of-network care is well documented in the current media. Although federal laws do not safeguard patients against the use of inflated chargemaster prices, some states have enacted consumer protection legislation “balanced billing laws” that limit the practice. Contract law, however, offers a solution that is based on existing market forces and mutual assent (Richman, Kitzman, Milstein & Schulman, 2017).
Stakeholders
Healthcare organization in the U.S. is a complex affair with many direct and indirect relationships between stakeholders. In addition to healthcare providers, patients and insurers, the key participants include the pharmaceutical and medical devices industry, municipal and state administration, regulators, investors, and a variety of private service providers in related industries. The relationships between facility owners, management, healthcare personnel, vendors, suppliers, and government and private payers can be very complex and dynamic due to ongoing organizational changes. The continuum of care needs to function often in spite of these complicated and often conflicting and clashing structures.
Women as critical stakeholders
Women are often responsible for making healthcare-related decisions and choices. In Massachusetts, the cost-containment law intends to improve transparency and curb costs of care utilizing a variety of innovative approaches. The bill, however, had some unintended consequences for women’s care that later had to be corrected in several amendments. Women are more likely to be affected by unmanageable healthcare costs because of a combination of lower-income and higher needs due to longer life span, reproduction-related care, and increased risk of multiple chronic diseases. Women are critical stakeholders among consumers when it comes to healthcare (Glynn, MacKenzie & Fitzgerald, 2016).
Considerations within nursing
Healthcare shopping is not necessarily something patients want to contemplate on, especially when there is a perceived more or less urgent need. The consideration of cost is a shared responsibility between the patient and the physician.
Consumer behavior
Consumer behavior in healthcare differs from the behavior of the same people in any other industry. Commonly, people enroll in plans without overthinking the options and visit providers they know without any consideration of the quality of care or costs involved: confusion and lack of communication compound the problem. First, patients who seek care often do not know where they can find the answers to questions that only occur to them once they are in contact with the provider. Second, the answers they receive may inflict even more confusion, primarily when a provider in their network refers them to out-of-network specialist care.
Most importantly, their personal needs do not always conform to the hospital's internal processes. Consumer behavior in healthcare and patient attitudes depends on their trust in the healthcare system in general and on their understanding and knowledge of the system. Improving institutional culture and communication with customers at their own pace is essential to improve satisfaction and outcomes. Consumers shall be able to make informed choices — rational decision-making by consumers shall be at the heart of curbing health care costs (Roberts, 2016).
Are physicians aware of the costs of care they provide?
Jonas et al (2016) argue that value for patient and cost-consciousness needs to become part of physicians’ training. The study was driven by results of post-intervention surveys in a children’s’ hospital to develop a new curriculum about value-based care. Increased transparency and physician education are essential to provide cost-conscious care and limit the care that does not improve clinical outcomes. Project Striving for Value in Pediatrics includes topics that enable physicians to make treatment decisions that are value-based and cost-effective (Jonas, Ronan, Petrie & Fieldston, 2016).
Options and solutions
The four currently prevailing strategies to counter chargemaster abuses include increased transparency of pricing, enacting state laws that prohibit balance billing, transferring the obligation to pay for out-of-network care from consumers to insurers, and providing mediation. The most promising strategy, however, relies on the current bedrock of contract law (Richman, Kitzman, Milstein & Schulman, 2017).
The quality of care
Patients should be able to decide for themselves what type of care and where they should seek based on data that are available and accessible. The differences between hospitals are substantial in terms of quality, cost, and value. There are no tools in the public domain that would allow comparison of quality and cost of care. Weeks et al. (2016) created a tool that utilizes publicly available data derived from Hospital Compare and Medicare care expenditures. Although imperfect, the measures as presented still offered reasonably accurate information on the cost and quality of care (Weeks, Kotzbauer & Weinstein, 2016).
Transparency tools
By 2014 – 2015, health plans implemented a variety of tools that should assist members in their efforts to estimate the cost of care and their contributions in advance. These tools primarily cover commonly used procedures, including surgery and radiology. Price estimates facilitate informed choices and increase the probability that members will facilities that offer the best value for their money. The majority of the estimator tools allowed the comparison of providers and services and the cost of prescription drugs based on data from paid claims (Higgins, Brainard & Veselovskiy, 2016).
Cost-transparency tools are often not apparent to physicians who should be able to advise their patients on how to access cost-effective care. Out-of-pocket expenses are a significant burden to patients, and unnecessary care that burdens insurers is reflected in the cost of premiums. The Institute of Medicine, in its study of healthcare costs, concluded that in 2009, approximately a third of all healthcare spending, totaling $750 million, was spent on unnecessary services (Kirkner, 2014).
It is also unclear whether transparency tools decrease the cost of care. Studies from some developing countries suggest that this is not always the case. Comparisons of price levels work best when performed against multiple countries to account for a variety of methodologies and variations (Hinsch, Kaddar & Schmitt, 2014).
State laws on transparency
The problem of transparency of healthcare pricing initiated numerous discussions on the topic, such as the Healthcare Incentives Improvement Institute (HCI3) or Catalyst for Payment Reform (CPR). The results of these initiatives highlighted the grim state of affairs: in October 2013, 36 out of 50 states got a D or an F for their price transparency efforts or lack thereof, respectively. A new law passed in North Carolina in 2013, the Health Care Cost Reduction and Transparency Act, gives hospitals numerous obligations, including publishing prices they charge uninsured patients (Carroll, 2013).
State laws to curb costs
The cost of novel prescription drugs and their widespread use is one of the crucial drivers of increasing costs of care. In the absence of federal legislation, some states have been tackling the cost of healthcare on their own. Some states limit access to costly drugs or imposed restrictions for those whose care is covered by public funds. Some legislative proposals challenge the industry claim that the high cost of new drugs reflects the cost of research and approval and require disclosure of research and development costs as well as a value proposition and clinical benefit of the new drug. Verification of the data provided by the industry and the ability to include research expenses for failed projects remains a significant challenge (Sarpatwari, Avorn & Kesselheim, 2016).
Model Act
In November 2015, the National Association of Insurance Commissioners amended the Model Act to include more protections for consumers. The Model Act intends to improve pricing transparency and encourage mediation between payers and providers. Among other obligations, the providers would be required to create accurate network directories that would inform patients what care is out-of-network. The Model Act has not been enacted in any state yet but can serve as an example of growing efforts to curb the problem (Richman, Kitzman, Milstein & Schulman, 2017).
What’s next – options to consider
Because of the legal and political ambiguities in regards to access to care, and the complex system of medical insurance in America, it is advisable to start at the hospital level with a pilot project of cost-conscious care optimization for underinsured and uninsured populations. The pilot could encompass prioritization of cost when providing care to patients and the provision of cost-calculation when offering treatment options to patients. Evaluation of such a project can be conducted in cooperation with local and municipal authorities and academic institutions to develop an evidence-based solution that enhances public health in the community.
Conclusion
Active dissemination of information on relative risks, benefits, and treatment alternatives, including cost comparison and cost-effectiveness to enable consumers to make better choices, seems to be a more viable solution. Physician education of cost-conscious care significantly improves the awareness of the cost-effectiveness of individual therapies. For policymakers, systems modeling, in addition to a more accessible presentation of cost-effectiveness, would facilitate the development of rational, evidence-based solutions.
References
Richman, B., Kitzman, N., Milstein, A., & Schulman, K. (2017). Battling the chargemaster: a simple remedy to balance billing for unavoidable out-of-network care. Am J Manag Care, 23(4), e100-e105. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/28554214
Sarpatwari, A., Avorn, J., & Kesselheim, A. (2016). State Initiatives to Control Medication Costs — Can Transparency Legislation Help?. New England Journal Of Medicine, 374(24), 2301-2304. http://dx.doi.org/10.1056/nejmp1605100
Weeks, W., Kotzbauer, G., & Weinstein, J. (2016). Using Publicly Available Data to Construct a Transparent Measure of Health Care Value: A Method and Initial Results. The Milbank Quarterly, 94(2), 314-333. http://dx.doi.org/10.1111/1468-0009.12194
Roberts, K. (2016). Four steps for improving the consumer healthcare experience across the continuum of care. Am J Manag Care, 22(4), e122-4. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/27143347
Jonas, J., Ronan, J., Petrie, I., & Fieldston, E. (2016). Description and Evaluation of an Educational Intervention on Health Care Costs and Value. Hospital Pediatrics, 6(2), 72-79. http://dx.doi.org/10.1542/hpeds.2015-0138
Gupta, R., Tsay, C., & Fogerty, R. (2015). Promoting Cost Transparency to Reduce Financial Harm to Patients. The AMA Journal Of Ethic, 17(11), 1073-1078. http://dx.doi.org/10.1001/journalofethics.2015.17.11.mhst1-1511
Glynn, A., MacKenzie, R., & Fitzgerald, T. (2016). Taming Healthcare Costs: Promise and Pitfalls for Women's Health. Journal Of Women's Health, 25(2), 110-116. http://dx.doi.org/10.1089/jwh.2015.5295b
Kirkner, R. (2014). Doctors aren't grasping for cost transparency tools. Manag Care, 23(7), 23-27.
Hinsch, M., Kaddar, M., & Schmitt, S. (2014). Enhancing medicine price transparency through price information mechanisms. Globalization And Health, 10(1), 34. http://dx.doi.org/10.1186/1744-8603-10-34
Carroll, J. (2013). No informed consumers without price transparency. Manag Care, 22(10), 17-8. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/24350382
Galbraith, A., Sinaiko, A., Soumerai, S., Ross-Degnan, D., Dutta-Linn, M., & Lieu, T. (2013). Some Families Who Purchased Health Coverage Through The Massachusetts Connector Wound Up With High Financial Burdens. Health Affairs, 32(5), 974-983. http://dx.doi.org/10.1377/hlthaff.2012.0864
Higgins, A., Brainard, N., & Veselovskiy, G. (2016). Characterizing health plan price estimator tools: findings from a national survey. Am J Manag Care, 22(2), 126-31. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/26885672
Sullivan, S., Wells, G., & Coyle, D. (2015). What Guidance are Economists Given on How to Present Economic Evaluations for Policymakers? A Systematic Review. Value In Health, 18(6), 915-924. http://dx.doi.org/10.1016/j.jval.2015.06.007
Nařízení (EU) 2017/745 o zdravotnických prostředcích vstoupilo v platnost 26. května 2021. Platnost certifikátů vydaných podle stávajících směrnic vyprší nejpozději 24. května. Toto je třeba provést ve lhůtě, která odpovídá době nezbytné pro přezkoumání dokumentace a před vypršením platnosti současných certifikací. Česká republika stále nemá svůj oznámený subjekt. Jakmile dojde k akreditaci, bude ITC zavalen ohromným počtem nevyřízených podání v českém jazyce. Zajisdtěte si pomoc s podáním od týmu Arete-Zoe, který má s přípravou klinické dokumentace dle MDR bohaté zkušenosti.
The reduction of Czech-based Notified Bodies (NBs) leaves only one still pending accreditation and one in Slovakia that does accept submissions in Czech. The delay in accreditation has produced a significant backlog for submissions pending review and acceptance. The complexity of MDR is more stringent both for the preparers and the reviewers at the NB. This situation introduces many vulnerabilities into the submission process and represents substantial risk that can and should be minimized! The potential consequences of certification delays may be critical for some manufacturers. Is the cost penalty from delay because of necessary revision or rejection worth the minor economy of an in-house effort? Get your staff an assessment from a team with proven MDR success! Contact Arete-Zoe for a courtesy review of your situation and secure assistance that will reduce your risk! Stay agile, competitive, and profitable! What is the current situation? Regulation (EU) 2017/745 on medical devices (the Medical Device Regulation, MDR), which was adopted in April 2017, became applicable in the European Union on 26 May 2021, after a year delay due to Covid [i] . The certificates issued under the existing Directives for medical devices ( 93/42/EEC and 90/385/EEC ) will expire on or before May 24th, 2024. By then, all manufacturers who wish to keep their products on the market as medical devices, will have to upgrade their documents to the new standards. Previous documentation standards fall far short to the new requirements, placing significant burden on both the manufacturers and reviewers at the NB. Many previous submissions under MDR have been rejected based on documentation shortfalls within any of the many sections. When considered with the significant backlog, any aspect of documentation that requires revision only compounds certification delay and may jeopardize market access for many medical devices. All this needs to be done within a period that accounts for the time necessary for review prior to expiration of current certifications. Additionally, there is a significant bottleneck in submission processing due to the limited capacity of NBs in the EU due to a reduction in the number of designated NBs, increased number of products that are subject to review by NB due to reclassification, and increased complexity of MDR submissions compared to MDD/AIMD. The Czech Republic still does not have its own designated NB. Once accreditation occurs, the backlog of Czech language submissions will be overwhelming. The high number of returns and requests for amendments and revisions shall be expected in the initial months, slowing the process further for all. By May 2024, many manufacturers will find themselves in a situation when their products will no longer be marketable in the EU due to expired certificates and face additional consequences from having products purged from supply chain. Discussion MDR is here to stay. Czech Minister of Health MUDr. Vlastimil Válek in his introductory statement at the October 2022 AVDZP Conference [ii] stated that another postponement of MDR is out of question. While it is not in the interest of the European Union to be dominated by non-EU manufacturers, primarily from Asia, it is unlikely that the existing Regulation will be substantially changed to accommodate manufacturers’ concerns. Válek also reminded the public that the Wild East mentality with improvised devices throughout the hospital system that dominated the Czech market in the 1990s is gone and will not return. In short, MDR is a reality to which manufacturers will have to adjust. Notified bodies available to Czech manufacturers under MDR The number of EU NBs that are designated under MDR has increased to 34, half of which are located in Italy (9) and Germany (8). The remaining 17 are in Belgium (1), Croatia (1), Finland (2), France (1), Hungary (1), Ireland (1), the Netherlands (3), Norway (1), Poland (2), Slovakia (1), Slovenia (1), Spain (1) and Sweden (1) [iii] . European manufacturers can pursue certification of their products with any EU NB, with limitations to the type of product and the capacity and willingness of NBs to take on new clients. However, for access to the greatest number of NBs, the submission should be in English. Two Czech NBs were designated in Czechia under the 93/42/EEC (MDD): Institut pro testování a certifikaci, a.s. (ITC) and Elektrotechnický Zkušební Ústav, s.p. (EZÚ). Only one of them, ITC, is in the process for designation under MDR. However, the final scope of MDR codes ITC will be able to process has not been released. One additional institution, Czech Metrological Institute (CMI) is pursuing designation under MDR without prior history in medical devices under MDD or AIMD. The anticipated accreditation will take an additional year. Institut pro testování a certifikaci, a.s. (ITC), Czech Republic ITC’s current designations include Regulation (EU) 2016/425 Personal protective equipment, 2014/68/EU Pressure equipment, 2009/48/EC Safety of toys, Regulation (EU) No 305/2011 - Construction products and 2014/30/EU Electromagnetic compatibility. Designations under 93/42/EEC Medical devices and 98/79/EC In vitro diagnostic medical devices expired in May 2021 (MDD) and May 2022 (IVDD) [iv] . ITC will continue to perform audits under MDD during the transitional period until May 24, 2024. ITC submitted their application for designation under MDR on December 30, 2019. The Designating authority (ÚNMZ) verified completeness of the application and forwarded it to the European Commission in November 2020. The Commission designated the Joint Assessment Team in December 2020, which completed the evaluated in March 2021. On-site Joint Assessment was completed in June 2021. The official JAT report was issued in September 2021. ITC implemented CAPAs in fall 2021. In June 2022, designating authority ÚNMZ completed their review of CAPAs implemented by ITC and submitted it to the Joint Assessment Team for approval. In August 2022, ÚNMZ issued the final report. In September 2022, JAT issued its final assessment and a in October 23022, ITC underwent MDCG review and is now awaiting MDCG opinion that the notification can be accepted. The expectation is that ITC should be listed in the NANDO database by January 2023 for MDR [v] . According to Mgr. Jiří Heš, ITC will primarily serve Czech manufacturers who already are their clients and have certificates issued by them under MDD. New certificates under MDR won’t be issued in time and there will inevitably be a gap in coverage of products with valid MDD certification. [vi] ITC only began preparing application for designation under IVDR. Due to the extensive backlog of MDR certificates, it is reasonable to expect that the process of designation under IVDR will not be any faster. ITC currently does not offer any training on MDR for manufacturers or guidance on how to prepare submissions. The most significant thing any manufacturer can do for themselves is to ensure their submission is as appropriate as possible the first time. But they are left to their own means to sort out the transition from MDD to MDR. Without specific guidance from ITC on their expectations, there is significant risk from the ambiguity of the MDR Regulation itself. However, this risk can be reduced from experience from submissions under MDR to other NBs which will provide reasonable opportunity for a successful submission. Elektrotechnický Zkušební Ústav, s.p. (EZÚ), Czech Republic EZÚ’s current designations include Regulation (EU) No 305/2011 - Construction products and 2014/30/EU Electromagnetic compatibility. EZÚ won’t pursue designation under MDR. The activities EZÚ will continue include audit under MDD during the transitional period for 42 manufacturers whose certificates they serve, certification of quality management systems, and electrical safety. EZÚ also provides training on MDR for manufacturers and distributors [vii] . Czech Metrological Institute (CMI), Czech Republic CMI submitted their initial application in December 2020, a year later than ITC. The Joint Assessment Team evaluation (Article 39, paragraph 4 MDR) was completed in December 2021. In May 2022, CMI submitted their proposed CAPA plan. CMI strives to maintain the scope of devices included in their application (23 out of 44 basic codes and 18 out of 27 horizontal codes). The key requirement is to prove personnel availability for each code. CMI primarily intends to serve Czech manufacturers in Czech language, as only about a third of their reviewers have sufficient proficiency in English. CMI does not provide any training or guidance for manufacturers how to prepare documentation to pass their scrutiny. Certification of products on the Czech market There are over 400 Czech manufacturers listed in the database RZPRO holding nearly 6000 certificates that are currently valid. Of these, 4323 did not previously require the involvement of a NB (Class I). However, due to reclassification, some of these will require involvement of the NB under MDR, further stressing the throughput of the NB. Of the 1634 remaining certificates, 514 were issued by EZÚ and 391 by ITC. Another 133 MDD certificates were issued by other NBs that do not currently have MDR designation. The database also holds 2305 products other than Class I that do not have a NB listed. In total, ITC issued 541 certificates that are currently valid, including manufacturers from other countries. The database currently holds 630 valid certificates issued by EZÚ. All products certified by EZÚ will have to be recertified by another NB [viii] . The list of MDR codes that will be covered by ITC (or CMI, once designated) is not currently available. Mgr. Irena Storova (Czech State Institute for Drug Control) emphasized the quality of the MDR documentation as an essential condition required to avert a crisis. The current speed of issuing certificates by EU NBs is about 1.000 certificates a year. However, the anticipated need for medical devices in Europe is about 23.000 certificates issued by NBs over the period of 20 months, making the transition to MDR extremely challenging. The key problems are insufficient capacity of NB, partly due to accumulated backlog, partly due to increased complexity of MDR compared to MDD/AIMD, as well as inadequate preparedness of manufacturers to meet the new complex requirements of MDR [ix] . Experience of other EU NB shows exponential growth of applications and a serious lag in processing certificates. In February 2021, NBs received 1840 applications and processed 224 certificates. By October 2022, the number of applications grew to 8120, while the number of issued certificates was 1990 [x] . These numbers suggest further accumulation of backlog of unprocessed applications rather than catching up with the growing demand. The time to reach a Certificate according to MDR (MDR Quality Management System and Product certification) typically ranges from 13 to 18 months [xi] . This is consistent with ITC’s estimate that the review of a complete submission will take a year to issue a certificate. This means that all manufacturers who need their certificates renewed before the May 2024 deadline when they all expire will have to submit their applications before May 2023. Since ITC will only start accepting applications after the official MDR designation, it is safe to assume that all applications will be submitted in the period between the designation date and May 2023, creating a long backlog queue. To complicate the situation even further, manufacturers, whose MDR codes won’t be on ITC’s list, will have to look for a different NB to pursue their certificates. Czechia as a low price-point market The low-price level of devices on the Czech market complicates the transition to MDR even further. The system of defining reimbursements for medical devices is very rigid, and there are multiple pressures that keep prices down. These price controls conflict with increased costs associated with certification and recertification of products when considered with increased costs of energy, raw materials, transport, and labor. MUDr. Vlastimil Válek at the AVDZP Conference on October 13, 2022, stated that it is not in the interest of the European Union to allow non-EU manufacturers to dominate the EU market, and that there is an intrinsic value in self-sufficiency in times of crisis [xii] . The results from Survey on certifications and applications performed by MDCG & Stakeholders among NBs (51 NBs asked, 47 replies received) suggest that 60% of medical device clients are non-EU (10,913), compared to 7,143 EU clients [xiii] . Priority treatment for small business is not likely since SMEs are the majority of NB clients, both EU-wide and locally in the Czech Republic. In fact, as the threat for shortage of medical equipment becomes more urgent, policymakers might solve the crisis by prioritizing producers with high capacity, capable of meeting the demands of their respective health systems, as we have seen with the imports of medical equipment and protective materials during the Covid crisis. What is the risk to business due to delays in certification? The ability of NBs to process applications in a timely manner is an essential condition for the function of the medical device sector. This is directly influenced by the quality of manufacturers’ submission for certification. Manufacturers cannot legally keep their products on the EU market without valid certification. And, additional expenses will be incurred, if products have to be recovered from distribution chains due to delays in certification. Furthermore, this will create gaps in coverage, creating a void that can be filled by competitors. Extended periods of absence can stall otherwise good products and limit marketability once certification is finally obtained. Failure to obtain MDR certification for any portion of a product portfolio is an existential threat to any enterprise, potentially forcing reduction of staff, downsizing, making the enterprise vulnerable to competitors, or simply losing viability and going out of business. The absence of a feedback loop regarding the minutia of submissions’ content and format will cause additional delays and adjustments by the industry. ITC does not provide any MDR training and did not issue any guidance documents to facilitate successful submissions and reduce ambiguity relating to the novelty of the process. The first MDR certificate was issued in September 2019 by BSI [xiv] . This means that the cumulative experience in the industry among competition is significantly higher, placing Czech manufacturers 4 years behind other EU players. At present, Czech manufacturers have to rely on training provided by other NBs, industry consultants who rely on the same, in addition to feedback from their clients, and their own understanding of the Regulation and associated MDCG guidelines. Although CzechInvest does have a plan to start a comprehensive training program for manufacturers to facilitate the transition to MDR, the course has not started yet. The first students are expected to graduate in June 2024 [xv] . Learning curve by both newly designated NBs as well as manufacturers will inevitably affect the speed of processing, forcing reworks and amendments that would otherwise be avoidable. Securing consultancy with demonstrated MDR competency will remove substantial risk from the current situation. Recommendations What is the risk, and how does Arete-Zoe help your enterprise to mitigate such risk? The key to a successful MDR certification is a high quality, timely submission that complies with or better, exceeds minimum MDR requirements, ensuring timely processing and avoiding returns, requests for more information and outright rejections. It is important to note that the review and approval process depends on the understanding and application of MDR requirements by individual reviewers. Therefore, exceeding minimum requirements becomes a necessity for confident approval. The impact of additional information requests, although minor in terms of extra work, can be significant due to delays. Additionally, other manufacturers’ failed submissions in a long backlog of applications will continue to burden the system. The quality of the initial submission is essential to avoiding consequences in the transition to MDR and may be the single factor that keeps the business open. Manufacturers who have a fully trained in-house team already should still expect challenges in preparing MDR submissions themselves. The time to develop MDR expertise is very limited, considering the pressure to prepare the full documentation and submit it before May 2023. Even with a well-staffed team, the task can simply be overwhelming due to the sheer volume of material required in contrast to previous MDD/AIMD submissions. Arete-Zoe team has significant experience preparing clinical documentation for clients transitioning from MDD to MDR in both Czech and English and submissions through multiple NBs. Our exceptional success record with clinical documentation includes products that were previously rejected but passed with our assistance. We can help control the risk of failure or delay for our clients by providing the essential support you need to avert a avoidable delays in product certification. Arete-Zoe team can either prepare the full submission or augment your existing team with essential skillset your team might not have. References [i] https://www.ema.europa.eu/en/news/medical-device-regulation-comes-application [ii] Válek, V (2022). Introduction. AVDZP Conference 13/10/2022, Praha, Czech Republic. [iii] NANDO database https://ec.europa.eu/growth/tools-databases/nando/index.cfm?fuseaction=directive.notifiedbody&dir_id=34 [iv] NANDO database https://ec.europa.eu/growth/tools-databases/nando/index.cfm?fuseaction=directive.notifiedbody&dir_id=34 [v] Heš, J (2022). Implementace MDR: Kde jsme a kam směřujeme. AVDZP Conference 13/10/2022, Praha, Czech Republic. Institut pro Testování a Certifikaci. [vi] Heš, J (2022). Implementace MDR: Kde jsme a kam směřujeme. AVDZP Conference 13/10/2022, Praha, Czech Republic. Institut pro Testování a Certifikaci. [vii] Vlasák, M (2022). Dozorová činnost dle MDD. AVDZP Conference 13/10/2022, Praha, Czech Republic. Elektrotechnický zkušební ústav. [viii] Czech database of medical devices RZPRO https://eregpublicsecure.ksrzis.cz/Registr/RZPRO/ZdravotnickyProstredek [ix] Storova, I (2022). Problematika ukončení přechodného období MDR z pohledu SÚKL. AVDZP Conference 13/10/2022, Praha, Czech Republic. State Institute for Drug Control. [x] MDCG & Stakeholders (2022). Notified Bodies Survey on certyifications and applications (MDR/IVDR). 24/10/2022. European Commission. [xi] MDCG & Stakeholders (2022). Notified Bodies Survey on certyifications and applications (MDR/IVDR). 24/10/2022. European Commission. [xii] Válek, V (2022). Introduction. AVDZP Conference 13/10/2022, Praha, Czech Republic. [xiii] MDCG & Stakeholders (2022). Notified Bodies Survey on certifications and applications (MDR/IVDR). 24/10/2022. European Commission. https://health.ec.europa.eu/latest-updates/notified-bodies-survey-certifications-and-applications-2022-10-26_en?fbclid=IwAR3w3YH7UD2HBccQ6pBKWP3UlpgSnvQj9qFoNUeLIF-6ZWl8IOwP2Wx88Tk [xiv] BSI (2019). BSI certifies first product to the Medical Devices Regulation. 02 September 2019. BSI. https://www.bsigroup.com/en-GB/medical-devices/news-centre/enews/2019-news/bsi-certifies-first-product-to-the-medical-devices-regulation/ [xv] Hájek, J (2022). Národní plán obnovy. Komponenta 1. 4. Digitální ekonomika a společnost, inovativní start-upy a nové technologie. Program na podporu specifických systémových a produktových certifikací a souvisejícího vzdělávání. AVDZP Conference 13/10/2022, Praha, Czech Republic.
History of EU device legislation, definitions, obligations of economic subjects
Introduction & Orientation
More than 500,000 medical technologies are available on the European market, from hospitals to community care settings and people's homes. The products range from syringes, pregnancy tests, and wheelchairs to X-Ray machines and body scanners, pacemakers, hip implants, and pharmacogenomic tests. The medical technology industry is the source of a constant flow of innovations. The sector spends about 8% of its sales on R&D. Typical product lifecycle is about 18 to 24 months when a new, improved version becomes available. In 2020, the European Patent Office (EPO) accepted nearly 14,200 patent applications in the medical technology sector, trumping pharmaceutical patents (8,500 applications) and biotechnology (7,200). European and U.S. entities filed almost 80% of the applications (38% EU and EEA, 39% U.S.) [ 1 ]. The European medical technology sector employs more than 760,000 people, mainly in Germany (210,000), the United Kingdom (102,800), Italy (94,000), France (89,000), Switzerland (63,000), and Ireland (40,000), accounting for 0.3% of total employment. In comparison, the European pharmaceutical industry employs around 795,000 people. These jobs reach a value-added of about €184,000 per employee. More than 33,000 medical technology exist in Europe, of which 95% qualify as small, medium, and micro-sized companies (SMEs). The majority of these enterprises employ less than 50 people [ 1 ]. In 2020, Europe had a positive trade balance in the medical technology sector of € 8.7 billion. Compared to 2019, the European trade balance dropped by 27.5% (€ 12 billion in 2019). The most important trading partners for Europe are the United States, China, Japan, and Mexico. Germany, Ireland, the Netherlands, Belgium, and Switzerland have the highest trade share, both within and outside the EU [ 2 ]. Until May 2021, the medical device sector was regulated by Medical Device and In Vitro Diagnostic Device Directives 93/42/EC and 90/385/EEC (MDD and IVDD), when the new Regulations replaced these: Medical Device Regulation (EU) 2017/745 (MDR) and In Vitro Diagnostic Device Regulation (IVDR) 2017/746 [ 3 ],[ 4 ]. The new regulations introduced numerous changes, including the reclassification of some devices, requiring additional obligations for manufacturers to comply with. About 85% of in-vitro diagnostic devices will now require Notified Body involvement, compared to ~20% under the IVDD. Existing MDD/IVDD certificates remain valid until May 2024. After this date, all devices on the EU market must comply with the new MDR/IVDR regulations [ 5 ]. For some manufacturers, the costs associated with keeping some of their devices on the market under MDR/IVDR may no longer justify the expense considering their profitability. Others may not be able to obtain new CE Mark certification in time due to decreased capacity of notified bodies. These factors combined are already reducing the number of devices on the EU market and limiting the certification of innovative products. The number of notified bodies available to review new certifications and recertifications dropped significantly under the MDR/IVDR. Of 51 notified bodies designated to MDD [ 6 ] and ten to AIMDD [ 7 ], only 29 obtained designation for MDR, of which seven operate in Germany, seven in Italy, and three in the Netherlands [ 8 ].
The Medical Device industry produces a vast number of products, ranging from bandages and surgical instruments to life function monitors to imaging technology. The technology currently in use varies from devices that have been in use for decades to highly innovative products. Innovations in the medical device field are frequent and typically incremental in response to feedback from physicians. Mordor Intelligence estimated the global Medical Devices market at USD 532.62 billion in 2021, growing at a CAGR of around 5.5%, to reach USD 734.39 billion in 2027 [1]. Fortune Business Insights projects the global medical devices market growth from $455.34 billion in 2021 to $657.98 billion in 2028 at a CAGR of 5.4%. This development follows a decline from 2020, when CAGR dropped to 3.7% due to the pandemic [2]. The key drivers of market growth include the rising prevalence of chronic diseases, increased disability throughout the population, technological advancements in medical devices, and population aging. The U.S. medical device market was valued at USD 186.5 billion in 2021 and is anticipated to exhibit a compound annual growth rate (CAGR) of 5.0% over the forecast period to reach USD 262.4 billion in 2028 [4]. The Medical Device sector is even larger than Biopharmaceuticals, that by comparison, employed over 224,000 people, earning $21.2 billion [3]. The rising prevalence of chronic diseases and the increasing geriatric population in the country are the key market drivers. The Medical Device industry has a significant impact on the U.S. economy and supports hundreds of thousands of jobs. More than 80 percent of U.S. medical device companies have fewer than 100 employees [5]. In 2020, the U.S. Medical Device industry supported over 329,000 jobs, with an annual payroll of $25.8 billion [3]. Employment and payroll for Medical Device Subsectors, 2020 ( SelectUSA ):
U.S. Pharmaceutical Dependency on Foreign Sole-Source Production of Essential Materials Imposes Vulnerable Exposure to Interruption by Both Natural and Man-Made Threats
In the high consequence environment of pharmaceutical development, any assumption made earlier in the process can prove extremely costly if uncorrected once more information becomes available. From a business perspective, it is essential to create a safe avenue for communication of concerns regarding the drug candidate’s efficacy, safety, toxicity, or pharmacological function immediately as the researchers become aware of them.
Innovation always involves the risk of failure. It is an art to see what the data show, and what they don't, and which projections are the result of our wishful thinking or unsubstantiated assumptions. It may be just my impression that 14th-century logician William of Ockham whispers in my ear that entities shall not be multiplied unnecessarily.
Companies are growing in size due to acquisitions and mergers. Operations routinely span across geographical, jurisdictional, and cultural boundaries. The trend of industry consolidation continues in 2015 and 2016: the total number of deals flattened and remained even at around 600 mergers a year. Geographically, mergers, and acquisitions have been shifting from the U.S. to Western Europe. This shift is the result of transactions driven by the need to add complementary products to the core business areas and tax inversions.