The Price of Medical Technology:
The Industry Perspective
David H. Nexon
Senior Executive Vice President
November 04, 2008
About AdvaMed
• World’s largest medical technology association
• 1,600+ member companies and subsidiaries
• Members produce 90% of sales in domestic market,
50% of sales in global market
• 70%+ of member companies have less than
$30 million in annual revenue
• 65 staff with global expertise, bi-partisan backgrounds
• 45 member Board of Directors including 5 from smaller
companies
Technology: the Economic Value
Source: William D. Nordhaus, “The Health of Nations: The Contribution of Improved Health to Living
Standards,” in Kevin M. Murphy and Robert H. Topel, Measuring the Gains from Medical Research: An
Economic Approach, University of Chicago Press, 2003.
Technology: the Human Value
Change In Selected Health
Indicators 1980-2000[1]
• Life expectancy increased 3.2 years
• Disability among the elderly declined 25% (and is
saving Medicare $73 billion annually) [2]
• Mortality from heart attack was cut by 50%
• Mortality from stroke was cut by one-third
• Mortality from breast cancer has been cut 20%
[1] Medtap, The Value of Investment in Health, 2002.
[2] Kenneth G. Manton, et al., Journal of Aging Health, 2007; 19; 359.
Medical Devices: A Relatively Low and
Constant Share of National Healthcare
Expenditure
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
% of NHE
Medical Devices as a Percentage of National
Health Expenditures
Source: Roland “Guy” King, Estimates of Medical Device Spending in the United States, AdvaMed 2007
Medical Devices:
A Price Competitive Industry
Average Annual Increase in Medical Consumer Price Index,
Consumer Price Index, and Medical Device Prices from
1989-2004
5%
4%
3%
% increase
2%
1%
0%
Medical
Consumer
Price Index
CPI
Medical Device
Prices
Source: Roland “Guy” King, Estimates of Medical Device Spending in the United States, AdvaMed 2007
Hospital price increases have outpaced
device price increases
Producer Price Index Comparison
2003-2007
120
111.2
115.1
General medical and
surgical hospitals
106.5
Surgical appliance and
supplies manufacturing
Index Relative to 2003 PPI Levels
110
105.5
101.3
100
101.0
90
Surgical and medical instrument
manufacturing
90.2
93.0
Electromedical apparatus
manufacturing
80
70
60
2003
2004
2005
2006
2007
Industry: General medical and surgical hospitals
Industry: Electromedical apparatus manufacturing
Industry: Surgical and medical instrument manufacturing
Industry: Surgical appliance and supplies manufacturing
Source: US Department of Labor, Bureau of Labor Statistics, PPI Industry Data
2003 earliest year available for General and medical surgical hospitals
Medical Technology is Not Driving
Hospital Costs
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1998 – 2003, for community hospitals;
Centers for Medicare and Medicaid Services, Office of the Actuary; Medical Expenditure Panel Survey
Medical Technology is Not Driving
Hospital Costs
Costs of Goods and Services Purchased: Key Components
Costs of
Goods and
Services
Purchased
52%
Wages & Salaries/Employee
Benefits – 37.7%
($67 B)
Prescription Drugs – 3.1%
Professional Fees – 2.9%
Prof. Liability Insurance – 0.3%
All Other – 8.0%
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1998 – 2003, for community
hospitals; Centers for Medicare and Medicaid Services, Office of the Actuary; Medical Expenditure Panel Survey
November 04, 2008