How the healthcare system discourages creating low-cost solutions

The U.S. leads the world in creating new drugs and healthcare tech, but the system discourages inventors from creating cost-lowering technologies in favor of ones with a healthy return on investment, according to an article at the Journal of the American Medical Association.

"In the United States, the surest way to generate a healthy return on investment is to increase health care spending, not reduce it," says the authors, from the Uniformed Services University of the Health Sciences and Yale School of Medicine.

They use as an example a low-cost, once-a-day pill to treat cardiovascular disease, with the estimated potential to reduce the incidence of myocardial infarction and stroke by more than 80 percent.

But the pill is unattractive to investors because it costs so little--less than $1 per tablet--and the U.S. Food and Drug Administration requires large, costly clinical trials for approval.

"The same forces that encourage adoption and dissemination of costly products discourage developers from creating cost-lowering technologies, even those that might produce substantial health benefits," the authors write, citing the central finding of a 2013 RAND Health report.

That report's potential solutions include rigorous technology assessments and comparative effectiveness studies to help patients, physicians, and payers identify high-value products; authorizing Medicare to consider the price of competing products when setting payment rates; and for Medicare stop paying for drugs and treatments that are medically inappropriate or ineffective for particular conditions.

The authors of the JAMA article say there needs to be a realignment of incentives to encourage inventors and their investors to focus on value.

In one RAND Health study, researchers examined 61 studies and found that higher costs didn't necessarily translate to better care. Another study of 25,000 insurance claims from current and retired autoworkers in 10 metropolitan areas found that hospitals' reputations and prices have little bearing on their care quality.

To learn more:
- read the article