The Hidden Costs of Monopolies in Medtech

In reality, though, these markets are not highly competitive markets that drive down price, foster innovation and rewards choice. The reality is that through a variety of different practices, these technology providers paralyze the providers within a set frame of technology consumption that that repeats itself across decades and different technology iterations. The orthopedic doctor gets introduced to a certain brand of technology during his/her residency, develops a personal relationship with the sales representative, develops a comfortable relationship with the technology – and then sticks with the brand until retirement. Brand loyalty becomes a crutch for the average doctor, a means of reducing uncertainty and ensuring performance. It is actually rare, in spite of the number of suppliers in these spaces, that the doctor switches technology or varies the choice of brand in his/her procedures. Preference becomes reliance, and choice is replaced with continuity in technology utilization.

Preference becomes reliance, and choice is replaced with continuity in technology utilization.

This relationship between technology brand and clinical practitioner is effectively monopolistic. Even if there are alternatives, they are not considered. As a future or potential patient, I am actually happy with this, because my clinical treatment will be top-of-the-line from a technology perspective and perfectly administered by a doctor who knows the equipment and the devices inside and out. However, there is a hidden cost to these healthcare technology monopolies, and in a few instances, MedTech providers have been called out for monopolistic behavior. 

For example, six years ago, reprocessor Innovative Health filed a lawsuit against Biosense Webster for monopolizing and restraining trade in the nationwide markets for the sale of high-density mapping catheters and ultrasound catheters.  On May 16th this year, the jury returned a unanimous verdict in Innovative Health’s favor on all four counts presented at trial, finding that Biosense Webster violated federal and California antitrust laws. A permanent injunction issued August 27 ordered Biosense Webster to discontinue its case coverage policy and to cease other practices designed to restrict the use of reprocessed devices. Innovative Health CEO Rick Ferreira said, "Our customers have really felt taken advantage of. It is on their behalf we brought this case, and the court's decision is their victory as much as it is ours. Monopolistic conditions for too long have permitted suppliers to bully hospital buyers into taking deals that effectively cost more or provide lesser care. This decision should stop such practices. Reprocessing, of course, will now be able to bring hospitals even stronger savings, and we are looking forward to supporting this evolution." 

Reprocessing, of course, will now be able to bring hospitals even stronger savings, and we are looking forward to supporting this evolution.

This lawsuit exposes the hidden cost of medical technology monopolies: Biosense Webster (now J&J MedTech) captured the physician and locked the lab into using a certain configuration of medical technology, without a real option of choosing an alternative. There are four types of hidden costs associated with these MedTech monopolies:

• Price: When the typical orthopedic or cardiac (or whatever) doctor has been engaged by a technology provider, they adopt new generations of this preferred technology without asking questions. More specifically, every year, the MedTech company will launch devices with functional improvements that impress the doctor, who will typically not ask the important questions, such as “does this new device have better patient outcome?” or “does this technology improve patent safety?”. Since new medical technologies are almost always introduced at a higher price, the cost of patient care goes up every year as a result of this process. Functional improvements are important, but hospitals and other healthcare facilities have a relatively fixed budget, and if a new generation of the doctor’s favorite device is $500 more expensive than last generation’s device, that money has to be found elsewhere, where it could result in a reduction in patient care quality. In electrophysiology, the clinical area of treating AFib and related diseases, a major MedTech provider recently introduced new technology that provided higher resolution imaging. While this improvement functionally was impressive, no clinical studies suggested any difference in patient outcome. Thes same can be said about the launch of new Pulsed Field Ablation (PFA) technology in electrophysiology.
• Choice: The recent lawsuit against Biosense Webster showcased a number of anticompetitive measures that ultimately detract from the physician’s ability to choose between difference technologies. Thankfully, this lawsuit had a universally positive outcome, but other marketing methods are being used to reduce physician choice and competition. Specifically, we have seen dominant MedTech companies double down on kit-based marketing: The practice of selling device as a bundle as opposed to individually. For example, in Electrophysiology, transseptal “kits” are sold that include introducer sheath, wire, and cable. You can’t buy just the wire. This forces the physician to use this brand, rather than substituting parts between brands due to preference. It also creates inconvenient and expensive solutions if the wire fails (for example) and you can’t get a new wire from the manufacturer without buying all components of the “kit”. This reduces choice for the doctor.  Bundling, of course, is an antitrust violation, but creativity is unlimited in the MedTech industry, and therefore the practice is common. 
• Clinical practice: The relationship the doctor develops with technology and device brands during his/her residency indisputably shapes the doctor’s technology preferences and – in the end – his/her clinical practice. While doctors have a strong scientific background and often are very scientifically minded, MedTech marketing and education practices are designed to condition the doctor to allow their technology preferences to drive their clinical approaches rather than the other way around. As an example, electrophysiologists who have evolved in their clinical practice based on utilization of Biosense Webster (J&J MedTech) will tend to adopt new Biosense Webster technology and change their clinical approaches based on technology developments: The shift from 2D to 3D Intracardiac Echocardiography (ICE) visualization of the heart was driven by the launch of 3D technology rather than the clinical need to enhance visualization. Think about it. It’s like you buy the next generation iPhone because it’s the next generation iPhone, not because you were lacking anything in this from the last generation iPhone… 
• Innovation: The large manufacturers of medical technology in cardiology, orthopedics, and other clinical areas are masters of manufacturing, selling, and distributing medical technology to healthcare facilities. They are not really masters of developing new technologies, products, devices, and instruments. As in most markets, radical innovation that fundamentally change the way we do things (and, in medical technology, fundamentally change the outcome of medical treatment) comes from skunk works, from  companies that are uninhibited by existing technology and clinical practice and are fundamentally driven by how we “shoot the moon” or make BIG change happen. Unfortunately, access to healthcare markets is limited for such truly innovative MedTech companies, due to the absolute dominance of the larger MedTech companies: Start-up companies can simply not muster the salesforce and sales effort needed to break through the stronghold of the Abbots and Strykers of the world and get through to the physician and the value analysis committee. As a result, rapid innovation is largely absent in healthcare and only happens when the skunk works is bought out by the large MedTech company. Dominant suppliers of medical technology have largely outsourced innovation, which delays its impact and increases its price. 

The monopolistic nature of MedTech markets has deep, yet rarely mentioned impacts on clinical practice, pricing, and patient care. The recent Federal Court decision punishing Biosense Webster for restraint-of-trade practices is hopefully just the beginning of a longer trend of examining and restricting clinically and economically unhealthy consequences of MedTech concentration of market power.