What is a Healthcare Innovation Really Worth?

July 31st, 2012
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Healthcare, even for the insured, can wreak extremely high financial costs for patients, e.g., with hundreds of thousands of dollars for cancer treatments and new drugs that can run up to $10,000 a dose. While it’s morally impossible to determine the exact value of a human life, a group at the Fred Hutchinson Cancer Center is starting to ask a related question—how cost-effective are cancer treatments?
A recent article in Xconomy by Luke Timmerman that highlighted the Fred Hutchinson Cancer Center study also pointed out that inefficiencies arise because many patients who could benefit from treatment never receive the drug. That puts the ultimate value of a drug that may cost hundreds of millions of dollars to develop at zero. In addition, many people who have insurance can’t get reimbursed for certain treatments, and therefore still face financial hardships:

“Ramsey has already dug up some disturbing findings about how much money is spent, and how little value is gained. One study showed that among patients who have insurance, almost 40 percent suffered from ‘severe financial strain’ which was defined as re-mortgaging one’s home to afford medication, borrowing money from friends, or using up their life’s savings. Another study found that Genentech’s hit antibody drug, bevacizumab (Avastin), had almost a zero percent chance of being cost-effective for lung cancer patients (actually, it was a 0.2 percent probability). That hasn’t stopped the growth of cancer drug spending.”

Digital healthcare pioneer Eric Topol suggests that this costly scenario may be temporary. As healthcare becomes more targeted and consumer-oriented (as opposed to disease and subject-oriented), driven in large measure by increases in our understanding of the biology of diseases, the costs of developing treatments that can directly benefit an individual will go down. Ultimately prices will follow costs down, but until that happens, we still face a hefty cost-effectiveness question.
As a health economist, I believe that cost-effectiveness is not something you add after a product launch. Instead, the team creating any new device, diagnostic or treatment must incorporate cost-effectiveness at the beginning. This extends beyond reimbursement issues into whether the innovation will result in improved patient outcomes at a reasonable price. This is not as extreme as a purely financial ratio to determine value. It is, rather, a holistic view of how well a patient comes out from these treatments, both healthily and financially.
Do you think cost-effectiveness can be accurately measured in today’s environment? Will future, genetic-based treatments increase value? How would you incorporate cost-effectiveness into an innovative treatment or device? Would love to know your thoughts.

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About the Author:

I founded Popper and Company with Ken Walz more than ten years ago to address inefficiencies in health care by helping life science companies develop and commercialize new technology. Today, the members of our growing team leverage their extensive knowledge of the tools and trends shaping all aspects of health care and its participants. Send me an email.

One Response to “What is a Healthcare Innovation Really Worth?”

  1. Telehealth says:

    Health care makes some amazing changes within the last decade by using technology. Changes include a variety of stuff that varies from fundamental organization of client information to surgery techniques. Technologies have made things much simpler for treatment companies to trace an individual’s treatment, medications and ongoing recovery.