LifeHealthcare’s article in The Australian “medical technology companies propose new Prostheses List pricing model”

Med-techs propose new prostheses price model

Sarah-Jane Tasker, The Australian

A group of Australian med-tech companies is seeking a meeting with Health Minister Greg Hunt to push a new pricing model for the Prostheses List to end the bitter battle with private health insurers.

LifeHealthcare chief executive Matt Muscio is spearheading the proposal, saying the next couple of months are critical, given a senate inquiry on the controversial pricing list for medical devices is scheduled to report its findings.

“If we’re not part of the solution we are going to remain part of the problem,” Mr Muscio said.

Mr Muscio’s ASX-listed company is a major distributor of medical devices to hospitals and clinics around the country.

He said private health insurers had used misleading statistics to claim $800 million in savings could be made if the Prostheses List was reformed, an amount that would wipe out smaller medtech companies.

Private health insurers have consistently called for cuts to prices on the Prostheses List, which dictates what funds must pay for medical devices, arguing they pay significantly more than what Australia’s public system, and comparable countries, were charged.

The federal government started its reform of medical device prices with $86m worth of cuts, but a Senate inquiry into the list could recommend further changes.

Mr Muscio, whose company is a dominant player in the spine and cardiac ultrasound space, said he told a recent Senate hearing that his products had a price variance of 1.6 per cent between the public and private systems.

He said if this figure was used, the savings target would be $34m.

“Any stakeholder in this whole issue would say we need to look at the data and come to a resolution that is fair and equitable,” he said.

Mr Muscio is calling for a public-private price referencing model that splits each product by its individual code on the list, so they are not all grouped together under the same pricing banner, where pricing practices of the large players are worn by all companies.

“There are areas that have lost relevance in their pricing because there has not been a price referencing model in place,” he said, adding there were some “outliers” that had significant price differences between public and private hospitals. My group is advocating for fixing that. We need a model that finds those outliers and fixes them quickly.

“If the list looks at each item by code there will be good savings — not $800m but a material amount. It’s a model that in time will also ensure that companies only get into sustainable areas of medicine.”

The head of LifeHealthcare, which has about $120m in annual revenue and employs 180 people, said concerns about the affordability of private health insurance had heightened interest in the cost of medical devices.

“As affordability issues have increased everyone has felt the pressure and suddenly everyone starts pointing at each other and willingly using false data points to say ‘look at them, don’t look at us’,” he said.

“The reality is there is no silver bullet. It’s going to take a contribution from clinicians choosing more efficacious procedures, hospitals looking at ways to more efficiently manage patients, insurers being more transparent and delivering more value, and we will have to be better at delivering good health outcomes with good health economics and be open to reform,” he said.

Mr Muscio said his company worked with surgeons and international sup­pliers to develop products that fitted the Australian market. He said he was trying to bring stakeholders together. “We need to put forward a model that gives good short-term savings and a sustainable pricing model that will make sure healthcare is affordable and we have a vibrant industry that doesn’t have a damaged ecosystem where only the multinationals can stay in the market,” he said.

The chief executive said he spoke to some health insurers at a conference last week and told them he wanted to put forward a model they could buy into, so they stopped throwing the $800m figure around and making people think the medtech industry was “gouging”.

He said some of the smaller medtech companies were already affected by the $86m in cuts made to the Prostheses List, with redundancies and cuts to research and development.

“While medtech as one group don’t put forward a model that is strong enough, we are going to continue to be targeted, particularly by private health insurers,” he said. “We have to unite the voice and dispel some of the misinformation.”