Most of healthcare spending is out of sight and out of mind, doled out by insurers and state and federal government. How much does a CAT scan or colonoscopy cost? The vast majority of people have no idea. While that is unlikely to change anytime soon, more and more products directly purchasable by consumers can tend to health and wellness. Just a few decades ago, few could predict that cholesterol tests would someday be able to be performed in the comfort of one’s home. And just a few years ago, few could predict that fitness trackers would be able to detect atrial fibrillation and other irregularities.
These developments may have been unexpected, but provide consumers with an array of useful goods that, unlike the rest of the healthcare sector, are subject to the benefits of competition. But not everyone is caught up in the craze of consumer-driven healthcare. The cumbersome bureaucracy of the Food and Drug Administration (FDA) is unable to cope with the myriad of exciting new innovations—meaning, denying benefits to millions of Americans. This is why the FDA should reform and adopt a light-touch approach that will benefit consumers looking for safe, affordable ways to keep their medical issues at bay.
If you’ve been following health policy over the past decade (or two), you’re likely all-too-familiar with the phrase “bending down the cost curve.” It is an article of faith that, with just the right tweaking of the insurance system and/or utility-style regulation and/or government-run health care, we can see the cost of medical services decline. Yet, there’s plenty of medical technology out there that regularly sees price declines.
Take, for instance, the Apple Watch 3, which can “screen for irregular heart rhythm that is suggestive of atrial fibrillation” while detecting unusually high or low heart rates. Apple recently cut the price of the product to just $279, after introducing the new Apple Watch 4. DNA health test prices have dropped remarkably over the past ten years, going from nearly $1,000 to less than $100 thanks to vibrant competition between brands such as 23andme and Ancestry.com.
Compare these developments to the price of health procedures covered by traditional insurance or government programs, including scans and procedures. Virtually all said undertakings increased in price over the 2003 to 2016 period, according to data from Truven Health Analytics. Even adjusting for inflation, the vast majority of documented procedures have seen prices tack upward.
The data therefore shows that, where the free market is allowed to flourish and businesses permitted to innovate, healthcare costs fall. But where it’s trapped in bureaucracy, prices rise. So maybe, then, health-care technology doesn’t have to grow more costly overtime, and just maybe competition and consumer choice has something to do with price trends.
Unfortunately, onerous, confusing FDA regulation makes these consumer products difficult to bring to market. When evaluating products, the agency sorts items into three categories, or classes- I, II, or III. Some home health-care products, such as cholesterol trackers, have been confined to Class I, meaning they don’t need any sort of premarket approval. According to FDA guidance, however, products that analyze “multiple physiological signals” (i.e., heart rate and breathing) must be classified as a medical device (akin to an MRI scanner), and undergo regulatory scrutiny before getting approved. To make matters even more confusing, some companies with Class II products (i.e., Apple) can get fast-tracked to approval by participating in FDA’s pilot precertification program. The agency makes clear that for preselected corporations of a certain “company size” and “organizational excellence,” product consideration can focus more on the “technology developer, rather than primarily at the product.”
In addition to preparation time, the FDA has made clear that it expects half of all requests to take more than 150 days to evaluate, meaning that companies with less FDA recognition than Apple or Fitbit—which has faced even less regulatory scrutiny—may well fall on the other side of the curve meaning consumers could wait years to receive life saving technology for no reason. The lack of transparency and clarity in the FDA process is hardly limited to fitness trackers: Reduced-risk heat-not-burn tobacco products have been put on hold seemingly indefinitely after more than a year of not hearing back from FDA.
In addition, many smaller companies simply can’t afford the cost of going through the FDA’s Class II process, meaning Americans are potentially missing out on the release of more life saving products.
By consistently classifying innovative products as Class I and keeping premarket scrutiny to a minimum, the FDA can allow for continued robust competition in consumer health-care products. While healthcare spending and purchases are currently out of sight, they certainly do not have to be. The consumer revolution in healthcare can keep costs low and quality high, if the federal government allows it.
Catalyst articles by Ross Marchand