How will new trends in hospital spending affect new drug and medical device marketing?

By Charles Stuart

Med device marketers – take note! If you aren’t already seeing the impact healthcare officials are taking to limit hospital spending, you will be shortly (and this goes way beyond the medical device tax). Recent reports have shown that healthcare spending has been significantly increasing over the last 10 years. And many healthcare officials believe that the current rate of growth is unsustainable. The average price of new cancer drugs alone has more than doubled within the last decade from about $4,500 to 2002 to around $10,000 today. While the prices of medical devices are in actuality rising at a much slower rate, medical device marketers are still threatened by a growing skepticism around what some perceive as excessive expenditures within the hospital setting.

As a result, leading healthcare centers have begun saying no to new drugs and treatments where the cost/benefit ratio seems off-balance. Recently, Memorial Sloan-Kettering Cancer Center announced in October this year that they would not be providing a new cancer drug, Zaltrap, as a treatment option for their patients.

While studies demonstrated that Zaltrap prolonged patient lives by an average of 1.4 months compared to a standard chemotherapy regimen, the drug cost more than $35,000 during each month of treatment. Because of this, the physicians of Memorial Sloan-Kettering Cancer Center argued that the slightly better benefits of the drug did not justify the associated cost.

Interestingly, while the prices of pharmaceuticals have been consistently on the rise, the costs of medical devices have remained relatively stable – increasing only 1% per year in the last decade. In fact, national spending for medical devices was about $156.3 billion in 2010, making up only 6% of total national health expenditure.

Medical centers and hospitals are taking it upon themselves to mitigate the rising prices of medicines and treatments. Medical device marketers need to be aware of hospital administrator’s preconceptions about the ongoing price of medical devices and be able to explain how the perceived cost fits within the greater picture. Now more than ever, potential leads will be analyzing the benefit of a product with its associated price when purchasing a new product. Therefore, marketing campaigns will need to stress how new products will be beneficial not only to patients’ health but the hospitals’ wallets as well.

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