A (Lower Cost) Healthcare Industry to Deal With a (Higher Cost) Healthcare Industry

I was recently on the phone with a medical device company executive who was describing his company’s efforts to develop a non-invasive diagnostic device that could quantify the degree of cirrhosis in a patient with liver illness.  It’s technology that his firm sees as timely given the recent introduction of Solavdi and other Hepatitis C therapies: the device will be offered as a way for healthcare systems (and insurers) to risk-stratify a bolus of patients who are waiting for hepatitis C antiviral therapy.

As background: Sovaldi was really the first pharmaceutical therapy to give healthcare economists serious heartburn.  It won’t be the last.  The coming era of targeted cancer therapy is extraordinary (and welcome).  My mother died from melanoma only 1-2 years before the extraordinary growth of knowledge of this lethal skin cancer led to a rash of new therapies– medications that target things like BRAF, MEK, C-KIT proteins. But, these and other oncology drugs are fabulously expensive. My mother’s therapy would have cost hundreds of thousands of dollars, which is an expense insurers and risk-bearing systems were’t expecting to take on.

Now, I don’t know how viable this device-assisted triage approach will be, either technically or practically– nor whether it will fly given patient expectations.  But I hold it out as a great example of an emerging trend: the emergence of new technologies introduced to the healthcare market to manage the use of other much more costly medical technologies.

We’re beginning to see the creation of daughter industries as offshoots of big biomedical innovation.  What’s different is that these healthcare industries don’t support the expansion of the big innovation in that way that most daughter industries might. They are, instead, designed to disrupt it.

Most daughter industries, after all, hope for growth of the parent industry.  Consider the case, earbud, bluetooth and cellular accessories industries that followed the introduction of the iPhone… (I found this photo of a handsome iPhone sock that Caitlin Regan made for someone named Kathy…)  The more phones Apple sells, the more socks Caitlin and others can make.

Example of a (small scale) daughter business

Here’s my prediction:  as high-cost therapies emerge, daughter industries that help systems and payers manage their use will follow.  These will be IT tools, diagnostic devices and tests, genetic analyses and the like.  These tools will be designed to ensure that 1) blockbuster drugs are only delivered to patients who are appropriate for therapy and 2) that physicians sequence eligible patients in a thoughtful way.

In the near term, keep your eyes open for the (inevitable) ads in the medical journals offering healthcare systems various tools to manage their Sovaldi-eligible patients.