Manufacturers of high-cost medical devices should expect pricing pressures in Europe to continue for two to three years, medtech consultant Martin Jordan predicted during a June 18 Wells Fargo conference call.

Price erosion for the most expensive devices - such as certain cardiac and orthopedic products - will continue at a rate of 5%-10% during that time frame, Jordan estimated.

Jordan, who is managing director of Barcelona-based HTSS, noted that high hurdles for makers of innovative devices in Europe are nothing new. "Europe has never been as generous a market as the U.S., [and] we haven't been as gung ho about adopting new technologies," he acknowledged.

The current economic crisis, however, which has led to pricing pressures and government reimbursement cuts, has made things more difficult.

"It's just an uncomfortable time, and I think once we're over this, I think governments will go back and start reinvesting," Jordan said. "It's probably [a] maximum two-to-three year time frame for serious pressure on prices, and then things should ease up a bit."

One issue facing medical device companies is that "it's very hard to get innovation premium priced" when negotiating contracts with hospitals, he explained. While many governments have adopted a diagnosis-related group (DRG) system that keeps pricing somewhat stable, the hospitals are still the main buyers, Jordan contended.

The consultant suggested device companies take an approach similar to that of the pharmaceutical industry in Europe by focusing on establishing compelling data that demonstrates the value of their products to payers, rather than doctors.

"The industry's got to grow up a little bit and start thinking about the need to spend a little bit more money during the development phase on generating evidence that the payers want to see, rather than just evidence the clinicians want to see."

One example of a technology that hasn't "really managed to get reimbursement anywhere" because of a relative lack of clinical data is negative pressure wound therapy, he noted.

Most data on NPWT products in general, and Kinetic Concepts' V.A.C. system in particular, "is extremely poor," and NPWT manufacturers have not been able to secure reimbursement beyond some inpatient uses, Jordan asserted.

No Cuts For Transcatheter Valves, LVADs, For Now

Newer technologies, or those that have recently gained reimbursement, may not be strongly impacted by the current pricing environment, Jordan suggested.

For transcatheter aortic heart valves, which took several years to gain widespread European reimbursement, "I don't see any cuts in 2010," he said.

Medtronic's CoreValve and Edwards Lifesciences' Sapien transcatheter valves are currently approved in Europe for patients who are high-risk or non-candidates for open-heart valve surgery. Both companies reported data from multiple European registries at the recent EuroPCR conference (¹ Also see "Transcatheter Valve Data Gets Top-Line Attention At EuroPCR" - Medtech Insight, 31 May, 2010.).

Medtronic and Edwards are pursuing expanded indications for their respective devices, however, and as the number of eligible patients increases, payers may start to balk at the cost, Jordan predicted.

"For all payers there's a paying threshold, and the paying threshold is the cost of the procedure times the number of the procedures, so once you start aggressively developing the market like this then you're at risk of some pushback."

Left ventricular assist devices make up another new segment that for now seems able to sidestep pricing pressures, although reimbursement has been slow to catch on.

"A lot of people want to use them, but it's very difficult to get funding for them," according to Jordan. "I think what you're seeing now is you're starting to get add-on payments, or tweaks in the DRG system, for LVAD use in most countries."

However, "I think it's one of these problems where the evidence base isn't there, and because the cost of LVADs ... is so high, there's a certain amount of reluctance on the payers to say 'yes.' At most they'll say, 'yes, but ...' or restrict the indications," he concluded.

- Brooke McManus ( ² b.mcmanus@elsevier.com )

European Pricing Pressures Will Continue For Two-Three Years - Consultant

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