04/11/23

Towards Linking the Development and Delivery of Care for Cardiovascular Diseases:Designing Medical Device Supply Chain for the Unserved & Underserved Global Economies

Kingshuk K. SinhaUniversity of Minnesota

Joint work with Emily McIlvaine, Ph.D. Student

Cincinnati Innovations in Healthcare Delivery 2006September 22, 2006

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“What We Did Not See First, our call for papers did not elicit any studies focused on the biotech, pharmaceutical, or medical industry sectors. While research in these sectors has been published in related journals ….. we found no publications in recent issues of Production and Operations Management and very few overall directly related to production and operations management. Given the growth and significance of the biotech, pharmaceutical, and medical industry sectors around the globe, it is imperative we begin to identify and address the unique production and operations management challenges faced by these industry sectors.” (p. 121)

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“Industry studies is an observational science…..the systems we study involve companies and markets and institutions and their interactions ….. we must observe if we are to accurately understand and describe the remarkable complexity of it all.”

Reflections on Industry Studies

“We know that we need a microscope to see very small things …… Seeing large things, like industries, would be much simpler if we had a macroscope… Unfortunately we don't have a real macroscope.”

“Statistics is in fact our attempt at a macroscope but it is one that only functions erratically. It functions erratically because if we have the right overall picture, then the statistics can size it right for us, and tell us more about it, but if we don't have it right, the statistics won't tell us that we don't have it right and we can be very wrong.”

(Source: “Industry Studies: An Observational Science,” Speech by Dr. Ralph Gomory at the Annual Sloan Industry Center Meeting, Boston December 5, 2005.)

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An Introduction to the Research Program:The Central Question

How can the development of care be linked with the delivery of care, globally and effectively?

“Effectively” = Right care at the right place at the right time at the right price

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Outline

Health Care Supply Chain

Medical Device Supply Chain

Cardiovascular Disease-Centric Medical Device Supply Chain

Some Considerations

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Health Care Supply Chain

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Pharma

Biotech

Dev

elop

men

t of c

are

Health Care Supply Chain from End-to-End: Linking the Development of Care to the Delivery of Care

Medical Device

Health Insurance

Healthcare Delivery

Healthcare Supply Chain

Del

iver

y of

car

e

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Health Care Supply Chain:A Value Based Perspective

“Health sector supply chain refers to the information, supplies, and finances involved with the acquisition and movement of goods and services from the supplier to the end user in order to enhance clinical outcomes while controlling costs.” (Burns 2006)

Developer Producer Purchaser Payer Provider

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SupplierManufacturer

(Pharmaceutical,Medical Devices)

Physician/Clinic/Hospital

(Care Provider)

Patient(Consumer)

InsurerFDA

(Food & Drug Administration)

Health Care Supply Chain: Regulation and Reimbursement Perspectives

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Diet & Exercise

DrugsDevices

InvasiveProcedures

New BiologicsT

rave

l--T

ou

ris

m

Pay

men

t/R

eim

bu

rsem

ent

Health Care Supply Chain: Care as a Product Bundle of …

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“Combine high-tech devices with low-tech care giving, while targeting the mind, body and spirit.”

“Most hospitals are warehouses for sick bodies…Hospitals should be healing environments built for patients.”

Earl Bakken, Inventor of cardiac pacemaker and co-founder of Medtronic Inc.

Source: Pioneer Press, Sept 2, 2006

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Medical Device Supply Chain

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Medical Device Supply Chain:As Part of the Information-Based Medicine Ecosystem

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Medical Device Supply Chain: Key Drivers of Competition

Product innovation Improve clinical outcomes Reduce procedure time and operating costs Enable less invasive procedures Allow patients to reduce or avoid inpatient hospitalizations Shorten recovery time Facilitate patient care in less expensive settings Extend life expectancy

Product performance – product reliability and physician’s perception

Pricing and contracting

Total cost of delivered products (i.e., production efficiencies and supply chain management)

Customer support (Kruger 2005)

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Medical Device Supply Chain: Who is the Customer?

Patient (the end customer)

Physician (the care giver)

Health care provider [(hospital system and integrated delivery networks (IDN)]

Purchaser [Group purchasing organization (GPO), wholesaler and distributor]

Sales representative and independent distributor

(Burns and DeGraff 2002)

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Medical Device Supply Chain: (Counterintuitive) Principles of Economics (Kruger 2005)

It is assumed implicitly that consumers of goods and services pay for the goods and services – as the price of a good rises, the demand falls.

Medical devices are largely free of this economic law – the demand for medical devices can be exceedingly inelastic (i.e., not depend on price).

Above-average profits are not sustainable, competition from new entrants drive down prices, narrowing margins and reducing profits.

Medical Devices do not appear to be subject to this general rule. Companies (e.g., Johnson & Johnson and Medtronic) have enjoyed sustained above average profits.

Growth in nearly every other industry sector slows as markets become mature and saturated.

In medical devices, growth is sustainable because it is driven by general demographic trends, the continued prevalence of diseases, and the near infinite capacity for absorbing medical technology within the practice of medicine.

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Cardiovascular Disease (CVD) Care-CentricMedical Device Supply Chain

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(Porter & Olmstead-Teisberg 2006)

Modes of business definition in healthcare are doctor centric, procedure centric, or institution centric, not patient centric.

Patient value in health care delivery….. can only be understood at the level of medical conditions…. Value is determined by how well a provider delivers care in each medical condition, not its overall breadth of services

The Focus on Medical Condition

Cardiovascular Disease (CVD) Care-CentricMedical Device Supply Chain

The relevant business in health care delivery is medical condition seen over full cycle of care.

For example, the business is congestive heart failure, not heart surgery, cardiology, angiography, or anesthesiology.

Business definition always involves a geographic component.

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(Source: World Health Organization)

Cardiovascular Disease (CVD) Profile in Men

DALY: Disability adjusted lost year

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Cardiovascular Disease (CVD) Profile in Women

DALY: Disability adjusted lost year (Source: World Health Organization)

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Cardiovascular Disease (CVD) Treatment Trends in the U.S.

(Source: World Health Organization)

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World Health Organization (WHO) Statistics CVD is the commonest chronic illness in both developed and

developing countries, causing the most deaths and the greatest impact on morbidity.

Approximately one-third of the total deaths worldwide are cardiovascular in origin.

The CVD deaths amounted to numbers greater than those compared to the major infectious diseases (AIDS, TB and malaria).

Common perceptions about CVD are: It is a disease of the elderly, a disease of affluence, and even a pleasant way to die.

Cardiovascular Disease (CVD): Perceptions vs. Facts

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Cardiovascular Disease (CVD): Perceptions vs. Facts

Major Causes of DeathIn Persons of All AgesIn Low and Middle-IncomeRegions

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World Health Organization (WHO) Statistics (contd.)

Contrary to the conventional wisdom, 78% of the CVD deaths occurred not in the high income countries of the world but in the lower and middle income countries.

In sub-Saharan Africa, CVD is a major cause of death in the age range 15-60 years, killing more persons than infectious diseases, and the probability of death from a non-communicable disease is higher that in established market economies.

In India and China, socio-economic changes with individuals moving from a rural community into the cities have resulted in greater prosperity but at the cost of an increase in CVD related disabilities and deaths.

Cardiovascular Disease (CVD): Perceptions vs. Facts

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WHO (2003, p. 70) reports “marked disparities in the quality of treatment can be seen in groups of different race, ethnicity, sex, and socioeconomic status. In essence, many patients who could benefit from treatment remain untreated, or inadequately treated,” highlighting the unserved and underserved global demand for CVD care.

WHO’s call for action: “In future, increased emphasis needs to be placed on the appropriate use of proven treatments for everyone with coronary heart disease or stroke.”

Perspectives on Cardiovascular Disease (CVD) Treatment

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Diet & Exercise

DrugsDevices

InvasiveProcedures

New Biologics

Tra

vel-

-To

uri

smCardiovascular Disease (CVD) Care

As a Product Bundle of ….

Pay

men

t/R

eim

bu

rsem

ent

PacemakersImplantable DefibrillatorsCoronary StentsProsthetic Valves

Coronary artery bypassBalloon AngioplastyValve Repair & ReplacementHeart Transplant

Cellular Therapy

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Cardiovascular Disease (CVD) Care As a Product Bundle of ….

Physician Rankings of the Top 10 Most Beneficial “Medical” Innovations

1. MRI and CT

2. ACE Inhibitors to treat high blood pressure

3. Balloon angioplasty to open blocked blood vessels of the heart

4. Statins to improve lipid metabolism and reduce risk for coronary heart disease and other vascular diseases

5. Mammography

6. Coronary artery bypass graft

7. Proton pump inhibitors and H2 blockers to treat gastro-esophageal reflux disease

8. Selective serotonin reuptake inhibitors and new non-SSRI anti-depressants

9. Cataract extraction and lens implant

10.Hip and knee replacement(Fuchs and Sox 2001)

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CVD Care-Centric Medical Device Supply Chain:

Some Considerations

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Linking the development and delivery of care for cardiovascular (CVD) diseases: Designing medical device supply chains for the unserved and underserved global economies

Estimating the demand for CVD care emerging from the unserved/undeserved global economies for which medical devices can be an appropriate and effective part of the treatment – assessing the true market potential.

Examining strategies for product design and supply chain design (delivery infrastructure – diagnostic and treatment capability, physical infrastructure) to meet the demands of unserved/underserved global economies

CVD Care-Centric Medical Device Supply Chain:Some Considerations

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Low HighAccess/Awareness

Low

High

Affordability

Patient-Centric Design & Delivery of Cardiovascular Disease (CVD) Care

E.g., Sub-Sahara

E.g., Oil RichMiddle-East

E.g., Major MetroCities in India

E.g., Urban U.S.

Policy Contingencies: Regulation – Reimbursement – Recall

CVD Care-Centric Medical Device Supply Chain:Some Considerations

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Demandt = f (Affordabilityt, Accesst, Awarenesst)

Awareness • Patient• Physician

• Patient: Cultural and educational• Physician: Education and training

• Diagnostic• Treatment• Follow-up

• Physician & allied health professional capability• Logistical infrastructure• Physical infrastructure: Quality and capacity

Access1

Affordability • Out of pocket• Insurance• Reimbursement

• Financing and leasing• Micro-lending• Remanufactured devices• Low cost product design/re-design

Drivers Typical Types Future Considerations

1“Given either a lack of facilities and operators for percutaneous interventions or long distances to such facilities in many developing countries, we did not evaluate this procedure.”

(Gaziano et al. 2005, p. 651)

CVD Care-Centric Medical Device Supply Chain:Some Considerations

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In closing ….

“Healthcare is a peculiar beast where in spite of all the new technology, costs keep going up all the time. That is a strange paradox. We are out to buck that trend. We cannot afford to let the masses be deprived of top class tertiary care.”

(Dr. Devi Prasad Shetty in “Narayan Hrudayalaya Heart Hospital: Cardiac Care for the Poor,” HBS Case April 2006)

Thank you!