Clinton plan remains mum on high technology

October 6, 1993

When President Clinton unveiled his plan for reforming the nation'shealth-care system last month, he put an end to almost a yearof anticipation. For medical imaging companies, however, the formalrelease of Clinton's American Health Security Act of 1993

When President Clinton unveiled his plan for reforming the nation'shealth-care system last month, he put an end to almost a yearof anticipation. For medical imaging companies, however, the formalrelease of Clinton's American Health Security Act of 1993 wasanticlimactic. The plan's broad outline of a new national health-caresystem contained few details addressing the acquisition and diffusionof high-technology medical equipment.

Due to the plan's lack of specifics, as well as Clinton's statedopenness to amendments to the plan, vendors might as well resortto reading tea leaves to determine how managed care will affectequipment purchasing and utilization.

One thing is certain, however: The sluggishness in the capitalequipment purchasing market that has been caused by uncertaintyover the plan's impact on health care will continue in the foreseeablefuture.

As expected, Clinton's reform plan would create health allianceswithin states to contract with health plans, as well as a guaranteedpackage of benefits to ensure that all Americans have access toquality health care. Few in the medical imaging industry haveexpressed opposition to these goals, and many believe that bringing37 million uninsured Americans into the system will increase utilizationof many lower cost modalities.

More ominous, however, is the plan's proposal to establishglobal budgets to cap health-care expenditures. The creation ofa National Health Board to oversee the plan also perturbs medicalimaging vendors.

In addition to other powers, the board would set a nationalper capita premium target, based on current per capita health-careexpenditures and adjusted to account for the costs of coveringthe uninsured. The board would also establish per capita budgetsfor alliances, and each alliance would require board approvalfor its proposed health-care premiums.

If a health alliance fails to operate within federal requirements,the board could notify the secretary of Health and Human Services,who would have the power to dissolve the alliance and replaceit with a federal plan funded by an employer payroll tax.

Global budgets could have an indirect impact on the introductionand diffusion of high-technology equipment such as medical imagingdevices, according to Robin G. Wiley, manager of legislative andregulatory affairs for the diagnostic imaging and therapy systemsdivision of the National Electrical Manufacturers Associationin Washington, DC.

"By setting an expenditure limit on the amount of moneythat's available for the purchase of all health-care services,the dollars available for the purchase of high technology aregoing to shrink," Wiley said. "We're very concernedabout the potential impact of global budgeting on the diffusionof new technologies."

While the plan at present does not give the National HealthBoard the power to regulate medical technology, that could beadded to the plan at some point in the future, Wiley said. Inaddition, the plan gives wide latitude to states in determininghow to regulate high technology.

"The way I read it, there is nothing in this proposalthat would prohibit states from establishing individual technology-reviewboards, and in some ways that's a greater danger than having asingle technology-review board at the federal level," Wileysaid.

Many states have already begun efforts to regulate technologydiffusion, and in some cases have instated outright bans on purchasesof high-tech devices such as MRI scanners (SCAN 9/16/93).

Other provisions of the plan that could impact medical imagingvendors include:

  • a reduction in Medicare payments for capital expenditures;

  • cuts in Medicare and Medicaid reimbursement to reducehealth-care costs;

  • the extension of Medicare's prospective-payment systemto hospital outpatient services; and

  • a ban on physician self-referral, with a large-entityexemption for companies with $100 million in stockholder equity.

DESPITE THE POTENTIAL IMPACT of the Clinton plan on equipmentpurchasing, device vendors still fare better under the proposalthan the pharmaceutical industry. Drug makers were singled outwith three separate initiatives targeted at controlling drug prices.The plan would:

  • Create a "breakthrough drug committee" toensure that new drugs are priced reasonably. Although the committeewould have no authority to set or control drug prices, it wouldhave the power to obtain proprietary information from companiesto determine if a drug's price has been set fairly;

  • Allow the secretary of Health and Human Services tonegotiate a rebate from manufacturers for new drugs that are determinedto be excessively priced. If a manufacturer refuses to negotiatea reasonable price, the secretary may exclude the new drug fromcoverage under Medicare; and

  • Extend Medicare and Medicaid reimbursement to outpatientprescription drugs, but require manufacturers to pay a rebateto Medicare. The rebate would be either 15% of the average manufacturerretail price or the difference between the average manufacturerretail price and the weighted average of the prices of the drugin the non-retail market, whichever is greater.

The provisions could have a pronounced impact on new drug development,according to Steve Berchem of the Pharmaceutical ManufacturersAssociation in Washington, DC.

"(The breakthrough drug committee) and other provisionswould have a chilling effect on continuing investment in R&D,"Berchem said. "What company would spend 12 years and millionsof dollars developing a drug when there's a potential for thehealth secretary to say, `You're not going to be reimbursed foruse of that drug'?"

The provisions could also limit access to capital for industrieslike biotechnology, said George W. Ebright, CEO of monoclonalantibody developer Cytogen of Princeton, NJ.

"(The plan creates) the threat of the government stoppingcompanies from providing a reward to the investor," Ebrightsaid. "It almost assuredly dries up any interest any intelligentinvestor would have in putting money in the industry."

The Clinton Administration has yet to distill the plan's provisionsinto legislative language. When a bill is introduced, probablysome time later this year, both the medical imaging and pharmaceuticalindustries will make their concerns about the plan known to lawmakers.

"The real fun will start in the next session," Wileysaid. "We've been very proactively lobbying both (Congress)and the administration on this issue and will continue to do so."