ABC Radio Melbourne Mornings program interview with Dr Rachel David regarding medical device companies’ failure to deliver promised savings as part of the MTAA/Government agreement

Station: ABC Radio Melbourne
Program: Mornings
Date: 14/11/2019
Time: 10:39 AM
Compere: Virginia Trioli
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


VIRGINIA TRIOLI: Some interesting analysis has come out of healthcare system data by Private Healthcare Australia shows the price of four leading brand hip replacement devices – at around about ten and a half thousand dollars for those devices – is double the price in New Zealand and the UK, and triple the price that you’d pay if you were in France. There’s real pressure now on the Federal Government to overhaul how much they pay for knee and hip replacements. And when you look at the figures, I guess we can understand why.

Rachel David is the CEO of Private Healthcare Australia. Hi, Rachel.

RACHEL DAVID: Yes. Hi, Virginia.
VIRGINIA TRIOLI: Why are prices so high here in Australia compared to other places?
RACHEL DAVID: Well look, this has been a problem for health funds and health fund members for some time. It is really quite a significant contributor to the upward pressure on health fund premiums. It’s a historical thing; the Commonwealth Government actually regulates how much health funds need to provide in benefits or for all implantable medical devices through a thing called the Prostheses List. They have a massive list of all of the possible medical implants and they put prices next to them. That list was designed before 2006. Unfortunately, it was designed in a way that fixed the prices at global high levels. As you know, the cost of technology tends to fall over time, but the prices on that list have not declined, even for products that for all intents and purposes are basically generic, i.e. they are very commonly available and the technology hasn’t changed in many years.

I must say the Federal Government has taken some steps to try and reduce those benefits by – because they have the power to do so – by negotiating with the big multinational companies that supply these devices. But unfortunately, that measure didn’t work because what happened was they reduced the prices by a certain percentage, the benefits. It was supposed to flow through for funds but what the companies did instead was to drive volumes of other devices to make up the value they lost. So in fact the problem is, with the Commonwealth regulating the way that it does, we need the Commonwealth to step away from that and allow the market to work so we can actually bring some of these prices down.

VIRGINIA TRIOLI: It seems strange that nothing has been done to change that regulatory setting that you speak of that was made some time ago. Who’s applied the pressure to make sure that that’s not revisited?
RACHEL DAVID: Well look, I think it’s become- while the economy was good and everyone’s wages were going up and no one was paying too much attention to health fund premiums, this just kicked along even though it was an expenditure that we didn’t need to have. But as wages have flattened since 2010, and you know, families that need access to surgery, two thirds of surgery is funded by private health. The families who’ve needed access to surgery are really struggling with health fund premiums. The shining light has been applied to the fact that this area is really not under control, and the data really shows that we are still – even after these benefit reductions – paying two to five times too much.

I think the multinational device companies- we’re talking about some of the biggest companies and most influential companies in the world. Its Johnson and Johnson, Medtronic, Abbott, and Stryker, those companies, they can bring a lot of influence to bear, not necessarily on the politicians but on the hospitals and doctors. They have sales reps that are in most of the private hospitals following most of the doctors around, and they can easily run a scare campaign that they won’t make these devices available if the price drops. Now we know that’s probably not the case. The market in Australia is still very healthy for medical implants. We have an ageing population that is willing to pay something for their surgery. But what we can’t have is this situation where the health funds have no control over what are actually sky high prices of commonly used technology

VIRGINIA TRIOLI: Well hang on, sure, you’re mentioning scare campaigns before. I just wonder about the coincidence of this, if you like, Rachel David. Because I know health insurers are submitting their proposed annual premium increases, their requests for that, to the Health Minister Greg Hunt this week for approval, and this is one of the issues that’s been raised in relation to that. So it seems that every year when their private health insurers ask for premiums to go up – and we know how many Australians are deserting you, private health insurers, because it’s just simply too expensive – every time you submit a request for an increase there’s always a reason why. Is this just this year’s?
RACHEL DAVID: Look, we have been lobbying and advocating about this issue constantly throughout the regulatory cycle …
VIRGINIA TRIOLI: Sure, but what I’m suggesting is that if it wasn’t this, it’d be something else.
RACHEL DAVID: The main reason that premiums do go up is because health funds are paying for more health care. We have a large baby boom population that’s of the age where they are requiring more surgery, and the demand is higher than it’s ever been in our history for surgical interventions. But that is actually the reason why we can’t be paying above market rates for commonly used medical technology. So it’s one of the drivers, not the sole driver, of premium increases. The big drivers in addition to technology are that ageing of the population and the size of the baby boom population, now that it’s reached that average age of 72. But that’s the reason why we can’t afford one dollar of waste to be going towards things that we are either overvalued, or aren’t- or are being used in situations where they shouldn’t be used.
VIRGINIA TRIOLI: Okay we’ll leave it there. Rachel David, thank you.
RACHEL DAVID: Thanks Virginia.
VIRGINIA TRIOLI: Rachel David is the CEO of Private Healthcare Australia.
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