The Impact of Reimbursement Policies and Practices on Healthcare Technology Innovation (original) (raw)

Effects due to decision-making processes are unclear, although specific components or outcomes of these processes, such as payment, product categorization, and cost sharing, may have more discernable effects (described below). In theory, decisionmaking processes that are transparent and evidence-based are more likely to foster innovation that enhances consumer welfare by sending clearer signals to developers about the types of products that payers place more value on, and how they assess that value. Timeliness and consistency in decision-making processes may also help by reducing developers' and investors' level of uncertainty about the likelihood of payers reimbursing a new product. Product categorization or differentiation Empirical evidence is limited concerning the effects on ROI or innovation from the approaches to product categorization or differentiation used by payers. In theory, approaches that distinguish products based on value are more likely than administrative approaches to promote investment in and development of products that are clinically and cost-effective and address areas of unmet need. Method of payment With per-unit payments, effects on innovation largely depend on the method used to determine payment amounts, as discussed in the next panel of this table. With bundled payment, effects on innovation are uncertain. Radical innovations are unlikely to be affected by bundled payments because of the level of benefits they provide and the likelihood that they will be paid as an add-on to the bundle. At the same time, there may be significant disincentives for incremental innovations, unless they are cost-reducing. Effects of bundled payment on substantial innovations, which fall between radical and incremental innovations, are unclear. Method of defining payment amount External benchmarking, a process of defining a payment level based on the sales price in the market or markets in which the product is sold, or an estimate of the provider's acquisition cost, is likely to increase ROI and incentives to innovate, compared to other approaches used to define payment amounts. The effects of internal benchmarking, or defining a payment level based on what is paid for comparable covered products for which the payer has already established a payment amount, are largely unclear, but it is most likely that this approach will reduce ROI and incentives to innovate. Valuebased approaches are the most promising for yielding effects on ROI that reflect products' benefits relative to their costs (judged from consumer, payer, and/or societal perspective). Effects of lowest possible price strategies are unclear, but this approach may over-incentivize investment in incremental innovations and underincentivize investment in radical innovations. Patient cost sharing Although there is substantial evidence that cost sharing affects utilization, cost sharing seems unlikely to have substantial effects on ROI or incentives to develop or invest in innovative products. Patient demand for innovative products is likely to be relatively inelastic, especially for radical innovations. Coinsurance may lead to greater effects compared to fixed copayments, especially for high-cost products, but it still seems unlikely to have significant effects on innovation. Manufacturers' programs that help patients with their cost sharing further limit potential effects.