Transcript Slide 1

Towards Linking the Development and Delivery of Care for Cardiovascular Diseases:
Designing Medical Device Supply Chain for the Unserved & Underserved Global Economies
Kingshuk K. Sinha
University of Minnesota
Joint work with Emily McIlvaine, Ph.D. Student
Cincinnati Innovations in Healthcare Delivery 2006
September 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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Reflections on Industry Studies
(Source: “Industry Studies: An Observational Science,” Speech by Dr. Ralph Gomory at the Annual Sloan
Industry Center Meeting, Boston December 5, 2005.)
 “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.”
 “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.”
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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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Health Care Supply Chain from End-to-End:
Linking the Development of Care to the Delivery of Care
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Medical
Device
Pharma
Biotech
Health
Insurance
Healthcare
Delivery
Delivery of care
Development of care
Healthcare Supply Chain
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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Health Care Supply Chain:
Regulation and Reimbursement Perspectives
FDA
(Food & Drug
Administration)
Supplier
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Manufacturer
(Pharmaceutical,
Medical Devices)
Insurer
Physician/Clinic/
Hospital
(Care Provider)
Patient
(Consumer)
Health Care Supply Chain:
Care as a Product Bundle of …
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Travel--Tourism
Payment/
Reimbursement
New Biologics
Invasive
Procedures
Devices
Drugs
Diet &
Exercise
“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
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
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
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(Kruger 2005)
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-Centric
Medical Device Supply Chain
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Cardiovascular Disease (CVD) Care-Centric
Medical Device Supply Chain
The Focus on Medical Condition
(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 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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Cardiovascular Disease (CVD) Profile in Men
DALY: Disability adjusted lost year
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(Source: World Health Organization)
Cardiovascular Disease (CVD) Profile in Women
DALY: Disability adjusted lost year
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(Source: World Health Organization)
Cardiovascular Disease (CVD) Treatment Trends in the U.S.
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(Source: World Health Organization)
Cardiovascular Disease (CVD): Perceptions vs. Facts
Common perceptions about CVD are: It is a disease of the elderly,
a disease of affluence, and even a pleasant way to die.
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).
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Cardiovascular Disease (CVD): Perceptions vs. Facts
Major Causes of Death
In Persons of All Ages
In Low and Middle-Income
Regions
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Cardiovascular Disease (CVD): Perceptions vs. Facts
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 1560 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.
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Perspectives on Cardiovascular Disease (CVD) Treatment
 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.”
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Cardiovascular Disease (CVD) Care
As a Product Bundle of ….
New Biologics
Travel--Tourism
Payment/
Reimbursement
Cellular
Therapy
Invasive
Procedures
Devices
Drugs
Coronary artery bypass
Balloon Angioplasty
Valve Repair &
Replacement
Heart Transplant
Diet &
Exercise
Pacemakers
Implantable Defibrillators
Coronary Stents
Prosthetic Valves
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Cardiovascular Disease (CVD) Care
As a Product Bundle of ….
Physician Rankings of the Top 10 Most Beneficial “Medical” Innovations
1.
2.
3.
4.
MRI and CT
ACE Inhibitors to treat high blood pressure
Balloon angioplasty to open blocked blood vessels of the heart
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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CVD Care-Centric Medical Device Supply Chain:
Some Considerations
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
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CVD Care-Centric Medical Device Supply Chain:
Some Considerations
Patient-Centric Design & Delivery of Cardiovascular Disease (CVD) Care
High
E.g., Oil Rich
Middle-East
E.g., Urban U.S.
Affordability
E.g., Sub-Sahara E.g., Major Metro
Cities in India
Low
Low
Access/
Awareness
High
Policy Contingencies: Regulation – Reimbursement – Recall
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CVD Care-Centric Medical Device Supply Chain:
Some Considerations
Demandt = f (Affordabilityt, Accesst, Awarenesst)
Drivers
Typical Types
Future Considerations
Affordability
• Out of pocket
• Insurance
• Reimbursement
•
•
•
•
Access1
• Diagnostic
• Treatment
• Follow-up
• Physician & allied health professional capability
• Logistical infrastructure
• Physical infrastructure: Quality and capacity
Awareness
• Patient
• Physician
• Patient: Cultural and educational
• Physician: Education and training
1“Given
Financing and leasing
Micro-lending
Remanufactured devices
Low cost product design/re-design
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)
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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!
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