HTA Explainer – Devices Vs Pharmaceuticals

[vc_row][vc_column][vc_column_text]Medical and pharmaceutical technologies have key differences which have important implications for how they are evaluated, both clinically and economically. As such, a thorough understanding of the differences that exist within both the industry and the technology is required to accurately assess the benefits associated with them.

The MedTech industry is diverse and medical procedures involving devices can be therapeutic, diagnostic, prognostic or pathological. The companies that make medical devices also differ from pharmaceutical companies in both size and number. While pharmaceutical companies tend to be large, the median size of a medical device company is less than 50 people (in the US). Medtech companies also often provide much more support to the health care providers or surgeons to ensure technical standards are met and the device is used effectively.

Medical technology is characterised by a high rate of innovation, often resulting in shorter life cycles than pharmaceuticals. This key difference can limit the opportunity for generation of clinical evidence to support marketing approval and reimbursement of devices. Innovation is often based on feedback from medical practitioners and their patients to improve an existing technology’s functionality.

There are inherent constraints in clinical trials design for devices to prove efficacy.  The large-scale, blinded, randomised, placebo-controlled trials common for pharmaceuticals are often difficult or unrealistic to perform for medical devices, particularly surgically implantable devices.

Most clinical trials also have limited patient recruitment capacity since devices typically have smaller numbers of potential end users and even fewer eligible clinical trial candidates than a typical pharmaceutical clinical trial.

Another common limiting factor is that many devices require specialised training or skills to install or monitor them. Success of the implantable device may be dependent on the skill of the surgeon implanting it, not on the performance of the device alone.

Care must also be taken when assessing the benefit and harm profile of devices compared with pharmaceuticals. The effect of a medical device is physical whereas the effect of a pharmaceutical is chemical; this poses differences in addressing adverse events. The risk posed by the device remaining in the body must be weighed against the risk of removal. Often the implants are introduced into the body via surgery and these procedures contribute to the complication of evaluation of the implants, while adverse events related to a pharmaceutical can be addressed by discontinuation of treatment or changes in dosing.

All the issues described above mean a pragmatic approach is required when assessing medical devices for reimbursement. Data may be more limited while clinician hands-on experience with the devices may be more relevant. Nonetheless, it is important that the benefit/risk profile of the devices is evaluated and an assessment is made of the value to patients and the healthcare system.

The original version of the February 2017 Prostheses Guide identified that there are differences between medical devices and pharmaceuticals and that this would be taken into account by committees and advisory groups assessing sponsor applications. Unfortunately, this was removed from the latest version published in June. As demonstrated above, the differences between devices and pharmaceuticals are very clear, and must be recognised in HTA assessment if the Prostheses List process is to be an effective enabler of patient access to valuable technology.

Devices Pharma
Industry composition Over 80% small and medium-sized companies Very large multinationals dominate
Innovation Majority of new products bring added functions and clinical value based on incremental improvements Usually large step innovation
Clinical trials Limited patient recruitment capacity due to smaller numbers of potential end users and eligible clinical trial candidates Large-scale, blinded, randomised, placebo-controlled trials
Addressing adverse events Risk posed by device remaining in the body must be weighed against risk of removal Discontinuation of treatment or change in dosing



HTA has been growing in popularity among reimbursement agencies worldwide in the last 20 years. Its application to medical devices has been slower for a range of reasons. Its popularity has a number of drivers including the desire to find an objective basis for funding decisions for health technology.

A cost-effectiveness or a cost-utility evaluation seeks to measure the additional clinical benefit and cost of using a new medical product compared to what is now used for the same condition. In cost-utility analysis, patient quality of life and length of life is combined into a single ‘utility’ measure. This is the analysis most commonly used by the Department of Health and its major committees.

To operate effectively, HTA generally requires two major components: firstly, clinical evidence that can be used to compare products; and secondly: an economic analysis of benefits and costs. It therefore requires research – usually by the sponsor – to gather and present data as well as a systematic process of evaluation.

When assessing whether HTA is being done properly, questions can be asked such as:

  • Is the process fair and transparent?
  • Is the depth and complexity of the process suitable for the expected clinical risk and cost?
  • Are the correct outcomes being evaluated?
  • Is there a reasonable way of dealing with uncertainty given data is never perfect?

Australia was one of the first countries to use HTA to assess reimbursement for pharmaceuticals through the Pharmaceutical Benefits Advisory Committee (PBAC). Typical submissions grew from a few dozen pages in the early 1990s to thousands of pages currently.

This was followed by assessment of other medical procedures and technologies through the Medical Services Advisory Committee (MSAC) starting in the late 1990s.

The Prostheses List Advisory Committee (PLAC) and its subcommittees also assess relative cost and effectiveness for prostheses to go on the Prostheses List where a higher benefit is requested. When a medical device is on the Prostheses List, private health insurers are required to pay for it if they have relevant hospital cover for the procedure.

The Australian Government has a policy of making assessment for reimbursement of medical technology and procedures more uniform. To this end it amalgamated the Department of Health sections responsible for supporting assessment process for the Pharmaceutical Benefits Scheme (PBS), Medicare Services Schedule (MBS) and the Prostheses List into one Branch – the Office of Health Technology Assessment.

The MedTech industry, through the Medical Technology Association of Australia (MTAA) is supportive of the appropriate use of HTA for Prostheses List applications but it needs to be undertaken with care. Medical devices are different from pharmaceuticals in that:

  • They are dependent on operator skill
  • Blinded trials are often not practicable
  • Short life cycles/incremental improvements narrow the evidence window
  • Low volume reduces the quantity of evidence
  • The effect on the patient is usually physical not chemical
  • They may require much more company support to use

PulseLine understand that MTAA is now in a process of Prostheses Reform discussion with the Australian Government and other stakeholders. The correct use of HTA for prostheses is a key part of that discussion. The industry has recommended that a ‘prostheses-specific pathway’ be developed that bolsters the capacity of PLAC to evaluate relative effectiveness and cost of new prostheses without requiring a full MSAC deliberation that is resource-intensive and lengthy.

HTA for medical devices is here to stay. Time will tell if the processes put in place by for the Prostheses List enable patient access to good technology or hinder it.

Back to basics – the Prostheses List and Private Health Insurance

So, what is the Prostheses List?

Put simply, the Prostheses List is a list of medical devices for which insurers are required to pay a benefit when a member has the relevant coverage.

For example, if you had hospital orthopaedic cover and you needed a hip replacement, your health fund would be required to pay the minimum benefit for any artificial hip on the Prostheses List.

The Prostheses List is a crucial contributor to the value of private health insurance, enabling members to receive the best quality health care as determined by their doctor.

The Prostheses List ensures that surgeons can choose the best available prostheses for privately insured patients without the options being restricted by health funds.

There are approximately 11,000 items on the Prostheses List. The List is divided into Parts A, B and C.

Part A covers devices that are used as part of hospital or hospital substitute treatment where a Medicare benefit must be paid to the doctor for the procedure performed. The device must be surgically implanted in the body or enable another device to be implanted or allow an implant to continue to function after surgery.

Devices on Part A also must be approved for use by the Therapeutic Goods Administration and assessed for effectiveness and cost against other products by the Prostheses List Advisory Committee before they can be listed.

Part A is divided into 13 major categories according to the broad conditions they address, and is further divided into sub-categories, groups and sub-groups. Each prosthesis has its own billing code with a benefit that must be paid for the device.

Part B covers products that are derived from human tissue for treatment of a condition. Part C covers specific groups of medical devices which don’t meet the criteria of Part A but which the Minister for Health considers suitable for benefit payments by private health insurers.

Contrary to popular belief, external prostheses, such as artificial limbs, or prostheses used for cosmetic rather than reconstructive purposes, are not eligible for reimbursement according to Prostheses List criteria.

Despite the cost of private health insurance being a top level concern for many Australians, the existence of the Prostheses List and the major contribution that it makes to the value of private health insurance is largely unknown.

Australia’s Health System Explained

[vc_row][vc_column][vc_column_text]The World Health Organization describes a good health system as one that ‘delivers quality services to all people, when and where they need them’. In Australia, our health system is best descried as a complex mix of health professionals and service providers from a range of organisations, including government and non-government sectors, working to meet the health care needs of all Australians.

Australia’s health system has multiple components – health promotion, primary health care, specialist services and hospitals. To meet individual health care needs, a person may need – or have to engage with – the services of more than one part of the system.

1. Primary health care

Primary health care is often a person’s first contact with the health system. It comprises a range of services that are not referred: general practice, allied health services, pharmacy and community health. Various health professionals deliver these, including GPs, nurses, allied health professionals, community pharmacists, dentists and ATSI health workers.

2. Specialist services

Specialist services support people with specific or complex health conditions and issues, such as antenatal services for pregnancy, radiotherapy treatment for cancer and mental health services. Specialist services are generally referred by primary health care providers and often described as ‘secondary’ health care services.

3. Hospitals

Hospitals are a crucial part of Australia’s health system, delivering a range of services to admitted and non-admitted patients (outpatient clinics and emergency department care). All public hospitals in Australia are part of a Local Hospital Network.

State and territory governments largely own and manage public hospitals – which usually provide ‘acute care’ for short periods. Private hospitals are mainly owned and operated by either for-profit or not-for-profit organisations.

Australia’s health system may be more accurately described as various connected health systems, rather than one unified system. The Australian Government, state and territory governments and local governments share responsibility for it, including for its operation, management and funding. While the overarching framework for the health system is laid out by government, the private sector also operates and funds some health services. These including operating private hospitals, pharmacies and many medical practices, as well as funding through private health insurance.

Changes to Australia’s Constitution in 1946 allowed the Federal Government to become involved in the funding of public hospital services, resulting in the funding, operational and regulatory arrangements that exist today.

Australia’s health system is underpinned by Medicare – a universal public health insurance scheme. Medicare is funded by the Australian Government through general taxation revenue and a 2% Medicare levy. Intergovernmental arrangements for public hospital funding between the Australian Government and state and territory governments guarantee Medicare cardholders access to fee-free treatment as public patients in public hospitals. Medicare also covers a portion of the Medicare Benefits Schedule fee for medical services and procedures, and Medicare cardholders have access to a range of prescription pharmaceutical subsidies under the Pharmaceutical Benefits Scheme.

Some medical and allied health services are not subsidised through Medicare. For example, Medicare does not usually cover costs for ambulance services, most dental examinations and treatments, physiotherapy and optical aids (such as glasses and contact lenses).

Private health insurance is also an option for meeting health care expenses in Australia. People can choose the type of cover to buy. The two types of cover available are:

  • Hospital cover for some (or all) of the costs of hospital treatments as a private patient;
  • General treatment (‘ancillary’ or ‘extras’) cover for some non-medical health services not covered by Medicare – such as dental, physiotherapy and optical services.

Private health insurance works in tandem with the publicly funded system but does not cover the entirety of a private patient’s costs. Part of the cost of hospital admission as a private patient is covered by Medicare (the medical fee) and part can be covered by insurance.

The Australian Government and state and territory governments are responsible for the regulation of the health system. Various regulatory agencies within the system work to ensure that acceptable standards and quality of care and services are met, and that people are protected when using health goods and services and when dealing with health professionals.

The Australian Government is also responsible for regulating the safety and quality of pharmaceutical and therapeutic goods and appliances. The Therapeutic Goods Administration (TGA) is responsible for regulating therapeutic goods, including prescription medicines, vaccines, sunscreens, vitamins and minerals, and medical devices.

The Australian Government is also responsible for the Prostheses List. The Prostheses List is a list of medical devices that private health insurers are required to pay a benefit for when one of their members has the relevant coverage. For instance, if a member of a health fund has hospital orthopaedic cover and requires a hip replacement, their health fund is required to pay the minimum benefit for any artificial hip listed on the Prostheses List, with generally no out-of-pocket expenses for the patient.

This arrangement ensures surgeons can choose the best available medical device for their privately insured patients without private health insurers restricting their options.

The List is an essential part of the private health insurance offering, enabling Australians with private health insurance to receive the best quality heal care as determined by their doctor, and not by their health insurance provider.

While Australia’s health care system may indeed seem complex and confusing, it is still one of the best health care systems in the world.[/vc_column_text][vc_column_text]

Information in this article has been informed by the Australian Institute of Health and Welfare report, 'Australia's Health 2018'.