"HEALTH CARE REFORM AND ITS POSSIBLE EFFECTS ON INNOVATIVE THERAPIES" Hearing - House Subcommittee on February 2, 1994 Statement Presented by Varian Associates, Inc. Thank you for the opportunity to address this very important subject, ticularly as it pertains to the treatment of cancer, which remains one of the on's most dreaded diseases. I am Derrel De Passe, Vice President of rldwide Government Relations with Varian Associates. Varian is a diversified nology company located in Palo Alto, California, which helped pioneer the elopment of radiotherapy systems for the treatment of cancer. Today it ranks the world's leading producer of medical linear accelerators for that purpose. My remarks will focus on two areas. First, I will address the need for julatory reform in order to ensure continued innovation in the U.S. medical vice industry and timely patient access to the latest treatment advances. cond, I will discuss elements which we believe a health care reform proposal ust contain in order to achieve the fundamental goals of cost reduction and iversal access, without sacrificing U.S. technology innovation and the highest ality of health care in the world. ENEFITS OF MEDICAL TECHNOLOGY: Today the U.S. medical technology industry is the country's fastest growing dustry. U.S. firms supply nearly 50 percent of the world's total medical device eds, which in 1995 will exceed $100 billion. In the advanced radiotherapy ld, American companies supply 75 percent of the world's linear accelerators, a arket which will approach three-quarters-of-a-billion dollars in 1995. R&D vestment in this industry is extensive, running up to twice the national average. The wide availability in the U.S. of the most advanced medical technology as made this country's health care system the envy of the world. For example, in the U.S. some 2500 radiation oncologists now treat cancer safely and effectively with radiation, which is used in about 60 percent of all cancer cases. Thanks to the linear accelerator and other treatment innovations, cancer cure rates are substantially better than even 10-20 years ago. The overall cure rate rose from 39 percent in 1960 to 54 percent in 1988. In 1960, Hodgkin's Disease had a cure rate of 40 percent for all stages of that cancer. Today that cure rate has increased to 78 percent -- and from some stages it's as high as 97 percent. Prostate cancer's cure rate has gone from 50 percent to 78 percent. Literally millions of patients have survived, and tens of millions have had their complications reduced and quality of life improved because of the medical linear accelerator. Because of that success, radiation oncology has become a profit center for many hospitals. Simply put, it saves money by providing a cheaper, effective alternative to surgery. Taking the two most common types, breast cancer and prostate cancer, as an example -- it costs about 40 percent less to treat these cancers with radiation than it would with surgery. Considering that these cancers represent 26 percent of all cancer incidences, the potential savings are significant. Because of the priority which the U.S. places on health care, this life saving, cost effective technology is most widely available in the U.S. The typical cancer patient in the U.S. must wait only 1 - 2 weeks for treatment after diagnosis, whereas patients in other industrialized countries are not so fortunate. Patients in Canada and Great Britain, for example, must wait up to six weeks for treatment. A story published in the October 16, 1993 edition of the Toronto Star vspaper describes how, as the article's headline put it: "The Wait For Surgery Prove Deadly." It reports how Ontario's cancer centers are in crisis. Some ients are forced to have mutilating surgery, losing voice boxes and breasts cause they can't get early radiation treatment. Others, languishing on huge ting lists, face the prospect of their cancer growing to an incurable stage as y wait. Asked what he would do if placed on such a waiting list, one doctor didly replied, (quote) I'd panic like hell and then go to Buffalo (end quote). You can replace Buffalo with Rochester, or Seattle, or Minneapolis, or ny other bordering cities. The situation is the same. Canadians have a sis, and not just in radiation treatment for cancer. The circumstances are hilar in many other areas of medicine where, despite its faults, the U.S. record echnological achievement is the model for the world. ED FOR REGULATORY REFORM: Unfortunately, with or without health care reform, the U.S. regulatory vironment poses a serious challenge to the continuing success of medical vice industry in the U.S. Increasingly that environment is limiting patient cess to the latest technologies and is having a stifling effect on the medical vice industry's ability to innovate and turn out revolutionary technologies and ducts. You need bureaucracies to deal with regulations, and innovation and reaucracy are incompatible. To address this problem, many innovative medical device companies are oving offshore. One consultant recently told us that more than 90 percent of their clients, which are medical device and pharmaceutical companies, are considering either moving or making their next investment overseas. The reason -- there's just too much regulation to make it worthwhile to get into anything new in the U.S. I can't speak for those companies, but I can tell you that for Varian it is very likely that offshore doctors and patients will have the first opportunity to use and benefit from our next-generation products. The reason the product approval process is dramatically faster abroad. We're not happy about that, but it's the reality. If those countries can do it without compromising safety, then we need to ask why America cannot? These regulatory frustrations are causing more capital spending to go abroad, more factories to be sited outside our borders, and more investments in companies and R&D to be made outside the U.S. This means we're exporting high paying jobs as well as our technology. And, while some of that is inevitable because of the increasingly global nature of the market, some of the offshore migration is clearly the result of a less hospitable business environment in the U.S. Government regulatory pressures are also having a dampening effect on technology innovation. Medical device manufacturers like Varian are shifting the focus of research from revolutionary R&D to evolutionary R&D. In the past, we devoted most of our effort to looking for breakthroughs to cure the incurable. Today there's just too much risk in revolutionary R&D. Instead, companies are now more focused on finding smaller improvements in throughput for patients, in cost, in reliability, and in human engineering aspects of equipment. Ten years |