Distinguishing Medical Devices from Drugs
Although pharmaceuticals provide the closest analogy to medical devices, we should not assume that drug and device issues are identical. Both drugs and devices are essential for the treatment and diagnosis of disease, but there are very important differences as well. Recalling the FDA definition, we know that drugs and devices operate through different biomedical mechanisms—most drugs are metabolized, and devices are not. The size and the composition of the marketplace and the range of producers differ in the two industries.
Of course, drugs and medical devices are often used in concert; for example, syringes and intravenous equipment deliver drugs directly into the body. Innovative skin patches allow gradual absorption of chemicals through the skin for various medical treatments, such as for motion sickness. Drugs and devices may offer alternative treatments. Patients may choose chemotherapy, a drug treatment, over surgery, a procedure, to eradicate cancer; women can choose among birth control pills (drugs), diaphragms, and IUDs (devices) to prevent pregnancy.
The governmental distinction between drugs and medical devices is more than a biomedical nicety. Device technologies range from lasers to computer systems to implanted materials. Because of that diversity, the nature of the medical equipment
and the costs associated with its purchase and use vary much more widely than for drugs. That is not to say that all pharmaceuticals are cheap. Indeed, recent introductions, particularly products based on biotechnology, carry high price tags. Tissue plasminogen activator (TPA), a drug for treatment of stroke victims, can cost as much as $5,000 a dose.[21]
In 1990, one dose of TPA cost $2,200, in contrast to the drug it, claims to replace, streptokinase, which cost $200 a dose. U.S. sales of TPA in 1989 were nearly $200 million. Karen Southwick, "Analysts Say TPA Use May Drop in Wake of Study," Healthweek, 26 March, 1990, 45.
Recent controversies over the high price of zidovudine (AZT), one of the few effective drugs for AIDS patients, raises the same issue. However, price variability in devices is still much broader. Devices range from simple products, such as crutches and bandages, to high-cost capital equipment, such as laboratory blood analyzers, lithotripsy equipment, and magnetic resonance imaging machines that cost several million dollars. Unlike drugs, such equipment may require maintenance, specially designed facilities, and specially trained operators and are subject to depreciation and deterioration. Other devices, such as components for kidney dialysis, raise important questions of reuse not relevant for drugs.In addition, the medical devices market may differ from the drug market. While hospital pharmacies generate sales, physicians generally order prescription drugs for individual patients, and consumers can purchase over-the-counter (OTC) drugs directly. The primary purchasers of medical equipment are hospitals, which rank ahead of physicians, ambulatory care centers, and individuals. Hospital purchasing patterns are extremely sensitive to changing reimbursement policies by third-party payers.
There are significant distinctions between drugs and devices on the supply side as well. Because of the range of technologies embedded in medical device production, a widely diverse group of firms consider themselves part of the medical device industry. In pharmaceuticals, the top one hundred companies market 90 percent of the drugs.[22]
Grabowski and Vernon, Regulation of Pharmaceuticals, 18.
The device industry is not nearly as concentrated: currently, over 3,500 device companies produce several thousand products. These companies range from those also known for drugs, such as Johnson & Johnson and Pfizer, to electronic giants, such as General Electric and Hewlett-Packard. In addition, there are many smaller companies concentrating exclusively on medical devices, such as Alza Corporation, whichspecializes in innovative drug delivery systems, and Medtronic, the leader in heart pacemakers and heart valves. Others have diversified. For example, SpaceLabs, now owned by Bristol-Myers/Squibb, applied technologies that were developed for the space program to produce a variety of monitoring and data-recording devices.
With all this diversity, it helps to consider medical device producers as a single industry. While this industry is many industries, in one sense, because no substitutability exists among all products, there is a commonality of buyers—hospitals, clinics, laboratories, physicians, and patients. However, there is a commonality in use in a broad sense—the products affect the function of the body and/or treat disease. Finally, it is the peculiar set of government health policies that have shaped the performance of this industry. All companies are, to some extent, offspring of the same set of policies, and this brings us full circle to the FDA definition of medical devices. The industry is unified by its relationship to government, both because it is defined by government and because of its symbiotic relationship to it.