Time for medical devices companies to stop charging an ‘Australia Tax’

By Emily Amos, Managing Director Bupa Health Insurance. 

In 2018, a Parliamentary committee report found multinational technology companies were charging Australian customers up to 50% and 100% more for IT products than those in comparable countries.

A grossly unfair situation by anyone’s standards, especially considering the proliferation of technology around the world.

It was the transparency and competition of an increasingly global market that helped drive a fairer deal for Australian consumers and has ensured we now pay more stable prices for smartphones and other smart devices. However, the ‘Australia Tax’ is alive and well for the Big MedTech multinationals who continue to charge Australian private patients the world’s highest prices for medical devices that are used in everyday medical procedures, with no additional clinical benefit.

So why is the connection between Big MedTech pricing and private health insurance important? It’s because Australian consumers end up paying for these overpriced devices ultimately through their health insurance premiums. As healthcare costs increase, so do insurance premiums. This has a flow-on effect as it puts private health care out of reach for many, and puts further pressure on our public hospital system.

The agreement between the Federal Government and Big MedTech that effectively determines the price we pay for medical devices is set to expire in January 2022. So, now is the time for true reform that will help protect affordability for Australian consumers and address this grievously unfair situation.

Why do Australian customers pay more for medical devices?

The price Australia’s private patients pay for medical devices is set by the Government without reference to a competitive market process, or pricing in public hospitals or internationally. Consumers, through their health insurer, are required to pay the price on the Government’s Prostheses List for more than 11,000 individual medical devices such as artificial joints, vascular and cardiac stents, insulin infusion pumps, pacemakers and more.

In recent years, many consumable items used during surgery, such as sponges and glues, have been added to the Prostheses List, even though they aren’t technically prostheses, because this prevents any negotiation on their prices

Because the list is so extensive and unlinked to market prices, the prices for devices are often inflated. And each year, the list grows making quality and cost more difficult to control.

What does this mean for Australians needing health care?

Every day, Australians are paying around $5.5 million for medical devices used during surgery. This is a cost that sits outside of doctors’ fees, hospital stay costs and medications.

This means over the next five years, Australian consumers, through their private health funds, will pay more than $10 billion for medical devices. If we paid the same price as consumers in New Zealand and South Africa, the cost would be $3 to 4 billion less, and less again if we lived in France or the United Kingdom.

Take the example of a stem used in hip replacements. In New Zealand, the price of the stem is equivalent to $1,868 and in the United Kingdom $1,823. Yet Australians pay more than double this price at $4,196.

We don’t want our customers to pay a dollar more for their health cover than necessary, but the reality is that the inflated cost of these medical devices is placing a major burden on the private health system and is a key driver in rising private health insurance premiums.

When people opt out of private health insurance due to affordability or other reasons, more people are forced to use the already overburdened public system, compromising the sustainability of our health system.

We have one of the best health systems in the world here in Australia and we need to protect it.

What needs to happen?

We must use this opportunity to address some critical issues in prostheses pricing, including:

• Abolish the Prostheses List and establish an independent approach – overseen by the Independent Hospitals Pricing Authority – to set prices for medical devices. This should reflect what happens in the market, both here and internationally, and encourage competition between device manufacturers so Australian customers get the best ‘bang for their buck’;
• Radically simplify the approach to prostheses pricing through bundled pricing rather than paying the listed price for each individual component. For example, in many cases, the individual medical devices needed for a hip or knee replacement are well established and could easily be bundled together under a single price;
• Remove consumable items (that are not prostheses and are driving up prices) from the list and whatever framework replaces it. In many cases, patients are already paying for consumables through the contracts insurers enter into with hospitals; and
• Establish disciplines that measure, report and incentivise good patient outcomes when it comes to medical devices so our clinicians have the data available to make the best decisions for their patients.

All of this can be achieved without impacting the choice or quality of medical devices available. And if done correctly, the super profits that currently flow to Big MedTech multinationals can instead be distributed to Australian consumers.

For our part, Bupa is committed to passing on every single dollar saved through these reforms to directly benefit customers through reduced premiums. Not only is it the right thing to do, it is the key to a sustainable healthcare system for all Australians.

More information

Bupa has provided a submission to the Department of Health on the Prostheses List, and we support Private Healthcare Australia’s Roadmap for Prostheses List Reform.