Containing Healthcare Costs:
A Second Opinion

Sigi Ziering, PhD
Chairman and CEO
Diagnostic Products Corporation

The twentieth century will be remembered as a period in which technology and scientific discoveries increased exponentially. Nowhere, however, has the technological progress been more rapid than in healthcare, including in vitro diagnostics, a part of modern medicine unknown a century ago. Rapid diagnostic and prognostic determinations have changed the landscape of medical practice. It is hard to imagine how we could hope to control the spread of HIV without the ability to identify carriers serologically, or monitor diabetes without glucose tests, or carry out in vitro fertilization without assays for various fertility markers.

Undoubtedly, the increased life spans and improved living conditions of the past century are the result of these unparalleled advances in medical technologies. Even so, a majority of the world's population still lacks access to modern medicine. As per capita income and living standards in the less developed world increase, the need for, and expansion of, healthcare services will be a prime concern.

For in vitro diagnostics in particular--an industry that includes the field of immunoassay, in which DPC operates--we see a rapid expansion ahead driven by aging populations in the developed countries; by new technologies based on more specific, rapid and sensitive analytic techniques; and by the expanding needs of large populations in such underserved regions as the former Soviet Union, China, India, Africa and South America.

Developed countries are experiencing a temporary restraining effect due to the containment of medical expenditures by government institutions and third-party payers. Thus, as new technologies provide expensive life-extending and life-enhancing procedures and devices such as transplants, heart valves and MRIs, the price society is willing to pay for these advances becomes a contentious topic. Discussions of cost containment invariably cover the whole domain of healthcare irrespective of the relative merits or the cost effectiveness of a particular procedure. It has been estimated that upward of 70 percent of diagnostic value is provided by the laboratory. Yet, in vitro diagnostics accounts for less than 4 percent of total healthcare expenditures, with less than 1 percent of total healthcare expenditures accruing to manufacturers of such systems and services worldwide.

The in vitro diagnostics (IVD) industry is no exception in this move toward across-the-board limitations on healthcare expenditures. Like other healthcare providers, the IVD segment has been severely affected by efforts to curtail these expenditures--and this in spite of the enormous progress made by our industry not only in developing new tests but also in driving the cost per test down significantly over the past decade, through fierce competition and better technology, including labor-saving automation. As a result, restrictive limitations on the number and frequency of tests allowed have been imposed by outside agencies, who thereby second-guess the physician--all in pursuit of financial containment. Yet, the services provided by the IVD industry are not only indispensable tools for the physician, but are also, without doubt, the most cost-effective tools in existence.

At the same time, driven by pressures for lower expenditures, and by the questionable paradigm pervading our society that bigger is always better, moves towards the centralization of all services have been much in evidence. This trend largely ignores what the physician and his or her patient really require, and what is technologically feasible. It is all the more remarkable that efforts to create still larger centralized laboratories are being made at a time when manufacturers have developed newer technology in response to the demands of practitioners for rapid and localized analysis. Simple-to-operate instruments connected to a main computer are becoming available. This next generation of instruments enabling routine analysis with a wide menu of tests to be performed at the bedside, as well as in the operating and emergency rooms, is now available.

These facts ultimately raise the question of where control of medical practice should reside. An often misapplied yardstick used in overall efforts at capitation and cost containment is the computation of these costs as a percentage of a country's gross domestic product (GDP). This is a largely fallacious approach, since historical measurements of healthcare expenditures as a percentage of GDP ignore the increased demands for available services based on new technologies that extend life and improve its quality.

Thus, society has to make a decision based on the expectations of its citizenry and their demands for increased utilization of these newer technologies, rather than on absolute expenditure percentages. Yet we, both as taxpayers and as employees and employers, are the ultimate sources of this increased revenue required for "better" medicine. It seems incongruous to me that we have delegated to bureaucrats the decision of how many of our tax dollars should go for medical expenditures. The hidden costs associated with inadequate or substandard medical treatments are hard to quantify; yet they must far outweigh the false economies created by these new reforms. It is also most depressing--and a violation of our personal freedom--to see the cherished patient-doctor relationship destroyed and replaced by a bureaucracy primarily concerned with dollars and cents. Limiting the power of the physician through centralization of medical services--whether by fiat, as under communist regimes, or by the use of false economic models--will not work. A cancer patient should have the absolute right to receive a specific test when recommended by a physician, even if the specificity is less than 100 percent. Clearly, when it comes to our most elemental right to adequate medical care, our opinions as taxpayers and potential beneficiaries must be heard.

Medicine managed to function without immunoassays until the 1960s, but at what price in missed or, worse yet, false diagnoses and prolonged suffering? From a purely financial perspective, more costly treatments, performed previously in the absence of precise and definitive diagnostic tools, can be avoided. As a member of the IVD industry, DPC has developed effective diagnostic tools for an ever-increasing range of human diseases. We are proud of the role we have played, and will continue to play, in this worthwhile human endeavor.

As we move into the next century, the future of this industry looks brighter than ever. Decisions on how much of our--the taxpayers'--funds should be devoted to healthcare should be left to those who ultimately pay for it and benefit by it. Western medicine is the envy of the world. Let's not destroy it.