Putting members’ health before profit

Profit-driven medical devices companies not telling Australians the full story with self-serving report

Global medi-tech giants are raking in hundreds of millions of dollars in profits from the medical devices market, leaving Australian consumers to foot the bill.

A recent report, backed by multinational profit-driven medical devices firms, failed to mention the companies that commissioned the analysis continue to pull in more money than ever from their devices businesses – and Australians are among the hardest hit.

Johnson & Johnson reported a 6.9 per cent or US$500 million jump in medical devices revenue at June 30, while Medtronic reported first quarter revenue of US$7.493 billion, up 1.5 per cent.

“The big multinational device companies see Australia’s regulatory environment as a license to print money. Australia is so profitable that it is described as ‘Treasure Island’,” said Matthew Koce, CEO of Members Health, the peak body for 25 of the country’s not-for-profit health insurers.

The latest data from Independent Hospital Pricing Authority and Commonwealth Department of Health 2016/17 shows in Australia, consumers paid about $862 million more for medically implantable devices in private hospitals than what they would have in a public setting.

The average cost of a pacemaker in the public system was $3,759 while in the private system it was $14,286 – three times more expensive. A hip replacement in a public setting cost an average of $6,169, but more than $10,100 in private. The biggest offender was the implanted heart defibrillator (AICD) pacemaker (DRGF01B), which cost $14,022 in the public system but $53,196 in the private system – an outrageous 280 per cent price increase.

Evidence of this profiteering can also be seen in the dramatic price differences for some prostheses in neighbouring New Zealand.

One bare metal coronary stent, for example, is $898 on Australia’s Prostheses List, 51 per cent more than the New Zealand price of $439.50 (NZ$465). One drug eluting coronary stent is $2,484 in Australia, 80 per cent more than the $496.21 (NZ$525) across the Tasman Sea. And one femoral head (for hip replacement surgery) is $2,109 in Australia, 45 per cent more than $1157.83 (NZ$1,225)1.

In France, prices across 158 prostheses items were on average 45 per cent cheaper than in Australia in 2018, data compiled by Members Health shows.

“It is incomprehensible that Australia’s private health consumers are forced to pay many times more for identical medical devices than those in the public hospital system or overseas,” Mr Koce said.

“Headline premiums are rising, but it is not the slim – sometimes even negative – margins that many health funds operate on that is driving those increases. The great Australian prostheses rip-off is the culprit.”

New data from Australian Prudential Regulatory Authority shows premium revenue rose 2.77 per cent in the June quarter, while benefits grew 2.99 per cent – driven by a 9.8 per cent rise in prostheses costs and a 7.5 per cent rise in medical services.

In 2018, the Coalition Government delivered modest cuts to the price of prostheses totaling $188 million, but the data shows that was a drop in the ocean.

“We commend Greg Hunt for being the first Health Minister to tackle such entrenched and blatant profiteering, but the situation is far worse than initially thought and much more needs to be done to protect consumers from the excessive prostheses charges being imposed by the these big multinational behemoths.”

Members Health funds are member owned and exist only to serve consumers, not for profits, and therefore return more in benefits.

“We are fortunate to have a diverse and competitive private health insurance market, where there is genuine competition and choice for consumers. The last thing anyone would want is a Coles and Woolworths duopoly or a situation like the big four banks.”

Consumers are increasingly becoming aware of the benefits that come from being with a Members Health fund. As a group the Members Health funds are growing at more than double the industry average and are paying out more in benefits to take care of peoples’ health, Mr Koce said.

Members Health is the peak national body for 25 not-for-profit, member owned and community based health insurers. Members Health funds provide health cover to over 2 million Australians.

Read the full release and supporting data here: 2019-08-22 – Prostheses report – Members Health response