Discussion Forum

SAN FRANCISCO — Adding its thumbs down to a growing list of studies and commentaries that slam national competitive bidding, the Pacific Research Institute weighed in last week with another damning review of the process, saying it “yields prices for equipment that are substantially lower than those that would emerge in a competitive market.”

In a study titled “Medicare Auctions for Durable Medical Equipment,” Benjamin Zycher, PhD, a senior policy fellow at PRI, wrote that under the “flawed auction system, prices for medical devices and equipment are likely to be about one-third to two-thirds below the competitive price.

“Accordingly, market incentives to invest in new medical technologies will be reduced as well,” Zycher said. “Investment would be reduced by 12-15 percent or approximately $2.1-$3.1 billion annually from 2011 through 2020.”

According to Zycher, “This investment loss would cause, conservatively, a loss of about 500,000 expected life-years each year, the economic cost of which would be about $50 billion per year, which is substantially greater than the entire U.S. market for medical devices and equipment.”

A June 13 statement from PRI said CMS has “powerful incentives to pursue budget savings rather than economic efficiency, or patient wellbeing, in resource use.”

The California-based think tank, which champions free-market policies, said the study demonstrates that the magnitude of such an adverse economic effect should make reform of CMS’ bidding program “a high priority for policymakers.”

In addition to PRI, the American Consumer Institute, Galen Institute and Heartland Institute have also published reports criticizing the CMS bidding program.

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