Medical Tourism: Medical Tourism

Home , Medical (constituency), Pharmaceutical industry, Tourism (constituency)

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October 2007

MEDPHARMA PARTNERS LLC & MEDTRIPINFO.COM

101 Federal St., S. 1900 Boston, MA 02110 www.mppllc.com www.MedTripInfo.com

David E. Williams John Seus [email protected] [email protected] (617) 731-3182 (978) 281-6705

Medical Tourism: Implications for Participants in the US Health Care System

Table of Contents

Introduction ...... 2 Five predictions about medical tourism ...... 3 Issues for US industry participants...... 6 Health plans and employers...... 6 Health care providers ...... 8 Medical device companies ...... 10 Pharmaceutical companies ...... 12

Conclusions ...... 13 For further information ...... 13

Why Medical Tourism Deserves Attention Now… • US patients are discovering high quality, low cost care and excellent customer service in overseas locations. Cost savings range as high as 60 to 90 percent. • Increasingly, patients are traveling for “serious” surgeries, including cardiac and orthopedic procedures. This builds on the established phenomenon of medical tourism for cosmetic and dental surgery. • Employers, health plans and benefits consultants are taking notice and in some cases are launching pilot programs. The media have drawn attention to medical tourism, while medical travel facilitators have sprung up to help patients and companies go abroad. • Singapore, Dubai, India, the Philippines, Malaysia and others are incorporating medical tourism into their economic development strategies and investing substantial resources in the sector.

Various reforms underway in the private Introduction sector, including the introduction of health care information technology, disease management, predictive modeling, wellness It’s common knowledge that US health care programs, pay for performance, cost sharing, spending is out of control. Per capita costs consumer directed plans, and limitations on are more than double the OECD median and medical malpractice payouts are unlikely to continue to grow rapidly. Corporate leaders have any real impact. As the general public worry that health care costs make the US begins to comprehend the limitations of uncompetitive in the global market and voters existing initiatives, a search for new answers rank health care as the single most important will ensue. Traveling abroad for medical care domestic issue. There’s growing awareness –a concept often called “medical tourism” — that the US doesn’t get what it pays for either. is one of the ideas they will discover. US public health indicators are near the bottom of international rankings, and Medical tourism is not a panacea. In fact customer service (euphemistically called there is no guarantee that it will become a “patient experience”) is inferior to other US central part of health care reform in the way service industries. Furthermore, close to 50 that outsourcing has become a way of life in million people in the US lack health other industries. Nonetheless the time is ripe insurance. for US health care players to learn more about the topic. Medical tourism presents Despite –and to some extent because of— opportunities and threats for health plans, health care reform, the cost problem is employers, pharmaceutical and device worsening. Most reform plans --including companies, providers, payers and patients. those proposed by Presidential candidates Those who understand the emerging market from both parties-- emphasize increasing will be well-positioned to take the initiative access to health care through subsidized and to benefit as the field evolves. The and/or mandated health insurance. industry is still in a very early stage – and Proponents often claim that universal health significant changes will transpire over the insurance will drive down costs as newly next few years. insured patients substitute visits with primary care physicians for expensive emergency The purpose of this white paper is to lay out room care. Actually, insured patients tend to the issues that US players should begin consume more health care services and may addressing now and to provide the context in be even more likely to visit the emergency which to evaluate them. room than the uninsured, according to a 2006 Health Affairs article.

mechanisms are being put into place to Five predictions about medical address legal concerns. tourism Finally, insurers sense an opportunity to No one knows exactly how the medical increase their negotiating leverage with their tourism field will unfold. However, here are existing provider networks by creating viable some predictions. overseas alternatives. Such leverage may help them reduce their costs relative to Prediction #1: US health insurers will start competitors. The lower cost position could be to cover medical tourism in 2008 used to boost profits or to create pricing flexibility that would allow insurers to better Insurers are under pressure from customers address small employers, who are to hold down premiums. Managed care increasingly unable to afford comprehensive techniques such as primary care health insurance even as pressure on them gatekeepers, limited access to specialists and to offer coverage grows. hospitals, pre-certification and capitation have largely run their course. These approaches Prediction #2: Mini-med plans and small are unpopular with patients and providers employers –not big health plans and blue and have lost much of their effectiveness. chip companies-- will be the early adopters Meanwhile, insurers Medical Tourism Predictions are beginning to hear Medical tourism requests to cover #1: US health insurers will start to cover proponents such as medical tourism. The medical tourism in 2008 foreign governments requests are coming #2: Mini-med plans and small employers and providers are from multiple sources: –not big health plans and blue chip heavily focused on employers and their companies-- will be the early adopters attracting interest from benefits consultants, Fortune 500 foreign hospitals and #3: Opposition to medical tourism by US companies. They’ve governments, medical physicians will be modest also concentrated their tourism facilitators, and #4: State governments will begin to efforts on large, well- individual members embrace medical tourism by 2010 known health plans who want to receive including Aetna, Cigna, coverage overseas. A #5: The emergence of medical tourism United and the largest few major health plans won’t have a major, direct impact on Blue Cross Blue Shield US health care costs, but the have taken small steps plans. They theorize toward coverage. For secondary impact will be substantial that once one big example, Blue Cross player jumps in, others Blue Shield of South will follow. Carolina has added Bumrungrad Hospital in Thailand to its hospital network and started Smaller employers, health plans and Third Companion Global Healthcare to help other Party Administrators (TPAs) have been health plans establish overseas networks. largely ignored. And yet this is actually the Health insurers in Southern California and biggest segment of the commercial market Texas offer cross-border plans aimed and the one most open to medical tourism primarily at Mexican citizens living in the US. coverage. Consider that close to half of Americans work for organizations with fewer Concerns about patient safety and liability are than 200 workers, according to the Census starting to be addressed. The Joint Bureau. Many of those employers are at the Commission International (JCI), an arm of edge of their ability to provide comprehensive JCAHO, the main accreditation body for US health insurance. Only 60 percent of hospitals, has accredited over 100 foreign employers with fewer than 200 workers hospitals. Arbitration and mediation offered health insurance in 2006, a decline of

8 percentage points since 2001. This attend global conferences where American compares with the 99 percent of larger physicians from leading institutions treat their employers who provide health insurance, a colleagues from other countries as peers. rate that has held steady over the last They have often trained together and they decade, according to the Kaiser Family publish in and read the same journals. It’s Foundation. typical for physicians from overseas to speak and read English. Smaller employers look at insurance differently. Many are shifting to so-called More than 25 percent of physicians in the US “mini-med” or “limited benefit” plans that are foreign-born, according to the US Census cover day-to-day expenses such as doctors’ Bureau. They practice in a variety of settings, appointments, but not surgery. The plans are from large academic medical centers to small affordable but often cap expenses at as little rural offices. As a result, US-born physicians as $25,000 per year, which de facto excludes know firsthand about the quality of overseas major surgery. Such employers will view physicians and US patients are already medical tourism as a way to enhance benefits accustomed to being treated by doctors from rather than About 40 percent of our patients are from outside faraway places. simply as a cost Singapore. The American embassy here goes out of control measure. its way to make sure that military, foreign service, and The demand for diplomatic corps members anywhere in Asia get here health care is Mini-med as quickly as they can, because our hospitals in insatiable. A companies are Singapore have a long tradition of serving the shortage of already picking expatriate community and doing it very well. physicians up on this means that most opportunity. In The good news is that for Americans who can't afford doctors aren’t fact, the founder access to health care in the US, there are options. scrambling for of the Medical There's a wonderful, English-speaking tropical more patients. Tourism paradise called Singapore. We can provide just about Indeed many Association is an anything for roughly half of what it would cost in the practices are executive of a US. We do things just as well. closed to new mini-med plan patients. If and his company We're part of the solution. We're not the cure. anything, has quietly physicians may begun providing -- Dan Snyder appreciate coverage for COO of Parkway Health (Singapore) having uninsured overseas patients taken off surgery. their hands so they can focus on more lucrative customers. Prediction #3: Opposition to medical tourism by US physicians will be modest Prediction #4: State governments will begin to embrace medical tourism by 2010 An oft-repeated assumption is that the US medical establishment will block the medical It sounds far-fetched, doesn’t it? After all, can tourism industry from developing by bad- you imagine the backlash against politicians mouthing overseas physicians and hospitals. who suggest sending patients away for Some medical societies and influential medical treatment? Who will be able to stand physicians have made cautionary up to the pressure even if medical tourism is pronouncements, but the situation among a good idea? practicing physicians is not nearly so negative. Actually it’s likely that at least a few state governments (along with some local ones) Medicine is already a global profession. will begin flirting with medical tourism soon. Physicians from academic medical centers States have shown a willingness to take the

Medical Tourism – Implications for participants in the US health care system p. 4 ©2007, MedPharma Partners LLC, www.mppllc.com, (617) 648-3828 Medical Tourism – Five Predictions lead on health care policy. Massachusetts is every US resident who could go abroad for implementing near-universal health insurance treatment actually went, the savings on total coverage and California is considering doing medical costs would be about 5 percent. the same. Oregon, Tennessee, Florida and That’s still a big number, especially compared others have embarked upon their own to other initiatives that are available. But with innovative paths in health care. health care costs increasing by 10 percent per year, a one-time reduction of 5 percent States, unlike the Federal government, won’t be decisive. generally have to balance their budgets. Rising health care expenses mean states However, there is an opportunity to leverage must shift funding from other programs or medical tourism to achieve broader benefits. raise taxes, both of which are unpalatable. As When overseas providers begin to present a health care costs continue their relentless credible alternative to their US counterparts, it climb, it becomes harder and harder to may spur domestic providers to re-engineer balance the books. A politician who proposes their clinical and administrative processes medical tourism might actually attract praise and to challenge inefficient, outdated work rather than scorn –by appearing to be doing practices. Thinking of health care in terms of something about the health care cost crisis discrete, albeit often complex, services with other than complaining. Remember that state measurable inputs and outputs will advance and local governments have been active the field. Customer service levels can be participants in drug “reimportation” schemes, expected to rise, and not just in services that even challenging Federal laws to do so. face direct competition. Additionally, US and foreign providers will start to work together, Southwestern states, due to their proximity to with some administrative and clinical tasks low-cost countries in Latin America, may take performed in the US and some overseas. the lead. Other states or municipalities with Advanced, inexpensive communications large foreign-born populations may also be technology will enable broader application of good candidates. New York, for example, has “virtual medical tourism,” through increased half a million Dominicans. Santo Domingo -- use of new forms of telemedicine. with US trained and board certified cardiac surgeons and low prices-- is a 4-hour nonstop flight away. Why wouldn’t New York at least explore the possibility?

Prediction #5: The emergence of medical tourism won’t have a major, direct impact on US health care costs, but the secondary impact will be substantial

Medical tourism will make a dramatic difference for specific cases. The stories of $100,000 surgeries performed for $10,000 or $20,000 abroad are real. Orthopedic and cardiovascular procedures are particularly active areas for medical travel because the surgeries are expensive, have well- developed outcomes measures and limited or highly defined post-operative rehabilitation. Dental and cosmetic surgeries are also popular abroad, due to their elective nature.

Nonetheless the aggregate impact on US health care costs will be relatively minor. If

substantial impact on the overall medical bill. Issues for US industry Finally, employers and health plans may be less comfortable than uninsured individuals participants with the very lowest cost overseas providers, Medical tourism has different implications for who tend to operate in countries where the the various constituencies that comprise the overall infrastructure is less advanced. US health care system. This section outlines the main issues that pertain to each. Writing on MedTripInfo.com, Michael D. Horowitz MD MBA has demonstrated that it is Health plans and employers possible to achieve cost savings of 80 percent or more by journeying to Costa Rica Health plans and employers need to begin for specific procedures. On the other hand, paying at least some attention to medical Ken Erickson of GlobalChoice Healthcare – tourism. Customers and employees are which offers medical travel benefits to beginning to ask about it, overseas providers employers—pegs the savings potential at 5 and medical tourism agencies are knocking at percent of the total premium, which is the door, and some high-profile pilot activities substantial but not overwhelming. For now it have been announced. There are a variety of is only practical to travel abroad for issues to consider. orthopedic procedures, such as hip and knee

replacements, and cardiovascular surgeries. Whether or not to participate The list is likely to expand over time, which Despite the high interest in medical tourism, will increase the potential impact. very few insured patients are going overseas for care today. An overseas provider network Communications and positioning is not yet an important criterion for most Health plans and employers that begin customers. Plans and employers should offering a medical tourism benefit will be consider being early adopters of medical greeted with suspicion and hostility in addition tourism if one or more of the following apply: to enthusiasm. Some patients and their A high incidence of expensive cardiac • families will question the motives of their and orthopedic procedures that can employer or payer and close their minds to be done well overseas. the possibility of a medical trip abroad –even A high proportion of members with • if it’s an option they would otherwise ethnic ties to a medical tourism consider. Domestic providers may also worry destination. They may be more that their jobs are being outsourced or that inclined than others to return to a their reimbursement will be squeezed. place where they know the language

and culture and have relatives. Plan sponsors need to move deliberately and Convenient air or ground connections • rely to a large extent on pull from their to medical tourism destinations. members rather than pushing too hard. For

example, uptake is likely to rise once a To decide whether to offer medical tourism, trusted colleague returns from a successful it’s essential to understand the economic treatment abroad and tells his or her story to potential. It’s common in the popular press to co-workers. A way to accelerate that process hear stories about people saving 90 percent is to make members aware of independent, or more by going abroad. Those figures are online resources such as MedTripInfo.com, a less relevant for health plans and employees. website that provides information, news, and First, the savings are usually based on US discussion forums on medical tourism. hospital “charges” compared to foreign Journeying to an overseas hospital needs to prices. “Charges” are a useful comparison for be purely optional, at least at first. Members uninsured patients, but overstate what’s paid also should be given incentives such as lower on behalf of insured patients. Second, cost-sharing or additional vacation time, savings may only be achievable on a narrow which some may wish to use to extend their range of procedures, which may not have a time overseas.

Medical tourism can’t take place in a vacuum; between providers and patients to US providers need to provide pre- and post- complement strong contractual guarantees operative care and ideally should work as from providers. Although it isn’t a simple team members with their overseas message to communicate, it may also be counterparts. Therefore it’s crucial to ensure worth noting that patients actually don’t have that domestic providers are comfortable with such straightforward recourse in the US. their overseas colleagues. A good way to do Malpractice suits take years to resolve and this is to contract with a narrow overseas even then plaintiffs win at trial only about network at first, comprising well-known one-fourth of the time, compared to a 50 facilities staffed with US trained and board percent win rate for other personal injury certified physicians. Corporate and health cases, according to a recent University of plan networks may encompass a different set Missouri study. of providers than those most popular with self-pay patients. Proximity, local Coordination with other initiatives infrastructure, quality and financial resources Medical tourism is a way to enhance and are likely to be more important considerations extend other initiatives. For example, pairing for health plans and employers. medical tourism with consumer directed health plans is potentially quite promising. A Depending on the local environment, it may significant limitation of today’s plans that be possible to use the expansion of the combine Health Savings Accounts (HSAs) provider network overseas to spur with traditional PPOs is that members improvements closer to home. One possibility exhaust their entire HSA balance even with is to use overseas providers as a way to minor surgery, and thus lose their incentive to increase the flow of outcomes information. keep costs low Overseas providers are We're seeing a 40 to 60 percent savings when a major likely to be willing to on the procedures themselves. We can intervention is share detailed outcomes have up to a five percent effect on a required. Overseas and patient satisfaction company’s entire health care cost. alternatives may be measurements. This inexpensive enough could be a good way to But you just can't take somebody and say, that they do not get local providers to ‘We're going to send you to Mexico for consume an entire increase transparency your cancer care.’ It doesn't work. You HSA balance. On and to improve their have to have the protocol to take them out the other hand, performance as they of their system, put them into another consumer directed compete to demonstrate system and integrate them back into their plans could preeminence. And payers care correctly in order to realize those undermine medical shouldn’t rule out the savings. So just saying, ‘Hey, it's less tourism by offering possibility of using expensive there, we're going to go,’ doesn't full coverage of comparisons with work. major medical overseas pricing to help expenses in the US. hold the line on local -- Ken Erickson Plans and reimbursement rates. CEO of Global Choice Healthcare employers could encourage medical Patients and their families will naturally be tourism by injecting additional funds into concerned about the quality of care overseas members’ HSAs as a reward for participating and what recourse they have should things in international medical tourism, assuming go wrong. Using only hospitals that are they can find ways to do so legally. accredited by the Joint Commission International (JCI) in countries with solid legal For companies that offer only mini-med plans, systems will go a long way toward alleviating sometimes called limited benefit plans, these concerns. Medical tourism players are medical tourism is a natural fit. That’s developing insurance for complications and because such plans usually don’t cover major working out arbitration arrangements medical costs at all. Medical tourism provides

Medical Tourism – Implications for participants in the US health care system p. 7 ©2007, MedPharma Partners LLC, www.mppllc.com, (617) 648-3828 Medical Tourism – Issues for US Industry Participants a relatively inexpensive way to add a major been shifted overseas. Now pharmaceutical medical component. Members will be pleased companies are moving R&D and clinical trials because medical tourism can be presented abroad. as an added benefit, not a substitution of overseas for domestic care. Domestic Is the same thing going to happen to providers may be pleased, too since it will physicians and hospitals? The overall answer give them somewhere to refer these patients is no. The provision of health care services who otherwise may be left untreated or will remain a largely local business. It’s not become bad debt problems. worth the trouble to travel abroad for routine care, emergent care is too time sensitive, and Logistical issues most seriously ill patients are too sick to One question health plans and employers will make the journey. Nonetheless, there will be face is whether to work through a third-party an impact. to develop a network. Even the largest employers should consider doing so, at least In assessing the risks associated with in the short term. That’s because any single medical tourism, providers should consider employer is unlikely to have the patient the following: volume or the skill set to have much sway • Do they provide orthopedic surgery, with overseas providers, unlike facilitators cardiac surgery, cosmetic surgery or who often have strong local relationships. For dentistry? These are the areas that will be health plans it’s a somewhat different story. most affected. Plans are accustomed to building their own • How close are they to foreign networks and sometimes bristle at the idea of destinations? This is more about airline a “middleman” interfering with those service than geographic location. For relationships. Nevertheless it’s at least example, Singapore is halfway around the worthwhile listening to what the aggregators world but there’s a nonstop flight with who have been in the business for a while excellent service from New York City, have to offer. which puts it in range. Meanwhile, it can take longer than that to get to Central Health care providers America from the Midwest. • What is their patient and payer mix? If

local patients and payers are predisposed Hospitals and physicians must develop a to medical tourism either due to cost view on medical tourism. After all, the concerns, cultural affinity or business rationale for medical tourism is to escape strategy, providers will need to take the high costs in the US. Those costs are what issue seriously. make up providers’ revenue. Providers should address the risks of medical tourism Opportunity assessment but also look for opportunities. Whatever the For most providers, the potential outcome of their analysis, providers should opportunities from medical tourism will develop a communications plan to respond to outweigh the risks. For example: the medical tourism phenomenon. Patients going abroad need a variety of • diagnostic, preparatory and follow-up Risk assessment services. “Travel-friendly” providers in the Outsourcing and offshoring have US can attract a disproportionate share of fundamentally restructured many US such patients. Patients who lack health industries. Substantial portions of the US insurance –and who might turn into bad manufacturing base have shifted to China. debts if they have costly surgery in the Software development and call centers are US—are likely to be able to pay for pre- often located in India. The health care sector and post-surgery services domestically itself has been part of this trend as lower- and become profitable patients. skilled, labor intensive functions such as • Cost-effective community hospitals that transcription and claims processing have struggle to compete with their local

academic medical centers may find that JCI accreditation standards are comparable to leading overseas academic hospitals with Joint Commission accreditation standards, but excellent reputations are willing to partner they are different. The difference is that the JCI with them. Community hospitals may be standards and survey process were adapted for able to refer certain tertiary cases to their the international community and designed to be partners abroad rather than lose them to culturally applicable and in compliance with laws their local competitors. and regulations in countries outside the United • Academic medical centers may be able to States. For example, informed consent by expand their own presence abroad in patients is a JCI requirement, but different order to support their academic mission, cultures handle this in different ways. In some attract the most complex cases, and carry cultures, such as the United States, patients fill out research collaborations. Prestigious out a consent form, while in others a family academic medical institutions such as member may be the only one allowed to give Johns Hopkins have already become consent. Additionally, The Joint Commission involved in significant international medical domestic standards reference federal and state ventures. requirements, such as the code emanating from • Foreign-born physicians comprise a large the National Fire Protection Association (NFPA) of and growing share of US providers. The the USA, which doesn’t apply in the same context emergence of medical tourism opens up internationally. JCI accreditation may stipulate the opportunity for hospitals and similar requirements as the domestic standards, physicians to leverage relationships these but allows for adaptations outside the USA. providers have in their home countries to establish productive alliances, ensure JCI standards were developed by an International effective communications and enhance Standards Subcommittee made up of experts continuity of care. representing five major regions of the world. These standards address important topics such Communications plan as the qualifications of doctors and nurses, Providers will soon hear questions about properly assessing patients to match care to their medical tourism if they haven’t already. identified medical needs, anesthesia procedures, Patients may ask questions such as: infection control and safe use of medicines. • “I’m planning to go to India for surgery. Will Additionally, JCI has established Regional you work with my surgeon there? Will you Advisory Councils in Europe, Asia Pacific and the help me choose one?” Middle East. These Councils comprise leading • “I can’t afford your price but I’d rather not experts on quality improvement, patient safety go overseas. Will you match the price I’ve and other stakeholders who provide feedback on been quoted or at least provide me with JCI proposed standards as well as input regarding some kind of a discount?” the health care delivery systems of the region and special considerations for cultural or religious Health plans and employers may say: adaptations. • “We are trying to increase affordability. Will you help us create an end-to-end offering We continue to be open to feedback and input that includes overseas providers?” that we receive concerning the applicability of our • “We are holding the line (or cutting) standards. In fact, we have recently released our reimbursement for our US providers as we third edition of the Joint Commission International add international providers who will do Accreditation Standards for Hospitals. more for less. You will have to get used to it.” -- Karen Timmons • “We want you to increase your level of President and CEO of transparency and expect you to report Joint Commission International more quality and efficiency information just like our international providers.”

It’s important to have answers to these differentials has damaged public perception questions that match the risk and opportunity of the pharmaceutical industry and assessments. Patients have already begun emboldened government purchasers in price asking questions about costs and clinical negotiations. Medical device companies will necessity as a result of consumer directed face similar challenges in managing product health care. Medical tourism is really just an policy and pricing across countries in the extension of that trend. And of course payers increasingly transparent world. Price are always looking for a negotiating edge. variations across international markets are less dramatic than for pharmaceuticals, but Questions like these need not put providers prices for some high-end devices vary by a on the defensive. As discussed, the factor of two or three from the lowest to opportunities generally outweigh the risks. US highest priced markets, which is large enough providers are integral to the ultimate success to cause friction with customers and of medical tourism; patients and payers governments. US-based surgeons, who are generally do not want to antagonize them. the key constituency for device companies, may be displeased to learn that an important Medical device companies factor in the cost difference between surgery in the US and abroad is the cost of the device

itself. The onset of medical tourism appears to present more risks than opportunities for the Low-cost, offshore manufacturers are medical device industry. The situation varies targeting medical tourism markets with their by company, depending on the specialties devices. In one case we are aware of, an and procedures served, existing business Indian supplier offered pacemakers at one strategy in medical tourism destinations, and quarter of the market price of US products in position in the US market. a medical tourism country. Clearly, there are

questions about this product’s features and Risk assessment the company’s quality systems, but such Medical device companies have made large companies are a fact of life. Should global investments in Direct to Consumer (DTC) leaders simply ignore them? Will a advertising in recent years, encouraging segmented market develop, with lower cost, patients to exert their influence in selecting a prior generation products offered at low specific implant. Medical tourism builds on prices in the same geographic markets this trend by encouraging patients to take an alongside the latest generation, highest even greater role in their care. These patients priced products? Will global leaders begin to will ask overseas providers to specify the compete in the lower priced segments? If so, medical device they will receive. Patients will should this be done by introducing lower want to know whether the device is the same priced brands alongside core brands? Will one that would be used in their home country the high and low ends of the markets and whether it is FDA approved. converge over time as they have in some

technology markets such as computer chips? Overseas providers will supply this information in order to reduce uncertainty and Medical tourism will create other challenges build patient confidence. This presents a for medical device companies. Companies challenge for device companies. For that sell certain types of implantable devices example, if the device model used at the are required to maintain patient registries in destination hospital is not marketed in the case there is a product recall or related issue. patient’s home country, government Typically, these are country-based registries. regulation may prevent the company from Medical tourism will force companies to providing product information on its web site. consider global registries, which are more

complex and costly. Device companies can benefit from lessons the pharmaceutical industry has learned in recent years. Information about wide price

Companies also need to decide whether they The growth of medical tourism will open up will assist their customer physicians and opportunities for product development. As hospitals in treating medical tourists, either major medical tourism centers expand their for the initial intervention outside the home global reputations and patient volumes, they country or for follow-up care, which may take will become attractive research partners and place in the home country. Device clinical sites. Leading players such as companies can make product design Harvard and Johns Hopkins are already decisions that raise or lower barriers to involved in ventures in potential medical medical tourism. They have choices in how tourism destinations. Microsoft, GE and other they specify the onboard electronics and leading technology companies have adjustable features of an implant and can expanded R&D activities to Asia in order to influence how registry data is created and benefit from high-quality, low cost technical managed. talent. Medical tourism may help enable medical device companies to decentralize For the most part, leading medical device their largely US-centric R&D models. companies manufacture their most important US-based global medical device leaders can products in the US and Western Europe. seize the opportunity, but medical tourism While some companies have opened plants also presents an opening for non-US or entered joint ventures in low-cost companies with smaller US market shares to countries, they generally manufacture or pursue global leadership. source accessories or lower tech products from these locations, not the “crown jewels.” Few of the largest medical device companies Depending on how companies respond to the have truly global organizations. Typically, product policy and pricing challenges, there is a commercial leader for the US medical device supply chains may become market, which can represent 60 percent of much more complex in the future. revenue, and a leader for International, to whom largely autonomous country managers Companies will need to step up policing of report. Other industries, including their supply chains to limit grey market and pharmaceuticals, have shifted to a more counterfeiting activity as growth accelerates integrated global management structure over outside their home regions, where companies the past 10 to 20 years. Medical tourism and typically have less direct control over its indirect impacts may accelerate the suppliers. A market for used stents already industry’s shift to a more modern, global exists in parts of Asia, presenting serious management approach in order to manage risks to patients and the device industry. the resulting pricing and product policy challenges. Opportunity assessment The emergence of medical tourism will Overall, medical tourism presents significant underscore the importance of the high-growth risks for medical device makers, but it also medical tourism countries and accelerate the accentuates trends in the globalization of the development of larger world-class health care business. Companies need to understand delivery institutions in those countries. their specific issues based on the medical specialties and procedures that their products After a long period of robust growth, US and support. Significant changes to organizational European markets for drug coated stents and structure, international product policy and implantable cardioverter defibrillators have pricing, product development and supply cooled. Device companies already have their chains may all be in order. eyes on Asia as incomes in the region rise. Any movement of patients from Western markets, and concentration of patients from across Asia into world-class medical tourism destinations, will make these markets even more valuable.

income countries such as Thailand and Brazil Pharmaceutical companies have placed heavy pressure on Western companies to lower the prices of AIDS drugs,

threatening to break the companies’ patents if Medical tourism will not have a profound they don’t comply. Companies such as Abbott impact on the pharmaceutical industry, but it have found themselves with limited leverage is something pharmaceutical companies and have tended to back down. However, should think about. Like the medical device some of the same countries are counting on industry, pharmaceutical companies need to medical tourism to help drive economic consider medical tourism’s impact on the growth. This could provide them with an movement of patients, information and incentive to respect intellectual property physical products. norms in order to bolster their image in the

eyes of prospective medical tourists. The hospital is a key source of drug starts for some pharmaceuticals, such as antiplatelet therapies and anticoagulants prescribed after cardiac surgery or insertion of a cardiac stent. Patients who begin therapy abroad may see a disruption in their pharmaceutical therapy when they return home if the therapies are not approved in both countries, if formulations differ, or their insurance company favors a different product. Hospitals serving medical tourists will be targeted by non-Western suppliers of specialty drugs such as EPO that are infused during the hospital stay. The business gained from medical tourist destinations could help these suppliers achieve the financial wherewithal to file for approval and launch in Western markets.

The Internet has increased the awareness of international drug pricing disparities and placed pricing pressure on the industry. Pharmaceutical companies have become adept at trade management to limit cross- border shipments by distributors and have made progress in raising doubts among consumers about the safety of “reimported” drugs. But consider the case of a patient who travels to India for major surgery. Upon discharge he receives a few days’ supply of pharmaceuticals from the hospital pharmacy and is told he can refill his medications over the Internet through the hospital’s mail order service once back home. It seems likely that this patient –who traveled halfway around the world for care—will become a loyal, long-term customer.

The emergence of medical tourism may provide Western pharmaceutical companies with leverage in intellectual property disputes with foreign countries. For example, middle-

Medical Tourism – Implications for participants in the US health care system p. 12 ©2007, MedPharma Partners LLC, www.mppllc.com, (617) 648-3828 Medical Tourism – Conclusions For further information Conclusions This white paper raises questions that US Medical tourism is an emerging phenomenon players should be asking about medical that has important implications for tourism and provides general guidance. If you participants in the US health care system. would like to discuss how MedPharma The direct impact will be modest at first Partners can assist your organization in because only certain procedures and clarifying its strategy regarding medical treatments lend themselves to medical travel tourism please contact David Williams and only a small percentage of eligible [email protected] or (617) 731-3182 or patients will travel over the next few years. John Seus [email protected] or (978) 281- However the impact is likely to increase over 6705. time as medical tourism becomes an accepted part of the solution to high health To read more about medical tourism or to care costs and as the industry evolves. If provide feedback on this white paper, please medical tourism is incorporated into state or visit www.MedTripInfo.com Federal government policy, the effects will be felt sooner. About MedPharma Partners LLC

The indirect impacts of medical tourism are MedPharma Partners is a health care and life potentially more significant than the direct sciences management consulting firm serving effects. Health plans and employers are likely pharmaceutical, biotech, medical device and to bring medical tourism into the mix of cost health care services clients in North America, containment solutions, exposing US doctors Europe and Asia. Clients range from Fortune and hospitals to the possibility of international 100 companies to start-ups. competition for the first time. Medical device companies will face some of the challenges Our professionals average 15 years of health of international trade that have bedeviled the care consulting and corporate experience. pharmaceutical industry, and this may accelerate the industry’s shift to a more global approach to management. About MedTripInfo.com Pharmaceutical companies will witness a further globalization of their business. MedTripInfo.com is a website devoted to medical tourism. It features news, information, interviews and commentary, along with discussion forums for patients, entrepreneurs, health care providers and policymakers.

As medical tourism enters the mainstream, MedTripInfo is becoming a trusted resource for employers, patients, and their families who are considering going abroad for care.