U.S. health care reform could hurt medical innovation, but it doesn’t have to

CLEVELAND, Ohio — Could U.S. health care reform cancel out medical innovation, at least for a time?… It could.

“We are at a crossroads,” said David Nexon, senior executive vice president of AdvaMed, the association for medical device makers. ”Whether our system will continue to value innovation or not is very much an open question.”

A panel of speakers at the Cleveland Clinic’s ongoing medical innovation summit who represented industries from pharmaceutical makers to venture capital said reforms could stifle innovation with too many development standards or too high hurdles for approval, as some would argue they have in Europe. Richard Smith, senior vice president for PhRMA, the pharmaceutical industry association, said he is optimistic that this will not happen in the United States.

Innovation also could be hurt if cost containment measures win big over quality in reform measures, or if reform-related uncertainties cause investors to abandon the medical technology industry.

Nexon characterized the negative potential as a “blind spot” to considering innovation in incentives that are being added to pending reform legislation.”There’s nothing in the incentives to inhibit innovation,” he said. ”The trouble is, if you don’t think about innovation, you can have a deadening effect.”

Dr. Beth Seidenberg, partner in venture capital firm Kleiner Perkins Caufield & Byers, put the starkest face on the potential squashing of innovation. “With the ambiguity you outlined in the health care reform bills, most VCs are not going to invest in innovation,” Seidenberg said. ”That is a frightening prospect. My worry is we’ll have a gap of five-to-10 years where we’re going to stall innovation. I think that would be a crime.”

Edward “Ted” Buckley, director of economic policy at the Biotechnology Industry Organization, said he didn’t know what kind of capital could replace venture capital, if that were to withdraw from biomedical industries. Venture capital often is the high-risk money invested in emerging medical technology companies.

“If you lower the value equation for biotech, pharma, medical devices, innovation, in general, all forms of capital would look for a better investment,” Buckley said. “Do we want more ipods, or do we want more medical innovation?”

The antidote to this potential damage is coming to the health care debate table. ”I’m hoping my comment will not come to fruition,” Seidenberg said. “I made it to this audience because leaders in the medical field have to have a voice in Washington. I believe it’s really important that physians and scientists are active in the debate.”