http://www.reuters.com/article/2012/10/08/us-devices-recall-idUSBRE8970E220121008
By Debra Sherman
CHICAGO | Mon Oct 8, 2012 7:03am EDT
(Reuters) - Insurance companies, often stuck with the tab
for health services when a medical device fails, are ready to share the pain.
As the number of costly, high-profile recalls
rises, along with pressure to cut their own spending, insurers are starting to
pin more of the responsibility on manufacturers.
If they succeed, medical device makers - already
worried about weaker global demand for many of their products and the impact of
a new U.S. tax on their profits - will have even more costs in the wake of
product recalls, the biggest of which can already lead to billions of dollars
in expenses.
"The (insurance) plans are being more
aggressive. The reason it gets so much more focus now is because there are so
many cases," said Mark Fischer, chairman of Rawlings & Associates, a
unit of the Rawlings Group that helps insurance companies recoup payments from
the party that was deemed at fault for claims, a legal service known as subrogation.
In recent
years, more than a hundred medical devices were recalled out of concern they
could cause serious injury or death.
Rawlings is one of the largest firms providing
claims recovery services for the healthcare industry, along with Trover
Solutions Group, both based in Louisville, Kentucky. Others include HealthCare
Subrogation Group and Meridian Resource Company.
Rawlings is currently
retained to pursue more than 30 mass tort cases related to healthcare, compared
with an average of about three in a given year just a decade ago, Fischer
said.
"There has been a drastic increase in the
number of cases being pursued," he said. Insurers tend to hire Rawlings
when there are enough cases being filed over a product to warrant
multi-district litigation status.
Fischer helped recover funds for insurers from
claims on Sulzer Medica's defective hip implants in 2000 and Medtronic Inc's faulty Fidelis defibrillator leads in
2007.
In the Fidelis case, Medtronic settled U.S.
lawsuits covering more than 9,000 individual personal injury cases for $221
million, according to their regulatory filings.
Fischer then pursued Medtronic to recover money for
clients like WellPoint Inc that had paid doctors and hospitals for treatment
relating to the defective leads, or wires that connect an implantable
defibrillator to the heart.
He expects a settlement - the first collected
from a medical device maker - to be signed by year's end, but would not
give a dollar amount.
WellPoint spokeswoman Lori McLaughlin said the
insurer routinely tries to collect from manufacturers on recall-related health
claims.
Aetna Inc, the nation's third largest insurer, said
it has managed to wrest reimbursement from drug and device markers, and has
negotiated payments to patients for costs from defective or recalled products,
without providing details.
Trover Solutions Chief Executive Robert Bader
reckons that about 80 percent of health insurers turn to firms like his to
pursue manufacturers in recall cases.
"It's the fiduciary responsibility of the
insurer to recover members' premiums from the manufacturer. It's a highly
specialized process and so a lot of them outsource," Bader said.
The government's Medicare health plan for the
elderly recovers part of the money it paid for recall-related medical services
once a settlement is reached, said spokeswoman Kathryn Ceja. She would not give
details on how it pursues those funds.
FALLOUT OVER THE RIATA RECALL
A 2010 recall of Riata defibrillator leads by St.
Jude Medical could become the next tug-of-war between insurers and medical
device makers over who picks up the tab.
Some 79,000 U.S. heart patients still have the lead
implanted in a blood vessel leading to the heart. Deciding on how to proceed is
tricky since removing the leads may be riskier than leaving them in.
The Food and Drug Administration in August said all
Riata patients should receive medical imaging tests to see whether the insulation
covering the thin wires eroded, exposing the cables and making them more prone
to short-circuit, as well as making the surrounding tissue vulnerable to heat
damage.
The agency did not say how often imaging tests
should be performed. But ordering just one test per patient will add millions
of dollars to the cost of their care.
A single fluoroscopy - which shows a real-time,
continuous X-ray image on a monitor - for each Riata patient could cost between
$7.9 million and $45.3 million overall, based on a Reuters review of the
procedure's cost at different hospitals.
Doctors say more than one X-ray would be needed to
monitor the leads, which can remain in a patient's body for many years. Dr.
Bruce Lindsay, section head of Cardiovascular Medicine at the Cleveland Clinic,
said doing an annual imaging study would probably be sufficient.
Even before the FDA guidelines, Medicare covered
the extra cost of imaging studies in almost every instance, doctors say. But
some private insurers had balked.
"I've had to call (insurers) constantly and
justify it," said Dr. Martin Burke, director of the Heart Rhythm Center at
the University of Chicago Medicine.
"We're definitely finding more problems (with
Riata leads), but surveillance has gone up. We're finding more because we're
looking more," he said.
St. Jude spokeswoman Amy Jo Meyer said the company
has expanded its regular warranty to include a baseline fluoroscopic or X-ray
screening if a patient's insurer does not cover it. Paying for additional
imaging would be reviewed on a case-by-case basis.
"It
would not be in device makers' best interest to balk at paying these costs. In
the end, they do have to stand behind their products and these products do
sometimes fail," said Debbie Wang, an analyst with Morningstar.
TALLYING THE COSTS
Burke and colleagues estimate that Medtronic's
Fidelis recall cost Medicare some $287 million over five years for monitoring
or replacing the leads, according to a study published in the Heart Rhythm
Journal.
Medtronic spokesman Chris Garland said the company
gave a credit to patients for its recalled Fidelis leads, plus $1,200 for
"reasonable unreimbursed medical expenses." He would not say how many
people received the replacement and additional funds.
The Fidelis case was just one out of 113 medical
device recalls between 2005 and 2009 classified as serious enough to cause
significant health problems or death, according to an analysis published in the
Archives of Internal Medicine last year. Most involved devices that correct
heart problems.
The study found that 24,000 patients underwent
procedures in 2005 related to problems with devices from Medtronic or from
Guidant, now part of Boston Scientific Corp.
"We
expect manufacturers to take reasonable responsibility for costs associated
with a recall of their products to prevent the healthcare system from absorbing
the impact," said Aetna spokeswoman Tammy Arnold.
(Editing by Michele Gershberg, Bernard Orr)
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