APPENDIX 4
Memorandum by Smith & Nephew (MT 18)
INTRODUCTION
Smith & Nephew welcomes the Select Committee's
inquiry and are pleased to have the opportunity to participate
in this very important debate.
Smith & Nephew—the company
1. Smith & Nephew plc is a global medical
technology business, specialising in Orthopaedics, Endoscopy and
Advanced Wound Management products. The Company ranks as the global
leader in arthroscopy, is one of the world's leaders in advanced
wound management and is one of the fastest growing orthopaedics
companies in the world.
2. Smith & Nephew has more than 1,700
employees in the UK and a total of 8,000 worldwide. The Company
operates in 32 countries around the globe, generating sales of
£100 million in the UK and £1.2 billion worldwide. Smith
& Nephew is one of the few medical device companies in the
world with its group research focus firmly based in and led from
the UK.
3. The Research Centre spearheads the innovation
stream for Smith & Nephew. The multidisciplinary team is responsible
for the development of radical new healthcare products in all
of our three of our business areas. Innovations are driven by
discoveries in new materials, biological therapies, treatment
modalities and tissue engineering. In 2003 the Company invested
a total of £67 million in research and development.
4. Smith & Nephew is dedicated to helping
improve people's lives through the development of innovative,
cost-effective products and techniques that deliver significant
advantages to clinicians and patients. Radical new treatment and
surgical techniques are being developed that will deliver new
products up to 15 years from now.
5. Smith & Nephew is committed to providing
education programmes to surgeons, doctors and nurses to help improve
treatments and outcomes. The Company trained 200,000 nurses worldwide
in 2004. The Smith & Nephew Foundation is the single largest
supporter of nursing research in the UK, providing funding of
£300,000 per year.
6. The Company's solutions are driven by
health economic benefits. The broader benefits of returning people
to their working lives should not be underestimated. Healthcare
economic considerations are integrated into the product development
process. This ensures that the benefits of the Company's new and
existing products not only seek to improve patient outcomes and
provide better treatment and procedures for both clinician and
patient, but also contribute to more cost effective solutions
for healthcare services.
7. Each one of Smith & Nephew's three
businesses helps meet the ever-increasing healthcare demands fuelled
by the aging population in developed countries, increased incidence
of obesity and diabetes, higher numbers of sports and other activity
related injuries, and patients' high expectations of quality and
scope of treatment, through such benefits as:
— faster and improved healing to reduce
hospital stays and rehabilitation time;
— reduced number of products required
for effective treatment, ie fewer dressing changes for chronic
wounds; and
— less clinician time through improved
procedures and treatment regimes.
8. Smith & Nephew help people regain
their lives by repairing and healing the human body.
Company representatives
9. The following Smith & Nephew directors
are available to appear before the Select Committee to discuss
any of the enclosed recommendations in more detail.
Sir Christopher O'Donnell
Chief Executive
10. A chartered mechanical engineer; graduate
of Imperial College and London Business School; Sir Christopher
has 25 years experience in medical engineering and devices with
UK/US companies. Joined Smith & Nephew in February 1988 as
Managing Director of Smith & Nephew's Medical Division, appointed
main board Director in 1992, and Chief Executive in July 1997.
Sir Christopher is a non-executive director of BOC Group and was
awarded a knighthood in the Queen's Birthday Honours List in June
2003 for services to the medical devices industry.
Liz Hewitt
Group Director of Corporate Affairs
11. Liz Hewitt joined Smith & Nephew
as Group Director of Corporate Affairs in May 2004. Formerly Director
of Corporate Affairs for 3i Group, Liz is a Chartered Accountant
with wide experience of industry, having worked as a venture capitalist,
and has Board experience in the public sector and the private
sector including risk and audit committees, corporate social responsibility,
and corporate governance. Liz also has experience as international
corporate communications director for two FTSE100 companies with
businesses in the UK, USA, continental Europe and Japan.
John Posnett
Global Head of Health Economics
12. John Posnett joined Smith & Nephew in
February 2000. He is a Professor of health economics at the University
of York. Before joining the Company, John spent six years as Director
of a specialist health economics consultancy within the University.
During this time, he worked with individual trusts and health
authorities, the NHS Executive and the Department of Health, and
with a number of pharmaceutical and healthcare companies. John
has advised health ministries in Mexico and Central America on
health sector reform. For five years he was Director of the postgraduate
programme in health economics at the University of York.
THE UTILISATION
OF TELEMEDICINE
13. Smith & Nephew supports and understands
the role that telemedicine has to play in providing effective
healthcare, even though the vast majority of their products require
professional application by trained clinicians rather than indirect
contact with the patient.
14. The Company recognises the increasing
demand for consumer information and sponsors various consumer
led educational initiatives in our key product areas. However,
the Company's main focus is to ensure that healthcare professionals
are aware of and understand the range of products available to
them and the contribution to quality of healthcare that these
can bring now and in the future.
THE RECOMMENDATIONS
OF THE
HEALTHCARE INDUSTRIES
TASK FORCE
15. The Healthcare Industries Task Force
report "Better health through partnership: a programme for
action" is both timely and necessary.
16. The Company welcomes and endorses the key
outputs of the report. In response to the New Enquiry (Press Notice
of 7 December 2004: "The Use of New Medical Technologies
within the NHS") Smith & Nephew would like to make the
following observations on some of the report's key outputs.
Device evaluation—key output 1
17. Smith & Nephew are aware of the
importance of accurate, objective device evaluation if the resources
of the NHS are to be used optimally.
18. The repositioning of the Device Evaluation
Service (DES) offers a good opportunity for the Government to
foster an effective collaborative approach with healthcare industry
businesses.
19. Some surgical techniques, especially
minimally invasive or keyhole surgery, deliver financial benefits
at a different location within a hospital trust, and the benefits
in terms of health economics encompass more than the simple cost
of the surgery.
20. This is particularly true of endoscopic
techniques, which in many cases have replaced traditional open
surgery. These new technologically advanced and enabling medical
devices may add initial costs within the operating theatre department,
but they help to reduce trauma to the body and pain to the patient,
reduce hospital stays and potentially provide better outcomes
for surgeons. In particular, endoscopic surgery results in two
or three stitches at the end of a procedure as opposed to a substantially
larger wound from open surgery.
21. From a continuum of care perspective,
the entire patient episode may prove less expensive to a Trust
and the NHS, despite potentially higher initial investment costs
for surgical instrumentation.
22. National guideline cost data for the
NHS could be published to make this information more freely available
to industry.
23. This data has the potential to increase
the speed and reduce the complexity of producing healthcare economic
outcome studies for new technologies by medical devices manufacturers.
This information would include such costs as average patient bed
day costs by procedure group and would provide a platform from
which overall cost savings to the NHS could be demonstrated.
24. It is unclear how strong the link is
between evaluation and procurement at a clinical level within
the NHS and the wider potential benefits to the UK economy (such
as return to work times). Endoscopic techniques for example, may
offer return to work times that are significantly less than those
for open surgery.
25. A clearer and faster pathway, through
a new or established assessment body, would be helpful in assessment
of economic benefits that may fall outside direct costs to the
NHS.
Innovation—key output 2
26. Smith & Nephew welcomes the work
of the Innovation Hubs, especially their pragmatic approach to
intellectual property management.
27. Legislative changes, such as the implementation
of the In Vitro Diagnostics Directive from 6 December 2003, have
altered the requirements for the manufacture of some devices that
were previously part of the so-called "home-brew" development
of diagnostics for clinical use.
28. This emphasis on conformity to pan-European
manufacturing standards places a new challenge for device innovation
from within the NHS and it will be important to ensure that translational
arrangements, to move concepts into small-volume manufacture,
are put in place.
Procurement processes—key output 3
29. The Company's main observation regarding
procurement is that the emphasis on device pricing should not
obscure the true cost of a choice of therapy. This theme is explored
fully under the section "The Effectiveness and Cost Benefit
of New Technologies" detailed below in this document.
30. Smith & Nephew recommends a more
effective dialogue be set up between organisations wishing to
develop and market medical devices and NICE. The aim of this dialogue
should be to ensure the data package demonstrates product safety
and efficacy to NICE standards, while remaining as concise as
possible so as not to add to the upstream development costs of
the product.
31. Smith & Nephew would also like to
see a more effective link between the NICE approval on device
evaluation and actual product take-up in clinics. At present,
the Company's experience leads us to conclude that while a negative
report from NICE can be most effective in preventing device usage
by a surgeon, the reverse is not true. A positive report may fail
to achieve a change in favour of new, more effective and economical
therapies.
UK as the regulatory lead in the EU and internationally—key
output 6
32. Regulatory categorisation of medical
devices can prove to be an impediment to innovation. This is apparent
in two ways: in tissue engineering and the categorisation of new
technologies as "devices" or "medicines".
33. For tissue engineering, the absence
of an EU regulatory framework is not necessarily a road block
for access to the UK market, although the situation is difficult.
With uncertainty regarding the categorisation of new products
("device" versus "medicine") a piecemeal approach
to the introduction of newly engineered tissue products becomes
necessary.
34. The resultant risk regarding uncertainty
about the size and nature of the submission for a product license,
therefore, is not an attractive one for businesses. Similarly,
the lack of a formal regulatory framework means that product reimbursement
is very difficult. Taken together these features will continue
to impede the introduction of advanced tissue products.
35. The industry needs the establishment
of a firm definition and class of medical product to encompass
this technology. The expectations relating to product license
data packages will need to be specified according to the product
type. For example, the replacement of a metabolic organ (eg pancreatic
function) would require a different level of demonstration of
safety, quality and efficacy from that of a replacement of structural
connective tissue.
Training and education—key output 9
36. Smith & Nephew welcomes the proposed
enhancement of training and education. Without adequate awareness
of the principles upon which new device technologies are based,
it is unlikely that full benefits will be gained from their introduction.
With regard to this issue it is worth remembering that nurses,
including Tissue Viability Nurses, usually have to take holiday
and pay for attendance at wound conferences. This practice must
surely limit the sharing of information and training.
THE SPEED
OF, AND
BARRIERS TO,
THE INTRODUCTION
OF NEW
TECHNOLOGIES
37. The effects of the Human Tissue Bill
continue to impede the progress of the Company's research and
development programmes.
38. There has been widespread criticism
of the Bill amongst researchers and commercial organisations reliant
upon the supply of human tissue for their research and development
activities.
39. In April 2003, the Department of Health
issued guidelines on the procurement and importation of human
tissue. Smith & Nephew has experienced frustration and uncertainty
as a result of the lack of guideline clarity, resulting in delayed
projects and considerable research time spent sourcing tissue.
40. In particular, the lack of clarity over
the circumstances under which patient consent can legitimately
be obtained and the resultant anxiety over interpretation of the
Bill, has resulted in the supply of tissue from clinicians and
the NHS drying up.
41. Within the UK, the Peterborough Tissue
Bank is now our only source. The Company recognises the importance
of avoiding the tragedy of Alder Hay and the Bristol Royal Infirmary,
but believes the wide-ranging influence of the Bill extends beyond
the understandable concern over, for example, the removal of whole
body organs, into areas such as the relatively uncontentious subject
of the use of tissue discards from surgery for research purposes.
42. Smith & Nephew recommends that NHS
Trusts develop a strategy and process to encourage tissue donation
and a clear distinction be made between living and dead donors.
More stringent regulations should be reserved for any request
involving the removal of cadaveric tissue.
43. Anonymised discard tissue (ie tissue
removed from a patient during routine, non-life threatening surgery)
should be treated as cleared for any research purpose under a
general consent. It will be important to align UK regulations
with both US and European positions to avoid penalising research
in the UK.
44. The adoption of a potentially beneficial
new medical technology can be slow moving due to NICE's Interventional
Procedure or Technology Appraisals evidence requirements. These
include unspecified patient volumes, published clinical studies,
and patient outcome data.
45. Some outcome studies may require many
years to build a sufficient study population to show efficacy
under the current systems, causing a time-lag whereby adoption
may be one or two generations behind the current level of technology.
46. Clearer guidelines and consideration
should be given with respect to the level of published clinical
studies and patient outcome data that is achievable in relation
to the area of use of particular medical devices.
47. These guidelines could consider what
benchmarks of patient outcome volume would be realistic within
a set timeframe of evaluation (for example, 18 months from the
availability of a new technology). This would be helpful in distinguishing
between pharmaceutical interventions, high volume medical devices
(such as hip replacements), and lower volume devices and technologies.
THE EFFECTIVENESS
AND COST
BENEFIT OF
NEW TECHNOLOGIES
48. The report of the Healthcare Industries
Task Force (HITF) highlights the need to promote the timely adoption
of worthwhile new technologies into the NHS as an enabler for
improved performance. Safe, cost-effective and innovative interventions
can provide benefit to patients and improve efficiency in the
NHS.
49. Cost-effective new technologies are
often more expensive, although because of superior performance,
the total cost of treatment is lower overall. Increasing emphasis
in the NHS on cost containment, as opposed to long-term value
for money, is one of the key barriers to the adoption of new technology.
Product cost is usually a very small part of the total cost of
treating a patient, and focusing on minimising the costs of procurement,
irrespective of product performance, may simply lead to inefficiency
and to higher costs overall.
50. This section highlights the vital distinction
between product price and the true cost of treating a patient,
and illustrates some of the ways in which medical devices can
enhance efficiency in the healthcare sector.
Surgical debridement of wounds
51. It is generally agreed that wound debridement,
(the cleaning and preparation of the bed of the wound), helps
to create a wound environment that is more conducive to healing.
Surgical debridement is quick and effective: sharp instruments
such as scalpel, scissors or curette are used to remove devitalised
tissue and bacterial contamination from the wound. Surgical debridement
is normally carried out in an operating theatre under general
anaesthetic.
52. A new Smith & Nephew technology
(Versajet) has recently been approved in the UK and US for the
surgical debridement of wounds. It uses a fluid jet under high
pressure (up to 15,000 pounds per square inch) to cut and evacuate
necrotic tissue. The new technology is safer and more selective
than conventional instruments and offers greater precision. Compared
with a scalpel, the fluid jet more completely removes devitalised
tissue and at the same time spares healthy tissue. The benefit
to the patient is that the wound is expected to close more quickly
and the amount of scarring is reduced.
53. The price of the new instrument is significantly
higher than the price of conventional instruments, as the price
of a disposable Versajet handpiece is nearly 40 times the price
of a scalpel blade. However, the greater precision of the instrument
means that it is possible to prepare a wound for closure with
fewer debridement procedures. In a recent US evaluation, the median
number of surgical debridements required was reduced from two
per wound with conventional instruments to one with Versajet.
54. In the US evaluation, the total cost
of debridement was $2,100 per patient with Versajet compared with
$2,800 with conventional instruments. Despite the fact that the
new technology costs more initially, because it saves operating
theatre, nurse and surgeon time, the overall cost of treatment
was reduced by approximately $700 per patient.
55. Not all of this saving will be in cash,
although there will be some cash saving from reduced expenditure
on saline, pulse lavage and surgical instruments. Most of the
saving will be in the form of nursing, surgeon and operating theatre
time. All of these resources have alternative uses, and releasing
nursing and surgeon time enables the NHS to treat more patients
with the same capacity.
Multi-layer high compression therapy for venous
leg ulcers
56. A venous leg ulcer is a chronic wound
which, if not treated appropriately, can endure for years. The
wound can be painful and will often restrict physical and social
mobility significantly. In the UK, patients are typically treated
by a community nurse at home or in a specialist clinic. There
are more than 200,000 new venous leg ulcers annually in the UK.
57. It is well accepted that treatment with
multi-layer high compression improves healing compared with no
compression or low compression bandaging.(1) The superior performance
of high compression compared with traditional dressings has two
positive impacts on efficiency:
— The use of high compression, when
appropriate, leads to shorter healing times and lower treatment
costs overall.
— Due to the greater durability of
high compression bandages compared with traditional products,
wear time is longer and costs are reduced by the lower frequency
of dressing changes.
58. These benefits have been demonstrated
in a number of studies. One study(2) compared clinical outcomes
for patients with a venous leg ulcer treated with multi-layer
high compression to the usual care provided by community nurses
in a typical health authority in England. Usual care involved
many different treatments, including traditional non-compression
dressings. In this study, after 24 weeks of treatment, 40% more
patients were healed with high compression than with usual care.
In the high compression group, nurses visited on average just
over once a week to change dressings. With the cheaper products
in the usual care regime, nurses visited more than twice a week.
59. Modern high compression bandages (such
as Profore) may cost up to four times more than traditional dressings.
Despite this higher initial cost, the cost per week of treatment
was 45% lower in the high compression group due to the lower frequency
of dressing changes. Total cost per patient was 50% lower in the
high compression group because of the lower cost per week and
the shorter healing time.
60. This example illustrates the importance
of the distinction between product price and the true cost of
patient care. Minimising procurement costs by buying the cheapest
product leads in this case to a significant negative impact on
patients and doubles the overall cost of treatment. Most of this
additional cost is in the form of community nursing time.
61. This example also illustrates the importance
of reimbursement through the Drug Tariff for products used in
the community. Without reimbursement, patients would be forced
to buy their own dressings. There is no guarantee that patients
would appreciate the impact on nursing time of buying inefficient
therapies simply on the basis of price. It is essential for the
reimbursement mechanism to recognise the additional value associated
with more advanced therapies.
Primary total hip replacement
62. Implantable medical devices, such as
hip replacements, are designed to function for the natural life
of the patient. Device failure can be catastrophic. At best, failure
involves pain and loss of function leading to the need for revision
surgery. At worst, there is a higher risk of death associated
with revision, particularly in elderly patients.
63. The cost-effectiveness of implantable
devices is heavily dependent on the expected life of the device.
One of the key impacts of new technology in this area is to extend
expected life and to reduce the probability of failure. As with
most new technology, the advanced materials and design embodied
in new hip prostheses may make them more expensive than existing
products.
64. In April 2000, NICE undertook a review
of prostheses for primary total hip replacement. The resulting
guidance(3) noted that "THR [total hip replacement] is considered
to be one of the most effective orthopaedic procedures at the
present time" (para 2.1). The guidance also suggested that
the expected rate of revision at 10 years is a key parameter in
the choice of competing prostheses. In our submission to NICE,
we demonstrated the long-term cost savings associated with the
Spectron (all poly) hip compared with lower priced alternatives.
The long-term cost advantage of the Spectron followed from the
lower probability of revision associated with its more advanced
design.
65. At the time of our submission to NICE,
Spectron was approximately 50% more expensive than the hip which
was most commonly used in the NHS, known as the Charnley hip.
However, based on data from the Swedish National Hip Arthroplasty
Register, the mean nine-year revision rate for Charnley hips was
5.3%. The comparable rate for Spectron was 0.8%. Allowing for
the likelihood of a patient requiring revision surgery because
of failure of the prosthesis, the expected lifetime cost per patient
using the Charnley hip was £4,400 compared with £3,800
using Spectron.
66. Although the expected cost per patient
is lower, using the Spectron hip would increase annual costs of
THR in the initial years because the prosthesis is more expensive.
However, because the cost of the prosthesis is a relatively small
part of the total cost of the procedure, this increase amounts
to a maximum of 5.2%. Within nine years, total annual costs to
the NHS would be lower because of the lower number of revision
operations.
SMITH & NEPHEW
DEVELOPMENT PHILOSOPHY
— Extend the life of the implant.
— Easy to use implants/instruments.
— Enable less-invasive procedures.
— Restore patient function: "Helping
people regain their lives by repairing and healing the human body."
REFERENCES
1. Cullum N, Nelson EA, Fletcher AW, Sheldon
TA. Compression for venous leg ulcers (Cochrane Review). In: The
Cochrane Library, Issue 4, 2002. Oxford: Update software.
2. Morrell CJ, Walters SJ, Dixon S, Collins
K, Brereton LML, Peters J Booker CGD. Cost effectiveness of community
leg ulcer clinics: randomised controlled trial. British Medical
Journal, 1998. 316: 1487-1491
3. Guidance on the Selection of Prostheses
for Primary Total Hip Replacement. National Institute for Clinical
Excellence, Technology Appraisal Guidance No 2, April 2000.
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