We Hear A Lot About New Drugs. But What Spurs Innovation In Medical Procedures? – Forbes India

Although many researchers have investigated the incentives for drug innovation, far fewer have looked at medical procedures
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In David Dranove’s Health Economics class at Kellogg, he leads students through discussions of drug development, pricing, and regulation—and asks them to consider how all of these elements affect how new drugs come to market. What are the incentives for innovation? How do firms use innovation as a strategic advantage? How does drug innovation benefit society?

But Dranove, a strategy professor, acknowledges that when he lectures about innovation, he has the nagging feeling that something important is missing from what he’s presenting: innovation not of drugs but of medical procedures.

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Shining a Light on CPT Code Creation

Dranove enlisted the help of some of his MBA students to identify the most salient sources of data on medical innovation—and they were the ones who explained the importance of the American Medical Association’s CPT code catalog.

Untangling Incentives

The researchers discovered that between 2008 and 2017, only 29 percent of new procedures were promoted from CPT III to CPT I, or the fully reimbursable category.

Improving the Process

Throughout the process of approving CPT codes for medical procedures, the AMA is necessarily making many choices, Dranove points out. Among them: How much evidence should they require to support a procedure’s effectiveness? What should that evidence look like?

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[This article has been republished, with permission, from Kellogg Insight, the faculty research & ideas magazine of Kellogg School of Management at Northwestern University]