Price of medical devices matters more to buyers than long-term effectiveness

Price is more important than long-term effectiveness when purchasing medical devices, finds research from Aalto University School of Business, Erasmus University Rotterdam and Bath University School of Management.

The researchers presented over 1,300 purchasing managers, medical professionals, and general managers in the UK with a hypothetical choice between two pacemakers to bulk-buy: a cheaper basic model and a more expensive model with infection-reducing qualities.

In the experiment, participants were given a scenario in which they gained a personal bonus on cost savings if the cheaper device was chosen. In this hypothetical situation, the researchers find purchasing managers choose the cheaper option without the increased effectiveness, while medical professionals do not.

The researchers are concerned by this finding, as healthcare procurement in Europe is increasingly the responsibility of purchasing managers. 

“The results show it is important to align internal incentives for purchasing managers and medical professionals with the incentives of suppliers in a way that makes everyone strive towards healthcare effectiveness,” says Katri Kauppi, Professor at Aalto University School of Business and a co-author of the study.

“While not every purchasing decision is a matter of life and death, looking at price in procurement decisions has a human cost and indirect economic effects,” says Katie Kenny, another co-author and a doctoral researcher at Aalto University.

The researchers also find risk-sharing agreements influence purchasing decisions. In another hypothetical scenario, purchasers were offered the opportunity to share post-operation treatment costs with the manufacturer of the more expensive pacemakers if infections still occurred. This made medical professionals more likely to choose the more effective device, but purchasing managers’ choices were unaffected.

“Health benefits, including their economic importance in terms of labour inputs and tax revenues, should be better valued so they can be taken into account in procurement alongside short-term price savings,” says Juri Matinheikki, a co-author, visiting scholar at Aalto University, and Chief Specialist to the Ministry of Finance in Finland.

This research was published in the International Journal of Operations & Production Management.