JAN 2012

EyeWorld is the official news magazine of the American Society of Cataract & Refractive Surgery.

Issue link: https://digital.eyeworld.org/i/78721

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Page 19 of 71

20 EW NEWS & OPINION January 2012 Chief medical editor's corner of the world Sitting down with Clayton Christensen C layton M. Christensen is the Har- vard Business School professor who is best known for naming and popularizing the concept of "disruptive innovation," which he outlined in his best-selling 1997 book, The Innova- tor's Dilemma. Forbes calls him one of the most influential business theorists of the past 50 years. Dr. Christensen's counterin- tuitive theory explains why so many suc- cessful businesses eventually fail. Although they continue to develop "sustaining" inno- vations that improve their most advanced products for their best customers, the in- dustry leaders are eventually disrupted by innovations that combine new technology with a new market model and network. Personal computers, cell phones, digital music, and digital cameras are all exam- ples of how expensive and exclusive prod- ucts eventually became simpler, cheaper, and more accessible as they displaced the original industry leaders in the process. A number of Dr. Christensen's lectures are on YouTube and are worth viewing. A natural question is when and how an expensive and established industry, such as American healthcare, will experi- ence disruptive innovation. Dr. Christensen and two physicians analyzed this question in the 2009 book The Innovator's Prescrip- tion. Their recommendations for new mar- ket models are very provocative and controversial, but it is refreshing to see a non-partisan analysis by a non-stakeholder who is focused on making care cheaper and simpler to access for all patients. I met and heard Dr. Christensen speak in San Francisco last April, after he had just been featured in the March 2011 issue of Forbes. Go to www.forbes.com and enter Dr. Christensen in the search box to read this article chronicling his survival of a heart attack, lymphoma, and a stroke in the past 3 years. Along with having undergone surgeries for a retinal detachment and cataract, these experiences give him a unique perspective with regard to both healthcare reform and medical device in- novation. He was kind enough to allow me to interview him subsequently for EyeWorld, and with the help of Faith Hayden, EyeWorld staff writer, a synopsis of our discussion is transcribed here. David F. Chang, M.D., chief medical editor World-renowned innovator and author discusses the FDA and disruptive innovation Dr. Chang: As a patient, you have undergone both retinal detach- ment and cataract surgery. How did these personal experiences impact your understanding and apprecia- tion of medical device innovation in ophthalmology? Dr. Christensen: One of the things is wow, would I love to meet the first person to cut into another person's eye. The technology is ab- solutely extraordinary. Outcomes that were unthinkable 30 years ago are commoditized today so that many more people have access to great care. The medical device inno- vation is the "Intel inside" of every procedure. Dr. Chang: Compared to Eu- rope, gaining FDA approval for a medical device takes much longer and is far more expensive. The risk for venture capital investment due to regulatory uncertainty is higher than ever. How much does this im- pede or threaten to derail the inno- vation cycle in medicine in the U.S.? Dr. Christensen: The standard in use at the FDA is often not to pro- mote patient health. Instead, it works to preserve the health of the existing providers of products and services. It truly imposes an onerous tax on patients, even while it with- holds better products. I believe that if you put a lens on and looked at the FDA's process, it's an excruciatingly interdependent process. If you change this you've got to change that, and so on. So any improvement that anyone tries to make in the FDA process is excru- ciatingly complicated, costly, and difficult to accomplish. Microsoft Windows Operating System is a pro- prietary architecture. To add 20 lines of code you've got to change 20 mil- lion lines of code. So when they add new features to it, it could take them 4 years to make sure the new fea- tures don't screw up something else. I think that's what's happened with the FDA. In response to prob- lems with devices or drugs, it has created this system that's about as flexible as Microsoft Windows. Sim- ply saying we need to change the way we do things—the problem is, because of the FDA's interdependent architecture, it's actually really hard to do this. If there was a way to modularize the system, you could take the most egregious pieces and swap them out and replace them with something that functions bet- ter. This is how I would think about it. Almost always when a regulation is changed it never changes as the result of a head-on attack. Instead, the innovator goes out to the pe- riphery, beyond the reach of the reg- ulators. For example, Southwest Airlines wanted to get off the ground in the late 60s and early 70s, and the Civil Aeronautics Board in Washington had to approve any new route that any airline wanted to do. They wouldn't approve low-cost airlines because of course it was di- rectly against what the major air- lines would want to happen. So Southwest kept its routes inside of Texas and California because if it wasn't interstate then the federal agency had no jurisdiction over it. Dr. Chang: For Medicare pa- tients the cost of all surgical im- plants and devices is bundled into one capped procedural fee. Our government cannot afford the esca- lating costs of more expensive tech- nology. However, patients who want and can afford to pay extra for cer- tain elective technologies are pro- hibited from doing so. Does this lack of a free market ultimately doom in- novation in medical devices? Dr. Christensen: The last time a government tried to bless its citi- zenry by dictating process and the bundling of products was the com- munistic government. The regula- tion is always invoked in the name of the patient or the customer. But in reality it ends up supporting the existing providers. A good example is in finance. Up until the mid 1970s there was a rule in banking called regulation queue. It was put in place during the Great Depression to pre- vent banks from competing against each other and meant that banks couldn't pay interest on checking ac- counts. What a wonderful regula- tion—banks could get your money but were prevented from giving you interest. The way it got broken was Merrill Lynch created this idea where you could write checks on a Money Market Fund. Because it was not a commercial bank, it could do this outside the reach of the bank regulators. Then Fidelity did the same thing, and the money just flowed out. Dr. Chang: Your research has sought to differentiate between sus- taining and disruptive innovation. Please describe the difference and what a disruptive innovation in cataract surgery might look like. Dr. Christensen: Innovations that drive companies up the trajec- tory of performance improvement are said to be sustaining innova- tions. These innovations help the leaders make better products that they can sell for higher profits to their best customers. Generally, truly new technologies emerge from the players sustaining innovation. But their business model doesn't allow them to go down to the bottom to make it more affordable and accessi- ble to many more people. A disrup- tive innovation is one that transforms a product or service so that a much larger population of less-wealthy people now are able to own and use the product—or to en- able providers that have less training to do more sophisticated care. The equipment and the processes that enable this are, in my language, dis- ruptive. The Aravind Hospital in India only does eye surgery in a very standardized way that in theory is high quality and very low cost. Another good example is MRI technology. These machines cost $1 to $3 million a piece. Sustaining in- novation that improves the top-of-

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