How Malpractice Reform Affects Medical Device Innovation

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Doctors are afraid of getting sued. According to some accounts, 75% of them perform more tests and procedures than necessary to avoid potential lawsuits over medical malpractice. The phenomenon of “defensive medicine” has been examined exhaustively by researchers and invoked by policymakers in passing tort reform laws to limit the amount of damages patients can receive.

Less attention has been paid to the effect such reforms can have on medical device innovation. Under the chilling effect of potential lawsuits, a doctor may be less willing to try new procedures or technologies that deviate from commonly accepted treatments. By that line of thought, medical malpractice lawsuits would put a damper on innovation, and tort reform laws that limit exposure would spur it. But, there is another potential effect.

“When physicians are under pressure from high liability, innovators are incentivized to produce safer products to help them manage risk,” says Hong Luo, an assistant professor in the Strategy Unit at Harvard Business School. “That decision translates upstream to a company’s willingness to produce new products.”

That could take the form of more diagnostic tests or other complementary technologies that would help monitor procedures—for example, a new device to check the location of a baby’s head during a C-section so a delivery goes more smoothly.

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