The Road to Hana is a 64-mile stretch of highway connecting Kahului to the town of Hana in Maui. It is known as one of the most scenic drives in the U.S., but it can also be a dangerous adventure due to hundreds of hairpin turns, dozens of one-lane bridges, and countless blind curves. This is not unlike the road to the commercialization of a new medical device.
Successfully navigating this complex journey requires preparation and focus as the path to FDA approval is multifaceted and involves years dedicated to clinical research. Yet, many organizations underestimate the challenge that has the greatest impact on patient access and the ability for a new treatment to gain widespread adoption—securing payer coverage.
Medical device companies focus on clinical and regulatory strategies in order to be successful, but often under-index on payer coverage and reimbursement without a clear understanding of the challenges ahead. Reimbursement can make or break a device and many companies think that just because their device (or technology) is new it will automatically be reimbursed or receive a higher rate of reimbursement, only to learn they might not even be covered by payers.
The Evolving Regulatory Landscape
Over the last couple years, the FDA has made progress streamlining the regulatory process to accelerate bringing new devices and technology to patients sooner. Under the Medical Device User Fee Amendment, they have shortened pre-market review timelines. The agency has also provided valuable guidance explaining situations where they accept real-world evidence (RWE) and even clinical data gathered outside the U.S. because of challenges with independently gathering data across regions.
The FDA also launched the “Breakthrough Program” aimed at devices that target the most serious diseases in hopes of expediting review and approval of these device innovations. However, even with these efforts by the FDA, the journey from FDA approval to achieving desirable reimbursement can be complex and often takes years, so having a plan is essential.
Road to Reimbursement Success
Unlike the clinically focused path to FDA approval, reimbursement is more a business function of getting a medical device or technology successfully covered and paid for. With hundreds of commercial and government insurance programs (e.g., Anthem, UnitedHealthcare, Centene, Medicare, Medicaid, etc.), a one-size-fit-all approach will likely result in more setbacks than victories, because each payer is unique.
Step one of any medical device company’s plan should be gaining an in-depth understanding of the reimbursement landscape. An analysis of the coding, coverage, and payment for the device or technology as well as competitive products should be conducted early in the product development cycle so potential challenges can be planned for and addressed at the onset. Assessment parameters for this analysis can include:
- Competitive Environment
- Existing Coding and Coverage
- Pricing and Reimbursement Rates
- Clinical and Economic Value Levers
- Feedback on New Device Specifications/Benefits
- Input on Draft Product Positioning
To prevent reimbursement issues from impacting commercial goals or stalling innovation, the next step is to answer key questions so all internal stakeholders are aligned on a comprehensive strategic approach. Coverage is a payer’s decision to provide benefits for a specific product (or service). Questions such as “Are ‘similar’ devices already reimbursed?” need to be answered.
If the answer to that question is yes, the approach may require more of a promotional strategy as the new device could be used under the existing reimbursement mechanisms. However, if the code excludes the new device it’s imperative to understand why. The reasons for this could vary, such as the assigned code excludes the use of a new device because it specifies a specific material, product feature, or technology. By understanding these challenges, a strategy could be to modify an existing code or take the even more difficult approach of creating a new one.
In the situation where similar devices are not reimbursed this could prove more ominous. Again, it’s important to understand why it’s not reimbursed. Current devices may lack outcomes data or sufficient scientific evidence published in credible journals. So, providing scientific and health economic evidence which demonstrates the value to the health system and patients should be proactively thought through.
Securing Universal Access
Having achieved FDA approval and defined a coding mechanism, achieving payer coverage is the next step on the journey. Understanding coverage policies and payments is as important as the factors driving payers’ decisions. Payers can inhibit coverage for new devices by excluding certain elements such as patient sub-population, certain diagnosis, or even technology. By understanding the nuances of the coverage policies, and if there are any coverage restrictions, a strategy could be to expand coverage criteria allowing for the new technology or device characteristics under the new payer coverage policy.
Companies may look at achieving a National Coverage Determination (NCD) as the optimal goal. After all, federal Medicare is projected to cover more than 62.8 million Americans (as of the 2020 calendar year).1 But despite the fact that a NCD will impact reimbursement nationwide, the level of evidence and time required to accumulate that much information is significant.
As a result, many device manufacturers choose a shorter path by gaining inclusion through Local Coverage Determinations (LCDs). This also represents an opportunity to leverage key opinion leaders with experience using your new device or technology. Thought leaders can provide credible insights on how the new device benefits the target population during the “comment period” of the local coverage decision process, positively influencing LCDs. These local Medicare coverage decisions can result in further positive coverage decisions by Medicare Advantage plans (which represents approximately 39% of Medicare beneficiaries) and private insurers.
Know Your Payment Amounts
Clearly understanding the payment amounts for medical devices (and/or procedures) should be a key goal as well. Rarely, if ever, does the payment amount depend on a manufacturer’s price for the product, but instead reflects its perceived clinical and economic value. While payment mechanisms vary by setting (e.g., hospital, outpatient) and may be paid separately or bundled, amounts can be fixed or based on cost.
So, understanding the current payment rate, assigned to the code, could impact your strategy if the rate is too low. For example, if you develop a new reimbursement mechanism by convincing the coding entity that the new device is much better and different than the existing product, then this may persuade the payer to cover it since the current code cannot be used to describe the new device.
Evidence Generation Over the Device’s Lifecycle
Outlining the clinical trial and publication strategy should start early on during regulatory and reimbursement planning. Even though the primary focus of clinical trial planning is on safety and effectiveness to satisfy FDA and provider requirements, payers look at the clinical requirements through a different lens. One that includes procedure coding and anticipated health plan coverage for specific populations of covered lives related to the new device.
But the type of evidence important to payers also evolves over the course of a medical device’s lifecycle. During prelaunch, the emphasis is often on framing the burden of the problem, and payers are increasingly requesting RWE. Coverage decisions are based on decisions beyond clinical trials such as insurance claims, hospital charges, and more recently EMR and registries. Then at launch, the focus shifts toward preclinical studies and clinical trials to determine the device’s place in treatment or therapy.
For payers, the primary value drivers for new devices include the cost offset, the overall survival (OS) gain, and other effectiveness measures. Payers increasingly want to see evidence relevant to these variables that can be used as they assess a product’s value. Post-launch the evidence focus is more on comparative differentiation through budget impact analysis, additional clinical studies, and RWE. But even though the outcomes data come post approval, early planning and data collection should be proactively considered to address payers’ likely requests and fuel the publication plan.
In conjunction with an evidence-generation plan, the successful commercialization of a new device or technology also requires effective communication of a device’s evidence that supports the value proposition. A key component of this is the development and execution of a strategic publications plan to disseminate the clinical and economic information and highlight product benefits that are most valuable to targeted stakeholders. An effective publication plan not only reports clinical study results (prospective and retrospective) and bench testing results, but also could include early clinical experience with the device, quantify the economic need for the technology, and proactively frame potential customer objections.
Start with the End in Mind
Even as the regulatory landscape has evolved over the past couple years as the FDA works to streamline access to new medical devices, payers have become more selective when making coverage and reimbursement decisions. Identifying the key challenges a new medical device may face at the onset will help ensure your reimbursement strategy does not have any blind spots on the road to favorable coding, coverage, and payments decisions by payers.
A well thought out evidence-generation and publications plan to leverage the information supporting the value proposition of the new device will increase the chances your commercial objectives are met. However, failure to anticipate important questions that may arise and not being equipped to answer potential obstacles with the right evidence will make for a difficult and potentially treacherous journey.
1. CMS/Office of Enterprise Data & Analytics/Office of the Actuary.