Entering the US Market: What Medical Device Manufacturers Need To Know

Image: iStockphoto

Regulatory approval

It is the role of the United States (US) Food and Drug Administration (FDA) to protect public health by allowing only safe and effective products to enter the market, and by monitoring products for continued safety after they are in use. The FDA Center for Devices and Radiological Health (CDRH) (www.fda.gov/cdrh) is responsible for regulating companies that manufacture, repackage, relabel and/or import medical devices sold in the US. Accordingly, it plays an important role in determining whether health care products reach the US market.

One of the main mistakes that many small companies make in planning their regulatory submission strategies is having a lack of understanding of the regulations and not optimising the use of regulatory resources. Carole Carey, Director of the US FDA’s CDRH International Affairs Staff, suggests that companies should take advantage of CDRH’s website to determine whether their product is regulated as a device; its classification; the type of premarket submission, if any, that would be required; and postmarket compliance.

Carey adds that when she was a reviewer in the FDA Office of Device Evaluation, she found that one of the major pitfalls in proceeding with reviewing a 510(K) was a poorly organised submission, which lacked clarity and relevant content. “Sometimes it is simply a matter of providing a roadmap, for example, including a table of contents, adding page numbers, tabs and appendices. A well-written executive summary should always be included. A brief general device description, clear intended use and indications for use will set the stage for the reviewer and facilitate the review of the bulk of the application. For larger or complex submissions, applicants could consider hiring a good writer or editor,” says Carey.

Device reimbursement

Many companies focus on FDA regulatory approval to the exclusion of reimbursement, or they think that FDA approval automatically leads to coverage under the Medicare programme. The FDA and the Centers for Medicare & Medicaid Services (CMS) (www.cms.hhs.gov) function under different statutory and regulatory requirements. Medicare focuses on whether a particular FDA approved device has statutory benefit and whether it is medically reasonable and necessary. For example, an FDA approved medical device may not be medically necessary for particular patients and thus Medicare may not cover services that use the device in all cases.

Reimbursement is a critical ingredient in assessing value and should be addressed over the entire technical development continuum. Doing so can provide an innovative company with a better understanding of market value, commercialisation strategies and tactics necessary for success.

Medicare coverage, coding and payment policies vary depending on the specific provider type that performs an individual service, for example, inpatient or outpatient hospitals. Medicare pays for most devices as part of the total payment for hospital and medical services that are provided. CMS does not typically establish payment amounts for individual devices. In most cases, it is the hospital that negotiates prices with the manufacturer, not CMS. Individual private payers frequently have different policies.

Companies that are unsure about whether Medicare covers services that use a certain type of device or how Medicare pays for these services should contact CMS staff early in the development process. Terrence Kay, Senior Adviser to the Director of the Center for Medicare Management at CMS, recommends that “companies need not wait for FDA approval before discussing coverage, coding and payment issues with CMS.”

Device distribution

Device distribution in the US is unique and highly variable. Distributors, wholesalers, dealers, manufacturers, group purchasing organisations and providers are just a few of the stakeholders involved in delivering medical care and associated technologies to patients. These stakeholders have a significant impact on medical device pricing, contracting, reimbursement, technological innovation and market economics.

The route to market is not without its challenges. One of the biggest mistakes companies face when trying to enter the US market, according to Shawn Walker, Director of Bay State Solutions (www.baystatesolutions.us), is signing their product away to a company with national distribution simply because it is easier and less time consuming than exploring the alternatives. Although many products are well suited to a large distribution company, innovative medical devices generally are not. Products that are innovative or that involve physician acceptance are usually best served by independent representative networks, independent medical distributors, or a combination of the two.

Companies are encouraged to investigate all options as far as distribution is concerned. Although it is a time-consuming and expensive process, it will cost more in the long run if a company enters into a contract with the wrong partner. Walker adds that there are consultants who can assist with this function for those companies that do not wish to go it alone. Additional tips she recommends are that companies make sure they are committed to, and have budget for, supplying the US distribution partner(s) with the tools and support it needs. This may include clinical support personnel, the establishment in the US of a warranty and repair centre, or any other iteration that the particular product requires. It is possible to outsource these functions, which will probably be more effective than trying to manage everything from Europe.

Walker states that failure to plan and budget for ongoing support in the field is another strategic error. No matter what route to market companies choose, they must provide ongoing presence in the market place through some direct representation or an agent hired for this purpose. It is essential for branding, as well as for keeping the product on offer and prominent in the chosen distribution model.

Finally, companies must trust their distribution channel when it comes to knowing what motivates acceptance in the US, and never assume that what drives take up in Europe will work in the US.

Changes are on the way

A major change on the horizon is the impact of the US Presidential election. The change is likely to involve health care reform whichever party takes power. In addition, many hospitals are forcing representatives to become “credentialed” and pay average fees of US$150 per year per hospital to gain access to their clinicians. Access will be severely curtailed for those who do not wish to pay these fees.

On the regulatory side, the FDA Amendments Act of 2007 was signed into law on 27 September 2007. One of the provisions of this Act is the establishment of a Unique Identification System for medical devices. FDA is now in the process of developing draft regulations to implement these requirements.

Another change on the horizon is enhancements in IT systems to allow for better tracking and monitoring of medical devices throughout the total product life cycle. As part of the FDA’s commitment to improve procedures and move toward an e-government environment, CDRH is shifting from paper to electronic review. The FDA Unified Electronic Registration and Listing system has replaced the paper forms, and Electronic Medical Device Reporting is now in operation.

On the reimbursement side, CMS is intending to rapidly transform Medicare over the next several years into an active purchaser of high quality health care by linking payment to the value of care provided. This transformation will shift Medicare away from reimbursing providers based solely on volume of services and create appropriate incentives to reward health care providers for supplying high quality care.

For many European companies that are accustomed to working in value driven health care systems focused on both clinical and cost-effectiveness, this could present an interesting opportunity and is an area to watch in the year ahead.

Anne Avidon is US Lead Officer for Health Care and Medical Devices, UK Trade and Investment, One Memorial Drive, Cambridge, Massachusetts 02138, USA, tel. +1 617 245 4572, e-mail: anne.avidon@fco.gov.uk

UK Trade & Investment is the government organisation that supports companies in the UK trading internationally and overseas enterprises seeking to locate in the UK. For more information, visit: www.uktradeinvest.gov.uk