It’s Never Too Soon to Start Thinking about Reimbursement

It’s Never Too Soon to Start Thinking about Reimbursement


Posted in Design Services by Camilla Andersson on September 18, 2012

Factoring in reimbursement requirements early during the product development cycle can mean the difference between success and failure in the marketplace.


You may have developed a breakthrough device that is safe and effective, but it won’t generate the revenue you anticipated unless it can be properly reimbursed. Reimbursement doesn’t just happen, nor is it something that can be dealt with immediately before launch. In fact, to ensure that your product is properly reimbursed, almost all aspects of the product development process should take reimbursement issues into consideration.

In this article, we demonstrate how reimbursement considerations interrelate with a company’s product design, regulatory and business strategies, all at a very early stage of the product development process. In all cases, we use real-life examples from our clients (some details have been modified to protect company privacy).

 

The difference between being able to fit into existing reimbursement mechanisms and developing new ones is huge. If a new product can fit into an existing code, covered by payers and assigned with a satisfactory payment rate, reimbursement is practically immediate (following regulatory approval). By contrast, developing a new code, a coverage policy or just changing a payment rate typically requires the company to provide substantial documentation through a time-consuming and costly process.

Design tweaks early in the product development stage that position the product within existing mechanisms can mean the difference between commercial success and failure.

The examples below show how various decisions, that were made early in the development process, negatively affected reimbursement.

Do the numbers
One of our clients developed a four-sensor product that competed with other six-sensor products available on the market. This product was clinically better and less expensive than its competitors. The company asked us to check whether existing reimbursement mechanisms in one of the European countries could be used. A short assessment revealed available codes, a positive coverage policy and payment rates that exceeded the company’s expectations. However, the wording in the identified existing codes specifically indicated six sensors. Redesigning the product at that stage was too difficult and developing new reimbursement mechanisms for the four-sensor product was beyond the company’s budget. Although the product already carried the CE mark, the company was left out of the market.

Pressure to succeed
Another client developed and launched a product that used a medical pump. Unfortunately, the pump’s pressure settings deviated from the allowable range specified in the relevant existing code. Setting pressure rates to fit within the allowed range during the product development phase would have been simple. However, by the time the company started thinking about reimbursement, it was too late. Since the product did not fit into existing reimbursement mechanisms, no units were sold and the company shelved the product.

Some clients have begun to provide us with the specifications of their planned product, asking whether this might be a “reimbursable spec,” prior to undertaking the actual development work.

Choose your application wisely
The same product may be covered for one application, thus fitting into existing reimbursement mechanisms, and not be covered for another. Selecting the right application for the product should also take into account the reimbursement consequences.

One client developed a platform that could be used for several applications. The company asked us to develop and implement a reimbursement strategy while its pivotal trial, focused on application I, was underway. Our assessment found that if the company proceeded with the current application, the likelihood for reimbursement was low and might only be granted in five to 10 years at considerable investment. On the other hand, if the company used the same device for application II immediately upon receipt of the CE mark, the device would be reimbursed at a lucrative rate. Obviously, the company realised that by continuing with application I, it probably would not survive to achieve profitability. Consequently, the company abandoned application I and is currently selling its product under existing reimbursement mechanisms for application II.

The intersection of reimbursement and regulatory strategies
Collaboration between main players in the industry, such as regulatory bodies and payers, is increasing. In the United States, for example, the Department of Health and Human Services (DHHS) continues to seek means of making interactions between US FDA and CMS more efficient. However, some companies still treat their regulatory and reimbursement strategies as two parallel lines that never intersect.

In one case, our company was asked to develop a reimbursement strategy for a client who had already applied for and received regulatory clearance. Unfortunately, the wording that was used in the application substantially decreased the likelihood of reimbursement. Consequently, the company re-applied for regulatory clearance, but this time with a modified intended use. Needless to say, this delayed the launch of the product, resulting in substantial losses to the company.

In another case, a medical device company selected a very low-priced device as a predicate device for its sophisticated new technology. The company went through the regulatory process quite quickly; however, when we started discussing payment rates with payers, the low-cost predicate device had a negative impact. Despite tough negotiations, payers were already biased and the technology was priced below the company’s expectations.

Impact of reimbursement considerations on clinical research
Clinical data required for a successful regulatory approval does not necessarily encompass the clinical data required for successful reimbursement. However, in many cases, the data required for the reimbursement process can be developed in parallel to the required regulatory data during the same clinical trial. Companies that still consider regulatory and reimbursement as serial processes may reach the market with insufficient funds and time to finance another clinical trial just to develop reimbursement-related data.

One of our clients developed outstanding clinical data for its product and asked us to help develop specific reimbursement mechanisms for it. All of the payers were impressed by the developed clinical evidence, but they also wanted the company to present data regarding a few economic aspects. Since these economic aspects were not observed during the company’s previous clinical trial, the company had to perform a new trial to gather the requested data. Had the company thought about its reimbursement strategy prior to initiating the clinical trials, those economic aspects could have been integrated easily into its previous trials, thus avoiding investment in a new trial and a delay in the sale of its product.

In order to avoid such mistakes, we present the protocol and our expected results to payer representatives prior to initiating a clinical trial. They comment, in advance, on whether such trials would generate the data upon which they could base their reimbursement decisions. Only after receiving their approval do we initiate the trial itself.

Parallel tracks get you there faster
As the examples above clearly show, decisions regarding product design, applications and regulatory strategy, made relatively early in a product’s development process, may have an impact on its reimbursement. Some service providers, such as the Global Life Science Consulting Organization, took notice and started offering an integrated life-science consulting service, combining IP, regulatory, reimbursement and marketing considerations into one coherent consulting package.

The bottom line is to view reimbursement as one of the issues that needs to be dealt with in parallel and early in the device development process. As we have illustrated in this article, some mistakes may be very difficult and expensive to correct later on.

Amir Inbar
is CEO, Mediclever Reimbursement Consultants, 27 Old Gloucester St., London, WC1N 3AX, UK
tel. +44 20 8099 7435
e-mail: amir@mediclever.com
www.mediclever.com



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