Coverage and Reimbursement Considerations for Orthobiologics
For more than a decade, manufacturers have been commingling devices and biologics in an effort to develop innovative orthopedic technologies. While the advancement of orthobiologics promises a host of unique treatment options, it also provides different pitfalls during the development phase and in post-FDA approval/clearance. Manufacturers are likely to face coverage and reimbursement challenges upon market entry but can attempt to minimize or capitalize on these barriers through early development and execution of a sound reimbursement strategy.
Following is a brief overview of considerations that can impact payer coverage and reimbursement for orthobiologics—and may create opportunities for manufacturers to best position their products for commercial success. While the information focuses on orthobiologics, the content is relevant for any innovative product. In addition this information can help manufacturers of more traditional devices understand the coverage and reimbursement landscape for orthobiologics to appropriately assess them as potential competitors in an evolving and competitive marketplace.
What Is an Orthobiologic?
The term orthobiologic has two distinct definitions within the orthopedic lexicon. More narrowly, the field of orthobiology includes a wide range of technologies that contain a biological or biochemical component. Examples include tissue regeneration technologies, resorbable scaffolds to reinforce soft tissue, stem cell therapies and biologics delivered through a device. More broadly, the field encompasses a wide variety of technologies that do not include a biological or biochemical component but, nonetheless, provide novel alternatives to traditional orthopedic treatments that use metal plates, screws and implants. Examples include materials used for kyphoplasty or vertebroplasty, bone cements and bio-absorbable pins or nails used to enhance healing of fractures.
The field of orthobiologics is among the fastest-growing market segments in the orthopedic field. According to one recent report, orthobiologic revenues reached $3 billion in 2006, a 13% increase compared with 2005. Revenue from orthobiologics makes up as much as 10% of the entire orthopedics market. Furthermore, more than 200 companies have developed or currently are developing an orthobiologic technology, with the majority of products still in the development stage.
Coverage and Reimbursement
Given that the field of orthobiologics is relatively new, there is enormous opportunity for innovation. However, there also are enormous challenges from a coverage and reimbursement standpoint. In general, public (Medicare and Medicaid, for example) and commercial payers (HMOs and PPOs, for example) assess the available clinical and scientific literature to determine whether a product is safe and effective, whether it is reasonable and necessary, how it works compared with existing treatments and the product’s cost effectiveness. These standards and requirements often are more demanding than the original FDA approval or clearance.
After coverage is established, payers determine how much (if anything) they will pay for the new product or procedure. Actual payments to providers depend on the setting of care (who is performing the procedure and where), what other procedures or services are provided and the value and cost of the new product relative to the current standard of care. The degree to which a manufacturer can demonstrate the uniqueness and value of an orthobiologic and establish a coding pathway for appropriately describing the service performed ultimately will help determine whether providers are adequately and appropriately reimbursed when using the product.
Significant coverage and reimbursement challenges can include:
• Lack of data to differentiate the product and associated procedure from existing treatment options
• Coding options and associated reimbursement amounts that do not contemplate a product cost
• Competing products that are paid separately as biologics
Why the FDA’s Process Matters to Payers
Coverage and reimbursement for a particular orthobiologic depend on a number of factors that, in some cases, are indicative of the product’s FDA designation as a device, biological or combination product. While the manufacturer can make the case for a particular designation, the FDA ultimately is responsible for assigning the requirements for approval or market clearance. The results of those discussions impact how quickly the product comes to the market as well as what clinical evidence is available for review by payers. In a payor system moving toward evidence-based medicine, manufacturers must be cognizant of the advantages and disadvantages of each pathway and be prepared to provide supplemental clinical research to compete in the marketplace.
Many manufacturers often eye the FDA requirements as the ultimate bar due to the agency’s primary functions of channeling products to the market. Ideally, manufacturers want to be as resourceful as is practical in meeting FDA requirements for marketing the product, particularly with respect to expense. However, most manufacturers of orthobiologics or other innovative technologies often hurdle the FDA bar only to realize afterward that another, higher bar looms in the near future.
For example, an orthobiologic approved by the FDA as a device under a premarket approval with an investigational device exemption clinical study will come to market much sooner than it would as a biologic under a biologics licensing application—but with significantly fewer clinical data to support coverage. Based on the FDA study data, payers may decline to cover the technology, citing the need for additional data to establish safety and efficacy.
What happens if payers require outcomes data that were not part of the FDA study or more data than the manufacturer can provide?
The likelihood of immediate future success hinges on preparation. Inexperienced manufacturers that are blindsided by this payor reaction will have to scramble to put together a post-approval clinical strategy and will lose some, or all, of the advantages gained by quick market entry. The results can be devastating and could jeopardize the product’s place among the first entrants to the market. By contrast, those manufacturers that anticipate likely payer objections can take advantage of less-rigorous FDA device review requirements and better position their products for coverage by performing additional clinical studies beyond FDA mandates and incorporating reimbursement principles into the study design. (For a more comprehensive discussion of integrating reimbursement principles into clinical studies, read “Orthopedic Insights” from the May/June issue of ODT, available in the archives section of its Web site at www.odtmag.com.)
Applying These Lessons to the Market
The importance of understanding coverage and reimbursement requirements is critical for all medical technologies, but it is particularly critical in a market space where directly competing products can be biologics, devices or combination products. Successful manufacturers of these products will examine the market from both a device and a biologic perspective, taking lessons and the best elements of success from each world. For even the most experienced manufacturers, this likely will require investment of resources (both intellectual and monetary) to understand clinical data collection, payor objections and coding solutions from both the biologic and device perspectives.
Manufacturers of orthobiologics can limit, and in some cases eliminate, barriers to market access by:
• Understanding the product market space, including the benefits and consequences for approval as a biologic versus a device
•Understanding the nuanced differences between devices and biologics, particularly with respect to evidence requirements, clinical data and coding
• Identifying coverage and reimbursement hurdles as early in the development process as possible
• Developing meaningful clinical data that address coverage and reimbursement criteria
• Identifying coding pathways that appropriately represent both the procedure and the product
• Developing a strategic reimbursement plan to address the obstacles
• Committing the necessary resources (monetary and otherwise) to execute the plan
Tim Hunter is the director of reimbursement for Musculoskeletal Clinical Regulatory Advisers, LLC. In this capacity, he works with client companies to solve complex coverage and reimbursement issues for existing, new and future products. Please send inquiries to Tim at firstname.lastname@example.org.
Author’s Note: This article includes elements from Tim Hunter’s industry white paper, titled The Challenge of Orthobiologics: Navigating the Coverage and Reimbursement Landscape in a Complex Marketplace. The white paper is available at www.mcra.com/papers.html or by requesting a hard copy at email@example.com.