Historically, a successful strategy for introducing a medical device to market included thoughtful design, regulatory clearance, and an effective marketing plan. Of course, this is a gross simplification and assumes the device addressed an unmet need, had a competitive edge over existing therapies, or otherwise appealed to medical professionals and/or patients. During development, safety and performance have been primary drivers, with manufacturability and cost also given substantial consideration. After demonstrating safety and performance to some degree by verifying design inputs, validating device design, and securing regulatory approval, a total understanding was generally only obtained from postmarket data. Class II devices have typically had bench data from development, and no clinical data, upon commercialization.
This age-old strategy no longer works, however, due to the increasing complexity of healthcare costs and the dollar’s significant impact on patient care. Institutions controlling medical-related finances are becoming more influential over technology and the availability of novel therapies. Clearly, these institutions are focused more on value and a true demonstration of product benefit. As a result, the traditional fee-for-service payment model has shifted to a value-based system designed to control costs and maintain high product quality. Consequently, the onus for demonstrating high product quality and low cost has been transferred to medical device companies.
Safety, Performance, and Price
Healthcare products continue to primarily compete on three criteria: safety, performance, and price. In the past, demonstration of these criteria was partially theoretical and based on non-clinical data. By exceeding the competition in any of these areas and executing successful marketing and sales campaigns, a new technology could potentially gain market traction. With changes effected by payers, the way these criteria are assessed is changing and additional activities are required to demonstrate the value of medical technology to payers.
Demonstrating device safety before clinical use is challenging and requires a robust risk management process to drive the necessary activities to reduce risk as much as possible. The latest revision of ISO 14971 (ISO 14971:2012) greatly increases the utility of risk management during pre-clinical development. By requiring all risk to be mitigated to the lowest possible level (contrary to reducing risks “as low as reasonably possible” per ISO 14971:2007), device developers must now demonstrate that all risks have been mitigated regardless of financial or other practical considerations. However, even with increased risk control, reducing risks at this stage of the lifecycle is largely theoretical and based only on experience with similar technologies. The most common means for substantiating risk reduction include verification and validation testing, both of which are mostly non-clinical testing. Clinical use may reveal additional risks or demonstrate that the severity and occurrence of predetermined risks are different than anticipated. The clinical evaluation process helps fill this gap by assessing the clinical performance of the device (or a similar product) and determining whether insufficient data indicates a need for collecting clinical information for the device (see the May/June “Orthopedic Insights” column). When verification and validation, risk management, and clinical evaluation are conducted diligently, an accurate characterization of both safety and performance can be obtained. Ultimately, however, attaining clinical data is the only way to precisely determine device safety, especially when compared to existing technologies. As such, clinical data may be most valuable in promoting a device and securing early buy-in from payers.
For safety, the initial indicators of device performance are the results of verification and validation testing performed during development. The performance of other devices may be relevant too, as long as those devices are the same technologically, biologically, and clinically. This equivalence approach to clinical evaluation usually demonstrates equivalence, not superiority. While valuable information is obtained from verification and validation bench testing and animal studies, a precise measurement of superiority over competing technologies generally requires clinical data. Bench testing and animal studies are of even more limited use when there is only a minor margin of superiority.
While price has always been a competition focal point, it now is also weighed heavily against product performance and safety. An increasing focus on value, or price compared to performance, means the device price is now more closely linked to other criteria. Demonstrating that a product is equivalent to existing, more expensive therapies or showing that long-term care is less costly are critical to securing payment. Clear information incorporating robust data is required to demonstrate superiority over existing therapies or devices. An even more appealing case to payers may involve proving a device leads to lower long-term care costs compared to existing therapies.
Meeting Payer Requirements
The U.S. healthcare payer system is complicated, partly due to the mix of private and government funding. While payers may have varied criteria and systems for device payment, they all focus on the value a product provides—device price compared to benefit (performance and safety). Payers include, but are not limited to, private payers (insurance companies) and government agencies such as Medicare (federal, controlled by states), Medicaid (state, partially funded by federal), and Veteran’s Affairs.
Successful device sales no longer depend solely on staff and adoption of the product by key opinion leaders. The payer’s voice has become louder and their needs must be met even though their approaches to value-based healthcare are not entirely consistent. However, the general aspects of reimbursement are rather universal and composed of three components, each with a dedicated process: coverage, coding, and payment.
Coverage is simply a decision to pay for medical technology. It can be granted on a limited or broad basis; that is, for a limited set of parameters (indications, treatment setting, etc.) or more broadly. Obviously, broader coverage means higher market sales potential. For a new technology or service, a National or Local Coverage Decision is required and clinical data is necessary. This decision is dependent on the technology demonstrating superiority over existing therapies, not just equivalence.
Coding refers to the standardized system by which services are categorized and coded. If coverage is granted, coding is the mechanism by which reimbursement is obtained. The code is how the technology (or service in which the technology is used) is identified for payment. There are different coding systems used by different entities (e.g., CPT or HCPCS). While it seems like standardized coding systems would be straightforward, device coding can have a significant impact on sales. Strategic planning must be used in identifying the codes to ensure the device and technology will be paid for, to receive higher payments, and to receive new codes with strategic marketing advantages. While a new code may have advantages, it also may not result in payment.
Payment is, of course, the transfer of money for a particular medical technology (or the service in which the technology is used). Depending on the service, the healthcare setting, and the parties involved, the payment for a product may be disbursed separately or bundled with others. Services with bundled payments usually requires the healthcare provider to decide whether the value of a product warrants its share of the bundled payment received. Put simply, the lower the cost of a device, the more of the bundled payment is retained by the healthcare provider. In these cases, the product’s value must be proven to the healthcare provider. Like coding, payment is managed through classification systems (e.g., MS-DRG or APC).
Incorporating Payer Requirements During Development
While the traditional development process and regulatory path are largely unchanged, new requirements should be incorporated during development for greatest success. Coverage decisions typically require the FDA’s blessing; therefore, the formal reimbursement process may not begin until further in the development process. However, planning should begin early and multiple considerations should be made during the development process. Clinical trials are an effective way of obtaining data for product commercialization and for convincing payers. Clinical plans should include inputs from reimbursement experts and be consistent with the coding being sought. Consult with a reimbursement expert early to create a reimbursement strategy during the concept phase and before design freeze. Additionally, a product’s reimbursement strategy should be aligned with its regulatory and clinical gameplans. Following are additional recommendations for a more timely path to reimbursement.
Establish relationships with clinical experts early in the process; their input is still important for gaining reimbursement, particularly where payment is made by the healthcare provider (e.g., bundled payments).
Incorporate design inputs that will be valuable for reimbursement. Consider inputs that:
- Decrease treatment costs, reduce hospitalization, decrease the potential for complications, or otherwise decrease treatment costs compared to existing therapies
- Result in a competitive edge when compared to other products in the anticipated codes for the device
- Result in indications with new codes that may increase payment for the device, or indications that provide more opportunity without coding confusion
- Add other characteristics or functions that increase the appeal to payers and healthcare providers
- Clinical data, specifically from a randomized controlled trial, will be required for a new coverage decision
- Clinical data may be helpful or even required in creating a new code or add-on code
- A hospital may be incentivized to select a device over a competitor if the outcome is better
- Clinical data is also useful for other marketing strategies and pursuing other indications or markets for a device; these needs should be aligned in the product development plan and clinical protocol
- A clinical trial is a great way to convince key opinion leaders of the promise of a medical innovation; clinical data may secure their interest
Bryan Brosseau’s experience has been forged in over 15 years in the medical device and biologics industries. With numerous regulatory approvals for medical devices and biologics, his thorough understanding of the regulatory maze means a clear roadmap for regulatory success. His solutions have been effective in resolving FDA 483s and warning letters, addressing compliance and operations challenges, creating compliant and convincing technical marketing material, and getting medical devices and biologics to market quickly. Brosseau received his bachelor’s degree in Biology from the University of Georgia and maintains a Regulatory Affairs Certification from the Regulatory Affairs Professionals Society.