Aligning Regulatory and Reimbursement Strategies for Medical Devices

Medical device regulatory and reimbursement strategies in the US have often been considered two separate activities, dealing with two separate stakeholders that, to some, are not in sync with each other. It is common for a new device manufacturer to believe that device reimbursement is something to tackle once the device is cleared or approved through the FDA.

Recently, at Simbex, we are seeing a trend of device manufacturers taking a more proactive approach to their future reimbursement success. These clients have come to our Regulatory consultants with a requirement for reimbursement and request that we find the best regulatory pathway that enables reimbursement.

We sat down with Amaris Ajamil, PhD, RAC (Senior Regulatory Consultant) and Angela Presley, PhD (Senior Reimbursement Consultant) of Simbex to discuss this trend and how early-stage companies can benefit from these kinds of conversations.

Can You Elaborate on This “Trend” That You’re Seeing With Your Clients?

AA: These “reimbursement-driven” clients have done their homework. They have undertaken some market research and have determined that in order for their customers to purchase their device, the customer needs to be reimbursed by CMS or private payors to offset the cost of the product.

Any Ideas on Why This Trend Is Appearing?

AA: These clients have a full understanding of the product commercialization pathway and know that lack of reimbursement strategy is often a block to commercial success.

AP: Investors are getting a little bit savvier and have begun requiring the manufacturer to have an understanding of reimbursement earlier in the product development timeline. I think this is occurring because a lack of reimbursement is a common failure mode for products getting to market that it’s gotten their attention. These investors usually form their question as, “Do you have a code?” It is rarer for them to really understand the nuances of coverage and payment, but they have enough of a grasp on the topic to ask about the code.

Coverage, Payment, and Codes Can Be Confusing. To That Point, Could You Explain What Is Reimbursement and a Reimbursement Strategy?

AP: Reimbursement in a nutshell is asking the question “will the insurance company pay for your product or service?” That’s the simplest way to distill it down. In order to get payment, your device needs a code and favorable coverage policies. There are many codes out there that do not have coverage and therefore do not have payment. So having a reimbursement code (HCPCS or CPT) is a start but not the end. I think a lot of people don’t plan for reimbursement ahead of time because they think that they can just get that question answered once they get to market.

Why Is It Important to Consider Your Reimbursement Strategy So Early in Development?

AP: At Simbex, we try to catch people really early because your reimbursement strategy can influence design decisions around the cost of the product to make it fit within a cost-of-goods that’s reasonable for the amount of payment that you might get. Or you can understand some of the arguments that the insurance companies might make about whether they want to pay for something or not based on the effectiveness or based on the technology involved.

AP: If a manufacturer understands the reimbursement landscape ahead of time, they may make different design decisions during development, or they may even change who the initial user will be. We’ve had some clients come in thinking that they were making a product that would be used in the patient’s home, and then it turns out that the only pathway to payment was for use in the clinic setting through a CPT code so it gets paid for as part of a procedure or part of the physician’s time.

What Part of the Regulatory Strategy Does Payors Look At When Making Payment Determinations?

AA: The device regulatory strategy, which is usually compiled towards the beginning of the device development, includes the details of the device’s intended use, its FDA device classification, applicable submission pathway, and pre-clinical and clinical testing requirements. Ideally, manufacturers follow and execute this strategy to streamline the effort it takes to achieve FDA clearance or approval.

AP: One tricky part of the process is that, unlike the FDA, which has helpful pre-submission contact opportunities, device manufacturers usually do not get to opportunity to approach CMS with a question about which code applies to their device until after the device is registered with the FDA. As part of the application process to talk to CMS about reimbursement, manufacturers have to mention what FDA product code and pre-marketing submission pathway was used.

AP: In some cases, when CMS reviews the device’s product code and pathway, they could say, “Oh well, we don’t cover other things that have used this product code or pathway and therefore we’re pretty sure we’re not going to cover yours.” I’ve never seen it be the number one reason for denial – but it can be one of the factors that pushes them towards a negative decision.

So, Is It Possible That a Device’s Reimbursement Strategy Can Affect Their Regulatory Strategy?

AA: It certainly can in my opinion, though the true effect is on the device design. Payors have deemed certain devices as not “medically necessary” or considered “investigational.” If the first regulatory strategy determines that the device falls into one of those categories, device manufacturers must make the decision to either change device design or intended use to fit under a medically necessary device type – or innovate for a De Novo and try to create a new reimbursement code.

AP: FDA has their phrase “safe and effective”; CMS has “reasonable and necessary.” It’s a common reason for denial of coverage and they have avoided codifying it. Payors will usually say something is not reasonable and necessary because standard-of-care is cheaper and just as effective, or the device is not primarily medical in nature, or they think the device is a convenience item.

AA: We’ve seen some clients with fully developed devices that need payor reimbursement as part of their business strategy find out the hard way that the device is not considered medically necessary.

What Are Some of the Challenges Facing Device Manufacturers When It Comes to Aligning Their Reimbursement and Regulatory Strategies?

AP: CMS often requires more clinically complex data than the FDA. Sometimes the pivotal trial that proves a product is safe and effective within a certain population is deemed to be unapplicable to the typical CMS patient, who tends to be older and sicker than the general population. Additionally, CMS may deem a product as experimental if it lacks a sufficient number of trials. A single clinical trial is rarely considered enough evidence for the payors.

And Finally, What Resources Are Out There to Facilitate the Regulatory and Reimbursement Strategies?

AA: The FDA’s early payor feedback program (EPFP) allows manufacturers to request meetings with payors to obtain payor input on clinical trial design or other plans for gathering clinical evidence needed to support coverage decisions. It’s free for manufacturers to request the meeting through the Q-submission pathway.

AP: One drawback, however, is that the EPFP is more suited for higher-risk devices. Similarly, the Transitional Coverage for Emerging Technologies (TCET) pathway promises CMS coverage decisions within a year for devices that have gone through the Breakthrough Device Program at the FDA. Unfortunately, it doesn’t create new benefit categories which limits the kinds of innovations coming through the program to fit within the pre-existing benefit categories. We see this as especially problematic for digital health technologies.

AA: And, of course, we always recommend reaching out to regulatory and reimbursement consultants to help guide manufacturers and innovators through these complex topics.

Summary

The article discusses the growing trend among medical device manufacturers to integrate reimbursement strategies early in the product development process. Traditionally, regulatory and reimbursement strategies were considered separate, with reimbursement tackled post-FDA approval. However, manufacturers are now proactively seeking regulatory pathways that facilitate reimbursement, driven by market research and investor requirements.

Key Points:

• Proactive Approach: Manufacturers are increasingly considering reimbursement strategies early to ensure commercial success.
• Investor Influence: Investors are demanding reimbursement plans earlier in the development timeline.
• Reimbursement Basics: Reimbursement involves determining if insurance will cover the product, requiring codes and coverage determinations.
• Design Decisions: Early reimbursement planning can influence product design and intended use.
• Regulatory Strategy: Payors consider the device’s regulatory strategy, including FDA classification and submission pathways, when making payment decisions.
• Challenges: CMS often requires more clinical data than the FDA, and may reject non-representative population studies.
• Resources: FDA’s Early Payor Feedback Program and Transitional Coverage for Emerging Technologies pathway can aid manufacturers.

Key Takeaways

1. Early Integration: Incorporating reimbursement strategies early in development can streamline commercialization and avoid pitfalls.
2. Investor Savviness: Investors are increasingly aware of the importance of reimbursement, influencing manufacturers to plan ahead.
3. Reimbursement Essentials: Understanding codes, coverage, and payment is crucial for successful reimbursement.
4. Impact on Design: Reimbursement considerations can lead to significant design and user changes.
5. Regulatory Considerations: Payors’ decisions are influenced by the device’s regulatory pathway and classification.
6. Navigating Challenges: Manufacturers must gather robust clinical data and consider payor requirements to align reimbursement and regulatory strategies.
7. Utilizing Resources: Programs like FDA’s EPFP and TCET can provide valuable guidance, though they have limitations.

This proactive approach can significantly enhance the chances of a medical device’s commercial success by ensuring it meets both regulatory and reimbursement requirements from the outset.