Bang for Buck is Getting Tougher to Prove and Isn’t Always Enough

Medical Device Daily has published an interesting article referencing Cook Medical’s successful passage through FDA’s advisory panel meeting en route to FDA approval for its Zilver PTX drug eluting stent.  While the piece pertains primarily to the United States, it resonates strongly with Medlatest’s view of the world outside North America by reinforcing the fundamental principle that new technologies have to punch above the weight of their predecessors if they are going to receive reimbursement and gain market entry.

As reported extensively over the past few weeks, Cook Medical’s Zilver PTX is likely to become the first peripheral drug-eluting stent (DES) to be approved in the U.S., after an FDA advisory panel voted unanimously in favour of the device on Oct. 13, which would give Cook access to the estimated billion dollar peripheral artery disease market.

The article proposes that gaining regulatory approval is one thing, but gaining market acceptance, in the form of state reimbursement (Medicare in USA) is quite another.   In other words, without compelling clinical evidence to support the product beyond that required for “straightforward” approval, a company is unlikely to be able to bring often more expensive solutions to market easily because the reimbursement per case does not readily increase to accommodate the new technology.  Charging a premium for a new product is therefore anything but a “given”.

This sounds like old news to us Europeans.  I’m constantly reminded of trying to introduce a new product in Germany with its somewhat similar DRG (Diagnosis Related Group) system, being told that; “a new product must first replace an old product and even then it must be both better and cheaper.”

The author asks; “How then can makers of novel devices – with clinical improvements over standard-of-care – seek premium pricing?”

There’s an almost indignant tone to this statement, almost as if there should be an expectation that new product/technology equates to higher price.  I think the simple answer in a European context is that quite often makers won’t be able to charge a higher price, and may have to satisfy themselves with the strategy of garnering big chunks of market share at somewhat smaller premiums over existing technology, rather than small chunks of market share at super-premium pricing.  And this is almost regardless of the existence of a package of superb clinical evidence, because clinical evidence, improved patient experience, improved outcome, healthcare economics and all the usual elements do not (yet) trump “today’s price and today’s budget”.

“This makes premium pricing very difficult without some justifiable improvement elsewhere in the disease treatment continuum… really?”

Obviously that cannot be entirely true, otherwise all clinicians would be using the most basic gear to do their job, which they clearly don’t, but one only has to look at hospitals’ reversion to previous generations of hip prostheses “because they’re cheaper” if one wants evidence that it’s not far off the mark.  Also, there’s a “grandfathering” element at play too.  It’s hard to go back to a manual instrument in arthroscopy when a sophisticated electrosurgical gizmo has become standard of use in the past decade.

Adi Renbaum deals very nicely with the issues to hand and raises questions that any company seeking to introduce any kind of technological advance would be wise to consider. This is probably best elucidated in the following paragraph;

“The Medicare reimbursement bar has been raised. To seek any additional product reimbursement for the hospitals, the device must prove it delivers “significant clinical improvement” over the standard of care currently reimbursed by Medicare. “Significant clinical improvement,” is a loosely defined standard, however, and is applied subjectively for each new technology. For example, does a new neurovascular implant have to show evidence of superiority over “standard of care” in a pivotal trial to justify a higher price? Is proof of non-inferiority of a new continuous glucose monitor sufficient? Is a separate study necessary? Should we invest scarce funding to support studies when non-inferiority is the goal?”

We broadly agree with the analysis.  The pre-existing world in which “clinician likes therefore hospital buys”, is exactly that… pre-existing, except in a few hospitals where the clinician remains kingpin.

But we’re also saying that even demonstrable substantial clinical improvement is not a guarantee of success.  In the US, Medicare will trigger add-on payments reimbursable to hospitals in cases where significant clinical improvement has been demonstrated to its satisfaction.  In Europe we’re not in quite the same boat, because reimbursement takes so many forms.  Again however, reimbursement aside, how easy is it to convince a healthcare provider like the UK’s NHS to spend another £200 for an implant when the “tariff” for the procedure doesn’t cover it?  The answer is “not very” and despite government assertions that new technology is vital in driving up healthcare efficiency, the stakeholder group ever more broad(inclusive) and  the decision making process is ever more complicated and consequently protracted.

Adi Renbaum concludes that; “Preparing to demonstrate significant clinical improvement for reimbursement purposes is an essential part of clinical trials strategy and execution – it must be built into planning and costs of clinical trials management. Doing so as part of clinical trials will accelerate time to market. Conversely, not having these data for Medicare may delay sales and revenues indefinitely.”

At Medlatest we agree with the analysis, but would caution that there are more “given requirements” than those for regulatory approval and good clinical evidence.  Getting the price right and communicating the message across twenty language zones through vastly different cultures and regimes has never been easy, and it’s not getting easier.

To read Adi Renbaum’s article in full, click here


Ref:Buck for the bang: Premium med-tech pricing

Adi Renbaum, senior VP for health policy and reimbursement, Neocure Group

Source: Medical Device Daily