Navigating the Regulatory andReimbursement Landscape

The Second Annual Medical Device Regulatory, Reimbursement and Compliance

Congress - March 28-30, 2007

Philip J. Phillips, MBADirector, Medical Device Practice

BECKER & ASSOCIATES CONSULTING, INC.2001 Pennsylvania Avenue NW, Suite 950

Washington, DC 20006Tel: 202-822-1850

Email: phil.phillips@becker-consult.comwww.becker-consult.com

BECKER CONSULTING 2

Realities of the Landscape

• Economic profitability drives technology development• Regulation: a “double edged sword”

– Impedes innovation, but credentials products– Regulatory burden usually reflects knowledge of technology and the

estimated risk/benefit

• Existing payment systems adequately address most new medical technologies – Do not require new coverage decisions or coding for payment as often

integral to existing procedures– Bundled payments absorbs costs of technology

• Breakthrough technology creates the challenges

BECKER CONSULTING 3

Breakthrough Technology

• Clinically different from existing diagnosis / treatment options• Frequently subject to highest level of FDA regulation

– Trials usually subject to IDE requirements (“significant risk”)– Often Class III devices, subject to PMA requirements– Frequently subject to post market studies

• Often subject to CMS coverage, coding and payment processes– Significant to Medicare population, thus warranting careful evaluation– Costs may exceed payment under existing code structure, triggering

the need for a new code– Coverage decisions require evidence

BECKER CONSULTING 4

Challenges for Innovation

• Raising capital and navigating R&D cycles• Developing optimal regulatory and reimbursement

strategies– Navigating FDA and OUS regulatory bodies

– Determining payors and payments

• Synchronizing regulatory and reimbursement efforts– Concurrent and sequential actions

– Integrating measures for reimbursement evidence into clinical trials for marketing authorization

BECKER CONSULTING 5

Strategic Analysis Framework

Economic Profitability

Market Attractiveness

Competitive Advantage or Disadvantage

• Cost Position in Served Market

• Benefit Position in Served Market

• Direction Competition from Rival

• Entry Threats

• Competition from Substitutes

• Supplier Bargaining Power

• Buyer Bargaining Power

• Regulatory Pressures

Market Economics and Opportunities

Firm’s Strategy for Creating

Economic Value (“Value-Creation

Proposition”)

Firm’s Resources and

Capabilities

Explanation for profitability

Measurable indicators or causes

Root conditions

The Market

The firm’s value-creation proposition matches the firm’s resources and capabilities to market opportunities

The Firm and its Position in the Market

Courtesy of Ken Homa

BECKER CONSULTING 6

Timing Strategic Actions

Adapted from D&MD Publications

DrugDrugDeviceDevice

Phase II Phase III NDA/BLA FDA LaunchPhase II Phase III NDA/BLA FDA Launch

Pilot Pivotal PMAPilot Pivotal PMA

Define eligible patientsDefine eligible patients

Design clinical trial to incorporate Design clinical trial to incorporate coverage and payment criteriacoverage and payment criteria

Advocacy Group Development / Launch Planning / Publication StrategyAdvocacy Group Development / Launch Planning / Publication Strategy

Legislative MonitoringLegislative Monitoring

Potential Post-Potential Post-Marketing TrialsMarketing Trials

Informal / Formal Meetings with PayersInformal / Formal Meetings with Payers

Payer EducationPayer Education

Hospital Procedure CodingHospital Procedure Coding CPT / HCPCSCPT / HCPCS

Collect Cost / Health Collect Cost / Health Economic DataEconomic Data

Applications for New Applications for New Technology PaymentsTechnology Payments

Evaluate Cost EffectivenessEvaluate Cost Effectiveness

ClinicalClinical

MarketingMarketing

CoverageCoverage

CodingCoding

PaymentPayment

BECKER CONSULTING 7

FDA and CMS• Mission statements

– FDA: “protecting” and “advancing” public health, “speed innovations” and dissemination of “accurate, science-based information”

– CMS: “effective, up-to-date health care coverage” and “promote quality care”

• Different laws and regulations – Standards for decision-making

• “reasonable assurance of S&E”• “reasonable and necessary”

– Administrative procedures and processes– Time and resource requirements– Confidentiality of information

BECKER CONSULTING 8

FDA and CMS(Continued)

• Cultural differences– Same parent agency, different geographic locations

• Organizations do not easily communicate• Sponsors must independently coordinate requirements

– Motivational factors• Fulfilling missions and meeting statutory obligations• Agency-specific goals

– FDA: premarket goals linked to MDUFMA– CMS: internal

BECKER CONSULTING 9

Case Study

New Technology Intraocular Lenses (NTIOLs)• SSAA 1994: instructed DHHS to develop and

implement process for determining payment• Established 42 CFR Part 414 Subpart F

– Defined the terms of the process

– Established $50 payment adjustment for NTIOLs

– Annual review and approval process

– 5-year payment period for adjustment

BECKER CONSULTING 10

Case Study (continued)

• Eligibility– FDA approved lenses– “claims of specific clinical advantage and

superiority over existing IOLs with regard to reduced risk of intraoperative or postoperative complications or trauma, accelerated postoperative recovery, reduced induced astigmatism, improved postoperative visual acuity, more stable postoperative vision, or other comparable clinical advantages.”

BECKER CONSULTING 11

Case Study (continued)

• The NTIOL process– Notice and comment rule-making– Annual FR solicitation of applications– Review process

• Confirm FDA approval for the labeling

• CMS review of the evidence based studies supporting FDA approval

• Determination and designation of NTIOLs

• Effective 30 days after final notice

BECKER CONSULTING 12

Case Study (continued))

• Interesting observations– Initiated through Congressional action– Implementation reflects FDA and CMS views

• Little opportunity for collaboration between agencies

• Less than optimal efficiency– Sequential process

– FDA retains (possibly expands) regulatory authority

– CMS duplicates evaluation of evidence underlying FDA approved labeling

• The overall process can be successfully navigated

BECKER CONSULTING 13

Conclusions

• Strategic planning is essential to gaining FDA clearance and optimal payment structure

• FDA and CMS can be successfully navigated– Take the time to understand each agency– Enlist expert support as needed

• Do not focus on FDA and ignore the reimbursement landscape