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Reimbursement is one of the key factors to the market success of a product. Alan Muney, Chief Medical Officer at Cigna, provided insight on how health insurance and health service companies look at coverage today in a Medical Device and Diagnostic Industry interview.
Cigna asks three questions when considering coverage for a new device, said Muney:
- "Has the technology been proven by studies in peer-reviewed journals?"
- "Has it produced better outcomes than current technologies?"
- "Or does it produce the same outcomes as current technologies but at a lower cost?"
But when one looks at reimbursement, one must keep in mind that the motivation for the insurer (reimbursement) is different than that of the end user (all healthcare stakeholders) when purchasing your product. One is advised to keep both aspects in mind when developing and marketing a product.
Muney explains that Cigna sets up risk-adjusted algorithms to evaluate how a device affects the total cost and outcome of care as compared to current therapy. "We would look at a much more expensive device if it took costs out of the system," he said.
I will cover each question in more detail.
Question 1: Has the technology been proven by studies in peer- reviewed journals?
This is an interesting question, because when one defines "innovation" as new technology, there are no proven studies in peer-reviewed journals because it is new and has never been proven. If your technology has been proven, it probably means that your technology has incremental benefits or is a "me-too" product. From a marketing perspective, "me-too" products are very difficult to get physician adoption because it doesn't offer a big enough incentive to change.
The way to get your innovation proven is to set up great pre-clinical and clinical trials that demonstrate great outcomes that are more likely to get published in a peer-reviewed journal. To set up great trials, recruit onto your team Principal Investigators (PIs) who have experience in trials for that specific disease. It doesn't matter whether their experience is in device or drugs; you want their trial experience in terms of logistics.
If you have an innovative device that has not been used in this particular disease, you won't find a device PIs with previous experience and therefore you must rely on a pharma PI as an adviser, which is a wise thing. Experienced PIs know the reasonable or expected endpoints, know which inclusion and exclusion criteria will make a great trial, know how easy or difficult it will be to recruit patients and all the little things that may trip up a clinical trial. I call this de-risking your trials. This brings us to questions two and three.
Question 2: Has it produced better outcomes than current technologies?
When insurance providers talk about better outcomes, they are not only talking in terms of efficacy for better survival rate, better morbidity rate or better quality of life. They are also referring to how you can save overall healthcare costs, especially now that many organizations have applied for the classification of Accountable Care Organizations or ACOs.
As Muney mentioned, insurers are not only looking at the cost of the device, but also at the overall cost saving to the healthcare system for that particular procedure or treatment of a disease. For example, does using the device decrease hospital stay, eliminate a drug or product that the patient was using, get the patient back to work earlier, reduce the number of physical therapy sessions, or prevent future heart attacks for high risk patients.
In the past, some device manufacturers have tried to make a case to the physician or hospital for incremental time saved for a procedure, with the accrued time for each procedure representing a cost saving to the hospital. This argument no longer works, because it is very difficult to demonstrate that time allegedly saved translates into a safer procedure (better outcomes), or even creates time for additional procedures. Should the physician run into a complication that can't be anticipated until one gets into the procedure, additional time will be spent and any incremental time saved will disappear. Just one complicated procedure can nullify whatever time was expected to be saved.
For the insurance company, time saved for a hospital procedure is not a benefit, because they reimburse on a lump sum for a hospital procedures, no matter how long the physician/hospital takes to complete the procedure.
In conclusion, when one is trying to solve a critical unmet need, one also has to think about whether this solution is saving the overall healthcare system money.
Question 3: Or does it produce the same outcomes as current technologies, but at a lower cost?
At first glance, this comment could be interpreted as your technology needs to have the same material, quality, and performance in order to have the same outcome as the existing technology, but significantly cheaper. To develop a device that has the same material, quality, and performance at a lower cost is very difficult to accomplish due to the rising cost of materials.
The only method that achieves lower costs is through economy of scale, which one generally won't achieve in the beginning. Further, you don't want to carry a large inventory to achieve an economy of scale when you are not certain that your product will sell.
Unless one could substitute another type of material that possesses the same qualities and performance as the existing device and is less expensive will reduce the cost of the device.
The lower cost is for the benefit of the purchaser or end user. The reimbursement will either stay the same or be lower but since the cost is lower, more of the total cost is reimbursed for the purchaser, or end user in a hospital procedure.
The best case scenario is to focus on question 2 and develop a device that demonstrates better efficacy that results in better outcomes which saves overall healthcare cost.
Should you have any questions or would like assistance, feel free to email me.
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