Buck for the Bang: Premium Med-Tech Pricing

Adi Renbaum

Posted 10/31/11 on Medical Device Daily.

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 favor of the device on Oct. 13. Approval would give the sponsor, Cook Medical (Bloomington, Indiana) access to a peripheral arterial disease (PAD) market valued at $1 billion, depending on whose figures one relies.

I attended the Oct. 13 advisory committee hearing for the device and observed the panel members comment that this was among the best submissions they had seen in some time. Cook presented a clear study that met all primary endpoints and showed improvement over percutaneous transluminal angioplasty, the current standard of care. To non-FDA experts like myself, it seemed as though Cook was recognized for setting a new bar for conducting clinical trials and collaborating with the FDA.

I imagine that Cook Medical’s leadership was able to make all the right clinical trial investments necessary for the long-term viability of the product’s market value, not just the ones that were on display at the advisory panel meeting.

Simply put, such a prudent investment for the long term is equally, if not more, essential when planning for the reimbursement success of any new medical device. Medicare already pays for peripheral endovascular interventions, both in the out-patient and the hospital in-patient settings. So as any “new” interventions receive FDA approval, such as a Zilver PTX, Medicare likely would pay for these within the existing payment levels. After all, these are existing technologies, using existing drugs, being utilized in a new application, so Medicare payment would default to those existing payment classifications.

How then can makers of novel devices – with clinical improvements over standard-of-care – seek premium pricing? Device developers must calculate the impact of a higher product price on customers’ (hospitals) before commercializing at a premium price. With the same Medicare reimbursement for the procedure regardless of stent cost, hospitals will think carefully about paying a premium to use a new device, such as the Zilver PTX. This makes premium pricing very difficult without some justifiable improvement elsewhere in the disease treatment continuum.

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?

I think the key to demonstrating substantial clinical improvement lies in demonstrating patients’ functional improvement – this could be walking, resuming activities of daily living, returning to work or reducing days away from work, and other patient-reported outcomes measures – in combination to show that the new treatment has improved a patient’s life. Medicare wants to see the measurable “So what?” quantified and compared to the “So what?” of existing treatment options. I am certain that Medicare will no longer be satisfied by clinical results that are considered equal to existing care. The mandated Medicare evidence bar – “significant clinical improvement” – is the key to product success. After all, “significant clinical improvement” is necessary to trigger a new technology add-on payment, reimbursable to hospitals in addition to existing payment.

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.

Adi Renbaum is Senior VP of health policy and reimbursement for the Neocure Group in DC.

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