- Sissel noted that companies need to think not only about reducing healthcare costs but also factors such as how a health IT or medical device company’s technology affects the health system.
- The company, which developed a way to analyze CT images for heart problems, was initially rejected by CMS, a move that would have made them much less attractive for prospective investors.
It’s widely accepted that no matter how innovative or effective a device may be, until a company can convince private or public insurers to provide reimbursement it will be tough to convince clinicians to adopt it. Another part of the process is demonstrating clinical validation. But what that journey looks like may vary from company to company. That was the heart of a panel discussion at the MedCity INVEST conference in Chicago this week.
Among the panelists were Anne Sissel, Baxter Ventures Vice President; Marta New, Agent Capital Partner; Everett Crosland, Pear Therapeutics Head of Market Access & Reimbursement; and Bruce Quinn, a consultant, while Harry Rowland, Endotronix CEO served as moderator.
It’s not just about taking costs out of the system
Sissel noted that companies need to think not only about reducing healthcare costs but also factors such as how a health IT or medical device company’s technology affects the health system. If it’s a device, how will it impact the cost of care to the provider? How will it impact the longterm care of the patient?
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“We will look at that entire value chain and how that on a net basis will affect reimbursement and product adoption. Those are very important considerations and they have to go hand in hand,” she said.
But the ability of a company to detail that impact will depend on the stage of its development. As Crosland put it, in the earlier days of a business it is just not the model to have cost-effectiveness precede clinical evidence. This isn’t a chicken vs egg situation. Although it helps to be able to explain the need for your drug or device, or in Crossland’s case a digital therapeutic, one needs clinical validation to generate data before they can get into the specifics on cost.
“What is that clinical efficacy and the context of that clinical efficacy? What is the total cost of care in a disease state? What are those cost drivers? What you can do is put your product in the context of the large cost drivers and where you fit into the treatment paradigm relative to that cost driver. I think that helps tell a story that ideally, in the future, is validated,” Crosland said.
For New, reducing the cost of clinical development is key. As an early stage investor, her group wants to make sure companies are using innovative clinical trial design and elevating biomarkers to increase efficacy and reduce costs.
Product vs. Process
To underscore the point that the path each company takes in seeking ways for physicians to get reimbursed for using their tech can differ, Quinn cited the example of HeartFlow. The company, which developed a way to analyze CT images for heart problems, was initially rejected by CMS, a move that would have made them much less attractive for prospective investors. Referencing Bill Gates talking about the polio vaccine, Quinn observed that amount of effort spent developing a product is very small compared with the process of commercializing it. And yet, the company closed a $240 million Series E round. He figured something must have happened and it did. HeartFlow was able to get CMS reimbursement via a new Ambulatory Payment Classification code. Some $200,000 spent on lobbying might have helped too. Successfully navigating a complicated series of chutes and ladders paid off, Quinn noted.
How do you execute on strategy?
At one point, Crosland posed a question to Sissel: In the path to reimbursement, do you risk getting stuck in a model that gets you through the door to target low-hanging fruit? What does a good storyline look like?
Sissel said it can depend on a company’s overall cash flow. If the product is aimed at a wide patient population, it can be worth taking a hit on upfront revenue to quantify the commercial value.
“If the concern becomes an anchor under which you would be guided for the rest of this product’s life, then you might want to take a step back. If it can get you the data you need then it may be worth it,” Sissel said
She also advised companies to look at precedent to develop a clearer pathway.
Cutting out the provider
Therapeutics companies developing life-saving gene therapies with six-digit prices face a quandary. How can they set a price for their drug based on its value, helps recoup development costs and still get people to use their drug? Gene therapy companies want to keep their pricing high but want to increase access. In Spark Therapeutics case, New noted, the answer was to go straight to the payers to negotiate and leave out providers to eliminate the markup potential.
“Spark set up rebate programs so that if the treatment doesn’t work the payer or the patient gets their money back, which is a very attractive model. The payments are incremental and based on monthly rate. Increasingly, patients themselves are willing to pay a percentage of the drug’s cost. The therapeutics world has taken the stance of ‘yes, I am giving you a very expensive drug but will be giving you much better efficacy, I am going to give you a cure.’”
Date: May 07, 2018
