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Developing a reimbursement strategy for your product

Posted by: David E. Williams on July 24, 2012 Source: Kauffman Foundation

In preparing to bring a new device or drug to the market, proving clinical efficacy is not the only challenge for life science companies. There is an economic case that must be made as well, according to those who have been through the process as entrepreneurs.

To get ready for the market debut of the negative-pressure wound therapy device she invented, WiCare founder and CEO Danielle Zurovcik has spent months interviewing physicians, nurses, payers and patients in the U.S. and emerging markets. The process has enabled her to gain an understanding of reimbursement issues and conduct a pricing analysis, says Zurovcik, who is an MIT Ph. D. candidate.

Before reaching the manufacturing stage, “it's important to know you're not designing something that is too expensive for the market, and to understand what the payment structure is, and the price points. With a new device, it's difficult to enter the market if you are not meeting price points that are significantly less than those of existing treatments – unless you can present a very strong case that the value added is worth the additional cost or that there is a long-term cost savings,” she says.

Making that case represents “an uphill battle, especially during the current health care crisis,” Zurovcik notes.

Before bringing a product or drug to market, Zurovcik says, it's crucial to develop a good understanding of how payers' reimbursement policies differ, based on what conditions patients are being treated for and differences in settings – for example, treatment in an ICU versus long-term care, versus home care, she notes. “Payers are willing to reimburse for some conditions more than others.”

Along with gathering payers' opinions, Christine Bunt, CEO of Lexington, Mass.-based INTICA Biomedical, also emphasizes the value of contacting physicians who will use a new drug or device. When doing pre-market research, “one of the simple things you can do is talk to physicians, especially in the device world,” Bunt advises. “Go to a urologist and ask how they would use your device. Providers have entire sheets of CPT codes that can help you plot reimbursement strategy.

“It's very important that your device fits into a setting where your customer can make money, as well,” says Bunt, whose firm developed novel treatments and companion diagnostics for the cancer market. The therapeutics selectively target cancer stem cells, cancer cells and tumor blood vessels. “By identifying patients which are most likely going to respond to therapy, we have the potential to significantly impact patient outcomes,” Bunt says.

INTICA Biomedical received the 2012 Launch Award from the Boston University Office of Technology Development – a grant of up to $200,000 to help faculty commercialize technologies they have researched and developed at the university. 

Steve Rosenberg, chief scientific officer of Palo Alto-based CardioDx, agrees that before marketing a new drug or device, a life science company needs to conduct payer and customer research “to find out what are they looking for in terms of an evidence package,” says Rosenberg. His firm develops genomic tests assessing patients' risk of developing cardiovascular disease.

Based on his own experience, Rosenberg says he was surprised to learn that, in assessing the merits of a new device, “payers in general will only look at published literature. It doesn't matter if (study data) hasn't been presented; they want that second step of peer review, which can add a year to the process.”

“In this capital-constrained environment, it's very important to start thinking very early about reimbursement,” Bunt says. “You need to look at the competitive 'pipeline' to see who else is out there, whether there are targeted therapies already, and if you’re going to compete with them. You have a far better starting point to obtain reimbursement if you have no competition.”

Regarding pricing treatments for chronic diseases with high mortality rates, such as cancer, she also stresses the importance of “considering early-access programs for those patients who can't afford it. That also enters into your pricing strategy.”

Life science startups preparing to enter the market sometimes enlist the expertise of reimbursement consultants, which can add significant expense. But there are ways to make initial contacts with payers without having to hire consultants, Bunt notes. Her advice for entrepreneurs: “dive into your network. It's likely there is some fellow entrepreneur who can introduce you to payers” – chief medical or chief pharmaceutical officers who can provide useful input from the payers' perspective.

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