If “Do you have a code?” is the wrong question to ask when assessing the reimbursement prospects of an innovative device, drug, or diagnostic, is there a right one — a single question that can separate the life science reimbursement gold from the technological base metals that insurers won’t likely pay for? Yes there is, and it’s a question I don’t often hear asked in a clear and concise way:
“Can you demonstrate, with evidence strong enough to withstand rigorous review, predictable clinical benefits to a defined patient population?”
Stated even more simply: “Can you prove your technology’s clinical utility?”
Remember, we are looking for the single defining characteristic of the reimbursable technology — the one thing you most need to know to determine whether reimbursement will be a significant impediment to potential commercial success. If you have confidence in the clinical usefulness of a technology, and have a viable plan for demonstrating clinical utility to a possibly skeptical audience, all of the rest of the elements of the reimbursement process — the code acquisition, the payment level, the coverage policy determination — become essentially tactical implementation issues. Those issues are not trivial, and they provide ample opportunities for error that can result in delayed coverage or sub-optimal payment. But they shouldn’t be game-changers if they are addressed carefully, intelligently and early.
Can you identify a life science technology that’s been demonstrated to be effective in clinical practice, and which addresses an otherwise unmet clinical need, but is generally denied coverage and/or payment by U.S. insurers? I don’t think so. For every apparent case of a good technology that foundered because insurers wouldn’t pay — and I know a good number of executives who will argue that their company and product were unfairly denied reimbursement — there is, I believe, a failure to marshal adequate evidence of effectiveness or a failure to clearly identify and define the technology’s clinical utility. Sometimes, those failures can be traced to inadequate investment, planning and/or performance; sometimes they are due to a fundamental lack of understanding of what it is that insurers need to know and how that differs from what the Food & Drug Administration needs to know; and sometimes the technology simply doesn’t have clinical utility — because the need it addresses is already adequately addressed or because it has no practical clinical use.
Technologies that win FDA clearance but fail to gain reimbursement tend to fall into one of two categories:
- Diagnostics which, while they may provide accurate information about a patient’s clinical condition, are not “useful” because the information provided cannot affect therapy choices. This may be because therapeutic options are simply not available, or because therapeutic protocols are not sufficiently fine-tuned to respond to the diagnostic information. If a physician’s response to a test result is, “That’s interesting, but I have no way to use it,” insurers won’t pay for the test. There are, for example, a rapidly growing number of genetic tests that insurers won’t reimburse, for the simple reason that there are no therapeutic responses that would be affected by the genetic information provided by the test. Where a genetic test predicts response to a therapy and therefore has demonstrated clinical utility, as is the case with companion diagnostics, insurers are typically willing to pay.
Similarly, Medicare’s incremental extension of coverage for PET testing for different types of malignancy is not related to the ability of the imaging modality to provide good (i.e. accurate) information, but rather is driven by the application-specific demonstration that the information contributes to improved clinical decision making.
- Therapeutic products and diagnostics that “work,” but which lack compelling evidence to guide physicians (and therefore insurers) in determining:
- The circumstances under which they work;
- The patient subgroups for which they work; or
- How well they work in different circumstances and/or subgroups as compared to other therapeutic options.
So long as a reasonable physician might say “That’s interesting, but I need more information to know when to use it, or on whom,” insurers will be reluctant to provide coverage.
Notice that I haven’t mentioned cost. That’s because cost isn’t an overt, first-order variable in insurers’ coverage decision-making. Medicare is forbidden by law from considering cost in its coverage policies; private insurers will not — yet — ever say that they refuse coverage because a technology is too costly. This is not to say that technology cost isn’t a factor for Medicare or for private insurers. But it is a second-order factor. Expensive technologies are typically held to a higher evidentiary standard by insurers than are inexpensive technologies; the support for their clinical utility must be stronger both qualitatively and quantitatively — more studies, larger studies, more rigorous study designs, more aggressive clinical endpoints, more sharply defined inclusion and exclusion criteria.
Demonstrate clinical utility, and insurers will be willing to pay. Of course, you still have to jump through all of the procedural hoops, identify or acquire appropriate codes, find a way to generate advantageous payment in the context of highly structured payment systems, support your customers and do all of the other things that make reimbursement a vital part of business planning and ongoing operations. Do those things well, along with all of the broader things you need to do well, like sales and marketing, quality assurance, manufacturing and distribution, customer service, financial operations and controls and research and development, and you’ll prosper in the life sciences sector. It’s really very easy, isn’t it?
Edward Berger is a senior healthcare executive with more than 25 years of experience in medical device reimbursement analysis, planning and advocacy. He’s the founder of Larchmont Strategic Advisors and the vice president of the Medical Development Group. Check him out at Larchmont Strategic Advisors.
