Medical Device Regulatory, Reimbursement and Compliance Congress

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Medical Device Regulatory, Reimbursement and
Compliance Congress
Value-Based Pricing The Good, The Bad, and The
Ugly
March 27, 2008
Randel E. Richner, BSN, MPH President, Founder
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Reform

• There is no problem, however difficult, which if
  we roll up our sleeves, we cannot completely
  ignore.
• --George Carlin

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Policy Overview
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• Technology Is Good.
• Technology per se, does not cause increased
  health care costs
• It is only randomly possible to accurately detect
  the true value of technology due to a fragmented
  care delivery, migration of services, and system
  issues (complex overlay of private/public
  insurers to track and monitor care and value).
  Misaligned payment systems may cause perverse
  care incentives and artificial determinants of
  value.
• The calculation of risk in determining the
  threshold of value is largely ignored.

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New, Innovative and Complex Technologies
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• Devices are getting smarter and are providing
  more information
• Intelligent devices
• Biotechnology Revolution
• Personalized Medicine
• Combination Products
• Information-Rich Therapeutics

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Typical Market Development
Early adopter Early Majority Late
majority

Prove Principle Drive Adoption
Change Standard
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Innovation PTCA
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• Technology Assessment and Value

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Technology Access
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Decision-Making Occurs at Multiple Levels
Organizations Involved

• CMS, (Global--International)
• Major national third party payers and benefit
  managers

• Medicare Intermediaries and Carriers, DMERCs
• Regional health plans

• Medicaid administrators
• IDNs
• Physician groups
• Hospitals

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FDA/CMS Divergencies
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• FDA regulator public health/safety
• Safe products
• Assumes Market sorts out clinical value and
  comparative effectiveness
• Standards vary by risk
• CMS regulator purchaser
• Improved health for good value
• Increased focus on clinical benefits blur into
  public health effort
• Decisions are broad, policy-based

Uncertainties How will CMS define and pay for
incremental benefit? How long will full coverage
of labeled indications take?
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Evidence Development and Value

• Technology Assessment
• Evidence Based Medicine
• Coverage with Evidence Requirements
• Practice Based Management
• Pay for Performance
• Quality Outcomes
• Outcomes Assessment
• Cost-Effectiveness Analsyis
• Outcomes Demonstration Projects
• Overuse, Underuse, Misuse
• Superior Medical outcomes
• Least Costly Alternative
• Substantial Equivalence
• Comparative Effectiveness

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Type of data you collect depends on the category
of product
Similar to Another Product Expansion of Existing Technology Truly New and Innovative
Evidence Required Usually FDA approval with same indications suffice for inclusion in existing coverage Publication of Controlled Studies (usually 1-2) Coverage under Protocol Publication of 2 4 RCTs with ongoing study through Registry Data, Cost-Effectiveness Data
Evidence Should Prove Similar clinical efect and outcomes, cost-efficacy a plus for differentiation Incremental clinical and / or economic value of the device relative to its predicate Higher degree of certainty. RCTs show improved outcomes over other treatments, with lower costs
Clinical Trial Data Types Necessary/ Optional Regulatory approval, Practical clinical trial, limited cost study RCTs, Cost-effectiveness, Long-term outcomes, Ongoing Practical Clinical Trials RCTs, Cost-effectiveness, Long-term outcomes, Practical Clinical Trial, Post-market registry
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• Payment Misalignments and determining Value

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Medicares Complex Reimbursement Processes
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• Each payment system has its own rules, based in
  statute, and uses data from the providers it pays
• Different payments in different sites for the
  same items or services
• Can create inappropriate incentives
• Providers learn to balance underpaid/overpaid
  services to achieve bottom-line
• Benefits of less invasive services, migration to
  less costly settings, not recognized in value
  calculations

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Major CMS Payment Systems
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• PROSPECTIVE PAYMENT SYSTEMS
• Inpatient PPS
• Outpatient PPS
• Inpatient Rehab
• Long-term Care Hospital
• Inpatient Psych
• Skilled Nursing Facility
• Home Health

• FEE SCHEDULES
• Physicians
• Ambulatory Surgical Centers
• Clinical Labs
• Durable Medical Equipment, Prosthetics
  Orthotics
• Ambulance
• ESRD

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Example of Payment Divergences
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Diagnostic Colonoscopy CPT 45378 1.15 million
procedures performed in 2003

• Payment Site Utilization
• OPPS 513 56
• ASC 446 22
• PFS-PE 177 6

physician fee schedule (PFS) practice expense (PE)
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Home Hemodialysis provides great value providers
limit adoption

• Major clinical benefits
• LVH, heart failure improvement
• Anemia
• Rehabilitation/QOL
• 15-25 annual savings potential (10-17K of 70K
  costs)
• Kaiser promoting home dialysis

VS.
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Daily home dialysis challenges
Largest savings in hospital costs, which are part
of a different budget (Part A vs. Part B) and are
not realized by the dialysis provider
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• Risks

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Consider Unique technology-specific issues

• Risk should the level of evidence be the same
  for a new MRI test as for a new brain aneurysm
  stent?
• Operator Skill How does one design the impact
  of physician end-user skills on patient outcomes
  and study design?
• Life Cycles How do we expect to use traditional
  study approaches with minimum of 3 years from
  start to pubs when technology changes within a 2
  years?
• Combinatorial science How does the study
  account for the manufacturing changes (polymers,
  voltages, wires and metals, drugs) on the effect
  of patient outcomes?
• Physician end-user involvement How are
  physicians mobilizing to determine the outcomes
  critical to study to determine value?

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Drug RisksNear-Term Fatalities Per Person-Year
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Transportation
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Solution 1 Value

• New Study Paradigm. Encourage access, innovation
• Risk-based stratification of evidence
• Physician end-user involvement
• Focus on treatment comparisons rather than
  individual product comparisons
• Electronic records, and HIT advances invest in
  this infrastructure.
• Gold standard, database, epidemiological studies
• Bayesian analysis preexisting data are
  constantly adjusted using new data as acured
  potential reduction of sample sizes, and ability
  to continually update probability of success or
  failure.
• Collaborate with NIH, AHRQ, Private, public
  entities.
• Global interactions and use of data

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Solution 2 Reward the Future

• Reward preventative services and interventions
  that can clearly demonstrate a significant value
  over existing products.
• Integrate nanotechnology, IT, molecular
  diagnostics and combination therapies
  (drugs/devices) into existing payment schemas.
• Evaluate new medical technologies at CMS through
  the Council of Medical Technology and Innovation
  adapt payment mechanisms.
• Use an episode of care as a reward technology
  that moves from acute to home setttings (works in
  Kaiser-like systems where physician payment is
  not linked to utilization providers and payers
  are aligned)
• Include physician payments and incentives in the
  episode of care.
• PREEMPTIVE, PREDICTIVE, PERSONALIZED, and
  PARTICIPATIVE

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Solution 3 Value includes Risk

• Avoid the temptation to regulate when events
  occur before the technology is tested thoroughly.
  
• Partner with industry and medicine on improved
  methods to accurately measure risk.
• Use FDA-critical path initiatives as model.

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• Progress in the leading technology of our time
  has been so dramatic that it has brought about,
  time and again, swift qualitative changes in the
  material world around us, change that surely
  cannot be expressed simply as variations in
  prices or quanities.
• Trajtenberg, Economist, 1990.

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www.neocuregroup.com Founder President Randel
E. Richner, BSN, MPH 508-655-6161 ?
Richner_at_neocuregroup.com