Gaining Reimbursement for Medical Devices and Diagnostics

Gaining Reimbursement for Medical Devices and Diagnostics

Strategic Management

With the introduction of the medical device directive across Europe and the use of CE marking, regulatory hurdles for new devices are now being replaced by funding and reimbursement hurdles. These measures are causing a significant downward pressure on the price and profitability of new technology.

Learn how to get your medical device products reimbursed in all the major country markets ďż˝ and overcome these hurdles

Through this report, you will be able to:

Analyse the role of clinical and economic data in obtaining reimbursement
Determine what information and data are required to gain reimbursement in each of the major country markets
Gain a thorough introduction to the growing importance of health technology assessment.
Prepare a successful market entry strategy
Identify and maximise your chances of overcoming regulatory and reimbursement hurdles

In-depth market profiles for Germany, France, the UK, Italy, Spain and the US each cover an overview of the healthcare system, roles of all of the bodies and organisations involved and essential information on reference pricing.

PUBLISHED: SEPTEMBER 2001
PAGES: 146
REF: CBS880E
PRICE: £695/$1,460/¥167,000

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CONTENTS
LIST OF TABLES
LIST OF FIGURES
EXECUTIVE SUMMARY
ABOUT THE AUTHORS
ABBREVIATIONS

CHAPTER 1 INTRODUCTION
1.1 The difference between regulatory approval and reimbursement listing

CHAPTER 2 MARKET ENTRY STRATEGY
2.1 Introduction
2.2 Hurdles
2.2.1 Regulation
2.2.1.1 Medical Device Directive (93/42EEC)
2.2.1.2 Registration
2.2.1.3 Language requirements
2.2.1.4 Labelling
2.2.1.5 Authorities
2.2.1.6 Notified bodies
2.2.2 Reimbursement
2.2.2.1 The formal reimbursement process
2.2.2.2 The informal reimbursement process
2.2.3 Strategy
2.3 Health technology assessment
2.3.1 Health technology assessment basics
2.3.2 Reimbursement
2.3.3 Clinical and economic studies
2.4 The interplay of pricing and economics
2.5 Pricing policies
2.5.1 Price range
2.5.1.1 Break-even analysis
2.5.1.2 Marginal analysis
2.5.2 Pricing strategies
2.5.2.1 Cost-based pricing methods
2.5.2.2 Demand-based pricing methods
2.5.2.3 Competition-based pricing strategies
2.5.2.4 New products pricing strategy
2.5.2.5 Cost-benefits focused pricing strategy
2.6 The new European currency
2.7 Disease-based management
2.8 Useful further reading

CHAPTER 3 GAINING REIMBURSEMENT IN GERMANY
3.1 Overview
3.1.1 The social health insurance system
3.1.2 The health policy environment
3.1.3 The provision and finance of healthcare
3.1.3.1 Doctors in private practice
3.1.3.2 Acute care hospitals
3.2 The coverage of new technologies in Germany: formal and informal mechanisms and application procedures
3.2.1 Introduction of new technologies in the office-based sector
3.2.1.1 Inclusion of procedures in the doctors' fee schedule
3.2.1.2 Data requirements and decision-making criteria
3.2.1.3 Case-by-case reimbursement for emerging technologies
3.2.1.4 Inclusion in the fee schedule for patients with private health insurance
3.2.2 Introduction of new technologies in the hospital sector
3.2.2.1 The Hospital Committee
3.2.3 Introduction of aids for the disabled and medical appliances
3.2.3.1 The application process
3.2.4 The Co-ordinating Committee
3.3 Preparing for changes in the German healthcare market

CHAPTER 4 GAINING REIMBURSEMENT IN FRANCE
4.1 Overview
4.2 Legislative framework
4.2.1 Current legislation governing the provision of health services and products
4.2.2 National involvement in healthcare provision
4.2.2.1 Organisation
4.2.2.2 Budgeting
4.2.3 Local involvement in healthcare provision
4.2.3.1 Ambulatory care
4.2.3.2 Control
4.2.3.3 Budgeting
4.3 Projected legislation and political climate
4.3.1 Renewed focus on healthcare safety issues
4.3.2 Consequences of the July 1998 law for medical device manufacturers
4.3.3 The planned 'new TIPS' procedure
4.3.3.1 The medico-economic evaluation commission
4.3.3.2 The improvement of the service médical rendu
4.3.3.3 The Comitďż˝ Economique des Produits de Santé
4.3.4 The need to support technology innovation
4.3.5 Reinforcement of the principle of solidarity
4.4 Device purchasing in France
4.4.1 Purchasing in the public payer system
4.4.1.1 General considerations for devices
4.4.1.2 Purchasing in the primary care setting
4.4.1.3 Purchasing in the public hospital setting
4.4.1.4 Private contract clinics
4.5 Introduction of new products and technologies
4.5.1 Formal and informal reimbursement and price approval mechanisms
4.5.1.1 Public hospitals
4.5.1.2 Private contract clinics
4.5.2 Technology assessment
4.5.3 Economic analyses
4.5.4 Exceptional procedures for short term introduction of new products and procedures

CHAPTER 5 GAINING REIMBURSEMENT IN THE UNITED KINGDOM
5.1 Overview
5.1.1 Background
5.1.2 The private market
5.1.2.1 Private finance initiative
5.1.3 Funding
5.1.4 The Department of Health
5.1.5 The National Health Service
5.1.6 Primary healthcare
5.2 Reforms
5.2.1 Primary care groups
5.3 Health technology assessment
5.3.1 European Union regulation
5.3.2 Medical Devices Agency
5.3.2.1 Notified bodies
5.3.3 Fourth hurdle
5.3.3.1 National Institute for Clinical Excellence
5.3.4 Vigilance
5.3.4.1 The Device Technology and Safety Unit
5.3.4.2 The Safety and Efficacy Register of New Interventional Procedures
5.4 General requirements for reimbursement
5.4.1 UK Drug Tariff
5.4.1.1 Appropriateness
5.4.1.2 Cost-effectiveness
5.4.1.3 Safety and quality
5.4.1.4 Pricing
5.4.2 National contract
5.4.2.1 National Health Service Purchasing and Supplies Agency
5.4.2.2 National Health Service Logistics Authority
5.5 Requirements and funding of future clinical studies
5.5.1 Regulatory requirements for technology licensing
5.5.2 National Institute for Clinical Excellence technology appraisals
5.5.2.1 Process
5.5.2.2 Submissions
5.5.2.3 Clinical evidence
5.5.2.4 Specific guidance
5.5.2.5 Appraisal process
5.5.3 Reference pricing
5.5.4 Funding
5.6 Strategic advice
5.6.1 Products
5.6.1.1 Reusable surgical instruments
5.6.1.2 In vitro diagnostics
5.6.1.3 Ophthalmic devices
5.6.1.4 Hearing devices
5.6.1.5 Orthopaedics and rehabilitation
5.6.1.6 Diagnostic imaging equipment
5.6.1.7 Anaesthesia machines
5.6.1.8 Implants
5.6.1.9 General hospital hardware
5.6.2 Product placement
5.7 Contacts

CHAPTER 6 REVIEW OF REIMBURSEMENT IN ITALY
6.1 Introduction
6.2 Healthcare system
6.2.1 Overview
6.2.2 A system under reform
6.2.3 Funding, pricing and reimbursement
6.2.4 Key organisations
6.2.5 Summary of key legislation
6.3 Key industry issues
6.3.1 Regionalisation
6.3.2 Healthcare spending
6.3.3 Pricing
6.3.4 Late payments
6.3.5 Quality of care, access to technology and technology assessment
6.4 Prospects
6.5 Conclusion

CHAPTER 7 GAINING REIMBURSEMENT IN SPAIN
7.1 Overview
7.1.1 Definitions of healthcare funding and reimbursement
7.1.1.1 Reimbursement
7.1.1.2 Funding
7.1.2 Monitored use
7.1.2.1 Health technology assessment
7.1.3 Public purchasing system
7.2 General requirements for reimbursement for established and innovative new products
7.2.1 Reimbursement for off-the-shelf medical devices
7.2.1.1 Procedure for revision
7.2.2 Current design for cupďż˝n precinto to be updated
7.2.3 Reimbursement for orthoprosthetic devices
7.3 Requirements and funding of clinical trials in the future
7.3.1 Requirements
7.3.1.1 Key elements for clinical trials
7.3.2 Funding
7.4 Pricing
7.4.1 Direct agreement
7.4.2 Local government price setting
7.4.3 Public bids
7.5 Health technology assessment

CHAPTER 8 GAINING REIMBURSMENT IN THE UNITED STATES OF AMERICA
8.1 Overview
8.1.1 Healthcare market environment
8.1.2 Third party payers
8.1.3 Managed care organisations
8.1.4 New technologies/products
8.2 Regulatory organisational overview for the US
8.2.1 The Food and Drug Administration
8.2.2 The Centers for Disease Control and Prevention
8.2.3 The Health Care Financing Administration/Centers for Medicare and Medicaid Services
8.2.4 Evidence-based medicine
8.3 Marketing considerations
8.3.1 Healthcare market environment
8.3.2 Liason with managed care organisations
8.3.3 New current procedural technology codes
8.4 Conclusions
8.5 Useful addresses

REFERENCES

LIST OF TABLES
Table 2.1 Medical technology and device world market data, 2000
Table 2.2 Price sensitivity variables
Table 3.1 Ranking of therapeutic procedures
Table 3.2 Ranking of diagnostic procedures
Table 4.1 The possible ranking of medical devices by amďż˝lioration du service rendu
Table 5.1 UK healthcare expenditure, 1997
Table 5.2 Classification of medical devices
Table 5.3 UK Drug Tariff grading system
Table 7.1 Spanish autonomous communities with full devolution
Table 7.2 Off-the-shelf medical devices (Efectos y accesorios) listed in Annexes I and II of Royal Decree 9/1996
Table 7.3 Orthopaedic devices listed in Annexes Iďż˝V of the Ministerial Ordinance of 18 January 1996
Table 8.1 Healthcare expenditures in the US, fiscal 1998ďż˝fiscal 2000 ($ billion)
Table 8.2 Market segment analysis for medical treatment in the US, fiscal 2000 ($ billion)
Table 8.3 Source of healthcare payments in the US, fiscal 1998ďż˝2000 ($ billion)

LIST OF FIGURES
Figure 2.1 Steps to success
Figure 2.2 Price objective factors
Figure 3.1 Average social health insurance contribution rates, 1970ďż˝1998 (%)
Figure 5.1 Organisation chart for the 'new' NHS
Figure 5.2 Diagrammatic representation of the appraisal process
Figure 7.1 Process for inclusion in Annexes I or II (first stage)
Figure 7.2 Process for inclusion in Annexes I or II (second stage)
Figure 8.1 Public healthcare (regulatory) system within the US (FY2001)
Figure 8.2 Food and Drug Administration organisational chart (key departments)
Figure 8.3 Centers for Disease Control and Prevention organisation chart (key departments)

EXECUTIVE SUMMARY
Medical device reimbursement and funding policies in Europe and the US are complex and confusing. They represent an expensive target for manufacturers. In Europe, each national government has to deal with individual budgets and priorities, and has unique cost-containment policies that impact the way new devices reach users. These may even extend to governments' use of reimbursement approval to limit and control the dissemination of technologies. Moreover, some governments may use reimbursement approval as a tool in their cost-containment armouries to limit and control the dissemination of technology. Healthcare funding and all it encompasses, from hospital budgets to preferred reimbursement mechanisms and pricing, are a national issue. Some sort of harmonisation is required for the medico-technical evaluation of a product since benefits are equally valid for all patients, regardless of their nationality. This is a crucial issue in Europe and the US for two reasons:

Huge volumes of money will be misspent as each country repeats tests and evaluates devices and technologies in the context of health technology assessment (HTA). Companies will be pouring resources into proving to each country's HTA body that their products provide benefits to that particular country's healthcare service
The absence of a common policy (most particularly in Europe) will leave patients feeling vulnerable and disadvantaged if HTA results and reimbursement policies vary from country to country

Differences in approach create an environment that is broad and diverse. However this environment is itself constantly evolving as countries continue to develop. With the introduction of the Medical Device Directive (MDD) across Europe and the use of Conformité Européene (CE) marking, regulatory hurdles for new devices are now being joined by funding and reimbursement hurdles.

These measures are causing a significant downward pressure on the price and profitability of new technology, especially as non-medical decision-makers are growing in importance in the buying process. Moreover, product differentiation strategies are no longer effective in gaining a premium price. There are still opportunities for fully differentiated products and services, provided that there is improved outcome or the budget impact on the overall disease management is small.

The medical device industry has had to rethink its attitude towards providing clinical and cost-effectiveness data to support the launch of new technologies. In the past, industry has failed to show the benefits from new technologies. Governments are now demanding proof of added value.

Moreover, problems have arisen in Europe due to the introduction of treatments before efficacy has been proved. For a long time, Europe was a forgiving market, but it is now becoming increasingly more strict. Governments in France, Germany and the UK are looking more at health technology assessment and demanding clinical and economic evidence before a new product can be introduced.

HTA has been named the 'fifth element' in reimbursement decision-making by the Jacoti consultancy group of Belgium. The patient, the physician, the reimburser, the industry, and now additionally the healthcare technology assessment agency: these are the five elements involved in reimbursement decision-making for medical technologies in Europe.

The concept of HTA is developing at a rapid rate across Europe and gaining increasing importance in the US. The significance of HTA reports on reimbursement decisions varies widely from country to country. It is apparent that HTA will influence not only the development of new technologies, but also the use and pricing of existing products.

Such research needs to be a key element in every company's marketing strategy, and one that it can turn into a sustainable competitive advantage. However, industry studies are not enough. Health authorities want independent data based on local studies. Although this may result in delayed product launches, the new role of the economic dossier must be recognised.

Manufacturers need to understand not only the present situation, but must constantly monitor recent political decisions, their implications and the way they filter their way into funding and reimbursement procedures in the various markets.

This report provides a guide to getting your medical device products reimbursed in the US, Germany, France, UK, Italy and Spain. Suggestions on how to prove efficacy and cost-effectiveness of your product and strategic advice on differing approaches to the people in different countries are detailed.