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FDA Approval is NOT a Coverage Guarantee

In Reimbursement on November 14, 2012 at 9:11 pm

After years of product development and clinical studies, Eli Lilly has finally received US FDA approval for its Amyvid PET Scan Imaging Agent. Unfortunately, the regulatory approval fight has just begun.

In last month’s article by JR Associates, Eli Lilly’s challenges in obtaining CMS coverage were discussed.

This one’s for the Texan’s (JB), the horse lovers (Lillie), and the country music singers (Greg).

Some companies erroneously make the assumption that once the US FDA approves they can start selling their product and making money. Unfortunately, the legal right to market a product does not automatically result in sales. You might think that sales and marketing are the next step. However, obtaining CMS reimbursement is frequently your next big milestone.

The road to reimbursement has more than one possible outcome. First possible outcome, you receive the code you want from CMS (that would be nice). Second possible outcome, you receive approval for a different code that results in less money than you had hoped for. Third possible outcome, you are denied approval and must provide more clinical data. The possibility of less than ideal reimbursement options may force you into using a two-tiered reimbursement strategy: 1) a CMS strategy, and 2) a strategy for private payers. If your company is also planning to launch in Europe with CE Marking, then you should expect to experience a different reimbursement pathway for each Member State too.

To add insult to injury, investors have become more sophisticated. Therefore, your business plan must grow-up too. Correctly identifying the regulatory approval pathway is no longer enough. It’s not even table stakes. Now you need a strategy for reimbursement. The complexity of the regulatory process also scares off most of the would-be Angel investors that medical device companies used to rely upon. Medical device start-ups are increasingly being forced to hunt in the treacherous waters that Venture Capital sharks swim in. Bigger fish also require more tasty bait. For VC sharks, you will need to justify millions for a “seed” investment—not hundreds of thousands.

The remedy is three-fold:

  1. Put on your big girl pants and prepare for a the elevator pitch of your life
  2. Find regulatory and marketing team members that understand reimbursement
  3. Get ready to do clinical studies—even if your device only requires 510(k) clearance

What are your own suggestions for medical device reimbursement?

If you are interested in learning more about Medical Device Reimbursement, you might be interested in Kathryn Barry’s blog posting.

If you would like to see the comments others have, please join Joe Hage’s LinkedIn Group: Medical Device: QA/RA. If you are not already a member of the parent group (Medical Device Group), you should join.

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