What is reimbursement in medical devices?
Reimbursement refers to the payment that healthcare providers receive from insurance companies, government programs, or other third-party payers for the cost of medical devices and the associated services.
Securing favourable reimbursement terms is crucial for medical device manufacturers, as it directly influences market access and affordability.
While market access and reimbursement are distinct processes, they are closely interconnected. A successful market access strategy will lay the groundwork for favorable reimbursement decisions, and effective reimbursement strategies can help drive market access by making the device more affordable and accessible to patients.
Why is reimbursement important?
Reimbursement is a pivotal factor in health systems for several reasons:
- Market Access: Reimbursement coverage enables medical devices to be widely adopted by healthcare providers and patients. Without reimbursement, the high cost of many medical devices can be prohibitive, limiting their use to only those who can afford to pay out-of-pocket.
- Patient Access and Outcomes: Reimbursement policies directly affect access to innovative medical technologies. By securing reimbursement, manufacturers can ensure that their devices reach a broader patient population, potentially improving health outcomes.
- Revenue Generation: Successful reimbursement strategies can significantly enhance a medical device company’s revenue by expanding the customer base and ensuring income from third-party payers.
Although there are many different financing mechanisms to support medical device market access, reimbursement is most often the primary mechanism pursued by medical device manufacturers. Financial coverage through public or private programmes enables adoption at scale, increasing the chances of a medical device becoming incorporated into standard care.
Key elements of reimbursement
The reimbursement process involves several key elements, including coding, coverage, and payment.
Medical Coding is the first step in the reimbursement process. It involves assigning standardised codes to medical devices and the associated procedures. Healthcare providers use these codes to document the use of devices and submit claims for reimbursement. Securing appropriate codes for a new medical device is crucial, as it enables healthcare providers to bill third-party payers accurately.
The primary coding systems include:
- International Classification of Diseases (ICD): Used globally, ICD codes classify diseases, signs, symptoms, abnormal findings, and external causes of injury.
- Current Procedural Terminology (CPT): CPT codes describe medical, surgical, and diagnostic services. They are used primarily in the United States.
- Healthcare Common Procedure Coding System (HCPCS): Also used in the United States, HCPCS codes cover medical devices, supplies, and other healthcare services not included in the CPT system.
- OPCS-4 codifies operations, procedures and interventions performed during in-patient stays, day case surgery and some out-patient treatments in United Kingdom National Health Service (NHS) institutions.
Coverage Determination refers to the decision by insurance companies or government programmes about whether a medical device will be reimbursed. Coverage policies vary widely between countries and payers but generally consider the following factors:
- Clinical Evidence: Demonstrating the device’s safety, efficacy, and clinical benefits through robust clinical studies.
- Cost-Effectiveness: Showing that the device offers good value for money compared to existing treatments.
- Medical Necessity: Establishing that the device is necessary for diagnosing, treating, or preventing a medical condition.
Coverage decisions can be made at national, regional, or local levels, and manufacturers often need to engage with multiple stakeholders to secure comprehensive coverage.
Payment rates determine how much healthcare providers will be reimbursed for using a medical device. Payment rates are influenced by various factors, including:
- Device Cost: The price of the medical device itself.
- Procedure Complexity: The complexity and resource requirements of the procedure in which the device is used.
- Economic Models: Reimbursement models such as fee-for-service, bundled payments, or value-based payments.
Negotiating favourable payment rates is essential to ensure that healthcare providers are adequately compensated for using the device.
Reimbursement pathways by region
The reimbursement process varies significantly across different regions.
In the United States, the reimbursement process involves both public and private payers. The primary public payers are Medicare and Medicaid, while private payers include commercial insurance companies.
- Medicare and Medicaid: Managed by the Centres for Medicare & Medicaid Services (CMS), these programs cover a significant portion of the population. To secure Medicare coverage, manufacturers must demonstrate that their device meets the medical necessity criteria and provides clinical benefits. Medicaid policies vary by state, adding another layer of complexity.
- Private Insurance: Commercial insurers have their coverage determination processes. Manufacturers typically need to engage in negotiations and provide evidence to secure favourable coverage terms. The CMS also influences private payers through national and local coverage determinations (NCDs and LCDs), which set precedents for coverage policies.
In Europe, the reimbursement process varies by country, with each nation having health technology assessment (HTA) agencies and payers.
- Health Technology Assessment (HTA): Many European countries use HTA agencies to evaluate the clinical and economic value of new medical devices. Agencies like the National Institute for Health and Care Excellence (NICE) in the UK and the Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen (IQWiG) in Germany play crucial roles in these assessments.
- Country-Specific Pathways: Each country has its reimbursement pathways, including national, regional, and local decision-makers. For example, in France, the Haute Autorité de Santé (HAS) evaluates medical devices, while in Italy, the Agenzia Italiana del Farmaco (AIFA) is responsible.
Securing reimbursement in Europe often requires navigating multiple layers of bureaucracy and building strong relationships with local stakeholders.
Challenges in securing reimbursement
Reimbursement from payers offers the most significant revenue potential for most medical devices. However, this is often the most challenging financing to secure, with the most critical unknowns. For example, a 2018 survey of healthcare technology companies worldwide revealed that more than half had not secured reimbursement in any country, and 30% had achieved reimbursement in just one country. The respondents also noted that reimbursement was a very detailed and time-intensive process that took at least a year to complete.
A decade ago, large medical device companies attempted to classify countries into archetypes and develop reimbursement strategies for each group. However, in recent years, many companies have abandoned this approach due to complexity and are focusing on small markets with high potential. In addition, divergent reimbursement pathways in different countries can make digital health more challenging to scale internationally. Further, countries often follow different clinical guidelines and care pathways, increasing the complexity of healthcare system integration. A more considered route to market characterises successful launches, fully understanding each country’s digital health environment to build the high-quality economic evidence that public payers require.
Securing reimbursement for medical devices involves navigating a range of challenges, including:
- Regulatory Hurdles: Medical devices must first obtain regulatory approval before pursuing reimbursement. The regulatory approval process can be complex, varying by region. Ensuring that the device meets all regulatory requirements is a critical first step.
- Clinical Evidence Requirements: Reimbursement decisions heavily depend on clinical evidence demonstrating the device’s safety, efficacy, and benefits. Conducting robust clinical trials and gathering high-quality data can be time-consuming and costly.
- Economic Considerations: Payers often require evidence of cost-effectiveness, comparing the new device to existing treatments. Developing economic models and demonstrating long-term savings or improved outcomes is crucial for securing favourable reimbursement terms.
- Market Dynamics: The competitive landscape and market dynamics can influence reimbursement decisions. Payers may hesitate to cover new devices if similar, cheaper alternatives exist. Understanding the competitive environment and differentiating the device is important.
- Stakeholder Engagement: Reimbursement decisions involve multiple stakeholders, including payers, healthcare providers, patients, and regulatory bodies. Building strong relationships and effectively communicating the device’s value to all stakeholders is essential.
Strategies for achieving successful reimbursement
Given the challenges, medical device manufacturers must adopt strategic approaches to secure reimbursement. Key strategies include:
- Early Planning: Developing a reimbursement strategy early in product development is crucial. This includes understanding the reimbursement landscape, identifying key stakeholders, and planning clinical and economic evidence generation.
- Clinical and Economic Evidence: Investing in high-quality clinical trials and economic studies is essential. Manufacturers should aim to generate robust data demonstrating the device’s clinical benefits and cost-effectiveness.
- Engaging with HTA Agencies: HTA agencies and payers can often help manufacturers understand their requirements and expectations early and often. This proactive approach can facilitate smoother evaluations and negotiations.
- Real-World Evidence: In addition to clinical trial data, real-world evidence can be valuable in demonstrating the device’s performance and benefits in actual clinical settings. Collecting and presenting real-world data can strengthen the case for reimbursement.
- Stakeholder Collaboration: Collaborating with healthcare providers, patient advocacy groups, and other stakeholders can build support for the device. Testimonials, case studies, and real-world success stories can be powerful tools in reimbursement negotiations.
- Market Access Programmes: Implementing market access programmes, such as patient assistance programs or risk-sharing agreements, can address payer concerns and facilitate access to the device. These programs can help mitigate financial risks for payers and patients.
Trends in reimbursement
The medical device reimbursement landscape is continuously evolving, influenced by technological advancements, policy changes, and market dynamics. Key trends shaping the future of reimbursement include:
- Value-Based Reimbursement: There is a growing shift towards value-based reimbursement models, where payment is tied to the outcomes and value provided by the medical device. This trend emphasises the importance of demonstrating real-world benefits and cost savings.
- Digital Health and Telemedicine: The rise of digital health technologies and telemedicine creates new reimbursement challenges and opportunities. Securing reimbursement for digital health solutions requires navigating uncharted territory and developing new evidence frameworks.
- Personalised Medicine: Advances in personalised medicine and precision therapies are leading to more tailored treatments. Reimbursement models must adapt to these individualised approaches, often requiring specialised evidence and justification.
- Global Harmonisation: Efforts to harmonise reimbursement approaches worldwide are ongoing. The introduction of the Health Technology Regulation (HTAR) in the European Union is one project aimed at harmonising HTA methodology and improving transparency across the continent.
Resources
- MedTech Europe – Market Access & HTA Advocacy and insights into European medtech access policies.
- Global Medical Device Nomenclature (GMDN) Global Medical Device Nomenclature for regulatory and reimbursement classification.
Adoption: The point at which clinicians or healthcare systems begin integrating the device into routine clinical practice.
Authorised Representative: A natural or legal person appointed by a manufacturer to act on their behalf in carrying out specific tasks related to conformity assessment and regulatory compliance.
Benefit-Risk Analysis: The comparison of a medical device’s benefits to its associated risks, often used in regulatory decision-making.
Biomedical Engineer and Technician: Personnel that maintain and repair medical devices to ensure their proper functionality.
Budget Impact Analysis (BIA): A financial assessment tool used to estimate the cost implications of adopting a new healthcare intervention within a specific budget context over a defined time.
Capacity Building: The process of developing and enhancing the skills, abilities, and resources of individuals or organisations to improve their effectiveness and sustainability. Change Control: The systematic process of managing and documenting modifications to a device or its manufacturing process to ensure that all changes are assessed, approved, implemented, and tracked in compliance with regulatory standards and quality management systems.
Classification: The process of categorising devices into different classes based on their intended use, level of risk to patients and users, and regulatory controls necessary to ensure safety and effectiveness.
Clinical Evaluation: A methodologically sound ongoing procedure to collect, appraise, and analyse clinical data about a medical device and to verify its safety and performance, including its clinical benefits. Also see Clinical Investigation.
Clinical Guideline: A systematically developed statement to assist healthcare practitioners and patients in making decisions about appropriate healthcare for specific clinical circumstances.
Clinical Investigation: Any systematic investigation or study in or on one or more human subjects undertaken to assess the safety or performance of a medical device.
Clinical Workflow: The systematic sequence of processes and tasks that healthcare professionals follow when using medical devices to ensure efficient, safe, and effective patient care.
Commissioning: The process of ensuring that a device is properly installed, tested, and verified for safe and effective use in a clinical setting.
Commercialisation: The full journey of bringing a medical device to market, including regulatory approval, manufacturing, marketing, sales, and support.
Compliance: Adherence to regulations, standards, and guidelines set forth by regulatory authorities.
Corrective Maintenance: The process of diagnosing and repairing faults or failures to restore the device to its proper functioning condition.
Corrective and Preventive Action (CAPA): Actions taken to eliminate the causes of existing nonconformities or other undesirable situations (corrective actions) and to prevent recurrence (preventive actions).
Cost-Effectiveness Analysis (CEA): A method of evaluating healthcare interventions by comparing their costs in relation to their health outcomes, typically measured in terms of cost per unit of health improvement gained.
Cost-Benefit Analysis (CBA): A technique for assessing the financial feasibility of interventions by comparing their costs and benefits, where benefits are expressed in monetary terms.
Cost-Utility Analysis: A type of economic evaluation that compares the costs of healthcare interventions to their outcomes in terms of quality-adjusted life years (QALYs) gained, providing a measure of health-related quality of life.
Decommissioning: The process of safely retiring or discontinuing the use of a device, ensuring proper disposal or reprocessing following regulatory and environmental requirements.
Demand Forecasting: The practice of using historical data, market trends, and analytics to predict future customer demand for a product.
Distribution: The logistics and infrastructure used to deliver a medical device from manufacturer to customer or end user.
Distributor: A natural or legal person in the supply chain, other than the manufacturer or importer, who makes a medical device available on the market.
Economic Evaluation: The evaluation and analysis of the costs and consequences of using a medical device or intervention, often comparing different options to inform decision-making. This may also be called an Economic Assessment.
Economic Operator: Any person or entity engaged in the production, distribution, import, export, or supply of medical devices.
End-of-life: The stage in the medical device lifecycle when the manufacturer no longer supports the device due to obsolescence, discontinuation of production, or inability to provide necessary components or services.
Endpoint: The measurable result at the end of a study, including types such as:
-
Clinical Endpoint: A precisely defined and measurable outcome used to determine the effect of an intervention.
-
Performance Endpoint: A measure of how well the medical device achieves its intended purpose.
-
Primary Endpoint: The main result that is measured at the end of a study to see if the treatment worked (e.g., the change in a clinical measurement from baseline to the end of the study).
-
Safety Endpoint: A measure of the frequency and severity of adverse events experienced by participants during a clinical trial.
Equipment Management: The systematic process of acquiring, maintaining, calibrating, and retiring equipment to ensure it remains suitable for its intended use and complies with quality and regulatory requirements.
Equivalency: Demonstrating that a new device is as safe and effective as an already marketed device by comparing its technical and functional characteristics.
Enterprise Resource Planning (ERP) Systems: Integrated software platforms that manage and automate core business processes across an organisation, facilitating the flow of information and improving efficiency.
Equipment Management: The systematic process of acquiring, maintaining, calibrating, and retiring equipment to ensure it remains suitable for its intended use and complies with quality and regulatory requirements.
FDA Approval: The process by which the U.S. Food and Drug Administration (FDA) officially recognises that a medical device is safe and effective for its intended use.
Financing: Securing capital or funding to support the development, regulatory process, manufacturing, market entry, or adoption of a medical device.
Follow-Up: The period of observation of participants after the intervention has been applied.
Go-to-Market Strategy: A comprehensive plan outlining how a company will introduce and promote its products or services to its target customers and achieve competitive advantage in the marketplace.
Healthcare Professional: An individual trained and licensed to provide medical care, treatment, and advice to patients, encompassing a range of roles such as physicians, nurses, pharmacists, and allied health professionals.
Healthcare Provider: An individual or organisation licensed or otherwise authorised to deliver medical, nursing, dental, or other healthcare services to patients or clients.
Health System: The organised network of institutions, resources, and people that deliver healthcare services to meet the health needs of a specific population.
Health Technology: The application of organised knowledge and skills in the form of devices, medicines, vaccines, procedures, and systems developed to solve a health problem and improve quality of lives (WHO definition).
Health Technology Assessment (HTA): A systematic evaluation of the properties, effects, and impacts of health technology, such as medical interventions, pharmaceuticals or medical devices, to inform healthcare decision-making.
Health Technology Management (HTM): The systematic planning, procurement, implementation, and evaluation of medical technologies to ensure their safe, effective, and efficient use within healthcare settings.
Importer: A natural or legal person who places a device from another country on the market.
Indication of Use: A concise statement specifying the medical conditions or purposes for which the medical device is intended to be used, as approved by regulatory authorities.
Intended purpose: The use for which a medical device is intended according to the information provided by the manufacturer on the labelling, in the instructions for use (IFU), or in promotional materials. This may also be referred to as the Intended Use in some jurisdictions. Also see Indication of Use.
International Medical Device Regulators Forum (IMDRF): A global regulatory collaboration focused on harmonising medical device regulations to facilitate patient access to safe and effective devices. This organisation was formerly the Global Harmonization Task Force (GHTF).
Interoperability: The ability of different systems, devices, applications, or products to connect, communicate, and work together effectively without requiring special effort by the user.
Just-in-Time (JIT) Inventory Management: An inventory strategy that aligns raw material orders and production schedules closely with actual demand to reduce storage costs and waste.
Key Performance Indicators (KPIs): Measurable values that demonstrate how effectively an organisation achieves key objectives.
Labelling: The label on a medical device and all descriptive and informational literature associated with the device. Also see Instructions for Use (IFU)
Lifecycle Management: The process of overseeing a product, service, or system from its initial development through its growth, maturity, and eventual decline or disposal, ensuring optimal performance and resource utilisation at each stage.
Logistics: The process of planning, implementing, and controlling the efficient movement and storage of goods from origin to consumption.
Maintenance: Regular, planned actions taken to ensure that the devices remain in optimal working condition, including inspection, calibration, cleaning, and repair. Also see Preventative Maintenance and Corrective Maintenance.
Manufacturer: A legal entity that designs, produces, assembles, or labels a medical device with the intention of placing it on the market.
Market Access: The process of ensuring a medical device can be reimbursed, adopted, and used within a specific healthcare system or market.
Market Development: Expanding or creating new customer segments, geographies, or clinical indications for a medical device.
Marketing: Activities that promote awareness, education, and demand for a medical device among stakeholders like clinicians, payers, and patients.
Market Launch: The coordinated introduction of a medical device into a specific market, often involving regulatory clearance, marketing, sales training, and distribution setup.
Medical Device Management System (MDMS): A comprehensive framework that oversees the lifecycle of medical devices from acquisition to disposal, ensuring regulatory compliance, safety, and operational efficiency.
Meta-Analysis: A statistical technique that combines the results of multiple scientific studies to integrate findings and derive overall conclusions about the effectiveness or impact of a health technology or intervention.
Mode of Action: The means by which a device achieves its intended therapeutic or diagnostic effect.
Needs Assessment: A systematic process to identify and prioritise gaps or requirements in healthcare delivery that could be addressed through technological interventions.
Notified Body (NB): An organisation designated by a country authority to assess the conformity of certain products before being placed on the market, ensuring they meet applicable regulatory requirements and standards.
Payer: An entity or organisation, such as an insurance company or government agency, responsible for reimbursing or funding healthcare expenses related to using health technologies.
Preventative Maintenance: Scheduled inspections, servicing, and adjustments performed regularly to prevent potential equipment failures and ensure continued reliability and safety in clinical settings.
Post-Market Surveillance (PMS): The proactive collection and review of experiences and data related to a device after it has been released onto the market to ensure continued safety and performance.
Predicate Device: An existing on-market device that provides a basis for comparison or reference in demonstrating substantial equivalence for regulatory purposes.
Pre-market Approval (PMA): The process by which the U.S. FDA evaluates and approves the safety and effectiveness of high-risk medical devices before they can be marketed and sold in the United States.
Pricing: The strategy and process of setting the cost at which a medical device will be sold, balancing value, market conditions, and reimbursement.
Procurement: The process of acquiring, purchasing, or obtaining medical equipment, supplies, or technology necessary for healthcare delivery.
Qualification: The process of determining whether a product meets the definition of a medical device in a particular jurisdiction. Quality Management System (QMS): A formalised system that documents the structure, responsibilities, and procedures required to achieve effective quality management.
Quality Management System Regulation (QMSR): The U.S. Food and Drug Administration (FDA) regulation that aligns its medical device quality system requirements with ISO 13485:2016 to streamline global compliance and enhance device safety and effectiveness.
Quality System Regulation (QSR): Outlined in 21 CFR Part 820, the U.S. Food and Drug Administration (FDA) framework requires medical device manufacturers to establish and maintain a quality management system to ensure their products consistently meet applicable requirements and specifications.
Real World Evidence: Clinical evidence regarding the use and potential benefits or risks of a medical product derived from real-world data (RWD) sources outside traditional clinical trials.
Record: A documented piece of evidence detailing activities, decisions, or results, created and maintained to demonstrate compliance with regulatory requirements and quality management standards.
Regulation: The rules, laws, standards, and requirements set by regulatory authorities to ensure the safety, efficacy, and quality of devices intended for medical use.
Regulatory Approval: Official authorisation from a competent authority or regulatory authority that a medical device meets safety and performance requirements.
Regulatory Authority: An official body overseeing and enforcing laws, regulations, and standards within a specific industry or sector to ensure compliance and protect public interests. Also known as a Regulatory Authority. Also see Competent Authority and Notified Body.
Regulatory Submission: The formal process of submitting documentation and data to regulatory authorities for review and approval to market or sell the device within a specific jurisdiction.
Reimbursement: The process of receiving payment from insurers, government health programs, or healthcare facilities for the use of medical devices in patient care.
Risk: The combination of the probability of occurrence of harm and the severity of that harm.
Risk Management (RM): The systematic application of management policies, procedures, and practices to the tasks of analysing, evaluating, controlling, and monitoring risk.
Safety: The condition of being protected from or unlikely to cause danger, risk, or injury.
Sales: The process of engaging customers, negotiating terms, and closing transactions to deliver medical devices to end users.
Sales Channel: The route through which a medical device reaches the market, such as direct sales, distributors, or strategic partners.
Sensitivity Analysis: The process of evaluating how the variation in the output of a model can be attributed to different variations in the input parameters.
Service: Post-sale support including installation, training, maintenance, and customer assistance to ensure proper use and satisfaction.
Sponsor: An individual, company, institution, or organisation that takes responsibility for the initiation, management, or financing of a clinical investigation.
Stakeholder: Any individual or group with an interest or influence in the delivery, outcomes, or policies of healthcare services.
Standard: A document that provides guidance, requirements, or specifications established by regulatory bodies, industry organisations, or international consensus groups.
State-of-the-art (SotA): The current knowledge or good practice acceptable in the medical devices industry.
Supplier: An entity or organisation that provides materials, components, or finished products used in the manufacturing, assembly, or distribution of medical devices.
Supplier Management: Overseeing and controlling the relationships and activities with external suppliers to ensure the quality, reliability, and regulatory compliance of sourced materials and components.
Systematic Review: A structured and comprehensive synthesis of research studies that aims to identify, select, assess, and summarise the findings of all relevant individual studies on a particular topic.
Technical Documentation: All documents that demonstrate the design, manufacture, and performance of the device, essential for ensuring compliance with regulatory requirements. This is also known as the Technical File.
Technical Specifications: Detailed descriptions of the requirements, characteristics, and standards that a product, service, or system must meet or adhere to, ensuring clarity and consistency in its design, production, or implementation. Also see Standard. Technical specifications can also be an alternative term for Design Inputs.
Technology Integration: The seamless incorporation of health technologies into healthcare organisations.
Total Cost of Ownership: The comprehensive sum of all expenses associated with acquiring, operating, maintaining, and eventually disposing of the device over its entire lifespan.
Total Product Lifecycle (TPLC): A U.S. Food and Drug Administration (FDA) term referring to the entire process of a medical device’s development, from initial concept and design through premarket review, manufacturing, marketing, post-market surveillance, and eventual product retirement. It emphasises continuous evaluation of safety, effectiveness, and quality throughout the device’s lifespan.
User: Any individual who operates or interacts with a medical device, including healthcare professionals, patients, and caregivers.
Validation: Confirmation by examining and providing objective evidence that the particular requirements for a specific intended use can be consistently fulfilled.
Value Proposition: A clear statement of the clinical, economic, and operational benefits a medical device offers to its stakeholders.
Verification: The process of evaluating whether or not a product, service, or system complies with a regulation, requirement, specification, or imposed condition.