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.
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.
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.
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.