Medical Device Market Access: Optimising Medical Device and Diagnostic Launches In Developed Markets

Copyright © 2012 IHS. All Rights Reserved.

Optimising Medical Device & Diagnostic Launches in Developed Markets

IHS Webcast, 7th February 2012

Speakers:

Gustav Ando

Cameron Lockwood

Gaelle Marinoni


The content of this webcast is based on the findings of our latest study:

Optimising Medical Device & Diagnostic Launches in Developed Markets

Download an extract from this study

http://www.ihs.com/info/ecc/e/optimising-medical-devices/index.aspx?ocid=g370:globalinsight:social-network:0003


Agenda

Opening Methodology Study Background Medical Device and Diagnostic (MDD) Premarket

Approval Process MDD Reimbursement Framework MDD Procurement Framework Case Study Conclusions Closing Q&A


Methodology

Primary Research 48 in-depth qualitative interviews with key stakeholders, including

representatives from industry, insurance, government and health services across 9 developed markets

Interviews lasted between 30 and 60 minutes Interviews focused on national opportunities, barriers and market dynamics in

the context of regulations, pricing, reimbursement and procurement for MDDs

Secondary Research

IHS Global Insight proprietary Healthcare and Pharmaceutical services:

– World Markets Healthcare

– World Markets Pricing and Reimbursement

– World Markets Forecasting

Literature reviews

Government and other relevant agency websites


Study Background


Medical Devices: Top of the Healthcare News


Research Relevance

Within each market considered, the regulatory environment for MMDs is extremely complex and fragmented

This is especially the case in the pricing, reimbursement and procurement arenas, where multiple negotiations can take place not only at the national but also regional and local levels

With increased regulatory scrutiny and cost-containment pressure across markets, market access for MDDs is set to worsen further

The pharmaceutical industry will also be concerned by these increased market access barriers as the advent of personalised medicine and the market arrival of combination products mean the two industries cannot afford to operate in silos any longer


Germany Spain France Australia Canada

Sales of Medical Goods - Historical Data and Forecasts

2000

2005

2010

2015

Sale

s (m

illio

n LC

Us)

MDD Market Sizing

• The global market for MMDs was estimated to be worth USD350 billion in 2010. The US is the largest MDD market in the world, followed by Japan. Europe accounts for 30% of the world’s market.

• Over the next five years, MDD sales growth is expected to slow in Spain and drop into negative territory in Germany, France and Japan. Growth is expected to remain robust in Australia and Canada.

• Overall market growth is driven by sales of durable goods, a trend that is expected to continue over the next five years, with the exception of Germany.

Graph source: IHS Global Insight World Markets Forecasting.

Japan


MDD Premarket Approval Process


Premarket Approval Overview

The major markets differ in the criteria, timelines and clinical trial requirements associated with the premarket approval process.

Europe and Australia do not require MDD manufacturers to submit efficacy data to gain market approval, which is in contrast with other regulatory frameworks.

The lack of efficacy requirements in Europe and Australia has shortened the MDD development process for these markets. It is likely that it also eases the regulatory review process and lowers barriers to market entry.

Disparate regulatory requirements translate into divergent timelines for licensing approval across the major markets.

Australia EU Canada US Japan

Average Market approval Process length (months)

6-9 10 19 30+ 30+

Source: Northwestern University, US


In-Vitro Diagnostics

At present, ‘home brew’ tests, also known as in-house or laboratory-developed tests, fall entirely outside the purview of EU regulations

In the US, these tests are regulated by the Clinical Laboratory Improvement Amendments (CLIA) of 1988. However, CLIA focuses on quality of the testing process rather than utility or validity of the test itself

Regulations both in the US and the EU are expected to become more stringent, as regulators play catch-up with the emerging marketplace for this new science

In Europe, a revision of the in vitro diagnostic medical device (IVDMD) Directive is expected for early 2012, with implementation foreseen for 2015

In Australia, a new regulatory framework for IVDMDs was introduced in July 2010 to bring them under the scope of the medical device framework


MDD Reimbursement


Reimbursement Framework: Inpatient vs Ambulatory Setting

Across the major markets, hospitals mostly operate through global budgets or activity-based funding (DRG system) for inpatient activity. Both funding mechanisms have their limitations for the uptake of innovative MMDs.

Under a DRG system, MDDs can be reimbursed as part of a procedure or on their own.

DRG systems can act as a cost-containment tool as tariffs may not adequately reflect actual costs. They also create incentives to shorten length of stay to increase activity and adapt activity based on profitability.

The major markets differ in their MDD reimbursement frameworks for the ambulatory setting, applying fee-for-service, prospective payment and global budgeting systems. Under a fee-for-service system, practitioners are reimbursed retrospectively based on the nature & volume of their activity.


HTA Environment for MDDs

The major markets differ in terms of whether HTA is a routine part of coverage and/or reimbursement decision-making, or whether it is commissioned or performed on a case-by-case basis.

They also differ as to whether specific HTA frameworks have been developed for MDDs or whether these remain ad hoc.

Some markets exploit HTA for specific functions – in one instance in Italy, an institution has established an HTA programme for evaluation of reimbursement rate top-ups for innovative/high-cost technologies.

Finally, markets differ to the extent that they incorporate some form of economic evaluation into HTA.

There are clear signs that the HTA process will become more methodological and tailored to the MDD industry, with the requirement to demonstrate cost-effectiveness. This hurdle will require a rethink of clinical trial strategies.


MDD Procurement Framework


MDD Procurement Overview

MDD purchasing may take place:- At individual hospital level

- Between groups of hospitals

- Via central/regional government agencies

- Through dedicated, commercial companies

In some markets, these procedures vary in accordance with public procurement law and/or the type of MDDs.

In Europe, procurement tends to take the form of public tendering, depending on product type and/or specific cost thresholds.

While there was a trend toward decentralisation of purchasing in the late 1990s and early 2000s, in an atmosphere of cost containment, and in a bid to improve transparency, there has been a move back toward centralised purchasing.


Case Study: Japan


Japan: Market Facts

Japan is the second largest medical device market in the world and an import-dominated market.

Japan is addressed late, if at all, in MDD manufacturers’ launch sequence strategy.

Many manufacturers do not file for approval in Japan.

Medical technologies are approved in Japan three years after the US and five years after the EU.

Approximately half the MMDs marketed in the US and in Europe are not marketed in Japan.


Japan: Premarket Approval Process

Authorities involved:– Pharmaceuticals and medical devices Agency (PMDA)– Ministry of Health, Labour and Welfare (MHLW)

Legislation: – Pharmaceutical Affairs Law (PAL)

Requirements: – Marketing Authorisation Holder License– Manufacturing Licence– Accreditation

Japan: MDD Conformity Assessment Procedures

Classification General MDDs

Controlled MMDs

Other controlled MDDs

Specially controlled MDDs

Regulatory Requirements

Notification Certification Approval Approval

QMS Audit N/A RCB* PMDA PMDA

Approval/Certification

N/A RCB MHLW MHLW

QMS Compliance Not required Necessary Necessary Necessary* Registered Certification Body Source: PMDA


Japan: Premarket Approval Process

Premarket Approval Criteria

Timeline Clinical Trial Requirements

Safety and performance

8 months ‘administrative review time’

Usually required for ‘new’ or ‘improved’ (unless can demonstrate safety/efficacy without clinical data)

Japan suffers from a device-lag. The Japanese regulatory approval process for a new MDD takes just over 21 months compared to just over 10 months in the United States.

Japan has committed to an overhaul of its market approval framework, intending to shorten the timeframe between submission and approval down to 14 months for a regular review and 10 months for a priority review by 2013.


Authorities involved:– MHLW:

• Economic Affairs Division of the Healthy Policy Bureau• Medical Economics Division of the Health Insurance Bureau

– Central Social Insurance Medical Council (Chuikyo):• Insured Medical Device Expert Committee• Medical Fee Survey Expert Committee

– Health Insurance Claims Review and Reimbursement Services– All-Japan Federation of National Health Insurance Organisations

Provider reimbursement (national schedules): – Fee-for-service (retrospective) – Outpatient/inpatient setting– Diagnosis Procedure Combination (prospective) – Inpatient setting

MDD reimbursement: – Specified insured medical materials or special treatment materials (STMs)

– reimbursed individually– Non-special treatment materials (non-STMs) – reimbursed as part of

procedure

Japan: MDD Reimbursement


Japan: MDD Reimbursement

Reimbursement application to the MHLW’s Healthy Policy Bureau, Economic Affairs Division.

Reimbursement application processing time is ca. 20 days for Class A1-B, ca. 80 days for Class C1, ca. 100 days for Class C2 MDDs.

Cost-effectiveness is not a formal criterion in reimbursement decision-making in Japan.

MDDs Reimbursement Categories

A1 Non-STM – commonly used, commodity MDDs (syringes)

A2 Non-STM – high-end, multiple use MDDs (MRI)

B STM – existing functional category

C1 STM – existing product, new function

C2 STM – new product, no existing functional category

F Not eligible for coverage


Japan: MDD Pricing

MDD Pricing

A1 Direct negotiations between distributors and providers

A2 Direct negotiations between distributors and providers

B Reference pricing

C1 New product premium pricing method (existing similar functional category)

C2 New Product pricing method (no existing similar functional category)

F Not eligible for coverage

Price Control:

– R-zone: twice yearly price adjustments

– FAP

– Revision of the medical fee schedule every two years


Japan: MDD Procurement

In the public sector, tendering is mandatory for MDD contracts above a value of 100,000 SDR (Special Drawing Rights, ca. USD66K).

In the private sector, purchasing tends to be based on physician preferences with existing provider/distributor relationships a paramount to commercial success.

Complex distribution channels with primary and potentially secondary dealers, which vary depending on:

– Device price

– Hospital size

– Manufacturer

– Additional services such as stock management, inventory consignment sale


Japan: MDD Market Analysis

Pros ConsPrice premiums of up to 50% of high-priced reference markets

Physicians (with influence over purchasing) traditionally not so cost conscious

Cost-effectiveness criteria not yet formal part of reimbursement assessments

Rapidly ageing population

Predominately fee-for-service reimbursement framework

No fragmented reimbursement decision-making

Importance of dealer networks (opportunity to bring value-added services but requires adaptation to unique business environment)

‘Reference pricing’ within product classes sets reimbursement rates

Premiums to reimbursement rates often denied

Reimbursement classifications outmoded (established 1983)

Unique licensing requirements under regulatory regime

Significant delays in approval timelines

General cost containment of fee schedules


Conclusions


Summary of Conclusions

Developed markets present various degrees of attractiveness for MDD launches, which are directly correlated to the complexity and differentiation of national marketing approval processes and P&R environments.

From a marketing approval perspective, Europe and Australia are the most attractive markets. Regulatory requirements are not as stringent as in other countries, resulting in more predictable processes and faster timelines. However, regulatory requirements are not aligned with the information needs of payers, which frustrates market access.

From a P&R perspective, the landscape is fragmented in most countries, which is both a source of opportunities and challenges. While it improves the odds to secure some degree of market access, it also requires large amount of resources, know-how and adequate logistics.

The regulatory landscape for MDD is in constant evolution and poised to become stricter in the medium term. This adds to the challenge of designing effective launch strategies in an industry that tends to be characterised by fast innovation.


Get a free extract from this study: Download extract

Visit the IHS Healthcare & Pharma Blog:www.ihs.com/healthcareblog

Resources

http://www.ihs.com/info/ecc/e/optimising-medical-devices/index.aspx?ocid=g370:globalinsight:social-network:0003

http://www.ihs.com/healthcareblog

Medical Device Market Access: Optimising Medical Device and Diagnostic Launches In Developed Markets

Health & Medicine

Transcript of Medical Device Market Access: Optimising Medical Device and Diagnostic Launches In Developed Markets