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

Optimising Medical Device & Diagnostic
Launches in Developed Markets
IHS Webcast, 7th February 2012
Speakers:
Gustav Ando
Cameron Lockwood
Gaelle Marinoni

Copyright © 2012 IHS. All Rights Reserved.

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


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

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.

Sales of Medical Goods - Historical Data and Forecasts
Sales (million LCUs)

2000
2005
2010
2015

Germany Spain France Australia Canada
Japan

Graph source: IHS Global Insight World Markets Forecasting.

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 6-9 10 19 30+ 30+
approval Process
length (months)
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 Controlled Other Specially
MDDs MMDs controlled controlled MDDs
MDDs
Regulatory Notification Certification Approval Approval
Requirements
QMS Audit N/A RCB* PMDA PMDA
Approval/Certificat N/A RCB MHLW MHLW
ion
QMS Compliance Not required Necessary Necessary Necessary
* Registered Certification Body Source: PMDA

Japan: Premarket
Approval Process

Premarket Timeline Clinical Trial Requirements
Approval Criteria
Safety and 8 months Usually required for ‘new’ or
performance ‘administrative ‘improved’ (unless can
review time’ 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.


Japan: MDD Reimbursement

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

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

 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.

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

‘Reference pricing’ within
Rapidly ageing product classes sets
population reimbursement rates

Predominately fee-for- No fragmented Premiums to
service reimbursement reimbursement reimbursement rates
framework decision-making often denied
Pros Reimbursement
Cons
Price premiums of up to Importance of dealer
50% of high-priced networks (opportunity to classifications outmoded
reference markets bring value-added (established 1983)
services but requires
Physicians (with adaptation to unique Unique licensing
influence over business environment) requirements under
purchasing) traditionally regulatory regime
not so cost conscious
Significant delays in
Cost-effectiveness approval timelines
criteria not yet formal
part of reimbursement General cost
assessments 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.

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

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