Clearing Away the Fog: FDA Approval and Product Reimbursement

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Clearing Away the Fog FDA Approval andProduct
Reimbursement
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Welcome

• Charles Schalliol
• Baker Daniels

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• Mike Brooks
• President CEO, IHIF

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• Tony Armstrong
• President, IURTC

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• David Johnson
• President CEO, BioCrossroads

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Todays Theme Planning Ahead

• Each presentation will highlight advance planning
• How you approach the issues will impact the
  result
• Time spent determining strategy is not added time

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Todays Presenters

• Ralph Hall
• Extensive experience in FDA, health care law,
  and corporate compliance, especially with respect
  to the medical device industry, and a Professor
  at University of Minnesota.
• Suzanne OShea
• 21 years prior experience as regulatory counsel
  for the FDA, including Deputy Director of the
  Office of Combination Products.
• Amy Judge-Prein
• Amy has 15 years experience with FDA law,
  including as Associate General Counsel for Eli
  Lilly Company with extensive experience around
  selling and marketing of products and clinical
  trials.
• Dan Carmichael
• Dan has many years of life science legal
  representation having concluded his Eli Lilly
  Company career as Secretary to the Board of
  Directors and Deputy General Counsel. He is a
  key member in developing Baker Daniels FDA
  Regulatory practice.

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The Regulatory Process / Trends

• Ralph Hall

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Where is Value Added?
Concept / Idea and Market Need
Innovators
Establish Value - Clinical Trials (FDA) - Needs
and economics (CMS) - Protect Value (IP) -
Permission to market (FDA)
Linkage and coordinated strategy is required to
maximize value
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Current FDA/Business Interface

• 2007-19 NCEs approved
• lowest in 24 years
• Increasing cost
• Clinical studies
• Submissions
• Uncertain timing
• Increasing regulation
• Increasing scrutiny
• Congress
• Media
• FDA
• Tremendous pressure on industry
• More products
• Better products
• Safer products

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Key Questions

• Is the product regulated?
• If so, what is it?
• Is the activity regulated?
• If so, how?
• Must FDA approve the product before marketing?
• Who will pay for it?
• Is it protected via IP?

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Types of Regulated Products

• Drugs
• Devices
• Diagnostics
• Biologics
• Cosmetics
• Foods/Dietary Supplements

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Impact of Definitions
Product Time Cost Clinical
Drug 8-10 years 750 MM 5-30,000
PMA Device 5 years 50 MM 1,000
510(k) Device 3 years 10 MM -0-
Biologic (biotech) 8 years 750 MM 5-30,000
Cosmetic 2 years 5 MM -0-
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Drug Definition

• Intended to
• Treat, cure, mitigate, etc. a disease
• Affect the structure or function of body
• Generally acts chemically
• Intended use key concept
• Objective intent of manufacturer
• You define what the market is

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Other Key Definitions

• Device
• Intended to
• Treat, cure, mitigate, etc. a disease
• Affect the structure or function of the body
• Acts mechanically (not chemically)
• Devices include diagnostics
• Biologic
• Vaccine, blood product, tissue, serum

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Drug Biologics Regulation

• Drugs must be shown to be safe and effective
• Risk/benefit assessment
• Burden on company
• Clinical trials required
• Investigational new drug approval
• Approved protocols
• IRB approval
• Informed consent
• Ongoing manufacturing and reporting duties

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Device Regulation

• Risk based classification system
• Class I low risk
• Class II medium risk (510(k))
• Class III high risk (PMA)
• Diagnostic products
• Requirements vary based on classification
• Ongoing quality and reporting duties

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System Integration

• Product approval is indication specific
• Clinical trials are for specific uses
• Patents are for specific claims
• Actions and strategies must be linked
• Strategic data development
• Strategic product placement

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Compliance

• Failure to comply can be catastrophic
• Inability to sell the product
• Inability to market it
• Inability to get paid
• Inability to sell the company
• Significant enforcement exposure
• Financial penalties
• Criminal liabilities without fault

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Four Key Trends

• FDAs approach to new technology
• Clinical trial issues
• Pediatric products
• FDAAA implementation and implications

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New Technology

• Evolutionary vs. revolutionary technology
• FDA accustomed to dealing with new uses of known
  scientific principals
• A new use or therapy doesnt make the technology
  revolutionary
• Stents use known mechanical and biologic
  processes
• FDA comfortable using existing structures for
  evolutionary technology

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Revolutionary Science

• FDA challenges with revolutionary science
• Do existing systems fit?
• Does FDA have the necessary expertise?
• FDA always seeks to make the science fit
• Sample revolutionary technology
• Stem cells
• Software and networking
• Genetic and personalized medicine

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Nanotechnology as Revolutionary

• Great attention on nanotechnology
• Do nano particles act differently than non-nano
  article of same type?
• Do nano particles act chemically or physically?
• Are these drugs, devices or biologics?
• Are these combo products?
• Is FDA prepared for nanotechnology submissions?

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Clinical Trial Issues

• Recent public criticism of clinical trial
  oversight
• GAO report
• Mice and rats get more protection than humans?
• Increased FDA focus
• Initial review and approval
• Inspections
• Greater transparency

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Clinical Trial Issues

• Potentially slower approvals of INDs/IDEs
• Greater scrutiny
• More questions
• More inspections
• Clinical trial holds
• Enforcement actions
• Data challenges
• Data mining

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Pediatric Products

• Must consider pediatric indications
• Use of adult data for approval
• Surrogate endpoints
• Use of other pediatric age group data
• Drug patent extension
• Potential opportunity for faster review
• Remember safety
• Post market surveillance requirements

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FDAAA Implementation

• FDAAA passed Sept. 2007
• Substantial changes and additions to FDCA
• Congress willing to get involved in detail
• Pressure on FDA
• Constant oversight

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FDAAA Implementation

• Key provisions
• User fees
• Pediatric drugs and devices
• Post market surveillance
• Posting clinical trial information
• Food safety and imports

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FDAAA Implementation

• Major FDA effort required
• 200 major tasks
• New regulations and guidances
• Rules can change
• Consume resources
• Impact on reviews?
• Role of user fees
• Impact on management priorities and policies

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Conclusion

• Regulations getting more complex
• Approvals may be slowing
• Beware of timelines
• Increasing enforcement
• Congressional and public oversight
• Integrated regulatory strategy can yield big
  benefits

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Regulatory Strategy

• Suzanne OShea

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The Regulatory Review Process
pre-clinicaldata
INDIDE
clinical trials
CMCdesign controls
REMSMDRlot release
510(k)PMANDABLA
5296154
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• Strategy the artful and ingenious use of
  resources

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• Resources include statutory authorities and
  regulations
• Federal Register of August 28, 1996
• 61 FR 44395, 44401
• The Tobacco Rule

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Regulatory Strategy

• The artful and ingenious use of statutes,
  regulations, policies, and guidance documents to
  achieve the optimal pathway through FDA for a
  particular product, a particular company, in a
  particular set of circumstances.
• One size does not fit all.

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(No Transcript)
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Reg-Map New Use for an Old Drug
Bleomycin forsystemic administration
electroporation device
NDA supplement by drug company
510(k)
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Reg-Map New Use for an Old Drug
electroporation device

PMA
clinical trials
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Reg-Map New Fangled Delivery Device
new device
old drug
general use 510(k)
clinical trial of device old drug
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Reg-Map New Fangled Delivery Device
old drug
contract manufacturer
505(b)(2)application to CDER
clinical trials
pre-filled, single use disposal device
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Reg-Map Follow the
drug implant combination product
drug to treat a rare but deadly side effect of
implanted device
510(k) working with implant manufacturer
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Reg-Map Follow the
drug to treat a rare but deadly side effect of
implanted device
NDA to CDER
clinical trial, data development
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(No Transcript)
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Clinical Trial Contracting

• Amy Judge-Prein

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Current Pressures for Transparency

• Concern for bias with funding
• Registry / disclosure requirements

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Contracting Barriers

• Publications
• Inventorship
• Subject Injury Reimbursement
• Indemnification / Insurance

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Increasing Need for Financial Clarity

• Enforcement trends
• Anti-kickback need for clear budgets
• Complications of reimbursement
• MSP memorandum
• Concern for fraudulent submissions
• Avoiding promotion

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Device ReimbursementPlanning for Value-Based
Payment

• Dan Carmichael

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The New Yorker, May 12, 2008
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First principals. . .

• Were facing an innovation arms race
• New product launches outpace policy development
• Securing value-based payment requires evidence,
  advocates and time
• Stakeholders define value differently
• Successful reimbursement work is fully integrated
  into broader product plan
• Not just code applications and billing guides
• Senior leadership owns reimbursement
• Commit resources set realistic expectations

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• A cyclist and a jogger collide on a local trail.
  Both are taken to the emergency room with
  contusions, abrasions and possible concussion.
  Brain function is assessed using Product X. Both
  are treated and released.
• Total charges 1,262
• Total payment cyclist 1,118
• Total payment jogger 629
• How can payment be so different when the same
  services are provided?

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Payers employ different reimbursement mechanisms

• What kind of insurance does the patient have?

Medicare gt 65 years Disabled ESRD
Medicaid Financial need
Commercial (private) Employed Self-insured
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Reimbursement mechanisms depend on the site of
service

• Where is the service taking place?

Inpatient Single, prospectively set facility payment
Outpatient Multiple, prospectively set facility payments possible Separate payment for product possible
Ambulatory Surgical Center Single, prospectively set facility payment
Physicians Office Fee schedule Prospectively set contracted amount
Patients Home Separate payment for product possible
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Three interrelated principals underpin US
healthcare reimbursement
Securing value-based payment requires attention
to all three.
(Corollary Just getting a new code is likely
not be sufficient. . .)
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Coverage policy establishes whether the product
or service is an available benefit

• Different criteria than FDA
• The item or service may be covered if it is
• Reasonable and necessary for the diagnosis or
  treatment of an illness or injury or to improve
  the functioning of a malformed body part. . .
• Social Security Act 1862(a)(1)(A)
• Coverage decisions are made based
• on the quality of evidence

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Payers follow a rigorous process to set coverage
policy for their members

• Review published data and professional society
  guidelines, consult with relevant specialties,
  consider decisions made by other payers and
  technology assessment groups
• Attempt to reconcile goals of fiduciary
  responsibility and access

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National non-coverage policies preclude coverage

• Medicare contractors may not pay if non-coverage
  determination in place
• Commercial payers Experimental, investigational
  or unproven
• To overcome this hurdle
• Manufacturers bring new evidence
• Standard practice changes
• Professional societies request/support change
• Providers/patients demand access

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Payers evaluate precedent set by each others
coverage policies

• Medicare coverage policy is influential for
  private payersbut not determinative
• Larger payers also have clinical resources that
  may determine coverage policy, including the
  BlueCross BlueShield Associations Technology
  Evaluation Center (TEC), Kaiser and Aetna
• Smaller payers may look to both public and
  private bellwether payers for precedent in
  setting their policies

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Coverage Determination Processes
Payer CMS (Medicare) BCBSA Aetna
Advisory Body MedCAC TEC Corporate Medical Affairs
National Coverage Decisions Yes     Yes Yes
  Yes    
  Yes    
Local Yes Plan Medical Director Makes Decision Regional medical director can make decision in absence of a corporate policy
Who Trumps? National Local National
Website www.cms.hhs.gov www.bcbsa.com www.aetna.com
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Coding systems are the language of
reimbursement

• Patient diagnosis
• Inpatient hospital procedures
• Physician procedures
• Hospital outpatient procedures
• Diagnostic tests
• Clinical lab procedures
• Durable medical equipment
• Prosthetics, orthotics
• Surgical dressings

• ICD-9-CM
• CPT
• HCPCS

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Coding systems are managed by constellation of
decision makers

• ICD-9-CM
• CPT
• HCPCS

• Patient diagnosis-- NCHS
• Inpatient hospital procedures--CMS
• Physician procedures
• Hospital outpatient procedures--
• Diagnostic tests
• Clinical lab procedures
• Durable medical equipment
• Prosthetics, orthotics--
• Surgical dressings

AMA with input from professional societies
CMS HCPCS Workgroup
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How do coverage, coding and payment fit together?

• Reimbursement equals
• Coverage (is an item or service qualified to be
  paid) AND
• Coding (defines the category of benefit and links
  to an associated payment) AND
• Payment (what is the reimbursed amount for the
  service or item?)
• Each reimbursement element is interrelated
  each must be calibrated in order to achieve
  appropriate reimbursement

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Code pairs are used to process claims
ICD-9-CM Diagnosis 850.0 Concussion with no loss of consciousness
CPT 99283 Level 3 Emergency Visit
CPT 95816 EEG
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Code pairs map to payment according to site of
service
Service Physician Office Hospital Inpatient Hospital Outpatient Ambulatory Surgical Center
Physician Service Physician Fee Schedule Physician Fee Schedule Physician Fee Schedule Physician Fee Schedule
Facility and Supply Costs Bundled into Physician fee schedule MS-DRG APC Pricer Group
Prosthetics and Select Supplies DMEPOS Fee Schedule MS-DRG APC or APC Transitional Pass-Through Payment DMEPOS Fee Schedule
Drugs ASP6 MS-DRG Variety of Payment Formulas Pricer Group
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Payers role in healthcare system is shifting

• From claims processor to proactive consumer
• Focus on value
• Improving treatment outcomes
• Reducing cost of care
• Evidence-based decision making
• Often drives payers to seek data in addition to
  that required for market clearance

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Who defines product value?
Value
Payers
Industry
Patients
Providers
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Stakeholder Interests
Physicians Hospital/Facility Purchasing Agent Payers Patients/ Patient Groups
Clinical Evidence X X X
Cost Effective Treatment X X
Payment Amount X X X
Access to novel treatments X X
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Track policy development f/u payer meetings
Coding application
Guideline development with societies
Monitor payer response ID coverage trends
proactively
Prospective data collection
Commence reimbursement support
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-6
POC
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12
-12
Sales force education, mobilization
Materials preparation billing guide, etc.
Professional societies work
Courtesy introductions to bellwether payers
feedback on evidence plan
Identify target payers requirements for robust
evidence development
Confirm strategy, evidence planning seek
reimbursement for clinical trials?
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Strategic planning can accelerate value-based
payment for innovative technologies

• Start planning early
• Consider whether clinical evidence is sufficient
• Evaluate payer mix and target the key payers
• Consider how these payers have evaluated evidence
  to make coverage decisions for similar technology
• Are there strong advocates in the professional
  societies? In patient advocacy groups?
• Which arguments will be most effective with which
  stakeholder to obtain positive coverage?
• Data, data, data!!

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Conclusion Questions

• Charles Schalliol

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Conclusions

• Advance planning will help your company achieve
  the desired FDA and payment results.
• Coordinated, planned regulatory strategy is
  essential to achieving the outcome you desire.
• Regulation can be used to create competitive
  advantage!

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Dennis the Menace
"SOME DAYS JUST HAVE MORE RULES THAN FUN."
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Thank you!Questions?