BUILDING THE REGENERATIVE MEDICINE (REGEN) INDUSTRY
From the Lab to the Market:
Coverage and Reimbursement
Knowledge is Critical to Stem Cell
and Regenerative Medicine
Technology Development
By Tim Hunter
rug, biologic, and medical device
companies often overlook issues of
coverage and reimbursement during the
development phase of a new technology.1 In
some cases, the oversight is due to limited
resources (monetary and otherwise). In other
cases, key decision makers believe that coverage
and reimbursement for the product can be
addressed after FDA clearance or approval.
Failure to understand the coverage and
reimbursement landscape early in the
development of an emerging technology,
regardless of reason, can negatively impact (and
sometimes cripple) the product’s market success.
Proper consideration of coverage and reimbursement within the
product development lifecycle need not be an overly burdensome
expense, particularly in the earliest stages. Careful contemplation and
execution within the overall product development strategic plan can
minimize the up front costs. More importantly, prudent
consideration of coverage and reimbursement as a component of the
overall commercialization strategy can minimize or eliminate
potentially large downstream costs by ensuring that resources
invested in the product have been optimized to best support coverage
and adoption of the technology.
D
Introduction
Stem cell and regenerative technologies in development have the
capacity to replace, supplement, or improve currently available
treatment options. As such, it is important for manufacturers to apply
the proper coverage and reimbursement analyses requisite for the
potential technology application(s). As innovative treatment options,
stem cell and regenerative therapies likely will require innovative
coding, coverage, and payment strategies to maximize patient access
and ensure appropriate reimbursement for providers. While
corporate leaders better understand the need to incorporate a
coverage and reimbursement strategy, many do not understand how
or when to integrate this component.
Stem cell and regenerative medicine technology developers must
pay particular attention to coverage and reimbursement at all stages
of development. These products have the capacity to revolutionize
treatment for innumerable indications and produce the first viable
treatment options for otherwise intractable conditions. However,
innovative treatment options likely will require equally innovative
coverage and reimbursement strategies. Coding pathways likely will
not be in place to accurately describe these technologies and payors
likely will closely analyze clinical data to determine when and how to
cover and pay for them. Stem cell and regenerative medicine
companies should understand these challenges and be able to
effectively communicate strategies to address them. Addressing
coverage and reimbursement challenges up front can help companies
to raise the funding necessary for product development, construct a
clinical and regulatory strategy that promotes future coverage, and
successfully launch the product for commercial use.
What Constitutes Coverage and
Reimbursement Competency?
Stem cell and regenerative medicine companies must be able to
answer the myriad of questions posed by investors which also can be
used to inform decisions made throughout product development.
Levels of specificity will vary based upon a number of factors,
including the individual technology description, identified markets,
and expected indications.
At a minimum, companies should be able to address the
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following with respect to the technology platform:
1.
Coverage and Reimbursement Knowledge Can Be Used Throughout the
Product Life Cycle
Technology Formulation, Design, and/or Role within a
Procedure
• For example, is the product administered orally,
administered through injection, or combined into a
scaffold for implantation?
• Will the technology be used alone, or will it be used in
addition to or in place of another technology and/or
procedure?
• How do the technology design and function impact
coverage and reimbursement?
PRODUCT LIFE CYCLE
Fundraising
• Due Diligence
• Coverage &
Reimbursement
Landscape
• Fundraising
• Licensing
Clinical Study
• Protocol Review
• Data Collection
• Coverage During
Clinical Trial
Initial Setting of Care for Treatment and Eventual
Migration to Additional Settings of Care
• Inform Publication
Strategy
• For example, will the procedure initially be performed as
part of a hospital inpatient procedure, but eventually
migrate to outpatient settings?
• How does the treatment setting impact potential
coverage, coding, and reimbursement?
3.
Value Analysis – Capital Fundraising,
Licensing, & Acquisition
As researchers and business executives form companies around
stem cell and regenerative medicine technologies, the first likely
hurdle will involve fundraising to support the new entity.
Coverage, Coding, and Reimbursement Pathway in the
Anticipated Initial Setting(s) and Eventual Setting(s) of
Care
What drives interest in an innovative technology and
demonstrates value?
• What is the likelihood that public and private health
insurance plans will cover the technology?
• Do codes and pathways currently exist to provide
payment for the technology and related procedure? Are
the pathways adequate?
4.
•
•
•
•
Intellectual property portfolio
Clearance of FDA milestones
Preliminary data (i.e. European outcomes, pilot study)
Detailed understanding and description of the technology
and market
• Coverage and reimbursement pathway
Coverage and Reimbursement Landscape for Identified
Markets
For technology developers, even a cursory understanding of the
coverage and reimbursement landscape for the innovator technology
can be critical to securing investors. In a past issue of Genetic
Engineering and Biotechnology News, Proteus Venture Partners
managing director Gregory A. Bonfiglio states that “[g]reat science
doesn’t equal great business”.2 Investors want to understand how the
science will translate to the market and can use coverage and
reimbursement information when analyzing risk.
• How do plans currently cover treatment for the intended
indication(s)?
• What current coding pathways exist for competing
treatments?
• What clinical evidence exists to support these treatment
options?
Application Throughout the Product
Development Life Cycle
From the Lab to the Market
The current economic environment exacerbates the need for
stem cell technology innovators to more fully understand end
markets, including coverage and reimbursement hurdles and
opportunities. While investment in the biotech sector remains
relatively robust it has decreased significantly in 2009. According to
the National Venture Capital Association, venture capital investment
in the biotechnology sector decreased by approximately 46 percent in
the first quarter of 2009, from $1.08 billion to $577 million.3 The
number of venture capital deals decreased by 38 percent during the
same period. Investors likely have more investment opportunities to
investigate, meaning that stem cell companies need to provide the
most compelling evidence to support fundraising solicitations.
Application of coverage and reimbursement knowledge extends
far beyond securing coverage, coding, and payment upon FDA
approval. This knowledge can be used by stem cell and regenerative
medicine companies in virtually any business decision related to
product development. Therefore, it is important that companies
consider collecting this information as early in the development cycle
as possible.
Knowledge of the coverage and reimbursement landscape
cannot replace strong scientific and clinical outcomes, but it can
improve the quality of efforts at each critical stage in a stem cell or
regenerative technology company’s corporate and product
development.
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• Develop Coverage
Strategy
• Develop Coding
Strategy
• Acquisition
2.
Commercialization
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Coverage and reimbursement competency and planning can
help stem cell companies raise funds in the following areas:
and execution of a clinical study is expensive and often irreversible –
companies must make certain that all needed clinical data are
collected during the trial. Stem cell companies can use coverage and
reimbursement information to inform business decisions regarding
the clinical study, including the following:
Areas for Coverage and
Reimbursement Competency and Planning
Capital Fundraising
After the identification of a technology platform and
formation of a company, outside capital funds likely will be
needed to sustain operations during technology
development. Examples may include seed funding or Series A
or B financing.
• Clinical Trial Protocol Development – Reviewing the
clinical trial protocol with a reimbursement focus can
identify data points that are not required by the FDA, but
which may facilitate appropriate coverage.
• Coverage During the Clinical Trial – Medicare and some
private health insurance plans cover routine costs associated
with qualifying clinical trials.
• Claims Capture and Analysis – Companies can gain valuable
information from claims data reported during the clinical
trial.
Licensing
Technology innovators can use coverage and reimbursement
landscape information to develop a licensing strategy or
determine how to segment licensing agreements.
Product or Company Acquisition
The growth of the stem cell technology market likely will
provide large pharmaceutical and biotech companies with
new opportunities to acquire an end-to-end technology
platform to supplement, extend, and balance the existing
product pipeline.
When companies develop clinical trial protocols, attention is
rightly focused on the FDA requirements for market approval.
However, the protocol also can be used to address anticipated or
eventual health plan requests and requirements for clinical data,
which could impact eventual coverage and payment. Often, these
data can be collected by adding only a few questions to the study case
report forms. Reimbursement data points may be economic (i.e.
hospital length of stay, return to work, reduction of disability, reliance
upon pain medication, or reduction in prescription drug
management therapy) or relate to patient quality of life (including
return to expected function). Anticipation of payor requirements for
long-term data may lead companies to consent patients beyond the
FDA-required study duration to avoid patient loss to follow-up.
Finally, review of the protocol can identify study deficiencies which
could preclude coverage, such as potential non-coverage under
Medicare due to the exclusion of patients age 65 and over in the study
inclusion / exclusion criteria.
Medicare and some private health insurance plans may elect to
provide coverage for specific treatment costs during the clinical trial.
Such coverage partially offsets the cost of the study, but also provides
additional benefits to the sponsor. For example, the de-identified
claims data collected during the study provides valuable market
information regarding the charges and cost for both the treatment
being studied as well as the control.4 These data also provide excellent
information for use with payors after FDA approval to secure
coverage for the technology and associated procedure. Finally, the
data can be used as part of a post-approval coding strategy to ensure
proper payment for the technology, including the proper valuation of
existing codes or the need for new code development. Companies
should take care to follow publicly available guidelines for registration
of the trial, completion of patient claims and billing forms, and
limitations of coverage.
Prior to FDA approval, the company and the FDA likely will
engage in dialogue regarding the product label and indications for
use. During this dialogue, it is important to leverage existing coverage
and reimbursement knowledge to determine how the prospective
language will impact patient access to the product. A statement or
condition that appears harmless from a regulatory perspective may
have significant coverage and reimbursement ramifications.
For investors interested in this sector, comprehensive due
diligence should include consideration of the coverage and
reimbursement pathways (both present and future) for the
technology in question. These questions help to define the potential
market for the technology and play a role in determining the risk
profile.
With regard to licensing and acquisition, an understanding of
coverage and reimbursement can assist a company in identifying
potential partners or suitors. Such information allows company
executives to better understand how the product fits into the
partnering company’s product portfolio, sales force allocation, and
pipeline development. For example, if the potential licensing partner
is a developer of cardiac stents, it will be important for the stem cell
company to better understand how stents are covered by insurance
plans and how the stem cell technology could alter coverage and
payment for the stent implantation procedure. This information will
help the company during negotiations by enhancing its
understanding of how the potential licensee will use the technology,
how it improves the licensee’s product, and/or how health insurance
companies likely will cover and pay for the technology.
The topics of stem cell therapy and regenerative medicine grab
headlines. The technology concept, achievement of FDA milestones,
and availability of scientific data demonstrating clinical effect can
bring investors to the table. Companies that can bridge the scientific
data with eventual coverage and reimbursement can provide a more
complete understanding regarding the commercial viability of the
technology.
Clinical Study Development
As stem cell companies enter the clinical trial phase of product
development, it is important that they again assess the coverage and
reimbursement landscape. Decisions made during the development
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Case Study: Impact of FDA Label and IFU
on Coverage
• Product positioning
• Payor advocacy
The execution of a coverage and reimbursement strategy takes
time. Prior to FDA approval, stem cell and regenerative technology
companies should begin to execute certain elements of the strategy.
While the company cannot begin to market its product until it
receives FDA approval, it can and should lay the groundwork. Some
components will already be underway, such as the integration of
reimbursement principles into the clinical trial and collection of trial
data points. Others, including coding application preparation and
stakeholder development, should be initiated prior to market
approval.7 Finally, some components cannot be initiated prior to
FDA approval, such as product marketing and submission of coding
applications. Early identification and education of relevant medical
specialty societies is particularly important to the success of other
strategic components.
Issue: Stem Cell Company A is seeking BLA approval for a stem cell
technology to regenerate a knee meniscus. During negotiation of the
final label, the FDA stipulates an exclusion requirement restricting
use for patients who are obese. Will this exclusion criterion impact
coverage for the product?
Concern: An exclusion criterion based upon weight has the potential
to significantly impact coverage. In this case, the reference to obesity
could prompt public and private payors to restrict coverage to
patients with a body mass index at or below 29, based upon federal
government definitions. For a 6’0” male, this could restrict coverage
if the patient’s weight is above 213-220 pounds. For a 5’5”
individual, coverage could be restricted for patients above 174
pounds.5, 6 In this case, it would be important to determine whether
the exclusion criterion is appropriate and how the criterion could be
revised so as not to unintentionally restrict patient access.
By understanding the coverage and reimbursement landscape,
stem cell and regenerative technology manufacturers can better
understand how the clinical trial impacts eventual coverage and plan
accordingly.
The Importance of Specialty Society Support
Medical specialty societies play a critical role in the adoption of
new technologies as they represent the end users of stem cell and
competing technologies. Specialty societies rarely endorse one
product over others, but can be instrumental in the following areas:
Product Commercialization
• Validating the clinical benefits of the stem cell or regenerative
therapy
• Identifying the therapy as appropriate for patients suffering
from labeled indications
• Developing treatment guidelines
• Supporting coding applications
The product commercialization phase of development is the one
that company executives most closely associate with the need for
coverage and reimbursement expertise. However, some executives do
not recognize how early a company must begin to execute on its
coverage and reimbursement strategy, particularly for a novel
technology such as stem cell or regenerative product.
Stem cell and regenerative medicine companies must first
identify the specialty or specialties most likely to use the technology.
It is important to engage societies prior to market entry to ensure that
the relationships are developed with leadership and membership to
facilitate understanding of the technology, support the technology,
and defend the technology. Society members play a critical role in the
code development process. Although anyone can submit a request for
a new product or procedure code, it is the society support that drives
the process.
A comprehensive strategy consists of no less than the following:
• Assessment of the current coding options and future coding
needs
• Implementation of reimbursement principles within the
clinical trial
• Data collection and analysis of coding and claims data during
the clinical trial
• Application preparation for new codes for the technology
and/or procedure
• Stakeholder education and integration supporting
reimbursement principles
• Reimbursement tool development
Payor Coverage
Regenerative and stem cell products are likely to require high
reimbursement rates, particularly when compared against the current
standard of care. As such, payors likely will closely examine these
Example of Aetna Policies That Reference Stem Cell Technologies or Procedures8
Allogeneic Bone Marrow and Peripheral
Stem Cell Transplant for Aplastic Anemia
Stem Cell Transplant for Autoimmune
Diseases
Corneal Graft with Amniotic Membrane
Transplantation
Ventricular Remodeling Operations
Bone and Tendon Graft Substitutes and
Adjuncts
Blood Product Injections for
Tendinopathies
Multiple Sclerosis
Autologous Chondrocyte Implantation
Parkinson’s Disease
Autologous Skeletal Myoblast / Mononuclear Bone Marrow
Cell Transplant for Cardiac Diseases
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technologies even before they enter the marketplace. Particular
attention should be paid to coverage parameters not only for the next
generation technologies, but also for those procedures or technologies
that will be supplemented or replaced. Many payors currently have
coverage policies for stem cell transplant procedures, and also
reference the use of stem cell materials within other policies.
Stem cell technologies currently are addressed in a number of
health plan coverage policies. The number of policies likely will
increase in the future as additional technologies and procedures are
developed.
Comprehension of the coverage and reimbursement landscape for the
targeted market is a critical tool for use in all stages of company and
technology development.
Despite its importance, gaining coverage and reimbursement
expertise need not be prohibitively expensive. Research and analysis
can be performed internally or consultants can be engaged
strategically. Once performed, analyses need only to be updated
periodically to ensure that the most recent information is known.
By proactively considering the need for these competencies, stem
cell and regenerative medicine companies can budget for coverage
and reimbursement work, particularly within financing rounds,
clinical trial preparations, and product launch. Further, companies
can better ensure that they are optimizing evidence development and
best positioning stem cell and regenerative medicine technologies.
Conclusion
Stem cell and regenerative medicine companies face a number of
challenges in the development of novel treatment options.
Tim Hunter
Mr. Hunter is the Director of
Reimbursement for MCRA, LLC, a
consulting firm that works with emerging
and established companies to commercialize
musculoskeletal and related technologies.
He has over 12 years of experience helping
biotechnology, drug, and device companies
understand the complex and constantly
changing world of healthcare coverage and reimbursement.
coverage and reimbursement direction for oncologic technologies in
development and analyzed technologies for possible licensing and
acquisition. Prior to joining Johnson & Johnson, Mr. Hunter worked
as a consultant with Covance Health Economics and Outcomes
Services, where he led client companies through the intricacies of
Medicare and Medicaid coverage, private health insurance coverage,
new product development, and competitive marketing. Mr. Hunter
also has held positions within the United States Department of Health
and Human Services and the Biotechnology Industry Organization.
Prior to joining MCRA, Mr. Hunter worked for Ortho Biotech, L.P.,
a subsidiary of Johnson & Johnson, where he was charged with
understanding how federal Medicare and Medicaid policy changes
impacted the company’s portfolio of products, its customers, and patient
access. While at Johnson & Johnson, Mr. Hunter also provided strategic
Mr. Hunter holds Bachelor of Arts degrees in Political Science and
History and a Masters degree in Public Administration, with an
emphasis in Health Care Management, from the Maxwell School of
Citizenship and Public Affairs at Syracuse University.
References
1.
2.
3.
For more information regarding the role of reimbursement services,
including more detailed descriptions of coverage, coding, and
payment, please see Mr. Hunter’s published white paper entitled
“The Challenge of Orthobiologics: Navigating the Coverage and
Reimbursement Landscape in a Complex Marketplace”. This white
paper is available at http://www.mcra.com/whitepaper4.html.
4.
Companies should take care to follow all federal and state privacy
laws regarding the collection of patient health information. Study
agreements with investigation sites should set parameters for data
collection.
5.
National Institutes of Health, Body Mass Index Chart. Available at
http://www.nhlbi.nih.gov/guidelines/obesity/bmi_tbl.pdf .
Dutton, G. Stem Cell Firms Struggling for Financing. Genetic
Engineering & Biotechnology News, 2007. Vol. 27, No. 15.
Available at
www.genengnews.com/articles/chitem.aspx?aid=2217&chid=4.
6.
According to the Center for Health Statistics, approximately 20
percent of the adult population in the United States has a BMI≥30.
7.
Stem cell and regenerative medicine companies should take care
not to pre-promote any product.
8.
A complete list of Aetna clinical policy bulletins can be found at
www.aetna.com/cpb/cpb_menu.html.
Q1 2009 MoneyTree™ Report, PriceWaterhouseCoopers and the
National Venture Capital Association, April 18, 2009. Venture
capital investment in the biotechnology sector has decreased
approximately 62 percent from Q1 2007 investment.
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