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Clearing Away the Fog: FDA Approval and Product Reimbursement Welcome Charles Schalliol Baker & Daniels Mike Brooks President & CEO, IHIF Tony Armstrong President, IURTC David Johnson President & CEO, BioCrossroads Today’s 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 Today’s 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 O’Shea 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. 7 The Regulatory Process / Trends Ralph Hall 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 9 Current FDA/Business Interface 2007-19 NCEs approved ─ Increasing cost ─ ─ Clinical studies Submissions Uncertain timing Increasing regulation Increasing scrutiny ─ ─ ─ lowest in 24 years Congress Media FDA Tremendous pressure on industry ─ ─ ─ More products Better products Safer products 10 Key Questions Is the product regulated? ─ If Is the activity regulated? ─ If so, what is it? so, how? Must FDA approve the product before marketing? Who will pay for it? Is it protected via IP? 11 Types of Regulated Products Drugs Devices ─ Diagnostics Biologics Cosmetics Foods/Dietary Supplements 12 Impact of Definitions Product Time Drug Cost Clinical $750 MM+ 5-30,000 8-10 years PMA Device 510(k) Device Biologic (biotech) $50 MM 1,000 $10 MM -0- 5 years 3 years $750 MM+ 5-30,000 8 years Cosmetic $5 MM 2 years -013 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 14 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 15 Drug & Biologics Regulation Drugs must be shown to be “safe and effective” ─ ─ Clinical trials required ─ ─ ─ ─ Risk/benefit assessment Burden on company Investigational new drug approval Approved protocols IRB approval Informed consent Ongoing manufacturing and reporting duties 16 Device Regulation Risk based classification system I – low risk ─ Class II – medium risk (510(k)) ─ Class III – high risk (PMA) ─ Diagnostic products ─ Class Requirements vary based on classification Ongoing quality and reporting duties 17 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 ─ 18 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 19 Four Key Trends FDA’s approach to new technology Clinical trial issues Pediatric products FDAAA implementation and implications 20 New Technology Evolutionary vs. revolutionary technology ─ ─ ─ FDA accustomed to dealing with new uses of known scientific principals A new use or therapy doesn’t make the technology revolutionary Stents use known mechanical and biologic processes FDA comfortable using existing structures for evolutionary technology 21 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 22 Nanotechnology as Revolutionary Great attention on nanotechnology Do nano particles act differently than nonnano 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? 23 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 ─ 24 Clinical Trial Issues Potentially slower approvals of INDs/IDEs ─ ─ More inspections ─ ─ Greater scrutiny More questions Clinical trial holds Enforcement actions Data challenges ─ Data mining 25 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 26 FDAAA Implementation FDAAA passed Sept. 2007 Substantial changes and additions to FDCA Congress willing to get involved in detail Pressure on FDA ─ Constant oversight ─ 27 FDAAA Implementation Key provisions ─ ─ ─ ─ ─ User fees Pediatric drugs and devices Post market surveillance Posting clinical trial information Food safety and imports 28 FDAAA Implementation Major FDA effort required 200 + major tasks ─ ─ Consume resources ─ ─ New regulations and guidances Rules can change Impact on reviews? Role of user fees Impact on management priorities and policies 29 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 30 Regulatory Strategy Suzanne O’Shea The Regulatory Review Process pre-clinical data IND IDE clinical trials CMC 510(k) design controls PMA NDA REMS MDR lot release BLA 32 5296154 Strategy: the artful and ingenious use of resources 33 Resources include statutory authorities and regulations Federal Register of August 28, 1996 61 FR 44395, 44401 The Tobacco Rule 34 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. 35 Investors Drug, Device, or Biologic Intended Use Unregulated Article Reimbursement/ Payment Combination Product Clinical Trial Design Lead Agency Center Time to Approval Patent Protection FDA Exclusivity Number and Type of Application 36 Reg-Map: New Use for an Old Drug Bleomycin for systemic administration NDA supplement by drug company electroporation device 510(k) 37 Reg-Map: New Use for an Old Drug electroporation device + PMA clinical trials 38 Reg-Map: New Fangled Delivery Device new device Drug X old drug general use 510(k) clinical trial of device + old drug 39 Reg-Map: New Fangled Delivery Device Drug X old drug contract manufacturer 505(b)(2) application to CDER clinical trials pre-filled, single use disposal device 40 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 41 Reg-Map: Follow the $ drug to treat a rare but deadly side effect of implanted device NDA to CDER clinical trial, data development 42 43 Clinical Trial Contracting Amy Judge-Prein Current Pressures for Transparency Concern for bias with funding Registry / disclosure requirements 45 Contracting Barriers Publications Inventorship Subject Injury Reimbursement Indemnification / Insurance 46 Increasing Need for Financial Clarity Enforcement trends Anti-kickback need for clear budgets Complications of reimbursement MSP memorandum ─ Concern for fraudulent submissions ─ Avoiding promotion ─ 47 Device Reimbursement: Planning for Value-Based Payment Dan Carmichael The New Yorker, May 12, 2008 First principals. . . We’re facing an “innovation arms race” ─ Securing “value-based payment” requires evidence, advocates and time ─ Stakeholders define value differently Successful reimbursement work is fully integrated into broader product plan ─ New product launches outpace policy development Not just code applications and billing guides Senior leadership “owns” reimbursement ─ Commit resources; set realistic expectations 50 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? 51 Payers employ different reimbursement mechanisms • What kind of insurance does the patient have? Medicare > 65 years Disabled ESRD Medicaid Commercial (private) Financial need Employed Self-insured 52 Reimbursement mechanisms depend on the site of service Where is the service taking place? Inpatient Outpatient Ambulatory Surgical Center Physician’s Office Patient’s Home Single, prospectively set facility payment Multiple, prospectively set facility payments possible Separate payment for product possible Single, prospectively set facility payment Fee schedule Prospectively set contracted amount Separate payment for product possible 53 Three interrelated principals underpin US healthcare reimbursement Coverage Coding Payment Securing value-based payment requires attention to all three. (Corollary: Just “getting a new code” is likely not be sufficient. . .) 54 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 55 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 56 National non-coverage policies preclude coverage Medicare contractors may not pay if noncoverage 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 57 Payers evaluate precedent set by each others’ coverage policies Medicare coverage policy is influential for private payers—but not determinative Larger payers also have clinical resources that may determine coverage policy, including the BlueCross BlueShield Association’s Technology Evaluation Center (TEC), Kaiser and Aetna Smaller payers may look to both public and private “bellwether payers” for precedent in setting their policies 58 Coverage Determination Processes Payer CMS (Medicare) BCBSA Aetna Advisory Body MedCAC TEC Corporate Medical Affairs National Coverage Decisions Yes Yes Yes Regional medical director can make decision in absence of a corporate policy Local Yes Plan Medical Director Makes Decision Who Trumps? National Local National Website www.cms.hhs.gov www.bcbsa.com www.aetna.com 59 Coding systems are the “language of reimbursement” ICD-9-CM Patient diagnosis Inpatient hospital procedures CPT Physician procedures Hospital outpatient procedures Diagnostic tests Clinical lab procedures HCPCS Durable medical equipment Prosthetics, orthotics Surgical dressings 60 Coding systems are managed by constellation of decision makers ICD-9-CM Patient diagnosis-- NCHS Inpatient hospital procedures--CMS CPT AMA with Physician procedures Hospital outpatient procedures-- input from professional Diagnostic tests societies Clinical lab procedures HCPCS Durable medical equipment CMS Prosthetics, orthotics-HCPCS Surgical dressings Workgroup 61 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 62 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 63 Code pairs “map” to payment according to site of service Service Physician Office Physician Service Hospital Inpatient Hospital Outpatient Ambulatory Surgical Center Physician Fee Schedule Facility and Bundled into Supply Costs 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 ASP+6% MS-DRG Variety of Payment Formulas Pricer Group 64 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 65 Who defines product value? Payers Value Patients Providers Industry Stakeholder Interests Physicians Clinical Evidence Hospital/Facility Purchasing Agent X Cost Effective Treatment Payment Amount X Access to novel treatments X Payers Patients/ Patient Groups X X X X X X X 67 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 POC -12 -6 0 +6 +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? 68 Strategic planning can accelerate valuebased 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!! 69 Conclusion & Questions Charles Schalliol 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! 71 Dennis the Menace "SOME DAYS JUST HAVE MORE RULES THAN FUN." 72 Thank you! Questions?