Medical device reimbursement is a key consideration that must be well researched, understood, and managed by companies in order to ensure no money, to which you’re entitled to, is left on the table.
In this episode of the Global Medical Device Podcast, Jon Speer talks to Mike Drues from Vascular Sciences about the importance of medical device reimbursement and offers tips listeners can use to build a competitive reimbursement strategy that puts dollars back in the company’s pocket once a device is on the market.
Some highlights of this episode include:
- Many medical devices, products, and technologies are not on the market because product development does not happen, is not done quickly, or there is a lack of reimbursement.
- Strong regulatory and reimbursement incentives have been created for companies to develop ‘me-too’ products, but also disincentives to create new or novel devices.
- Reimbursement is important to medical device developers because they want to get paid. They must sell their devices and products to receive reimbursement.
- Some medical device entrepreneurs, developers, and companies seek out markets where reimbursement is not an issue with the Centers for Medicare and Medicaid Services (CMS) and insurance companies.
- When to begin thinking about reimbursement in the product development process—as early as possible—from the point of pre-prototype.
- Competitive Reimbursement Strategy: Is it better for a device to fit into an existing reimbursement code or design a device that requires a new reimbursement code that is difficult for competitors to use, too?
- Off-Label Products, Devices, and Drugs: Reimbursement is possible. However, what is taught in medical school is the standard of care, not what is on the label.
- Getting the FDA’s Breakthrough Devices Program (BDP) designation provides significant non-regulatory advantages, including reimbursement.
Memorable quotes by Mike Drues:
“Reimbursement has a big impact on product development. Specifically, not just the devices we have on the market today, but more importantly, the devices that we don’t have on the market today and why we don’t have them.”
“In the United States, a lot of people think that we have the best medicine that money can buy. That’s simply not the case. We have the best medicine that money is willing to buy, and there’s a big difference.”
“We’ve created strong incentives—both regulatory incentives as well as reimbursement incentives—strong incentives for companies to develop ‘me too’ kinds of devices. At the same time, we’ve created strong disincentives for companies to develop anything truly new or novel.”
“Another reason why reimbursement is so important to medical device developers is...if you’re working for a company, most people want to get paid.”
Announcer: Welcome to the Global Medical Device Podcast, where today's brightest minds in the medical device industry go, to get their most useful and actionable insider knowledge, direct from some of the world's leading medical device experts and companies.
Jon Speer: Ah, reimbursement. It's such a tricky, challenging topic, and I know some of you listening may be saying, " Well, what does reimbursement have to do with the thing that Greenlight Guru is focused on?" Well, to be quite honest, it has a lot to do, because part of our mission is, to help improve the quality of life, and in doing so, is to provide you tools and information and content and just knowledge on how to be better prepared, and more successful as medical device professionals. If you are in any way, shape, or form involved in the design and development of a medical device, reimbursement is a topic that you need to have at least some knowledge and awareness about, in order to be successful in the marketplace. It's a deep topic, but I'm encouraged that we've got Mike Drues with Vascular Sciences joining this episode of the Global Medical Device Podcast. He has a lot of knowledge on reimbursement and things CMS- related, so enjoy this episode of the Global Medical Device Podcast. Hello, and welcome to the Global Medical Device Podcast. This is your host and founder at Greenlight Guru, Jon Speer. Joining me today is, Mike Drues. Mike is with Vascular Sciences. Mike, welcome to a 2021 edition of the Global Medical Device Podcast.
Mike Drues: Thank you, Jon. Happy New Year to you, and to everybody in our audience.
Jon Speer: Absolutely. You know, it occurred to me recently that, you and I have spent a fair amount of time talking about some of the finer points, and sometimes nuances of regulatory, and sometimes we dive into quality. Somebody was asking me about reimbursement the other day, and I know... I'll say enough to be dangerous. I'm like, " I know somebody who knows a whole heck of a lot about reimbursement, and that's my good buddy, Mike Drues." How about we talk a little bit about reimbursement today?
Mike Drues: That sounds like a great idea, Jon. Happy to be part of the discussion.
Jon Speer: As we usually do, probably a good place to start is, maybe give some folks a little bit of context, what we mean when we talk about reimbursement.
Mike Drues: Great question Jon. Let's start out with a premise, and that is, there's probably only one topic that is more boring for most people to talk about than regulatory and quality, and that is reimbursement.
Jon Speer: Yeah, all right.
Mike Drues: But, like regulatory, reimbursement does not have to be boring, if we approach it properly. In other words, my attempt here is, not to talk about reimbursement codes and other kinds of minutiae like that. Quite frankly, that's not very important, especially for a non- reimbursement audience like ours is. On the contrary, if we focus on reimbursement strategy, like regulatory strategy... In other words, why should non- reimbursement folks care about the topic of reimbursement? One thing to start out our conversation Jon, is that, there is a tremendous impact of reimbursement on chronic development. We have a lot of folks in our audience that are involved in one aspect of medical device development, or another. One of the things that a lot of people don't realize Jon, is that, reimbursement has a big impact on product development, specifically, not just the devices that we have on the market today, but more importantly, the devices that we don't have on the market today, and why we don't have them. In other words, I can off the top of my head Jon, if I wanted to, I could probably give you a list of at least 10, or 12, probably more technologies that are clearly better than anything we have today. Yet, they're either not being developed very quickly, or in some cases, not being developed at all, for a number of different reasons. One of them can be a lack of reimbursement. It's interesting Jon, in the United States, a lot of people think that we have the best medicine that money can buy. It's simply not the case. We have the best medicine that money is willing to buy. There's a big difference.
Jon Speer: Yeah.
Mike Drues: Jon, you and I have talked many times about why we have so many me too kind of medical devices on the market. To be fair, we have a lot of me too drugs on the market as well. Well, the reason why quite frankly, is twofold. One is, as we talked about before, from a regulatory perspective, let's be honest Jon, it's easier from a regulatory perspective, to get a me too device through the FDA and onto the market, than a truly new, or novel device. Also, from a reimbursement perspective, it's easier to fit into an existing reimbursement code, than to work with the CMS, the centers for MediCare and MedicAid services, to set up a new reimbursement code. Bottom line Jon, and I take no pride in saying this, because it doesn't bode well for our industry, and our society, we've created strong incentives, both regulatory incentives, as well as reimbursement incentives, strong incentives for companies to have a me too kind of devices. At the same time, we've created strong disincentives for companies to develop anything truly new, or novel. I don't know about you Jon, but to me, I find that a huge problem. Would you agree?
Jon Speer: I do agree it's a problem, and I think part of the challenge... Man, this could go deep. This could go long, so we'll try to stay on point, and on topic. I'm not trying to get political here, no. We're not supposed to talk about politics amongst friends, but I remember all the... Every year, there's all this talk about healthcare reform, et cetera, et cetera, et cetera. There are so many layers between technology, medical device technology, pharmaceutical technology, whatever the case may be. The patient, it just drives me nuts. One of those layers certainly is the reimbursement, but you're spot on. There's a lot of de- motivators, or disincentives that are designed, I think intentionally. Reimbursement might be one of those. I hope I'm not saying anything too provocative here, but I know that you don't shy away from those things.
Mike Drues: Definitely not too provocative for me Jon. As a matter of fact, I think you're being quite tame, at least thus far. Just one, or two other points to consider, as we dig into this further, because you're right. This is a very, very deep topic. Another reason why reimbursement is so important to medical device developers is, let's face it. If you're working for a company, most people want to get paid. They want to get a salary. They want to get a pay cheque at the end of the week. In order to do that, you need to sell your products. You need to sell your medical devices. Most of the time, in order to sell them, you need reimbursement for it. Although, interestingly enough Jon, there are, just like in the regulatory world, there are exceptions to every rule. Some of my entreprenuerial friends specifically look for medical device markets where reimbursement is not an issue, where they do not have to worry about the centers for MediCare and MedicAid services, CMS who set sup the reimbursement codes, and do not have to worry about insurance companies. Can you think of any medical device examples Jon, where reimbursement would not be an issue?
Jon Speer: You manage to do this every single time.
Mike Drues: I don't mean to put you on the spot.
Jon Speer: No, but it's okay. Well, I think it's certainly... I don't have a specific example, but something that's more direct to the consumer, there may be some opportunities there, but even so, even some direct to consumer things, there's insurance and all that sort of thing involved. I was talking to somebody the other day, and they went in for a CT scan, and it's an interesting question. I hope I'm not dodging your direct question, but this person was asked, " Well, who's paying for it? Is it the insurance company? Well, if the insurance company, it's$ 499. If you're paying out of pocket, cash, well, it's $ 99." I don't know if that's an example, but perhaps something along those lines, it's more direct to consumer?
Mike Drues: It could be an example, Jon. Here's perhaps a better example. Medical devices used for cosmetic indications. For example, a laser that's indicated for the removal of a tattoo. There's not a snowball's chance here in Southern California that CMS or an insurance company is going to reimburse for a laser used to remove a tattoo. Quite frankly, they shouldn't. For the entrepreneurs in our audience, there is an interesting argument to be made, if you can find an area of medical device design and development where reimbursement is not an issue, like the one that I just mentioned, then that could simplify quite a bit, your go to market strategy.
Jon Speer: Yeah.
Mike Drues: Does that make sense?
Jon Speer: It totally does, and why does this matter? Why does reimbursement matter to those listening? I'll start with a short story, and certainly get your thoughts on this, but when I worked for a large company, we didn't give two thoughts in product development about reimbursement. I suspect the reason why is, because we had a whole department of people that worried about that. Then, fast forward quite a few years later, when I was doing a lot of work with startups, helping them bring products to market they didn't have a whole department of people. In fact, there is this, right, wrong, or indifferent, there is this perception that well, CMS, FDA, CDRH, they're both branches of federal government, they're both part of health and human services. They probably talk to each other and so on, and so forth. Jon, you know a little bit about quality, and a little bit about regulatory. Take care of that reimbursement. I was like deer in the headlights. But, if we didn't deal with it, granted, it was probably one of those me too type products, where there was already established procedure codes, and all that sort of thing. There was no incentive for the healthcare provider to use my product, because they weren't going to get paid. Even if it was the best thing since sliced bread, it is a payola system, unfortunately.
Mike Drues: Well, you're right Jon, and of course the next logical question to ask then is, how early in the product development process should a medical device company begin to consider regulatory, or in our case, reimbursement? What would be your advice there, Jon?
Jon Speer: Well, I think it's good to know prior, whether you're developing a me too, or something novel, I think it's good to understand the standard of care from a procedural standpoint. I think it's good to get information relatively early on in the development process. As far as a finite day, or moment, that's a little bit harder to come by. To me, it seem like as you understand what your intended use, and indications for use, what you're targeting... Maybe you're doing some early prototyping, and defining user needs, and things of that nature, that's probably a good time to start the process. What do you think?
Mike Drues: I think that's a great start, Jon. Let me, if you don't mind, take what you've just said, and add on a little bit more. Just like regulatory strategy, I think we want to begin to think about reimbursement as early in the product development process as we possibly can, literally from the point of prototype, or even pre- prototype. Why? For a number of reasons. First of all, I've seen it happen several times where, medical device companies, including some of the largest medical device companies on earth, they've gotten a device through the FDA and onto the market, only to later come to find that, people can't, or don't use them. Why? Because it's difficult, or sometimes impossible to get reimbursement for it. I think that quite frankly, Jon... I don't mean to be unkind here. That's a laughable mistake. That's an amateur mistake. I just can't understand how that possibly happens. You and I have talked before Jon. Let's say for example, we have a class two medical device. We can design that device one way, so that it's a 510(k). We can design the same device another way, so that it's a De Novo. Exactly the same thing applies to reimbursement. I can design a device to work one way, such that it easily fits into an existing reimbursement code. On the other hand, if I design it a different way, it might not fit into an existing reimbursement code. We might have to work with CMS to set up a new existing code, a new reimbursement code, rather, which is quite frankly, a pain in the neck. Another reason why it's very, very important to begin to consider reimbursement early in the product development process is, the amount of clinical data that we're going to need, to get the product onto the market. It's interesting. I hear people in our industry, they complain about the amount of clinical data that FDA may require as part of the submission for a 510(k), a De Novo, a PMA, what have you. Well, to quote a famous politician, I often say, " I feel your pain." But when it comes to reimbursement, CMS often requires 10 times more clinical data for reimbursement purposes than the FDA would require for approval, or clearance purposes, 10 times difference.
Jon Speer: Wow.
Mike Drues: Finally, the last reason why... I shouldn't say the last. Another reason why I think companies should consider reimbursement as early into the product development process as possible is, because of something I call, competitive reimbursement strategy. You and I Jon, have talked many times about what I call, competitive regulatory strategy.
Jon Speer: Yeah.
Mike Drues: Well, competitive reimbursement strategy is exactly the same idea. In other words, is it better for example, to fit into an existing reimbursement code, which is clearly the path of least resistance, or alternatively, to design your device such that a new reimbursement code is necessary to set up, if the latter is true, if we need to set up a new reimbursement code, what can we do to... shall we way, design that reimbursement code such that our product can fit into it, but at the same time, makes it very difficult, if not impossible for our competitor's product to fit into it. Once again, for those in our audience who have heard us talk about competitive regulatory strategy, the idea of competitive reimbursement strategy is very, very similar.
Jon Speer: Yeah, and it's interesting. I hadn't thought about it like that. It's I guess the regulatory corollary would be, if you don't want to be a me too product, explore other opportunities, whether that be novel and unique, and pursuing PMA, or maybe even a De Novo, or something like that. This sounds like that maybe the reimbursement complement to that, so to speak, which I guess raises a question though... Is it possible... Go with me for a moment, to... Let me rephrase the question. If I have a competitive reimbursement strategy and approach, that creates some novelty so to speak, from a reimbursement perspective, does that have any ramifications on my regulatory strategy?
Mike Drues: Good question, Jon. Theoretically, no. Reimbursement and regulatory are independent of one another, but they are also interdependent on one another. They're not completely removed from one another, but usually, as a general rule, if you have a device that is going to require a new reimbursement code, it's probably going to be new and novel in the eyes of the FDA, meaning that it's probably say, a De Novo, over 510(k). Is that always the case? No. The similar metaphor that I would use Jon is, is it possible to have a device that has breakthrough designation, BDT, and yet, we bring it onto the market as a 510(k). Although it seems like an oxymoron to put 510(k) and a PDP in the same sentence, it can be done. But, the general rule is, they're usually different, if that makes sense?
Jon Speer: Yeah, it does make sense, and what if somebody's using a product off label? What's the impact from a reimbursement perspective?
Mike Drues: Yeah, great question, or another way to phrase the same question I think Jon is, is it possible to get reimbursed for a product, when it's used off label? The shorter answer is, absolutely yes. In fact, it happens all the time. The frequency that it's happening is actually increasing. One of my many frustrations that I run into with a lot of my regulatory friends, and a lot of my medical device friends in general is, they think that what we teach in medical school is, what's on the product's label. From somebody who... You know from my background, Jon, I used to teach pathophysiology here, to medical students. I can tell you as a matter of certainty, we do not teach in medical school, what is on the product's label, whether it's for a medical device, or a drug, doesn't matter. What we teach is, the standard of care. If the standard of care happens to be in agreement with what's on your label, then great. If the standard of care happens to be in disagreement with what's on your label, that's when life gets interesting. I know this is obviously a medical device audience, Jon, but let me use a drug metaphor as an example. Aspirin, we've known for decades that, Aspirin, because it's a weak anti- coagulant, as well as a non- steroidal antiinflammatory, it's very good at preventing heart attacks and ischemic strokes. We've been teaching that in medical school for decades. Everybody knew that. But, it wasn't up until maybe about eight, or perhaps 10 years ago that, it was actually added to the label. What we teach in medical school is the standard of care, not what's on the product's label. Here's an interesting question for you Jon. When a company sells a product, a medical device, or again, a drug for that matter, it doesn't matter, are the dollars that are coming in from the sale of that product for off label use somehow less green than the dollars coming in from on label use? Obviously not. Simply put, CMS does reimburse for off label use frequently. I could give you a litany of examples, but let's take it a step further, Jon. As our audience knows, I work as a consultant for the FDA. I also work occasionally as a consultant for the CMS. This has led to some interesting discussions at the CMS over the years. I have said, and nobody can dispute this, that CMS reimburses routinely for off label bus. What a lot of people don't realize is that, in a small, but growing number of cases, CMS is actually reimbursing for uses that are contraindicated on the FDA cleared, or approved label. Contraindicated, so we have an interesting sort of a paradox, Jon. We have on one part of under Health and Human Services, HHS, FDA says don't use this product to do X. Then, at the same time, a different group under HHS, CMS, the Centers for MediCare and MedicAid Services says, oh, by the way, if you do use it for X, we're going to pay you for it. We're going to reimburse you for it.
Jon Speer: Interesting.
Mike Drues: I don't know about you, Jon, but it's one of the many interesting ironies, if not hypocrisies in the medical world, when it comes to health economics.
Jon Speer: Yeah, really interesting, and folks, obviously if you've been listening to the Global Medical Device Podcast for any length of time, good chance you've heard Mike Drues and I talk about competitive regulatory strategy, and you've heard me talk about, if you need some help with that, Mike is your guy. Clearly, he knows a lot about reimbursement as well, and certainly... I'm guessing Mike, you work with a lot of folks on regulatory strategy, you are probably in parallel, working with them on their reimbursement strategy as well.
Mike Drues: I do, Jon.
Jon Speer: Yeah.
Mike Drues: I don't market myself as a reimbursement consultant, per se, but I have-
Jon Speer: It's part of the-
Mike Drues: ...over the years and decades I've been playing this game, gotten dragged into reimbursement more, kicking and screaming. But to be clear, I'm not interested in designing the reimbursement strategy for a company. I certainly don't want to talk about reimbursement codes and the minutiae like that. That just bores me to tears. But, when it comes to integrating regulatory strategy and reimbursement strategy, that is something that I think is absolutely critical. Can I give you a quick example of what I mean, Jon?
Jon Speer: Yeah, for sure.
Mike Drues: So, a couple of years ago, I was involved with a combination product. This was a device/ drug combination product, like a drug delivering stent, if you will. The company asked me to develop a regulatory strategy to bring this combination product to the FDA and onto the market. Well, this was a no brainer for me. Jon, as you know, I do a lot of work with combo products. I made the case that the primary mode of action, the PMOA of this combination product was device, and therefore, CDRH would be the lead center, and we would primarily bring it onto the market as a device. The company said, " Okay Mike, no problem. We understand that. Here's the dilemma. If we bring this product onto the market primarily as a medical device, which is clearly what we want to do from a regulatory perspective, we get reimbursed at a certain level."" On the other hand, of we bring exactly the same product onto the market primarily as a drug, we get reimbursed at a higher level." Now, it shouldn't take an MBA after somebody's name, to appreciate Jon, that the company wants to get reimbursed at the higher level. What they asked me to do is, to re- engineer, or to tweak the regulatory strategy, to meet the reimbursement strategy. In other words, flip from PMOA equals device, to PMOA equals drug. It was very easy for me to do. The challenge was, when we took this to the FDA... Again, this was a couple of years ago, but when we did finally take this to the FDA, would one of my FDA friends recognize that's what I was doing, and ask the question, " Hey Mike, are you changing your regulatory strategy, to meet your reimbursement strategy?" Well, prior to going into that meeting, I would have guessed that probably about 70% or 80% of the FDA reviewers in the room would not have a clue as to that's what I was doing. But maybe 10% or 20% of them might, and as a result, they might ask that question. One of my philosophies that I've developed over many years of playing this game Jon is, you can't anticipate every problem, or question, but you can anticipate many of them. That was one of the questions that I anticipated. My trite response... I didn't give this response, because nobody in fact did was that question, but my trite response to that question was going to be Jon, " Yes, Mr. Or Mrs. FDA reviewer, that's exactly what I'm doing. Oh, by the way, please explain to me, why that's any of your business?" Because theoretically Jon, FDA is not supposed to be concerned about the money. That's CMS, but they could have asked that question. That's a quick example, and I have lots of other examples where regulatory strategy, and reimbursement strategy, along with product liability and intellectual property and everything else, all of these things have to be integrated. They all have to be connected like puzzle pieces. You cannot consider one without the other. In some cases Jon, like for example, the case that I just shared, which is not a hypothetical, it's a real example, in some cases, the reimbursement strategy is actually strong enough to flip the regulatory strategy. Does that make sense?
Jon Speer: Yeah. Just before you started explaining that, I was like, oh, now I... Mike often talks about this as a game of poker, and I could see where reimbursement is certainly an important aspect of that game of poker. Yeah, it makes a lot of sense. I guess I'm a little bit curious. You mentioned a breakthrough device program a moment ago. Do you see that something that might be a candidate for BDP, that this provides some sort of reimbursement advantage?
Mike Drues: Yeah, great question, Jon. As someone in our audience may remember, we've talked about the breakthrough devices program, or BDP in several discussions. There are some very significant non- regulatory advantages of getting BDP designation. One of them is in terms of reimbursement. In other words, one of the things that some people, including myself, were saying when the BDP was first created was, what good is it, to get a device through the FDA quickly and onto the market, if it's a breakthrough device? It's because it's a breakthrough, it doesn't fit into an existing reimbursement code. Therefore, people can't get reimbursed for it, therefore, they're not going to use it, so what good is it? What CMS did is, they originally created a program where for a period of two years, and just last year, it was expanded now, to a period of four years, for any medical device that is approved with BDP designation, you essentially get what I'll call automatic reimbursement for those first four years. After that, you then have to go through CMS, and you have to have the clinical data to show the... not safety and efficacy, because CMS doesn't care about safety and efficacy, but they want to know the cost benefit. You get four years of automatic reimbursement. What does that mean, Jon? I've got now, about nine devices that are currently in the BDP program at CDRH. Two, or three of those devices, companies wanted BDP designation, not because of any FDA, or regulatory benefits. As a matter of fact, to be candid, they could care less about the regulatory benefits of the BDP. What they were interested in was, the non- regulatory benefits, like for example, the automatic reimbursement that I just described. Bottom line, there are some very significant advantages to getting a BDP outside of the regulatory world. One of them certainly is reimbursement.
Jon Speer: Interesting. You know, I think you and I ... I think this might have been what triggered the conversation about reimbursement today. I think it was one of the recent times you and I spoke. I think we were talking about the CDRH 2021 priorities. Somewhere in there, we mentioned something about the... I think it's a pilot program between CDRH and CMS on a parallel review. You know what's curious to me is, why that program hasn't been more popular. Do you have any thoughts as to why, or why not?
Mike Drues: Yeah, it's interesting, Jon. I think what you're referring to is what's now called the FDA CMS reimbursement pathway.
Jon Speer: Yeah.
Mike Drues: It's interesting that you, like many people, call this a pilot program. It depends on how you define pilot. I looked this up, because I was actually on this committee many, many years ago. This program was started in 2011. Now, we're in 2021, a decade later, and you're asking the question that I've been asking for 10 years. That is, why the heck is this taking so long?
Jon Speer: Yeah.
Mike Drues: It's amazing to me. I was on that committee for a while, and I finally got off that committee, because I was just so frustrated. Maybe I shouldn't say this in a publicly recorded podcast like this, but I'm not running for politics, Jon, so what do I have to lose? If we were in a race with a snail, the snail would have won. I hate to say it, but it was just painfully slow. I'll give you a quick example. As you know, Jon, I've been involved with combination products for more than 20 years. I was one of the first people to be involved with the first drug delivering stents back in the day. When you look at the first drug delivering stent, it's interesting from a reimbursement perspective, because Courtice, and division of J& J, the first ones to bring the first drug delivering stent onto the market, realized that they faced a bit of a paradox. In other words, they could get the drug delivering stent onto the market that is through the FDA, but if as we said before, it doesn't fit into an existing reimbursement code, there's no drug delivering stent on the market yet, what code will you put it in? People aren't going to use it. What we did was, and this was a very controversial move within that particular company is that, before we even went for FDA approval, we went to get CMS approval. Long story short, it was the first time where two new reimbursement codes we set up prior to FDA approval of that product. The reason why that was controversial within that particular company, Jon, is very simple. Because, the company knew that it would be to their benefit to get the reimbursement code set up. But, the company also knew that it would be equally to the benefit of their competition as well, because then, all the other drug delivering stent companies can come in, and piggy back on the first company who did it. It's what I said earlier, about competitive reimbursement strategy. It is taking a long time, and one other example I would just quickly share, Jon, and then we can start to wrap this up, I think is, we really need to have a more formal mechanism, I think, to be able to communicate with CMS in advance, like a pre- sub meeting, that we do at the FDA. We need a pre- sub with CMS, if you will. Here's why, because I've been involved, and perhaps you have as well, Jon, with a handful of 510(k) devices. I would say at least, four, five, maybe a few more off the top of my head, where I was 100% confident that I could get this through the FDA as a 510(k), without any clinical data. I had absolutely no doubt in my mind. However, I also was equally confident that there was not a snowball's chance here in Southern California, that we would get reimbursement from CMS, without any clinical data. In those cases, Jon, and I was among the first people to do this, and now there's a few other people that are doing it, so it's the beginning of a trend... Before going to the FDA, this is... You will appreciate my poker metaphor, Jon, that you just alluded to a moment ago. Before we went to the FDA, we went to CMS and we came to an agreement as to what kind of clinical data that CMS is going to need for reimbursement, and then we went to the FDA. Before anybody in the FDA even opened their mouth and asked a question, we said, " Here's the clinical trial that we're going to do. Here's the number of patients. Here's the inclusion and exclusion criteria. Here's the end points and so on." I didn't tell my FDA friends that, the reason why we're doing this clinical trial has nothing to do with you FDA, Jon, it has everything to do with your friends up the road at CMS. I didn't tell them that. That's none of their business. But, what happened, I just gained a ton of brownie points, because everybody in that room knew that I could have gotten the device through the FDA and onto the market, without the clinical data. The reason why that's such an advantage, Jon, again, speaking in terms of the poker game is because, one thing I've learned in being married is, I will take brownie points for any reason that I can get them, because sooner, or later, I'm going to have to cash them in.
Jon Speer: Yeah.
Mike Drues: When I say this is a poker game, I mean that in every sense of the word. I hope those couple of examples are helpful, or illustrative to why reimbursement is so important in this game, not just to reimbursement professionals, but perhaps even more important, to the non- reimbursement professionals, whether they're engineers, or working in R& D, or in manufacturing, whether they're regulatory folks, I don't care. But, everybody needs to know at least something, like you and I are talking about today, when it comes to reimbursement.
Jon Speer: For sure, for sure. Any last moment tips and pointers that you think is important to leave the audience with today, on the topic of reimbursement? Again folks, we're just barely touching the surface on this topic. It's really deep, so we just wanted to at least give you some heads up, and a little bit of information that you can delve into this topic, but any other last minute tips and pointers for folks today?
Mike Drues: Well, it's just, as we've talked about, as I've tried to illustrate that, reimbursement, like regulatory, does not have to be boring, if you approach it properly. It is very important for everybody to understand, especially for the engineers in the audience, because it largely will explain, as I said that the beginning of our discussion today, Jon, not just the products, the medical devices that we have on the market, but the ones that we don't. That to me, is one of the most problematic things about this. In other words, the last example that I'll share with you, Jon is, I work with a lot of small and startups that are in the process of raising money. They talk to VCs, or angels. Can you guess, Jon, what the first two questions are, that a typical professional investor would usually ask, before writing a cheque? I'll give you a hint. It has nothing to do with market size, or even regulatory strategy. What do you think are the first two questions that professional investors will ask, before writing a cheque?
Jon Speer: Well, I can imagine one of those questions is something along the lines of, how long is it going to take, before I make money?
Mike Drues: Recouping your-
Jon Speer: Yeah, my investment.
Mike Drues: Absolutely, but ... Yeah, yeah.
Jon Speer: I can imagine another question would be something along the lines of, what are the challenges to get to market, or something along those lines. I don't know if I'm in the right area code here, but what were you thinking?
Mike Drues: Well, good guess, Jon. I don't mean to put you on the spot, but I do appreciate you being a good sport about it. In my experience, and I work with a lot of VC and angel groups. Typically the two most common questions that companies get first, one, " Do you have IP protection, intellectual property protection?" Second, and relevant to our conversation today, " Is there an existing reimbursement pathway?"
Jon Speer: Yeah.
Mike Drues: Is there an existing reimbursement pathway? Why? Because it illustrates the simple fact that it, as I said earlier in our discussion, much easier to fit into an existing reimbursement pathway, than to work with the CMS, which can take many, many years, and countless amount of money to set up a new one. The downside of that, Jon is, it's just another incentive for companies to bring out products that we essentially already have, or are very, very similar to products that we already have. Now, the last thing that I'll say, Jon, and then we can wrap this up, unless you have anything else, just like regulation you've heard me say many times, I refuse to use regulation, or FDA as an excuse to hold me back. I think we have too many people doing that. Similarly with reimbursement, I refuse to use reimbursement, or the lack thereof, as an excuse to hold me back, because let's face it, if everybody worked only on devices that fit into an existing reimbursement pathway, then we would never have any new, or novel device. We would essentially still be living in caves. It can be done, but I also have to point out to the customers that I work with is that, it is going to be in the long- run, more time- consuming, and sometimes more expensive, but it can actually make you more money in the future, because one of the advantages of if you are going to take the path of more resistance, work to create a new reimbursement code, or pathway, you might get a higher reimbursement. In the short- term, it might take you more money, and more time to get reimbursement, but in the long- term, you might make a ton more money, because your reimbursement is that much higher. Again, I don't know if... I'm trying to explain this as simply as I can in the short time that we have. These are complicated questions, Jon. When it comes to regulatory strategy, and when it comes to reimbursement strategy, and especially when it comes to integrating the two together, you really need somebody on your team that knows what the heck they're doing.
Jon Speer: For sure.
Mike Drues: Anyway, go ahead.
Jon Speer: Sure, sure. No, and I guess as you were describing that, knowing that the reimbursement process if I'm trying to get a new code can be years, it's possible that, that time could be longer that it's going to take you, to get your product cleared, or approved via FDA. Maybe not, depending on when you start, but it seems to me that this is again, another parallel to what you had I have talked about from a regulatory perspective in the past. Maybe there is an opportunity to get from a regulatory perspective, to get my product to market under a 510(k) for example, and then pursue a De Novo, or a PMA in conjunction with, as follow inaudible missions, it seems like there might be that same sort of opportunity from a reimbursement perspective too.
Mike Drues: Not only there might be, Jon.
Jon Speer: There should be.
Mike Drues: There oftentimes is, and I'm glad you brought that up, because it is a strategy that I've used many, many times. Using the regulatory as a metaphor, you don't have... it's not a binary decision, 510(k) versus De Novo, or even PMA. You might be able to do some combination. Well, similarly with reimbursement, if you're in a small company, or a startup where time to... a short- term goal would probably be, to design your device... Remember, when I talk about design here, I don't mean design just in the physical engineering sense, I'm talking about the labeling of your device as well, Jon. You design your device to fit into an existing reimbursement code. Why? Because it's quicker and easier in the short- term. But then, you go back to CMS later, maybe as a label expansion, along with your FDA regulatory strategy, to add a different indication, or something that might include, or might necessitate a new reimbursement code, which is going to take you longer, but as I said a moment ago, can in the long- term, generate a heck of a lot more money. In the meantime, you're selling the same product, or a very similar product, under a different reimbursement code, so you're generating money off of that.
Jon Speer: Smart.
Mike Drues: There are a lot of different ways that we can put these links of the chain together, in almost an infinite number of different sequences.
Jon Speer: Yeah, that's really smart. Mike, thank you so much for sharing some of your insights and wisdom on reimbursement. Super helpful. Folks listening, as we mentioned toward the beginning of today's episode, start it early. Certainly, if you're in development, and you haven't started to explore reimbursement, not that you're too late, but you've got some catch up to do. If you need a little bit of help guiding this maze, and next steps and strategy, with respect to reimbursement, Mike Drues from Vascular Sciences is your guy, so reach out to him. I'm sure he'd be happy to have a conversation, to see if there might be some of his tricks and tips and pointers. I mean this as all complimentary, that he can provide to you, to help you be more successful in your path, to bring exciting new products to market. Also want to remind you that, at Greenlight Guru, we're here to help. No, we don't have a module for reimbursement, but we do have partners like Mike Drues, Vascular Sciences, and we do have the only medical device quality management system software in the world today, designed specifically and exclusively for the medical device industry, but actual medical device professionals. It's certainly something that's going to be important in your journey of medical device industry is, design and development, risk management, document management, change management, campus, complaints, all of those sorts of things. We have all of these workflows built together in a cohesive platform. If you want to learn more about that, go to www.greenlight.guru to learn more. We'd be thrilled to have a conversation with you, to better understand your needs. If you need connections to partners such at Mike Drues about reimbursement, we've got those folks we can make connections to as well. Reach out to us. We're happy to help. As always, thank you for being listeners of the Global Medical Device Podcast, the number one podcast in the medical device industry, and that's because of you. Keep spreading the word, and sharing with your friends and family, and colleagues. I don't know if family members are listening to it, but maybe, but keep spreading the word. Thank you so much, as always, this is your host and founder at Greenlight Guru, Jon Speer, and you have been listening to the Global Medical Device Podcast.
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