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Takˇng the High Road - Building the right foundation for a medtech product launch requires fortitude and careful planning.
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From MARKETING 510K DEVICES publication
Taking the High Road
Building the right foundation for a medtech product
launch requires fortitude and careful planning.
Business Planning and Technology Development
Medical device compa- nies that have developed a premium- priced novel therapy frequently fall into a common trap sprung when they aggressively market their products as soon as they receive initial FDA clearance.
Since device companies have to submit to the agency only such data as are necessary to support claims of safety and efficacy FDA approval of device often requires less clinical information than the physician end users and the payers will want to see in evaluating the marketed device.
Nevertheless, investors eager for returns often misinterpret FDA approval as the green light for aggressively marketing a product. Without additional compelling economic and clinical evidence, however, early sales efforts may be terribly handicapped.
Maximizing the commercial potential of an innovative and premium priced therapeutic device particularly one targeting a clinical indication that is aheady treated by drug therapy usually requires having clinical or economic data that are comparative with those of competitive standards of care and that involve a longer time frame than the data submitted to FDA for approval. If a company takes the high road and funds these more rigorous clinical trials successfully before energetically marketing the technology it can potentially capture hundreds of millions of dollars of market yalue that a quick to market, low-road approach might leave on the table.
Management should research and determine the market's evidentiary requirements early in the product development cycle. Then, its clinical strategy should include explicit definition of data objectives for FDA approval as separate from those ofthe more extensive data requirements for winning market acceptance. Finally management should make sure that the investors recognize that FDA approval is simply one step toward commercialization and that clinical research will continue beyond receipt of the initial FDA approval. The true green light for aggressive marketing is the availability of sufficient com- mercially relevant clinical or eco- nomic evidence.
Standards for Approval In contrast to the Center for Drug Evaluation and Research, the Center for Devices and Radiological Health (CDRH)-the device side of FDA is generally reviewing technologies involving far less inherent safety risk or risks that are more easily studied.
(Many are substantial equivalent to one of existing devices.) In addition, device claims can be more easily written in terms of alternative end points. For example, a surgical device intended for treating gastroesophageal reflux disorder might simply be said to enable implantation into the lower esophagus.
A representative sampling of the pivotal trials that led to recent device premarket approvals shows how little clinical dala may be needed to attain approval (see Table I). Many of the devices listed in the table are invasive and either include a permanent implant or permanently reshape internal tissue; therefore, their manufactures were required to file pre- market approval applications, subjecting the devices to the most stringent regulatory process within CDRH. Nevertheless' none of these companies were required to follow patients for more than one Year, and many were not required to conduct randomized trials.
These days, when the term "evidence-based medicine" is used with increasing frequence payers will reimburse only treatments that offer clinical or economic benefits. To definitively demonstrate such benefits generally requires the performance of a head-to-head clinical trial matching the new product against the current standard of care over a lengthy time period.
The evidence needed to achieve a coverage determination is different from that FDA needs to determine the product's safety and efficacy and-dePending on the therapy disease state, and patient population may have to be more voluminous.
Some of the FDA-approved Products in Table I did not initially receive a positive coverage policy determination from payers such as the Blue Cross Blue Shield Technology Evalu- ation Center (TEC). For example, TEC found that the data supporting the use of vagus nerve stimulation (VNS) as a treatment for depression did not adequately demonstrate the effect of VNS on health outcomes in comparison with outcomes achieved with other therapies.
Similarly, FDA approved the ThinPrep Pap smear developed bY Cytyc Corp. (Marlborough, MA) as an advancement over traditional Pap technology. However, the clinical sup- porting data used to win FDA approval proved inadequate to address the data requirements of physicians and payers. Cytyc had to amass far more data before it could overcome the payer hurdle.
The launch Decision Company managers and investors wrestle with these issues as they develop their commercialization plans. They may see a choice between going to market with only the data used to obtain FDA approval or investing in gathering additional data after the approval and before going to market. Taking the middle course of going to market on the basis of the FDA data and then gathering additional data is possible but tricky. It is usually difficult to capture a premium price for the therapy without additional data. Also, it is difficult to introduce a device at a low price and raise the price later.
The additional data that would moot these issues usually accelerate market adoption at value based prices even as they facilitate reimbursement. However, being patient is not easy for a technology company. Gathering the additional clinical or economic data costs not only money but time, and therefore it delays the onset of revenues. This factor makes the ultimate decision that much more difficult.
Adding to the complexit¡ many elements of additional data typically can be gathered. For example, consider the NeuRx pacing device for the diaphragms of mechanically ventilated spinal cord injury patients developed by Synapse Biomedical Inc. (Oberlin, OH). By examining the experiences of past device companies and anticipating the perspectives of physicians and payers from early in the product's development, Synapse has been able to optimize the trade- off between clinical development and the timing and pricing of its market launch. The management team conceived of possible indications for its pacing device and has chosen to pursue studies that capture incremental value with relatively low risk and relatively low expenditures of time and money (see Figure l). The evidence from these studies will be accumulated before the company sets its price and launch plans.
Two realistic approaches are available to companies following the path of additional data gathering. The first is to launch the product at a premium price and then try to accelerate sales once postmarket clinical data are in hand. The other is not to launch the product until all of the compelling clinical data are collected.
The implantable cardio Yerter defibrillator (ICD) provides a good example of a product that entered the market the first way. ICD sales grew relatively slowly until a compelling clinical trial demonstrated that implanting an ICD delivered a pro- phylactic benefit for many patients with congestive heart failure. The ICD companies earned strong profits throughout the timeline described, partly because they were able to set a high price at the beginning for their first indications.
The second approach is more radical. One company exercising this dis- cipline is Asthmatx Inc. (Sunnyvale, CA), which is developing Alair, a device that provides a bronchial ther- moplasty treatment for asthma. By the time the company launches the product, it will have invested in at least seven trials studying approxi- mately 550 patients, many followed for five years Unfortunatel¡ many companies Eliminate primary ventilator Decrease Reduce Reduce Eliminate home care hospitalizalions pneumonias backup ventilator
Figure 1. The value of Synapse Biomedical's device grows incrementally with the accumulation of more clinical evidence, increasing its price potential. Source: Synapse company data. have found themselves in error when they began actively marketing a new product without having first accu- mulated the best clinical or econom- ic evidence. Restore Medical Inc. (St. Paul, MN) is an example of a compa- ny that might have benefited from taking a more patient approach. Restore received initial élearance for its Pillar palatal implant system for snoring in2002 and for obstructive sleep apnea in 2004 onthe basis of data collected from trials whose scope was minimal. Years later, the product has still not taken off; sales have remained modest relative to the con- siderable size ofthe obstructive sleep apnea market the system addresses. In the 12 months ending September 2007, sales for Pillar reached $4.4 mil- lion; meanwhile, however, the com- pany's sales, general, and administra- tion (SG&A) expenses grew to $14.7 million. Restore indicated in its 2007 Form iO-K that obtaining coverage- and, with it, likely physician adop- tion-will require publication of peer-reviewed clinical literature and completion of additional studies to demonstrate the clinical effectiveness of the Pillar system. Since the initial public offering-in less than two years-the company's stock price has plummeted to just one-fifth of its pre- vious value, as Wall Street's expecta- tions have remained unfulfilled. And now, Medtronic Inc. (Minneapolis) has acquired Restore for the low price of $29 million, two-thirds of which was the control premium.to Gonclusion If management carries out the following six analytic steps, it should be able to optimize the company's commercialization plan. 1. Identify potential alternative indications and claims for the technology in question. 2. Estimate the cost and time required to gather the data need- ed for FDA approval to market the technology. 3. Estimate the incremental rev- enue potential of each addition- al indication and claim. 4. Estimate the incremental cost, in time, money, and risk, of gathering sufûcient data to make clinical or economic claims that will be compelling to clinicians and payers. 5. Forecast alternative scenarios in order to determine the oPtimal trade-off between additional investments in the accumulation of compelling data against the opportunity cost in terms of time and money. 6. Determine howwell the clinical plans and commercialization plans dovetail in order to ensure that management and the investors are aligned. Simply planning to get a novel premium-priced therapy to launch as soon as possible, while an under- standable temptation, maY sell the device, the compan¡ and investors short. With some patience, and the fortitude to wait for a state of full preparation, a medical device compa- ny can enjoy the rewards of an oPti- mal launch-full-value pricing and strong market penetration.
Total Patients 362 190 160 160 188 r02 Table l. Relatively modestly scaled pivotal trials can earn FDA approvals. source: FDA. Conpany Angiolink Corp. 0eu¡ce Vascular closure Transurethral system for BPH Cardiac ablation Vagus nerve stimulation for depression Brain stimulator Renal stenl 2:1 3:l No No 30 days 6 months 6 months l2 months 12 months 9-12 months Days 12 months Celsion Corp. CrvoCor Inc. Cyberonics Inc. Medtronic Inc. Medtronic Inc. Micro Therapeutics Inc. Embolic system Microsulis Medical Ltd. Endometrial ablation device
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