Pricing Study for a Novel Medical Device

August 23, 2012 at 10:43 AM Leave a comment


A start-up medical device manufacturer recently approached MedSpan Research with a challenge.  The company is close to bringing their first product (a kit containing a drug vial, delivery system and supplies) to market.  They needed to determine the price premium they could charge above the cost of alternative therapies before a significant portion of payers begin to limit patients’ access.  Currently available drug vials, supplies and pumps that present alternatives to our client’s kit cost approximately $5,800 per month.

Market research suggests our client’s kit provides a number of advantages.  Compared to current drug delivery systems, the kit is:

  •  Smaller/lighter weight and less visible
  •  More convenient and easier to use
  •  Conducive to greater patient mobility while receiving therapy
  •  Associated with fewer injection site reactions
  •  Less painful during therapy initiation
  •  Completely disposable

Using our RapidAccess® database of payer executives, MedSpan Research recruited pharmacy directors from large U.S. health plans who are knowledgeable about similar therapies’ coverage, reimbursement and formulary management.  Working closely with our client, we designed a 20-minute Internet survey to:

  • Explore the current coverage and utilization management of similar, currently available therapies
  • Evaluate payers’ initial impressions of our client’s kit
  • Determine how access to, and formulary management of, our client’s kit varies at different price premiums relative to current therapy
  • Assess the impact of additional clinical data on formulary management

We found that the clinical benefits of the kit will support a price premium of 10% to 15% compared to current therapy alternatives.  At that price level, only some health plans would erect greater barriers to access.  Examples of these barriers include step edits through current therapy choices and requiring a greater financial contribution from patients.  However, charging a premium of 20% or greater encourages more health plans to implement greater barriers to access, including NDC blocks.

Payers were also presented with additional clinical data.  One set of clinical data demonstrated advantageous pharmacokinetics compared to current therapy alternatives.  A second set of clinical data demonstrated reduced use of low-cost adjunctive therapies.  The study showed that both sets of data are not likely to impact coverage, reimbursement and formulary management.  Most payers need clinical data demonstrating more significant cost savings to affect formulary management of the kit.  However, for our client, the cost of developing such data may overshadow any gains in profitability.

Overall, the study confirmed that payers are expected to provide sufficient formulary access to support a successful commercial launch of the kit.  Using the results of the study, our client will determine if the benefit of a greater price premium outweighs having disadvantageous access at a minority of health plans.

MedSpan Research frequently conducts pricing studies for many leading medical device and pharmaceutical manufacturers.  We have exceptional access to senior executives and key decision makers at major health plans, which helps us deliver expert insights.  Many of our pricing studies incorporate the perspectives of patients and prescribers to provide a comprehensive picture of how new products are likely to be received.  Through the results of this study, our client now has a more complete view of the market and ultimately, a clearer path to commercial success.

Author:  Ken Chiang

About these ads

Entry filed under: Lifecycle Management, Medical Device, Payer Reimbursement, Pharmaceuticals, Pricing Study, Uncategorized. Tags: .

Specialty Pharmaceuticals: Reimbursement Moves Toward ASP Differentiating a Core Hospital-based Therapy

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Enter your email address to follow this blog and receive notifications of new posts by email.

Like this? Share it!

Share/Bookmark

Twitter Feed


Follow

Get every new post delivered to your Inbox.

Join 290 other followers

%d bloggers like this: