Posts filed under ‘Lifecycle Management’

Pricing Study for a Novel Medical Device


In this study, we were able to provide valuable insights to a start-up medical device manufacturer to help them decide what price premium to charge for their first product.

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

Self Powered Pacemaker


The advances in medical device technology over the past several decades have been exponential, much like technological advances in other fields.  These medical devices have helped people live longer, more independent, and better fulfilled lives. A popular example of such a device is a cardiac pacemaker, where future improvements continue to develop.  Recently, researchers at the University of Michigan have designed a device where pacemakers will be powered by heartbeat vibrations, eliminating the need for a battery. An article on MedicalNewsToday.com describes more details of the design and how the device works.

The advantage of self-powered pacemakers for patients and for the healthcare system overall is the elimination of follow-up surgery currently required to replace batteries every 5-10 years. Patients need not go through invasive procedures in order to maintain their standard of living. This would also lower the cost for patients with cardiac problems that result in the need for a pacemaker.  Should the pacemaker powered by heartbeats end up costing more to produce than current battery-powered models, the overall costs in the long run without additional surgeries would certainly still make for a more economical device.

If the pacemaker being developed at the University of Michigan is successful, the potential for this technology to be applied to other medical devices is high. An article on dailyRX.com states the power source could be applied to implantable cardioverter defibrillators as well for patients who are at risk for sudden cardiac death. Who knows what other devices that now rely on battery power could eventually be powered by the human body’s endogenous vibrations? It is inspiring to see such innovation still occurring within the healthcare arena, and hopefully the advances will continue to help increase cost effectiveness and improve the benefits to patients.

Author: Jamie Notaro

Editor: Ken Chiang

March 14, 2012 at 10:57 AM Leave a comment

FDA Oversight Abroad


Like many products consumed in the United States, many drugs are developed and manufactured outside of our country’s borders. A New York Times article from August of last year reports that more than 80% of active ingredients for drugs sold here are made elsewhere1. In a recent House hearing, FDA Commissioner Dr. Margaret Hamburg stated that the FDA needs more resources in order to properly oversee the development and manufacturing of these types of products abroad. Modern Healthcare published an article describing these concerns the FDA has in regards to oversight of foreign-made drugs. Other issues such as drug shortages and pedigree are also mentioned.

FDA Deputy Commissioner for Global Regulatory Operations and Policy Deborah Autor is also mentioned in the article and states that action from Congress may be required to implement a national pedigree for drugs, which would track products from the manufacturer to the final buyer to ensure the integrity of the supply chain. Many states already have pedigree laws in effect, so the interaction of a federal clause and existing state statutes is something to be considered.  This type of action from the Food and Drug Administration and Congress could also have great effects on those companies that do produce drugs overseas. It may or may not cause them to need to make some changes to their supply chains, which could in turn raise the cost to produce a given drug.

These problems discussed in the article and at the hearing bring up an interesting dilemma. It seems a fairly universally agreed upon concept that the FDA should have the capacity to oversee the manufacturing of the drugs that are sold here in the United States, regardless of where they are made. However, would actions to give the FDA the resources it needs to increase supervision abroad make it more difficult for drug companies to produce their products at the same rate and for the same price? Which is more important: allocating resources to ensure drugs are being produced at the proper quality, or making sure there is enough of a given drug to provide for the need that is present? Drug shortages have been an ongoing issue of late, which could continue to worsen if certain drug manufacturing supply chains are interfered with.

The safety of both prescription and non-prescription drugs is key, that is unquestionable. But will the FDA really ever be able to keep track of the quality of every drug produced outside of the United States? Before taking any action, both the FDA and Congress should consider the potential benefits of higher levels of oversight versus what complications may arise from it.

Written by: Jamie Notaro

Edited by: Ken Chiang

 

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1 http://www.nytimes.com/2011/08/13/science/13drug.html?pagewanted=all

March 6, 2012 at 10:38 AM Leave a comment

Pharmaceutical Advertising


As consumers, we are by no means strangers to pharmaceutical advertisements. They are constantly in front of us, whether it is via TV commercials, magazine ads, or billboards along the highway. An article published on the New York Times (nytimes.com) website takes a look at how these direct to consumer advertisements have impacted Americans’ use of prescription drugs. It also discusses how doctors and patients now use checklists that can be found often times online to diagnose ailments and indicate the proper treatment.

The goal of pharmaceutical companies in regards to advertisements to consumers is clear; they want to raise awareness of their branded drug and want consumers to choose their prescription medication to take over others. It has been difficult to prove, however, that advertisements lead to any increase in direct sales as mentioned in the article. Are patients really any more likely to take a particular drug simply because they know of the brand, or do they simply listen to what their healthcare providers tell them to do? And is the information provided in these ads helping the consumer become more well-informed and knowledgeable with respect to what drugs they should be taking?

Many people, me included, seem to find drug advertisements to be a bit of a nuisance. Although I may be wrong, when the time comes for me to begin taking various prescription medications, I think I will let my doctor make the diagnosis and prescribe me whatever drug he or she thinks will work best—regardless of whether I’ve seen a commercial for it or not. Obviously this is not the case with every consumer; there are some that question their doctors on certain brand name drugs. My question is: is it really worth the time and money of pharmaceutical companies to heavily advertise their drugs to consumers? If there is no way to prove that they help sales and many consumers are annoyed by the ads, is the main reason to continue this heavy advertising to consumers simply to keep up with others in the industry?

I assume pharmaceutical companies could save a significant amount of money if they cut back on their advertising, and with little research to support that advertisements help sales, doing so may not have a negative impact. I know I would not be upset with the absence of prescription drug ads in my day to day life and I am sure I am not alone.

Author: Jamie Notaro

Edited by: Ken Chiang

February 28, 2012 at 3:07 PM Leave a comment

Healthcare reform and the quality of care


One of the most significant aspects of healthcare reform is its emphasis on improving the quality of care.  Many aspects of the law seek to improve the quality of care as a way of reducing cost.  The healthier we all are, the less we’ll spend on doctors and tests.  Now, if only the law could help every American lose 10 pounds!!  That would be the best ways to reduce the cost of care.

We cannot really discuss the quality of care until we know how to measure it.  There needs to be a consensus as to what constitutes good care.  The simpler these measures are to understand, the more providers and patients can focus on them and achieve success.

We also need a system for measuring the quality of care.  Quality measures also need to be simple so that they can be implemented and data collected cost effectively.  Of course, to do that, we need widespread use of electronic health records.

The U.S. government announced in February of 2009, the American Recovery and Reinvestment Act (ARRA). The ARRA act included $19 billion under the portion of its HITECH Act to promote the adoption of Electronic Health Record (EHR) technology in healthcare. Starting in 2011, medical providers can receive up to $44,000 or more by demonstrating what has termed as “meaningful use” of certified EHR technology to be eligible for government funds. 

Back to healthcare reform — the Patient Protection and Affordable Care Act (PPACA).  To drive improved quality of care, PPACA requires the identification and publication of a core set of quality measures for Medicare and Medicaid adults.   PPACA also requires Medicaid to establish a quality measurement program. 

PPACA requires the integration of reporting on quality measures with reporting for the meaningful use of electronic health records.  By focusing on the effective use of EHRs with certain capabilities, the HITECH Act makes clear that the adoption of records is not a goal in itself:   it is the use of EHRs to achieve health and efficiency goals that matters.  HITECH’s incentives and assistance programs seek to improve the health of Americans and the performance of their health care system through “meaningful use” of EHRs to achieve five health care goals:

  • To improve the quality, safety, and efficiency of care while reducing disparities;
  • To engage patients and families in their care;
  • To promote public and population health;
  • To improve care coordination; and
  • To promote the privacy and security of EHRs.

In the context of the EHR incentive programs, “demonstrating meaningful use” is the key to receiving the incentive payments. It means meeting a series of objectives that make use of EHRs’ potential and related to the improvement of quality, efficiency and patient safety in the healthcare system through the use of certified EHR technology.

Stage 1, which begins in 2011, the criteria for meaningful use focus on electronically capturing health information in a coded format, using that information to track key clinical conditions, communicating that information for care coordination purposes, and initiating the reporting of clinical quality measures and public health information.

The final rule reflects significant changes to the proposed rule while retaining the intent and structure of the incentive programs.  Key provisions in the final rule include:  

  • For Stage 1, CMS’s proposed rule called on physicians and other eligible professionals to meet 25 objectives (23 for hospitals) in reporting their meaningful use of EHRs. The final rule divides the objectives into a “core” group of required objectives and a “menu set” of procedures from which providers can choose.  This “two track” approach ensures that the most basic elements of meaningful EHR use will be met by all providers qualifying for incentive payments, while at the same time allowing latitude in other areas to reflect providers’ varying needs and their individual paths to full EHR use.
  •  In line with recommendations of the Health Information Technology Policy Committee, the final rule includes the objective of providing patient-specific educational resources for both EPs and eligible hospitals and the objective of recording advance directives for eligible hospitals.

Healthcare reform will fund the implementation of medication management services by pharmacists.  Medication therapy management (MTM) is a partnership of the pharmacist, the patient or their caregiver and other health professionals that promotes the safe and effective use of medications and helps patients achieve the targeted outcomes from medication therapy.  MTM includes the analytical, consultative, educational and monitoring services provided by pharmacists to help consumers get the best results from medications through enhancing consumer understanding of medication therapy, increasing consumer adherence to medications, controlling costs, and preventing drug complications, conflicts, and interactions.

Healthcare reform requires the public reporting of physician performance on quality and patient-experience measures through a website that will be called Physician Compare.  What begins with the implementation of EHR and the development of quality measures that are evaluated through data supplied by the EHR ends in public reporting of the results.  This will enable patients and hospitals to work with the physicians that provide the highest quality of care.  While high-quality of care might cost more up front, the (hoped for) decrease in hospital readmissions, adverse events and co-morbidities will (hopefully) reduce costs in the long term.

Implications for Healthcare Manufacturers

The emphasis on quality measures will more and better opportunities for healthcare manufacturers to demonstrate how their products and applications drive improvements in the quality of care.  Such demonstrates need to be based on clinical data that demonstrate how the product or application performs compared to the quality measures that Medicaid and Medicare adopt.  Medical groups and hospitals will look to healthcare manufacturers and government agencies to provide data that cut across multiple settings of care.  However, the growing availability of sophisticated EHR systems could enable medical groups and hospitals to develop data that are specific to their own patient demographics and mix.  It is in the best interest of healthcare manufacturers and government agencies to help coordinate these efforts.  Healthcare manufacturers will be encouraged to develop data for patient niches so that they are ready to address data that medical groups and hospitals gather that might demonstrate different results than those generated by the healthcare manufacturers.

The government and healthcare community (ie, providers and payers) will develop the quality measures.  The medical groups, hospitals and other payers will implement the EHR systems required to collect data relevant to those measures.  There is an opportunity for healthcare manufacturers to play a role in connecting the two endpoints.  That is, healthcare manufacturers can develop algorithms for analyzing the data so that the results comply in an appropriate way with the outcomes measures that Medicare and Medicaid establish.

Today, retail pharmacies are a secondary or tertiary contact for those drug companies and medical device suppliers that distribute product through this channel.  The growing importance of MTM programs will increase the importance of retail pharmacies for select disease states (eg, hypertension, dyslipidemia, diabetes).   Healthcare manufacturers will need to develop programs at the corporate levels of the retail pharmacy companies as well as the neighborhood pharmacies to educate the pharmacists and encourage and support the appropriate implementation of the MTM programs.  More effective MTM programs will encourage therapy compliance and higher quality care.

As the above evaluation demonstrates, the ARRA and PPACA will provide numerous new avenues for healthcare manufacturers to work with physicians, hospitals and other providers to drive an improved level of care.  The time is now to plan for these initiatives and start their development.

September 29, 2010 at 11:01 AM Leave a comment

Biosimilars and Healthcare Reform


As the next chapter in our series on the implications of healthcare reform for healthcare manufacturers, we will look at biosimilars and bioequivalent drugs. 

As an approach for reducing the cost of care, healthcare reform defined an approval pathway for biosimilars.  Biotechnology drugs will have market exclusivity for 12 years after the branded biotech drug is approved by the Food and Drug Administration.  The subject product would be biosimilar to the reference product if it “is highly similar to the reference product notwithstanding minor differences in clinically inactive components” and if “there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency of the product.” Such a determination by the FDA would substitute for a demonstration of the subject product’s efficacy, which would have been established by the reference product.

Biosimilar is different from bioequivalent.  The biosimilar drug’s sponsor can submit information that the FDA would evaluate to determine whether the subject product is “interchangeable” with the reference product (i.e., that the subject product “can be expected to produce the same clinical result as the reference product” and that, “for a biological product that is administered more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch”).  Because current analytical technology is insufficient to establish that two biologics are molecularly identical, interchangeability would have to be established through clinical trials; accordingly.

The biosimilar product also will enjoy a period of market exclusivity that ranges from 12 to 42 months depending on the nature of any patent infringement litigation against the first biosimilar.  That is, the FDA would be prohibited from determining that a second product is interchangeable with the same reference product until the earlier of:

(a) one year after the date on which the first interchangeable biologic was commercially marketed;

(b) 18 months after the date on which any patent infringement litigation against the first interchangeable biologic’s sponsor is dismissed or resolved by final court decision;

(c) 42 months after the date on which the first interchangeable biologic’s application was approved, if the applicant was sued for patent infringement; or

(d) 18 months after the date on which the first interchangeable biologic’s application was approved, if the applicant was not sued for patent infringement.

The reimbursement amount for any biosimilar product would equal the weighted Average Sales Price (“ASP”) of all package sizes of the biosimilar within the applicable billing code, plus 6 percent of the weighted ASP of all package sizes of the reference product within the applicable billing code. Assuming that the weighted ASP for the reference product is higher than that of the biosimilar, the 6% of this relatively higher value provides physicians with an incentive to administer biosimilars instead of reference products.

It is not currently clear how interchangeable and non-interchangeable biosimilars would be treated under “generic substitution” requirements imposed by health plans and governed by state pharmacy laws. For example, would health plans utilize their formularies or implement other utilization management techniques to encourage the dispensing of all biosimilars, or only of interchangeable biosimilars (to the extent otherwise permitted by law)? Generally, when the first generic version of a prescription drug enters the market, the innovator drug may be excluded from coverage under a pharmaceutical benefit entirely. This may not be the case, however, for reference biologics or, at least, for reference biologics with no interchangeable alternative.

Implications for Drug Manufacturers

Defining a pathway to approve biosimilar drugs has a number of implications for the manufacturers of reference products.  On the positive side, a 12-year period of marketing protection defines the outer reaches of the reference product’s lifecycle.  It provides time for drug companies to plan for and address the launch of biosimilars.  It also leads to barriers to entry for biosimilars.

Defining the lifecycle of a branded biotechnology drug could exert upward pricing pressure compared to the current market.  The manufacturer of the branded biotech drugs will need to generate a sufficient return on investment in a shorter timeframe than available today during first 12 years.

Once the branded biotechnology drug’s exclusivity has eclipsed, a single biosimilar will be on the market for 12 to 42 months.  This could lead to downward pricing pressure for branded biotech drugs after 12 years due to generic competition.  As with generic small-molecule drugs, the first biosimilar drug will exert limited downward pricing pressure.  The more significant pricing pressure will occur once multiple biosimilars are on the market.

The question arises as to whether physicians will support a biosimilar drug that has not demonstrated bioequivalency via clinical studies.  Also, how much use of the biosimilar out of clinical studies will be required to convince prescribers that the biosimilar delivers the same outcomes as the reference product?  These questions could extended the lifecycle of the reference biotechnology drug and protect it against downward pricing pressure.

On the flip side of the coin, will the manufacturer of the branded biotechnology drug need to demonstrate clinical and economic superiority to biosimilars to support marketing after the 12-year period of marketing protection lapses?  If yes, there will be a need for the manufacturer of the branded biotechnology drug to conduct comparative outcomes research compared to the biosimilar or bioequivalent drug.

Of course, there is one overriding question about biosimilars and bioequivalents, above and beyond the definition of an approval pathway.  Will the difficulty with developing biosimilars limit the impact of these aspects of PPACA?

 If you don’t have a crystal ball, be patient.  Time will yield the answers to these questions.

September 27, 2010 at 1:27 PM Leave a comment

Impact of Healthcare Reform on Lifecycle Management of Healthcare Products – Paying for Reform


 Between now and 2019, healthcare reform will cost taxpayers approximately $938 billion.  This is based on the latest estimates from the Congressional Budget Office.  The major funding sources for healthcare reform are displayed below.

 Some of these funding sources, although not the largest sources, will have an impact on healthcare manufacturers.  The funding sources of most concern to healthcare manufacturers include:

  •  Raising Medicaid basic rebates for branded pharmaceuticals from 15.1% to 23.1%.  As an aside, the 8% increase in rebates will be completely transferred to the Centers for Medicare and Medicaid Services (CMS).  This exacerbates the budget impact of healthcare reform at the state level.
  • Medicaid rebates on managed Medicaid volumes – The rebates available to Medicaid fee-for-service plans will be extended to managed Medicaid plans.  This will reduce the cost under the pharmacy benefit.
  • Reduction in Medicare reimbursement – Restructure payments to Medicare Advantage plans by setting payments to different percentages of Medicare fee-for-service (FFS) rates, with higher payments for areas with low FFS rates and lower payments (95% of FFS) for areas with high FFS rates.

    The healthcare reform act establishes an independent Payment Advisory Board comprised of 15 members.  The Board will submit legislative proposals containing recommendations to reduce the per capita rate of growth in Medicare spending if spending exceeds a target growth rate.  

    Beginning April 2013, require the Chief Actuary of CMS to project whether Medicare per capita spending exceeds the average of CPI-U and CPI-M, based on a five year period ending that year. If so, beginning January 15, 2014, the Board will submit recommendations to achieve reductions in Medicare spending. Beginning January 2018, the target is modified such that the board submits recommendations if Medicare per capita spending exceeds GDP per capita plus one percent.

    PPACCA will reduce Medicare payments that would otherwise be made to hospitals by specified percentages to account for excess (preventable) hospital readmissions.

  • Eliminate CPI reset for new formulations – Under current law, price increases of existing formulations cannot exceed the consumer price index without a penalty.  However, launching new formulations allowed drug companies to reset the base price for comparison.  However, PPACCA eliminates that loophole.  Launching a new formulation does not reset base for comparing price increases to CPI.
  • 50% discount in Part D gap for branded drugs – Beginning on January 1, 2011, drug manufacturers will cover 50% of the negotiated rate for brand pharmaceuticals when a Medicare Part D beneficiary is within the donut hole.  Medicare beneficiaries will pay the discounted price at the pharmacy and manufacturers will reimburse the retail pharmacies for the difference.
  • Excise tax on “Cadillac” plans – Insurers would pay an excise tax of 40% of annual premium cost when annual premiums are greater than $10,200 for individuals or $27,500 for families.  It is likely that some or all of the cost of the excise tax would trickle down to consumers.

Funding healthcare reform will affect healthcare manufacturers and how they market their products.  For example, the increase in rebates, elimination of the CPI pricing reset, 50% discount in Part D gap for branded drugs, reduction in Medicare reimbursement and the excise tax on “Cadillac” plans will increase downward pricing pressures.  Increasing rebates, eliminating the CPI price reset and the 50% discount in Part D gap for branded drugs will directly reduce the net revenue that drug manufacturers realize. 

The excise tax on “Cadillac” plans will increase the cost of coverage for beneficiaries.  This could lead to a reduction in consumers’ availability of resources available for co-pays and deductibles.  This, in turn, could lead to a reduction in utilization of drugs and medical devices and diagnostic imaging procedure and, therefore, lead to downward pricing pressure.

The reduction in Medicare reimbursement will reduce the incentive for physicians to prescribe or order products and provide services.  Physicians also might reduce their volume of Medicare patients.  This could lead to downward pricing pressure for healthcare products and services as well as a potential reduction in utilization.

The reduction in financial resources could encourage Medicare plans to increase the use of specialty pharmacies rather than allowing buy-and-bill for high-cost therapies.

September 7, 2010 at 2:00 AM 1 comment

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