Incentivizing Reimbursement

One of the greatest challenges confronting both startup and established neurotechnology firms seeking to commercialize new therapies is obtaining reimbursement. Even after a new device has run the gauntlet of clinical trials and paperwork to obtain FDA approval, a vendor must often begin the process all over again with CMS in order to obtain coverage and there is no guarantee that a decision will ever come.

This situation makes if harder for neurotech startups to obtain venture financing, since the time horizon to profitability for an implanted device can exceed the life of a fund. As it stands now, private insurers have little incentive to offer reimbursement if CMS does not. And the sad fact is that CMS is under constant budgetary pressure and simply cannot afford to pay for every new form of medical technology that comes along. Moreover, neurotech device therapies generally present payers with greater up-front costs than pharmaceutical interventions. Even if the neurotech therapy proves to be more cost-effective in the long-term, payers are motivated to focus on short-term costs.

We believe there is a solution to all of these problems and it involves incentivizing private insurers to offer coverage for experimental new therapies that show promise to be both more effective and more cost-effective in the long term than current therapies. If that proves to be true over say, a three- to five-year time horizon, then CMS would provide national coverage and reward the private insurer with a portion of the savings to the U.S. taxpayer that the new therapy enables. This approach could eliminate much of the disincentive that currently exists for offering reimbursement to new device therapies and would help level the playing field with pharmaceutical therapies by examining cost effectiveness over a longer period. It would also shorten the time to profitability for a new therapy and thereby improve a startup’s outlook for VC funding.

An even better scenario would be if the FDA and CMS enhanced their paralllel-review program to fast-track new therapies that have demonstrated proven safety and likely efficacy and also obtained support from a private insurer. For example, a pivotal clinical trial could be combined with a cost-effectiveness study to assess the relative efficacy of a new therapy compared to existing drug therapies for a target population. This would not only help defray the cost of pivotal trials for neurotech vendors, it would also potentially allow access to a wider segment of the patient population earlier in the disease progression. That stands in contrast to the “last resort” phenomenon, which mandates that neuromodulation therapies can only be used in drug-resistant populations.

The law firm Maynard Cooper is currently drafting potential legislation to address these issues and others to help remove some of the barriers confronting device vendors. Watch this space for more details.

James Cavuoto
Editor and Publisher