Medical Device Approval & Commercialization PDF

PROPRIETARY. DO NOT SHARE. Transcript: Medical Device Approval and Commercialization Section 1: Approvals Welcome Welcome to the Medical Device Approval and Commercialization course. This course is divided into 2 sections. Section 1 will discuss the process of obtaining approval for medical device...

PROPRIETARY. DO NOT SHARE. Transcript: Medical Device Approval and Commercialization Section 1: Approvals Welcome Welcome to the Medical Device Approval and Commercialization course. This course is divided into 2 sections. Section 1 will discuss the process of obtaining approval for medical device clinical trials, as well as final approval of a medical device and section 2 will discuss the business preparations involved in commercializing a product before and after a product launch, as well as continued regulatory oversite of a commercialized product. Acronyms Medical device regulation and commercialization involve the use of many acronyms. Click on each of the acronyms to see their meaning. This will help you be prepared for the use of these acronyms throughout this course. BP – Blood Pressure FDA – Food and Drug Administration GCP – Good Clinical Practice IDE – Investigational Device Exemption IVD – In Vitro Diagnostics NSR – Non-Significant Risk PMA – Pre-Market Approval SR – Significant Risk 1 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Section 1: Approvals Objectives After this section you should be able to: • Define IDE or Investigational device exemption. • Explain the process of obtaining approval to initiate human clinical trials to test a new device. • Appreciate the need for a gold standard when testing a new device. • State the timelines involved in medical device approval for the different approval pathways. Clinical Trials Clinical trials in the United States are regulated by the FDA. The mission of the FDA is “To encourage discovery and development of useful medical devices for human use, to the extent consistent with the protection of the public health and safety and with ethical standards, while maintaining optimum freedom for scientific investigators in their pursuit of that purpose.” It is with these goals in mind that the FDA regulates medical device clinical trials. Click on each of the buttons to learn about the purpose, considerations, and approval of a medical device clinical trial. When you are finished, click Next to continue. Clinical Trial Purpose Clinical trials allow companies to test new medical devices on human subjects. They are an important and necessary means to collect the safety and effectiveness data required to seek approval for a medical device. Clinical Trial Considerations All clinical trials must be approved by the FDA prior to commencing. Trials must be designed and performed in accordance with GCP, or good clinical practices; guidelines that help ensure patient safety and data accuracy. All clinical trial contributors have assigned responsibilities and these responsibilities are explicitly defined to ensure the trial runs smoothly and in full compliance with all regulations. All clinical trial subjects must be volunteers who have provided informed consent, understanding the risks of the trial. 2 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Clinical Trial Approval Formal FDA approval of a medical device clinical trial is received by issuance of an IDE or investigation device exemption. An approved IDE permits a device to be shipped lawfully to conduct investigations of the device without complying with other requirements of the Food, Drug, and Cosmetic Act that would apply to devices in commercial distribution. A company may first run a small-scale feasibility study which will provide both proofs of concept in humans and as well as data to determine the required size and length of the pivotal study. The pivotal study will be a larger study with more participants likely tested over a longer period that will provide statistical proof that the device is safe and effective. There is no regulatory requirement for a feasibility study, rather it will be a business decision whether or not to run a small-scale study prior to launching the pivotal trial. Clinical Trial Data Not all medical devices require clinical trial testing. Class 1 medical devices, such as tongue depressors and bandages, do not require clinical trial data. Class 2 medical devices that have a substantially equivalent predicate device, and therefore can proceed through the 510(k)-approval process, generally do not require clinical trials. Typically, laboratory testing is sufficient to prove that the device is safe and effective. For example, a new IV pump will be rigorously tested to prove that it delivers fluids accurately and that it is easy for nursing staff to operate, but it does not have to be tested on actual patients. That being said, a general trend seen in the industry is that the FDA is requesting more clinical data for the 510(k)-approval pathway. If a class 2 device does not have a substantially equivalent predicate and is proceeding through the de novo 510(k) pathway, clinical trials proving the safety of the device are required. Finally, all class 3 devices require clinical trials proving both safety and efficacy as part of the PMA or pre-market approval pathway. Different Types of IDEs There are a number of different routes by which a medical device can be used in the clinic prior to approval. Traditionally, the sponsor company will seek approval to test the device on patients by obtaining an IDE, or investigational device exemption. This allows the company to test the device exactly as described in the clinical trial protocol for which they received IDE approval. 3 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Following the completion of the trial, the sponsor may be able to provide continued access to the device for the patients who were in the trial. Because the device has not yet gained market approval, the company cannot receive any compensation for continued access. Physicians can obtain approval from the IRB, or Investigational Review Board, to use the device to treat patients outside the clinical trial. Again, because the device is not cleared for the market, the sponsor cannot be compensated for these treatments. Physicians can also use new medical devices even before they receive IDE approval through emergency or compassionate use. In these situations, the physician must notify the IRB and FDA following the use of the device. This course will focus on the process of receiving IDE approval and conducting a traditional clinical trial to obtain data to show the device is safe and effective. Pre-Submittal Discussions with FDA The easiest way to reach a destination is to have a clear map of how to get there. This is especially true in a highly regulated environment, and smart companies will communicate with the FDA early and often to map their route to approval and corresponding product development plan as carefully as possible. The company will establish communication with the agency early on in order to determine their device classification and most likely submittal pathway; 510(k), de novo 510(k), or PMA. It’s important to know if clinical trials will be required because of the impact on project cost and timeline. And receiving feedback on clinical trial protocols before submitting them for IDE approval can help the company avoid delays due to protocol rewrites. Decisions at the FDA are ultimately made by people with their own specialties, opinions, and concerns. Meeting with the FDA personnel who will ultimately review the final submission will provide the clearest guidance on what will be required for approval. It is important to request pre-IDE meetings early because booking a meeting can take up to three months. The initial meeting is usually face-to-face, requiring company representatives to travel to Bethesda, MD. Follow-up meetings can usually be accomplished by telephone. Originally an informal mechanism to improve applications, pre-IDE communication with the FDA is now a more formal protocoled process, requiring a pre-IDE submission package for a meeting to be scheduled. Preparation for these meetings should be careful and detailed. It is best to ask a few specific questions rather than many, vague questions. The FDA’s role is not to tell companies how to conduct product development. Rather, it is the company’s responsibility to understand the regulations - meetings with the FDA are an opportunity 4 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. to confirm that specific product development plans comply with these written regulations. And just because the regulator the company speaks with today agrees with the product development plan, doesn’t mean opinions and regulations won’t have changed when the final application is reviewed. IDE Types & Approvals Depending on the inherent risk of the device, different levels of regulatory approval are required. Click on each of the buttons to learn about the different risk levels. When you are finished, click Next to continue. Significant Risk (SR) = FDA Approved Devices that have the potential for serious risk to the subject require FDA approval and are classified as a significant risk. Non-Significant Risk (NSR) = IRB Approved Devices that pose a lower risk to the patient are classified as non-significant risk. NSR devices require only IRB approval. An IRB is an institutional review board, an independent ethics committee that has been formally designated by the FDA as a group of experts qualified to approve, monitor and review human clinical trials. Some examples of devices that would likely be classified as non-significant risk include MRI studies, non-invasive devices such as blood pressure cuffs, some contact lens studies, and most in-vitro diagnostic studies such as a new blood glucose monitor. Exempt Some medical devices are even exempt from pre-trial approval altogether. If a device is already approved but being tested to determine customer preferences for minor design or human factors changes, an IDE is generally not required. Clinical trials conducted outside the US do not require FDA approval but may require approval by that country's regulatory body. And most diagnostic device studies are exempt. These studies generally use clinical sample discards, such as excess blood left over from a blood draw that is de-identified by the clinic and provided to the medical device company for testing. If, however, the diagnostic device must come in contact with the patient, for example, a continuous blood glucose monitor, and IDE will be required. 5 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Significant Risk or Non-Significant Risk: Who Decides? The determination of significant risk is a stepwise process. First, the clinical trial sponsor, aka the company, assesses the device. If the sponsor thinks the device is a non-significant risk, they will present that assessment to the local IRB or institutional review board. If the clinical trial will be conducted at multiple, geographically distinct sites, an IRB from each site must review the assessment. Hopefully, the review boards will agree that the device is a non-significant risk, and therefore the clinical trial can be approved, monitored, and reviewed by the IRBs. If any one of the IRBs determines that the device is a significant risk, the company must seek IDE approval from the FDA. Representatives from the FDA are available to consult with the company and the IRB. If the sponsor has conducted pre-IDE meetings with the FDA, agency representatives will likely have already provided an opinion on whether they think the device is a significant or nonsignificant risk. And the FDA’s decision of course trumps the opinion of the IRBs. Components of The IDE (Investigational Device Exemption) The IDE, or investigational device exemption, is a formal record required to include information about the device including a US sponsor for the device. A foreign device company that wants to run clinical trials in the US must have a US representative the FDA can contact. Many contract research organizations, or CROs, provide such services. If any clinical trials have been run previously, for example, a feasibility study performed in Eastern Europe, these prior investigations must be reported. The IDE also includes the clinical trial protocols or investigational plan describing how the trial will be conducted. Each IRB that will be reviewing and monitoring the trial is listed in the IDE. As is, the principal investigator, or PI, will lead the clinical trial. The IDE will also contain a description of how the device that will be used in the trial will be manufactured and tested to ensure it functions properly. If the device has been sold in other countries or the US for a different indication, sales information must also be included in the IDE. All labeling information: anything printed on the device as well as instructions for use and directives for the clinician will be reviewed and approved as part of the IDE. A very important part of any clinical trial is obtaining informed consent from trial volunteers. The informed consent document will be included in the IDE so that the FDA or IRB can confirm that the trial procedures and potential risks are clearly stated in language that can be understood by a layperson. Informed consent documents may need to be provided in multiple languages. 6 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. IDE Geography The pathway and timeline for IDE approval depend on where the trial will be conducted. Click on each button to learn about the requirements for IDEs based on geography, when you are finished, click next to continue. FDA IDE Approval Timeline If the trial will be conducted in the United States, the FDA has 30 calendar days to respond to the IDE after its submission. In effect, if the company does not get a response from the FDA after 30 days of submission, the clinical trial may commence. Outside US (OUS) Studies If the trial will be conducted outside the US, no FDA approval is required. Instead, approval from that country’s regulatory body will be sought. Although no FDA approval is required to run the study, if the data from the study will be used in a submission for approval in the US, the clinical trial must have followed all FDA guidelines including good clinical practices. Clinical Trial Location Gaining market approval for a medical device in the United States or Europe generally requires clinical trials to be run within those geographies. This is to ensure that the test population is both genetically as well as culturally representative of the market population. Cultural representation can be very important in human factors testing. Many CROs or contract research organizations run clinical trials outside the US and EU because the trials can be run much more quickly. This can provide valuable information and may be preferable for feasibility studies but generally, the data generated from these trials does not negate the requirement for local clinical testing. Need for Gold Standard Devices and diagnostics are often compared to a gold standard. For diagnostics, this is physiologic proof of disease or an orthogonal test method. For instance, the gold standard for blood pressure is the insertion of a catheter into the patient’s artery to directly measure pressure. The blood pressure reading of a new arm cuff will be compared to the invasive gold standard to prove it is measuring accurately. The accuracy of a pregnancy test can be confirmed by a patient 7 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. ultrasound showing the growing fetus. The gold standard for a device will be industry-accepted and will likely be the predicate device against which the new technology will be tested. For example, a new artificial knee will be compared to an extensively used and currently marketed option. A new drug-eluting stent may be tested in comparison to an uncoated stent or to an existing coated stent. The flow rate of a new IV pump can be tested by weighing the amount of water that is pumped from an IV set in a given time. Regulatory Submission Summary Let's look at an overview or summary of the regulatory submission process for medical devices in the United States. The initial regulatory submissions will be for the device clinical trials. The Pre-IDE submission package is a request to meet with the FDA to introduce the device to the committee and discuss the test strategy proposed by the sponsor. The next regulatory submission will be the IDE application itself, requesting IDE approval for a significant risk device. Following clinical trial completion, the sponsor will apply for market clearance or approval. A class 2 medical device with a substantially equivalent predicate will follow the 510(k) premarket notification regulatory pathway. The 510(k) pathway follows three routes depending on the degree of device novelty. If the sponsor is seeking approval for a modification to a device, they already market, they can author a special 510(k) device modification submission. This much shorter submission generally does not require additional clinical trials and usually received approval quickly. If the FDA recognizes special controls and has guidances in place that the device conforms to, an abbreviated 510(k) can be submitted. Otherwise, a traditional 510(k) must be submitted. In the past, medical devices that did not have a substantially equivalent predicate were automatically designated as class 3. The de novo 510(k) pathway now allows sponsors to petition the FDA to designate these devices as class 2 and allow less extensive clinical evaluation. Class 3 medical devices will submit a PMA or premarket approval application, which will include clinical data demonstrating the safety and efficacy of the device. If the device treats four thousand people or fewer in the United States, it may qualify for humanitarian device exemption or HDE. This route of approval requires clinical trials similar to PMA, but the clinical trial requirements are less onerous. 8 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Regulatory Submission Contents A typical medical device regulatory submission for market approval can range from hundreds to thousands of pages in length depending on the complexity of the device and clinical trials. The regulatory submission discloses everything the company knows about the device and will even detail what the sponsor doesn’t know - unanswered questions or risks. A typical medical device submission for market clearance or approval will begin with an executive summary of the medical device’s purpose and design. Following the summary, administrative details such as the company address and contact information will be listed. A detailed description of the device and its characteristics will usually include drawings and mechanical designs. If the device has been marketed in other countries or a modified form, a history of market use and outcomes will be included. The intended indications for use will be very clearly defined. If it is a 510(k) submission, a detailed comparison to the predicate device will be included to prove substantial equivalence. All details of the device label; on-device printing, package label, package insert, instructions for use, and instructions for service are all submitted exactly as they will appear in the final product. Much of the FDA review will focus on the label and whether the data and information provided in the submission supports the wording of the label and therefore the device's intended use. The process for device sterilization will be described, and data validating the sterilization process will be included. Data from stability studies, both real-time and accelerated, will be included to support the sponsor’s proposed shelflife. If the device is non-disposable, evidence of safe and effective reuse will be provided. The submission will also include data from the animal studies conducted to support the biocompatibility of the device. The design, verification, and validation of device software will be described. The evaluation of electromagnetic compatibility and physical safety as well as performance test results will be included to demonstrate that the device is robust and can be used in the intended physical environments or how its use must be restricted to protect the device user or, in the case of electromagnetic compatibility, to protect nearby devices. The design, execution, and results of the clinical trial will be detailed to provide evidence of the device’s safety and efficacy. If any deficiencies were discovered during product development, these deficiencies will be specifically highlighted in the submission. All communication with the FDA regarding the device will be detailed in the contact history. And finally, the submission will conclude with the sponsor’s 9 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. recommendations regarding device class designation (Class 1, 2, or 3) and product code, which will determine what group at the FDA will review the submission as well as which devices are likely to be used as comparators. Submission Approval Timelines The review time for medical device submissions varies by geography as well as device complexity. In the United States, if the FDA does not respond within 30 days of submission for Investigational Device Exemption, the sponsor can begin clinical trials. However, the FDA responds to many IDE submissions with questions or comments requiring the sponsor to carefully respond and then wait an additional 30 days after submitting their response. Currently, only 32% of IDE submissions are approved in the first 30 days. The average time for approval of a 510(k) submission is four and a half months with 95% of submissions receiving clearance within a year. Approval of a de novo 510(k) submission takes longer, anywhere from 8 to 16 months, and the average approval time for a class 3 PMA submission is 13 months. The path to approval in the EU is substantially faster. Even high-risk devices typically receive a CE mark, clearing the device for market, in one to three months. Section 1: Approvals Summary To summarize section one, we learned that: • Medical devices in the United States are approved for sale by the FDA through CDRH the Center for Device and Radiologic Health. • In order to gain IDE or investigational device exemption and therefore approval to begin clinical trials, a device must be classified as significant risk or nonsignificant risk. • The advantage of nonsignificant risk classification is that an IRB or institutional review board can approve and monitor the clinical trials whereas significant risk devices must gain this approval from the FDA. • Ideally, new medical devices are compared to a gold standard to prove that they work effectively. 10 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. • Lastly, the timeline for medical device approval can vary widely from months to years depending on device complexity and risk level, as well as the country in which the device is to be approved. 11 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Section 2: Commercialization Objectives At the end of this section, you should be able to: • State the challenges involved in scaling up manufacture in preparation for product launch. • Explain the importance of coding and reimbursement. • Describe the regulatory oversight of a medical device once it has been approved. Business Preparations Receiving regulatory approval to market a medical device is only one aspect of product development. There are a number of business preparations the company will undertake to prepare for product launch. A detailed plan for sales and marketing is crucial to commercial success. This includes an analysis of promotional constraints to ensure all marketing materials and sales force interactions with customers meet regulatory guidelines and are consistent with the device label. A reimbursement strategy is also key to a successful product launch. If insurance companies and government healthcare providers won’t pay for the product, the market shrinks considerably. Sufficient quality and regulatory resources must be in place to respond to customer complaints consistent with government-required MDR or Medical Device Reporting guidelines. A careful plan for manufacturing ramp-up ensures that sales growth won’t be constrained by manufacturing capacity and that the device is manufactured in accordance with regulatory guidances. Finally, business preparations will also include plans for post-launch service and support of the device. Sales Challenges with New Devices There are a number of challenges that come with selling a new medical device. Click each button to learn about these challenges, when you are finished, click next to continue. Adequate Sales Force One of the first challenges in selling a new medical device is the recruitment of an adequate sales force. The company must decide whether to build an internal sales force or to work with a contract group and use an external sales force. A common problem with using an internal sales force is 12 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. that existing salespeople are already selling existing products and may not have sufficient capacity to take on new devices. Extensive training will likely be required for sales staff to learn all the details of the new product and potentially new customers. Prototyping Sales Strategy Is there a proven prototype sales strategy available that is appropriate for the new device? If the product is not going to succeed, the company wants to determine that quickly and cut its losses. A failure-fast strategy sets metrics for unit sales within a given period that must be met for the company to continue selling the product. Social Media Impact and Control A decade ago, sales and marketing were done in person or print. The introduction of social media into our society has forever altered how companies communicate with their customers. The regulatory requirements for medical communication, however, have not changed. All promotion and communication through the internet and social media must be consistent with the intended and labeled use of the product. Manufacturing Scale-Up Prior to the product launch, the manufacturing process has to be scaled up to meet anticipated market demand. Scale-up means different things for different medical devices. Laboratory instruments and implantable devices may only expect sales of a few thousand units per year, while a disposable device such as glucose test strips may have demand for millions of units. What does this translate to in terms of production rates? Producing 4 units per day will provide 1,000 units per year. If 10 million units are needed, the required production rate skyrockets to 1 unit per second. And production plans have to account for potential line shutdown and other manufacturing problems. If the manufacturing process is labor intensive, production is typically off-shored or automated to reduce cost. One challenge of manufacturing is keeping new technology and trade secrets secret. One option to protect intellectual property is to expand internal manufacturing capabilities in order to keep the device manufacturing internally. Manufacturing outside the US in particular leaves the company vulnerable to counterfeiting and loss of intellectual property. One strategy is to use multiple sites to manufacture different parts so that no single site knows the entire design. 13 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Similar to the Coca-Cola legend, no one has the complete recipe. There are also tax advantages to using multiple sites, as importing parts holds significantly lower tax consequences than importing the final product. If the device includes a biologic component, such as a protein or cell, or a chemical component, like a drug-eluting stent, the manufacturing complexity increases significantly. The ability to changeout manufacturing instrumentation or equipment decreases dramatically, and additional process and quality considerations are added. For example, increasing manufacturing capacity for a biologic requires preparation for FDA inspection and approval of the biologic manufacturing plant, a process that can take several years. Many small medical device companies will choose to outsource manufacturing to a CMO or contract manufacturing organization rather than make the capital investment required to build a manufacturing facility. Depending on the complexity of manufacture, contracts must be negotiated months or even years in advance of launch to ensure the CMO has reserved the capacity required to manufacture the desired number of units. Manufacturing Scale-Up Timelines There are multiple issues companies must take into consideration when planning the timeline for manufacturing scale-up. Perhaps first and foremost, is to balance manufacturing scale-up with anticipated sales growth. The preparation time required for different manufacturing processes can vary significantly. Injection molding equipment tooling, calibration, and then verification and validation can take anywhere from four to eight months depending on the complexity of the part. Set up and validation of semiautomated production lines typically requires 6-9 months, while fully automated production preparation can require up to two years. Many medical devices have to be manufactured in a clean room to limit particle contamination. If sufficient capacity is unavailable and the clean room has to be expanded, the expansion can take anywhere from 6-12 months. Preparing to manufacture a device with a US-based contract manufacturer or CMO requires anywhere from 1-3 years from start to product launch. Working with a CMO outside the US typically adds a year to the process. If the company chooses to build a new manufacturing facility, the ground will need to be broken at least three years before the planned product launch. Ready for The (Next) FDA Inspection? Not only does the manufacturing process have to be scaled up for high-volume production, but the facility and manufacturing process must also be ready for FDA inspection. Class 3 medical 14 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. devices following the premarket approval pathway require facility inspection prior to the product launch. Class 2 medical devices may launch prior to inspection, but an FDA audit can usually be anticipated within two years of approval. It's important to keep current on trends in the FDA's focus. For example, inspection of foreign facilities has increased in recent years, likely in response to foreign production problems such as Chinese heparin contamination. The FDA pays particular attention to documentation and change control. Having a robust CAPA, or corrective and preventative action plan in place, and demonstrating that it is routinely used is important. Employees must demonstrate their ability to perform and understand their job functions suitably. Processes should be established to ensure that FDA audit requests can be fulfilled completely and promptly. For example, documentation should be easy to locate and present. A specific audit team, headed by quality, should be established and trained to prepare for agency inspection. A common practice is to run a simulated inspection with independent personnel or even a third party that specializes in audit preparation. Reimbursement Strategy - Coverage Successful medical device commercialization is dependent upon a reimbursement strategy. Regulatory approval of a device does not guarantee reimbursement. The first element of a good reimbursement strategy is coverage. To gain coverage the procedure, device, therapy or service must generally be regarded as medically necessary. It must meet current medical standards and have a proven benefit to health outcomes. If a similar product is already on the market, coverage will be more likely if a study of comparative effectiveness has been completed, hopefully showing your new device to provide a superior outcome. Publication of peer-reviewed clinical trial results from a multi-site study demonstrating a clear scientific outcome is especially helpful in convincing payers that the device is worth covering. Reimbursement Strategy - Coding The second element of reimbursement is coding. Medicare, Medicaid, and many insurance companies require coding for reimbursement. These codes are controlled by the Centers for Medicare and Medicaid Services, or CMS, and by the American medical association, or AMA. 15 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. What Is CMS? CMS is the Centers for Medicare and Medicaid Services, previously known as the Health Care Financing Administration. The department was established in 1965 along with Medicare. CMS is part of the Department for Health and Human Services, just like the FDA. CMS is responsible for oversight of Medicare and Medicaid as well as HIPAA or the Health Insurance Portability and Accountability Act, and regulation of clinical laboratory testing through CLIA, or the Clinical Laboratory Improvement Amendments. Reimbursement Strategy: Coding There are two types of codes used for reimbursement, ICD-9 codes, and CPT codes. Click on each of the buttons to learn about the different codes. When you are finished, click next to continue. ICD-9 codes are used by hospitals to bill for inpatient procedures. For example, CMS will set a reimbursement amount for hip replacement surgery. This is a flat fee that covers the entire procedure. If the hospital chooses to use a more expensive instrument or implant, CMS will not increase the reimbursement amount, and the extra expense cuts into the hospital’s profit. CPT codes are used by hospitals and physicians to bill for outpatient procedures. CPT codes are issued by the American medical association and cost by CMS. For example, a laboratory blood glucose test has a set reimbursement fee, and this fee is the same regardless of the technology used to determine the patient’s blood glucose level. The reimbursements set by the code puts pressure on the industry to keep the cost of new medical devices low. It is critical for a new device or diagnostic to receive a code because Medicare and Medicaid will not reimburse without a code. Reimbursement Strategy: Payment The third element of reimbursement is payment. Hospitals and physicians can charge by their fee schedule, which is a set rate per procedure, and item used. These fee schedules have the highest possible rates and are usually only paid by uninsured individuals. Insurance companies will negotiate with the provider for a discounted fee for service, many of which are based on Medicare or Medicaid reimbursement schedules. Payment can also be based on how many days the patient is in the hospital, or by case rate which covers a defined group of procedures and 16 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. services. For example, procedures and services required for C- section delivery of a baby. Capitation reimburses a healthcare provider a lump sum per patient regardless of how many services the patient receives and typically is not a provider’s preferred method of reimbursement. Medicare pays for inpatient services by DRG or diagnosis-related group which classifies procedures that are reimbursed at a flat fee. For example, appendectomy has a DRG and a specific reimbursement that Medicare will pay. This is similar to the case rate payment. Health Plans & New Technology The fact that healthcare costs are increasing rapidly isn’t news to any of us. Insurance premium increases to match these rising costs seem to be in the headlines almost weekly. Convincing financially strained insurance companies to pay for new technologies can be challenging. Payers must balance access to new technology with the cost and clinical benefit. Increasingly, insurance companies are taking a population-based approach; requiring evidence that their customers will have both a need for and a meaningful clinical benefit from, the technology. The risks of early adoption of new technology are not only financial but also legal. If a patient has a poor outcome following a procedure with a new device, in our litigious society the patient may sue the insurance company on the basis that their choice to reimburse the new device is a kind of endorsement of its safety and efficacy. There are, however, also risks of being a late adopter of a new technology. Customers may grow dissatisfied that a new device or therapy is not covered by their insurance and will take their business to another insurance provider. Healthcare providers may become frustrated that their commonly used devices are not reimbursed and will drop an insurance carrier. If many patients are filing appeals to use a new device, the resources required to field the appeals could potentially outweigh the cost of reimbursement. There are also legal risks to late adoption. If a patient who is denied a new treatment suffers injury or death, the insurance company may face civil litigation. Private Payer Technology Evaluation Increasingly, private payers are requiring robust evaluation of new technology prior to covering its use. Strong scientific evidence from peer-reviewed journals is an important way to demonstrate the technology’s efficacy. Payers are looking not just for general efficacy, but for a proven clinical benefit for a specific medical condition. A common criticism of clinical trials is that they are so well controlled they don’t resemble normal clinical circumstances. Payers increasingly want evidence 17 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. that the improvements demonstrated in these well-controlled trials are also attainable under normal conditions. The clinical evidence must show not only improved health outcomes but also demonstrate that the new technology is at least as beneficial if not more than existing technology. This evidence-based practice or data-driven decision-making ensures that reimbursement is based on proven clinical outcomes. If the new technology doesn’t have a proven net health benefit coverage will not be provided. While this is a high hurdle, many new technologies can significantly improve health outcomes and even lower healthcare costs. All in all, insurers have no reason to withhold proven new technologies from their members. Product Launch Gate Review Prior to product launch, a formal gate review is performed to confirm that everything is in place for a successful launch. A typical review will include confirmation that the design history file is complete. This file contains all the details of the product design and verification/validation, including product requirement specifications, software design, risk analysis & management plan, design failure analysis, prototyping results, bill of materials, manufacturing requirements, and minutes from all design review meetings. A complete device master record is also essential for product launch. This record includes every detail of the device design and manufacture. Essentially the complete instructions for how to manufacture the device from the first order of raw materials until it ships to the customer. The results of all verification and validation work will be reviewed to ensure completeness. Approval and clearance from regulatory agencies in the US and abroad will be confirmed and filed. The final label, including any updates, will undergo a final review and be approved. All marketing materials and sales strategies will be analyzed to ensure they meet regulatory requirements and are effective. The distribution and service strategy will be reviewed to confirm the product will reach customers promptly, and that sufficient resources are in place if the product will be serviced - either in the field or by return shipment. A complaint system that meets regulatory requirements must be in place before a single unit of product is shipped so that patients and clinicians can effectively communicate with the company. And a final business review will be conducted to confirm that the product will be profitable at the set price point and that the company 18 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. will be able to ramp up production to meet anticipated sales. If the phase review successfully shows all of these requirements to be in place, the product launch is approved. Product Launch Once management has confirmed through the gate review process that the product is ready, the actual launch is initiated. Depending on the company’s certainty that the device will receive approval, units may already be manufactured and ready for shipment. New technologies that are less confident of approval may not begin manufacture until after approval, potentially resulting in a several-month delay between product approval and device distribution. The major focus of the product launch of course is marketing and sales. At launch, marketing materials will be released, and the salesforce will start visiting healthcare providers. The company may also host booths or give talks at conferences to demonstrate how their device is used. Most products are launched in a stepwise geographic roll-out. Large markets like the east coast and California are targeted first, followed by secondary markets such as Texas, Chicago, and Arizona. If the product is successful in the primary and secondary markets, it will then be rolled out nationwide. Post-Launch Assessment Following the product launch, an assessment is performed to evaluate the success of the launch. At the center of this assessment is the question of product quality. A management quality meeting in which quality assessments are reported to the senior staff is not only good business practice, but also a regulatory requirement. Management quality meetings must be held at least once a year. In these meetings, any quality problems, and potential quality improvements, as well as complaint reports and MDRs are reviewed and analyzed. A complaint report is a quality issue that did not affect patient outcome while a medical device reporting, or MDR, is an account of an adverse event that must be reported to the FDA. For example, a physician may file a complaint report with the company that one box did not contain instructions for use. That same physician could file an MDR if his or her patient ran a high fever after the implantation of the company’s pacemaker. Depending on the severity of the problem, the company may implement an immediate change to the product or wait for the next product revision cycle to make the change. The goal of these assessments is to have processes in place that generate continuous quality improvement and thereby ensure product safety and efficacy. 19 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Post-Market Surveillance Post-launch product surveillance is not just a good business practice for medical devices, it is a federal regulatory requirement. The mission of CDRH or the Center for Devices and Radiological Health, includes the promotion and protection of public health, timely approval of safe and effective devices, access to understandable medical information, facilitation of medical device innovation, and also monitoring of approved devices for continued safety and efficacy. National System for Medical Device Post-Market Surveillance To this end, a national system for medical device post-market surveillance has been established and has several components already in place. Medical Device Reporting or MDR requires manufacturers, importers, and user facilities (such as hospitals and nursing homes) to report significant adverse events associated with medical devices to the FDA. Over 200,000 events are reported through this system each year. MedSun, or the Medical Product Safety Network is an adverse event reporting program launched in 2002 that connects CDRH to the clinical community. Unlike MDR which focuses on manufacturers, the goal of MedSun is to foster a partnership between clinical sites and the FDA. Clinicians can report a problem through MedSun, and then MedSun researchers will work with facility representatives to understand the problem. Reports and lessons learned are then shared with the clinical community and the public so that practitioners nationwide can take preventative actions. Currently, there are over 280 facilities connected to the internet-based system that are generating over 5000 reports each year. The FDA can require sponsors to run several types of additional clinical studies. Post-approval studies are usually associated with PMAs and require companies to report on patient outcomes within a given period as a condition of market approval. Post-market surveillance studies are often ordered for class 2 and 3 medical devices and are called 522 studies for the section of the FD&C act that mandates them. These are more general studies that track patient outcomes for devices that are considered high-risk. The FDA can also require companies to run discretionary studies. For example, the FDA may want to compare four commonly used angioplasty balloons to determine if balloon type affects patient outcome. In addition to these components, the FDA has other tools in place to enable regulators to track, restrict, ban, and remove medical devices determined to be unsafe, adulterated, or misbranded. 20 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. Medical Device Reporting The regulatory requirement of medical device reporting was mandated by the Food Drug and Cosmetic Act or FD&C. The guidelines for medical device reporting encompass both mandatory as well as voluntary reporting. The purpose, of course, is to monitor marketed medical devices both for general performance as well as safety and efficacy. Mandatory reports must be filed with the FDA by manufacturers and importers within 30 calendar days of the company’s initial knowledge of a device’s malfunction or the injury or death of a patient. User facilities such as hospitals, surgery centers, outpatient facilities, and nursing homes are also required by law to report adverse events. A patient’s death must be reported both to the FDA as well as the manufacturer within 10 working days. The timeline is the same for a serious injury, but the facility needs to report the incident only to the manufacturer, not the FDA. In either case, the manufacturer is required to report the adverse event or death to the FDA themselves, even if the facility has already filed a report. Individual doctors are also encouraged to submit reports, but this is not a legal requirement. Previously, reports were presented in paper form, but an electronic system is now in place that speeds up communication. Anyone can voluntarily submit an adverse event report. In order to ease communication, the FDA has released the MedWatcher mobile app so that the public can report a problem with a device, drug, or vaccine directly from their smartphone or tablet. FDA Post Market Actions and Penalties Even after a medical device is cleared or approved for market, the FDA continues to monitor the product and has a number of different actions it can take, and penalties it can impose. The FDA has the right and responsibility to periodically inspect manufacturing sites. These inspections can take place at any time and the company must be prepared for inspection without notice. The FDA can require continued evaluation of the device post-approval in the form of post-market surveillance studies. In case of an adverse event, many devices can be tracked through serial numbers to the patient, enabling each patient to be informed of potential problems or recalls. If a problem is reported or discovered during an inspection, the FDA can issue a warning letter explicitly stating the issue that the company needs to address. If the problem is severe, or negligence or improper conduct is discovered, the FDA can impose penalties including product seizure, injunction, civil monetary penalties, and even criminal prosecution of individuals. An 21 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. adverse event or manufacturing deficiency can also result in the FDA narrowing the device’s use indications, and thereby its market. The manufacturer may be required to repair, replace, or refund the customer, or the product may simply be recalled from the market. If the discovered problems cannot be adequately addressed, the FDA will withdraw clearance or approval of the product and can ban or restrict the device from the market. The Increasing Role of the FDA In recent years, the FDA has been taking an increasingly proactive approach to medical safety. New standards and guidelines have been put in place and a number of standards have been updated. For example, the universal labeling system that will require all devices to have a UDI, or unique device identifier, is currently being phased in. A number of rules have been changed to respond to advances in technology. For example, requirements for software design and testing are much more sophisticated and complex. Technology advances are making it more and more challenging for manufacturers to find substantially equivalent predicate devices, but clearing the high hurdle set for class 3 medical devices creates a significant barrier to entry. The FDA responded by creating the de novo 510(k) pathway that is more robust than a traditional 510(k) but typically requires less extensive clinical trials than PMA. Why Are The Newest Devices Available In Europe? A current trend in the medical device industry is that the newest and most technologically advanced devices are available in Europe. This is because the process for medical device approval in the EU is deterministic, faster, and less expensive than in the US. While the hurdles may still be high and cumbersome, the sponsor knows exactly what is required to gain market approval. The business plan of many medical device innovators is to launch first in Europe to generate revenue quickly, and then only after the European product launch will the company seek approval in the United States. If clinical trials are required to gain approval for a device in Europe, they are generally faster and less expensive to complete. The process in the US has inherent regulatory uncertainty dependent on whether the device will be classified as non-significant risk and require only IRB approval for clinical evaluation or classified as a significant risk and required more time-consuming evaluation by the FDA for IDE approval. A comparison of approval timelines (from submission of the device application until product clearance) demonstrates that the average approval timeline in 2011 for the 510(k) pathway was 138 days or approximately four and a half 22 Copyright 2023 Biotech Primer, Inc. PROPRIETARY. DO NOT SHARE. months. For some devices, the process is much longer. The approval of 5% of medical devices takes over a year. By comparison, the process to receive the CE mark which allows the sale of a medical device in Europe generally takes 30-60 days. The CE mark is a declaration of conformity, attesting that an independent body has confirmed that the device is in compliance with EU directives and that the product is safe and meets the performance standards described in the device label. Section 2: Commercialization Summary To summarize section 2, we first explained that: • The process of scaling up manufacturing for a product launch can take several years to complete and must be carefully planned and executed to avoid costly mistakes and delays. • Next, we discussed that in order to gain reimbursement, medical devices must increasingly demonstrate evidence-based efficacy and cost-effectiveness. • And lastly, we discussed that regulatory oversight of the device does not stop after commercialization of the product, and medical device manufacturers must continue to work with the regulatory body, clinicians, and patients, to ensure product safety and efficacy. 23 Copyright 2023 Biotech Primer, Inc.