Value-Based Pricing: The Good, The Bad, and The Ugly

Transcription

1 Value-Based Pricing: The Good, The Bad, and The Ugly Medical Device Regulatory, Reimbursement and Compliance Congress March 27, 2008 Randel E. Richner, BSN, MPH President, Founder

2 Reform There is no problem, however difficult, which if we roll up our sleeves, we cannot completely ignore. --George Carlin

3 3 Policy Overview Technology Is Good. Technology per se, does not cause increased health care costs 1. It is only randomly possible to accurately detect the true value of technology due to a fragmented care delivery, migration of services, and system issues (complex overlay of private/public insurers to track and monitor care and value). Misaligned payment systems may cause perverse care incentives and artificial determinants of value. 2. The calculation of risk in determining the threshold of value is largely ignored.

4 4 New, Innovative and Complex Technologies Devices are getting smarter and are providing more information Intelligent devices Biotechnology Revolution Personalized Medicine Combination Products Information-Rich Therapeutics

5 Typical Market Development Early adopter Early Majority Late majority Introduce Disruptive Product Validate Launch post-fda Promote clinical utility Establish a network of advocates Position for Market Penetration Drive your message into the market Secure satisfactory reimbursement. Promote improved care Prove Principle Drive Adoption Change Standard

6 Innovation: PTCA % Penetration Length of Reign: Continuous improvement Unsatisfactory alternatives explored Upgrade to stents Uptake: Replaces CABG Moves procedure from OR to CCL Creates new medical specialty Intensity of adoption: Highly respected pioneer Decreased procedural costs Improves patient satisfaction Shortens LOS Time (in years)

7 Technology Assessment and Value

8 8 Technology Access Decision-Making Occurs at Multiple Levels Geographic Level Organizations Involved CMS, (Global--International) Major national third party payers and benefit managers National Regional Medicare Intermediaries and Carriers, DMERCs Regional health plans Local Medicaid administrators IDNs Physician groups Hospitals

9 9 FDA/CMS Divergencies Treatable Population FDA Label Indicated Population CMS Covered Population FDA regulator: public health/safety Safe products Assumes Market sorts out clinical value and comparative effectiveness Standards vary by risk CMS regulator: purchaser Improved health for good value Increased focus on clinical benefits blur into public health effort Decisions are broad, policy-based Uncertainties: How will CMS define and pay for incremental benefit? How long will full coverage of labeled indications take?

10 Evidence Development and Value Technology Assessment: Evidence Based Medicine: Coverage with Evidence Requirements Practice Based Management Pay for Performance Quality Outcomes Outcomes Assessment: Cost-Effectiveness Analsyis Outcomes Demonstration Projects Overuse, Underuse, Misuse Superior Medical outcomes Least Costly Alternative Substantial Equivalence Comparative Effectiveness

11 Type of data you collect depends on the category of product Similar to Another Product Expansion of Existing Technology Truly New and Innovative Evidence Required Usually FDA approval with same indications suffice for inclusion in existing coverage Publication of Controlled Studies (usually 1-2) Coverage under Protocol Publication of 2 4 RCTs with ongoing study through Registry Data, Cost-Effectiveness Data Evidence Should Prove Similar clinical efect and outcomes, cost-efficacy a plus for differentiation Incremental clinical and / or economic value of the device relative to its predicate Higher degree of certainty. RCTs show improved outcomes over other treatments, with lower costs Clinical Trial Data Types Necessary/ Optional Regulatory approval, Practical clinical trial, limited cost study RCTs, Costeffectiveness, Long-term outcomes, Ongoing Practical Clinical Trials RCTs, Costeffectiveness, Long-term outcomes, Practical Clinical Trial, Post-market registry

12 Payment Misalignments and determining Value

13 13 Medicare s s Complex Reimbursement Processes Each payment system has its own rules, based in statute, and uses data from the providers it pays Different payments in different sites for the same items or services Can create inappropriate incentives Providers learn to balance underpaid/overpaid services to achieve bottom-line Benefits of less invasive services, migration to less costly settings, not recognized in value calculations

14 14 Major CMS Payment Systems PROSPECTIVE PAYMENT SYSTEMS: Inpatient PPS Outpatient PPS Inpatient Rehab Long-term Care Hospital Inpatient Psych Skilled Nursing Facility Home Health FEE SCHEDULES: Physicians Ambulatory Surgical Centers Clinical Labs Durable Medical Equipment, Prosthetics & Orthotics Ambulance ESRD

15 15 Example of Payment Divergences Diagnostic Colonoscopy CPT million procedures performed in 2003 Payment Site Utilization OPPS $513 56% ASC $446 22% PFS-PE $177 6% physician fee schedule (PFS) practice expense (PE)

16 Home Hemodialysis provides great value; providers limit adoption VS. Major clinical benefits LVH, heart failure improvement Anemia Rehabilitation/QOL 15-25% annual savings potential ($10-17K of 70K costs) Kaiser promoting home dialysis

17 Daily home dialysis challenges Largest savings in hospital costs, which are part of a different budget (Part A vs. Part B) and are not realized by the dialysis provider

18 Risks

19 Consider Unique technology-specific issues Risk: should the level of evidence be the same for a new MRI test as for a new brain aneurysm stent? Operator Skill: How does one design the impact of physician enduser skills on patient outcomes and study design? Life Cycles: How do we expect to use traditional study approaches with minimum of 3 years from start to pubs when technology changes within a 2 years? Combinatorial science: How does the study account for the manufacturing changes (polymers, voltages, wires and metals, drugs) on the effect of patient outcomes? Physician end-user involvement: How are physicians mobilizing to determine the outcomes critical to study to determine value?

20 Drug Risks: Near-Term Fatalities Per Person-Year Log Scale Orders Of Magnitude Deaths per 100,000 person-years Smallpox vaccine Antihistamines Daily aspirin Clozapine Tysabri for MS Vioxx

21 Transportation Motorcycle: 450 Truck drivers: 45 Passenger car: Cell phones + driving: 1.3 Commercial airplane: Smallpox vaccine Antihistamines Daily aspirin Clozapine Tysabri for MS Vioxx Deaths per 100,000 person-years

22 Solution 1: Value New Study Paradigm. Encourage access, innovation Risk-based stratification of evidence Physician end-user involvement Focus on treatment comparisons rather than individual product comparisons Electronic records, and HIT advances; invest in this infrastructure. Gold standard, database, epidemiological studies Bayesian analysis: preexisting data are constantly adjusted using new data as acured: potential reduction of sample sizes, and ability to continually update probability of success or failure. Collaborate with NIH, AHRQ, Private, public entities. Global interactions and use of data

23 Solution 2: Reward the Future Reward preventative services and interventions that can clearly demonstrate a significant value over existing products. Integrate nanotechnology, IT, molecular diagnostics and combination therapies (drugs/devices) into existing payment schemas. Evaluate new medical technologies at CMS through the Council of Medical Technology and Innovation; adapt payment mechanisms. Use an episode of care as a reward technology that moves from acute to home setttings (works in Kaiser-like systems where physician payment is not linked to utilization; providers and payers are aligned) Include physician payments and incentives in the episode of care. PREEMPTIVE, PREDICTIVE, PERSONALIZED, and PARTICIPATIVE

24 Solution 3: Value includes Risk Avoid the temptation to regulate when events occur before the technology is tested thoroughly. Partner with industry and medicine on improved methods to accurately measure risk. Use FDA-critical path initiatives as model.

25 Progress in the leading technology of our time has been so dramatic that it has brought about, time and again, swift qualitative changes in the material world around us, change that surely cannot be expressed simply as variations in prices or quanities. Trajtenberg, Economist, 1990.

26 Founder & President: Randel E. Richner, BSN, MPH