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Taking the High Road

Building the right foundation for a medtech product launch requires fortitude and careful planning.

BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

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Medical device companies that have developed a premium-priced novel therapy frequently fall into a common trap sprung when they aggressively market their products as soon as they receive initial FDA clearance.

Since device companies have to submit to the agency only such data as are necessary to support claims of safety and efficacy, FDA approval of a device often requires less clinical information than the physician end-users and the payers will want to see in evaluating the marketed device.

Nevertheless, investors eager for returns often misinterpret FDA approval as the green light for aggressively marketing a product. Without additional compelling economic and clinical evidence, however, early sales efforts may be terribly handicapped.

Maximizing the commercial po­tential of an innovative and premium-priced therapeutic device—particularly one targeting a clinical indication that is already treated by drug therapy—usually requires having clinical or economic data that are comparative with those of competitive standards of care and that involve a longer time frame than the data submitted to FDA for approval. If a company takes the high road and funds these more rigorous clinical trials successfully before energetically marketing the technology, it can potentially capture hundreds of millions of dollars of market value that a quick-to-market, low-road approach might leave on the table.

Management should research and determine the market's evidentiary requirements early in the product development cycle. Then, its clinical strategy should include explicit definition of data objectives for FDA approval as separate from those of the more extensive data requirements for winning market acceptance. Finally, management should make sure that the investors recognize that FDA approval is simply one step toward commercialization and that clinical research will continue beyond receipt of the initial FDA approval. The true green light for aggressive marketing is the availability of sufficient commercially relevant clinical or economic evidence.

Standards for Approval

In contrast to the Center for Drug Evaluation and Research, the Center for Devices and Radiological Health (CDRH)—the device side of FDA—is generally reviewing technologies involving far less inherent safety risk, or risks that are more easily studied. (Many are substantially equivalent to existing devices.) In addition, device claims can be more easily written in terms of alternative end points. For example, a surgical device intended for treating gastroesophageal reflux disorder might simply be said to enable implantation into the lower esophagus.

A representative sampling of the pivotal trials that led to recent device premarket approvals shows how little clinical data may be needed to attain approval (see Table I). Many of the devices listed in the table are invasive and either include a permanent implant or permanently reshape internal tissue; therefore, their manufacturers were required to file premarket approval applications, subjecting the devices to the most stringent regulatory process within CDRH. Nevertheless, none of these companies were required to follow patients for more than one year, and many were not required to conduct randomized trials.

Company
Device
Total Patients
Randomization
Period for follow-up
Angiolink Corp.
Vascular closure
362
2:1
30 days
Celsion Corp.
Transurethral    system for BPH
190
3:1
6 months
Crycor Inc.
Cardiac ablation
160
No
6 months
Cyberonics Inc.
Vagus nerve    stimulation for    depression
293
1:1
12 months
Medtronic Inc.
Brain stimulator
160
No
12 months
Medtronic Inc.
Renal stent
188
No
9–12 months
Micro Therapeutics    Inc.
Embolic system
102
1:1
Days
Microsulis Medical    Ltd.
Endometrial    ablation device
324
2:1
12 months
Table I. Relatively modestly scaled pivotal trials can earn FDA approvals. Source: FDA.

These days, when the term "evidence-based medicine" is used with increasing frequency, payers will reimburse only treatments that offer clinical or economic benefits. To definitively demonstrate such benefits generally requires the performance of a head-to-head clinical trial matching the new product against the current standard of care over a lengthy time period. The evidence needed to achieve a coverage determination is different from that FDA needs to determine the product's safety and efficacy and—depending on the therapy, disease state, and patient population—may have to be more voluminous.

Some of the FDA-approved products in Table I did not initially receive a positive coverage policy determination from payers such as the Blue Cross Blue Shield Technology Evaluation Center (TEC). For example, TEC found that the data supporting the use of vagus nerve stimulation (VNS) as a treatment for depression did not adequately demonstrate the effect of VNS on health outcomes in comparison with outcomes achieved with other therapies.1

Similarly, FDA approved the ThinPrep Pap smear developed by Cytyc Corp. (Marlborough, MA) as an advancement over traditional Pap technology. However, the clinical supporting data used to win FDA approval proved inadequate to address the data requirements of physicians and payers. Cytyc had to amass far more data before it could overcome the payer hurdle.2

The Launch Decision

Company managers and investors wrestle with these issues as they develop their commercialization plans. They may see a choice between going to market with only the data used to obtain FDA approval or investing in gathering additional data after the approval and before going to market. Taking the middle course of going to market on the basis of the FDA data and then gathering additional data is possible but tricky. It is usually difficult to capture a premium price for the therapy without additional data. Also, it is difficult to introduce a device at a low price and raise the price later.

The additional data that would moot these issues usually accelerate market adoption at value-based prices even as they facilitate reimbursement. However, being patient is not easy for a technology company. Gathering the additional clinical or economic data costs not only money but time, and therefore it delays the onset of revenues. This factor makes the ultimate decision that much more difficult.

(click to enlarge)
Figure 1. The value of Synapse Biomedical's device grows incrementally with the accumulation of more clinical evidence, increasing its price potential. Source: Synapse company data.

Adding to the complexity, many elements of additional data typically can be gathered. For example, consider the NeuRx pacing device for the diaphragms of mechanically ventilated spinal cord injury patients developed by Synapse Biomedical Inc. (Oberlin, OH). By examining the experiences of past device companies and anticipating the perspectives of physicians and payers from early in the product's development, Synapse has been able to optimize the trade-off between clinical development and the timing and pricing of its market launch. The management team conceived of possible indications for its pacing device and has chosen to pursue studies that capture incremental value with relatively low risk and relatively low expenditures of time and money (see Figure 1). The evidence from these studies will be accumulated before the company sets its price and launch plans.

Two realistic approaches are available to companies following the path of additional data gathering. The first is to launch the product at a premium price and then try to accelerate sales once postmarket clinical data are in hand. The other is not to launch the product until all of the compelling clinical data are collected.

The implantable cardioverter-defibrillator (ICD) provides a good example of a product that entered the market the first way. ICD sales grew relatively slowly until a compelling clinical trial demonstrated that implanting an ICD delivered a prophylactic benefit for many patients with congestive heart failure. The ICD companies earned strong profits throughout the timeline described, partly because they were able to set a high price at the beginning for their first indications.3-8

The second approach is more radical. One company exercising this discipline is Asthmatx Inc. (Sunnyvale, CA), which is developing Alair, a device that provides a bronchial thermoplasty treatment for asthma. By the time the company launches the product, it will have invested in at least seven trials studying approximately 550 patients, many followed for five years.9

Unfortunately, many companies have found themselves in error when they began actively marketing a new product without having first accumulated the best clinical or economic evidence. Restore Medical Inc. (St. Paul, MN) is an example of a company that might have benefited from taking a more patient approach.

Restore received initial clearance for its Pillar palatal implant system for snoring in 2002 and for obstructive sleep apnea in 2004 on the basis of data collected from trials whose scope was minimal. Years later, the product has still not taken off; sales have remained modest relative to the considerable size of the obstructive sleep apnea market the system addresses. In the 12 months ending September 2007, sales for Pillar reached $4.4 million; meanwhile, however, the company's sales, general, and administration (SG&A) expenses grew to $14.7 million.

Restore indicated in its 2007 Form 10-K that obtaining coverage—and, with it, likely physician adoption—will require publication of peer-reviewed clinical literature and completion of additional studies to demonstrate the clinical effectiveness of the Pillar system. Since the initial public offering—in less than two years—the company's stock price has plummeted to just one-fifth of its previous value, as Wall Street's expectations have remained unfulfilled. And now, Medtronic Inc. (Minneapolis) has acquired Restore for the low price of $29 million, two-thirds of which was the control premium.10

Conclusion

If management carries out the following six analytic steps, it should be able to optimize the company's commercialization plan.

  1. Identify potential alternative indications and claims for the technology in question.
  2. Estimate the cost and time required to gather the data needed for FDA approval to market the technology.
  3. Estimate the incremental revenue potential of each additional indication and claim.
  4. Estimate the incremental cost, in time, money, and risk, of gathering sufficient data to make clinical or economic claims that will be compelling to clinicians and payers.
  5. Forecast alternative scenarios in order to determine the optimal trade-off between additional investments in the accumulation of compelling data against the opportunity cost in terms of time and money.
  6. Determine how well the clinical plans and commercialization plans dovetail in order to ensure that management and the investors are aligned.

Simply planning to get a novel premium-priced therapy to launch as soon as possible, while an understandable temptation, may sell the device, the company, and investors short. With some patience, and the fortitude to wait for a state of full preparation, a medical device company can enjoy the rewards of an optimal launch—full-value pricing and strong market penetration.


References

  1. "Vagus Nerve Stimulation for Treatment-Resistant Depression," Blue Cross and Blue Shield Association, Technology Evaluation Center (TEC), Assessment Program 21, no. 7 [online] (Chicago: TEC, August 2006 [cited 11 August 2008]); available from Internet: www.bcbs.com/blueresources/tec/vols/21/21-07.html.
  2. M Maremont, "Cytyc Test for Cervical Cancer Offers Minimal Advancement, a Study Says," The Wall Street Journal (February 13, 1998): 1.
  3. "Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2004 Rates; Final Rule," Federal Register 68, no. 148 (August 1, 2003): 45345–45672.
  4. K Steward and C Hu, Medtronic: Initiating Coverage Report (New York City: Credit Suisse, November 6, 2007).
  5. MR Bristow, AM Feldman, and LA Saxon, "Heart Failure Management Using Implantable Devices for Ventricular Resynchronization: Comparison of Medical Therapy, Pacing, and Defibrillation in Chronic Heart Failure (COMPANION) Trial," Journal of Cardiac Failure 6, no. 3 (2000): 276–285.
  6. AI Mushlin et al., "The Cost-Effectiveness of Automatic Implantable Cardiac Defibrillators: Results from MADIT," Circulation 97 (1998): 2129–2135.
  7. AJ Moss et al., "Prophylactic Implantation of a Defibrillator in Patients with Myocardial Infarction and Reduced Ejection Fraction," New England Journal of Medicine 346 (2002): 877–883.
  8. GH Bardy et al., "Amiodarone or an Implantable Cardioverter-Defibrillator for Congestive Heart Failure," New England Journal of Medicine 352 (2005): 225–237.
  9. T Salemi, "Asthmatx Breathes Easier," In Vivo 25, no. 6 (October 2007): 11–20.
  10. "Medtronic Signs Agreement to Acquire Restore Medical," press release [online] (Minneapolis: Medtronic, April 22, 2008 [cited 11 August 2008]); available from Internet: wwwp.medtronic.com/Newsroom/NewsReleaseDetails.do?itemId=1208882503881&lang=en_US.

Mark Speers is a managing director and partner and Susan A. Posner is a vice president at Health Advances LLC (Weston, MA, and San Francisco), a strategy consulting firm that focuses on the commercialization and growth potential of medical technologies.

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