Three speakers opened our ears, eyes, and minds at Healthegy’s Medtech Conference, held June 1, 2017, in Minneapolis. Two of the presentations provided input that reshaped my own long-held notions — holdovers from many years working in the medical device industry — and the third helped me to think about value-based outcomes from a more productive perspective.
Regulatory Uncertainty No Longer Top Concern For Boston Scientific
Michael Mahoney, chairman and CEO of Boston Scientific, provided the conference’s keynote address and spoke about the cultural change he has worked to create since taking the company’s helm late in 2011. In addition to restoring a “winning” attitude to a once-slumbering giant, Mahoney opened some ears with his insights on topics including the regulatory landscape.
Mahoney’s opinion of the FDA was surprisingly upbeat. He said the agency is becoming increasingly proficient, citing his company’s own productive pre-submission meetings and expedient approval of numerous investigational device exemptions (IDE) as reason for positivity. Mahoney also described an improved overall atmosphere of transparency at the FDA. Certainly, that has been a goal of the agency since the Center for Devices and Radiological Health (CDRH) underwent internal, public, and external reviews of the 510(k) process in 2010, and it was good to hear an industry leader validate that improvement. Perhaps Mahoney is one of the people providing positive feedback on the CDRH customer service satisfaction survey I covered in an earlier article?
Regarding the regulatory climate in Europe, Mahoney was not so optimistic. His overall opinion was that regulation within the EU is becoming more difficult, though he allowed that the uncertainty of new European Medical Device Regulations (MDR) could be creating most of the chaos. Mahoney said he expects calm to prevail once the industry learns how to work within the new regulations, but his overall sense was that EU regulations will become more restrictive and more difficult to navigate. It made me wonder if the Europe-first strategy of some U.S.-based companies might change in the future. There may no longer be an opportunity for more expedient clinical trials or quicker approval (CE Mark) in the EU.
Mahoney also identified his new most significant challenge in leading Boston Scientific, and it is not regulatory approvals: his top priority is reimbursement. Mahoney is more concerned with the Centers for Medicare and Medicaid Services (CMS) than the FDA. Innovative technology can be developed and cleared or approved, but medical professionals cannot prescribe its use without appropriate billing codes, as well as a means for the healthcare system to pay for the product or service. This challenge is compounded by the very real need to control healthcare costs while continuing to provide world-class care.
Medtech Investors Prefer Class III Devices?!
Jonathan Norris, Managing Director at Silicon Valley Bank, opened some eyes when he shared recent investment data indicating DeNovo/PMA devices are more-preferred investments. How can this be? I have talked to and worked with many start-up medtech companies, and their common mantra has been, “we have to find a 510(k) pathway for this device.” No one wants their first go-around with the FDA to be a Class III device with a PMA submission including full clinical data, right? It turns out we are looking at things the wrong way. We create business plans including the tasks, timing, and cost of commercializing a device. We are thinking like product development people, not business people.
The data Norris shared indicated that all Class III device startups exited (were acquired) prior to regulatory approval. The data also showed that — with a single exception — no Class II devices exited until after 510(k) clearance had been obtained. So, the higher-risk devices with the more burdensome regulatory pathways actually have shorter finish lines (from a business perspective). Norris summed it up rather succinctly when he said, “Class III devices produce higher multiples (return on investment) and have a shorter exit.”
Value-based Outcomes, Is Anybody “Getting” This?
Nimesh Shah, Chief Business Officer of Fractyl Laboratories, opened some minds with a simple, yet eloquent, explanation of this concept” “To understand value-based outcomes, don’t think of what you are providing as a device. Think of value-based outcomes as complete solutions. Perhaps, to properly benefit from the therapy that your device provides, you might also need to provide a complimentary education program for patients.”
A light went off in my head when Shah spoke. I flashed back to the early days of my career, when I was working for a respiratory company that designed and developed (among other products) continuous positive airway pressure (CPAP) machines. Awareness of sleep apnea was growing in the 1990s, and sales of CPAP machines and masks were increasing. But that’s just it. We were thinking of what we were providing to the users as machines and masks. As long as we could blow air up their nose, we were providing value.
About 50 percent of the people prescribed a CPAP machine don’t use it, even though Medicare or private insurance has paid, or is paying, for the machine. What was often lost was the fact that value is providing a machine the user understands and is comfortable with, one whose therapy they will seek each night for better sleep, a more productive day, a safer driving experience, and perhaps even reduced blood pressure. Overall, providing a value-based solution reduces a patient’s likelihood of incurring additional healthcare costs, which is a positive outcome for all of us.
Now I get it!