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Reimbursement for MedTech and Biotech Startups

10/17/22 | 4 MIN READ

Learn about strategizing for future reimbursement while developing a medical device or therapeutic.

What is Reimbursement?

Reimbursement, according to Investopedia, is “money paid to an employee or customer, or another party, as repayment for a business expense, insurance, taxes, or other costs.” In the context of medical devices and therapeutic drugs, reimbursement is when a public or private third party pays a provider for the costs of a treatment. This third party could be an insurance company, or outside of the United States is usually the government. 

Having reimbursement opportunities can incentivize a healthcare provider’s willingness to use a treatment, and a developer to create and provide it. Reimbursement opportunities also de-risk development of new technology. If a developing medical device has few reimbursement opportunities, the developers may have trouble finding investors or securing funding for research & development or commercialization. 

For medtech and biotech startups and companies, it is important to consider forms of income or payment while strategizing device or therapeutic development. This way, executives can plan financials with more precision and clarity of the end product. 

Here are three steps to analyze reimbursement prospects:

1. Exploring the Reimbursement Landscape

In this first step of the process, a company should understand how the reimbursement system in the targeted country works in regard to their developing product. In this phase, companies should research the existing reimbursement systems and the applicability of their product to it. Some questions to consider in this step are:  

  • How does the money flow from the reimbursing organization to the developer? 
  • Who are the possible reimburses? 
  • Who has an incentive to pay for the use of a new technology? A hospital, insurance company, or the government?
  • Are there any existing similar products currently reimbursed in the market? If so, what are the reimbursement mechanisms for these existing products, and could they possibly apply to your product? 
  • Are there specific codes that categorize products, drugs, or applications that receive reimbursement? What are the payment rates assigned to each code? 
  • What is the coverage criteria associated with the use of reimbursed products? Are there any product specifications that must be met, that you can address while developing your product? 
  • Are there comparable products to use as examples? What were the results of their applications to receive reimbursement? 

The goal of this step is to triage current reimbursement mechanisms and decide if a product can be commercialized under existing reimbursement mechanisms or whether new reimbursement mechanisms are needed. Generally, operating within existing reimbursement mechanisms is more streamlined, since it may take years for new reimbursement mechanisms to be created. If reimbursement is coming from the government, for example, the company needs to wait through the slow policymaking process before new reimbursement guidelines are implemented, if ever.

Finally, a company should research the decision-makers they would need to collaborate with in order to obtain reimbursement. 

With all this information, a company can create a preliminary reimbursement strategy outlining the milestones, pathway, timeline, and associated budget to develop and commercialize their product.

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2. Reimbursement Planning

In this second step, companies need to consider data that would convince the reimburser identified in the previous step to provide reimbursement. There are four parts to complete this process: creating a value story, economic model, support of clinical data, and getting feedback frond decision makers.  

Creating a Value Story

First, a company needs to create a value story, which outlines a patient's current situation, and the outcome of the patient using your product, from a clinical or economic perspective. For example, a device that quickly identifies diseases reduces the time involved in diagnosis and allows a patient to get early treatment. A tip is to analyze the value from the reimbursing entity's perspective - for example, if a hospital is providing reimbursement, does increasing patient health decrease costs for the hospital? 

You can also look to healthcare systems in different geographic markets, if you’re planning to distribute internationally.

🔬 Read about:  Market Access for MedTech Product Development

Economic model

Next, you can create an economic model that quantifies the estimated economic benefit. This process should help you identify the most important features or aspects of the product, and also optimally price your product. In this step, you should find a balance between the wants of your company and the decision makers - ideally, your product benefits all parties. 

Support from Clinical Data 

Next, look to your clinical data to determine which claims made in the value story are already supported by existing clinical data. If your company is planning an additional study, review the clinical study protocol and find additional tests that provide data in the areas needed for reimbursement.  

🔬 Read:  Rules of Clinical Engagement for Healthcare Startups 

Feedback

In finishing up reimbursement planning, you should obtain preliminary feedback from the reimburser you are targeting. This step is like a “sanity check,” to get validation on your reimbursement strategy. Bring your clinical data and economic model to representatives of reimbursement agencies, and take note of the feedback they give you. Is your product similar to something they have previously reimbursed, or is it completely out of their scope? Doing this can help companies avoid delay and streamline studies to ensure their reimbursement expectations are met. 

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3. Implementation

The final step in reimbursement is implementing your reimbursement strategy to obtain the funds you planned for. You need to develop a billing guide that instructs healthcare providers how to bill for your technology under the existing reimbursement mechanisms. This billing guide is imperative to aligning reimbursement strategy with implementation, as it reduces the chance of a salesperson misleading the reimburser to bill using the wrong codes.

If your company chooses not to use existing reimbursement methods, either due to availability or choice, this third step becomes lengthier. Your company would need to fund additional clinical studies and harness the support of the local medical community. Depending on what activities a company wants to engage in to reform the reimbursement mechanisms, this could take months or years, and can cost more than commercializing the product. medical device

Frequently Asked Questions:

Q: What reimbursement knowledge should companies should be aware of during R&D so they’ll be better prepared for the reimbursement process?

A: A company should be exploring the reimbursement landscape in R&D because the results of this discovery could impact the product development. During this phase, a company should know if the product they are planning to launch can be commercialized under existing reimbursement mechanisms. This information can affect the amount of money that needs to be raised, as well as the types of clinical studies needed. 

🔬 Related:  Regulatory Affairs for Life Science Startups

Q: Should regulatory and reimbursement strategy be synchronized?

Reimbursement and regulation run parallel to each other, so regulatory strategy can affect your chances to get reimbursement and vice versa. However, these two strategies look at different areas, so your clinical trials and research should cater to both reimbursement and regulation. Make sure your regulatory and reimbursement strategies are aligned. 

🔬 See More:  Getting Your Tech Out of the Lab & Onto the Market


The information in this article comes from a webinar with Amir Inbar, founder of MEDIClever, and hosted by University Lab Partners.

Be sure to subscribe to the ULP Youtube Channel to never miss another webinar, and connect with us on LinkedIn to stay in the loop!

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