Using Payer Research to Assess Medical Device Market Access

Using Payer Research to Assess Medical Device Market Access

Using Payer Research to Assess Medical Device Market Access 860 484 Avalon Health Economics LLC

Advances in technological innovation and access to capital have recently resulted in a wave of new medical devices, including more accurate diagnostic tools, remote monitoring systems, and automated surgical tools.  This next generation of medical devices has the potential to lower costs and improve outcomes.  Perceptive device makers are taking the time to carefully develop their clinical evidence, the results of which become a critical component of not just FDA approval but also purchaser decisions whether or not to adopt the new device.  However, from the perspective of users of medical devices—the purchasers, including hospitals, health systems, and clinics– these developments don’t necessarily make their jobs any easier.  Value analysis committees (VACs; sometimes referred to as “value assessment committees”) face crowded application spaces, with a multitude of choices of diagnostic and therapeutic tools.  In parallel with rapid technological advances, VACs have had to quickly gain expertise and competencies in evaluating these novel devices.[1-4]

Thus, there is increasing pressure on medical device makers to demonstrate both clinical and economic value to hospital purchasers and VACs.  This trend is driven by a number of forces, but three factors in particular stand out: (1) hospitals face increasing pressure from value-based purchasing (VBP) arrangements, whereby net reimbursement is linked in a variety of ways to care outcomes;[5-13] (2) as budgets for supplies and medical devices escalate, hospitals have relied increasingly on VACs and other supply chain management functions to streamline the acquisition process, and streamlining has led to identifying “value for money” opportunities in ways that have not been done in the earlier era of health care purchasing;[1, 14-17]  and (3) provider integration in the form of integrated delivery networks (IDNs) and accountable care organizations (ACOs) have enabled a “broader” perspective of care delivery, often referred to as “population health,” whereby providers are incentivized to engage in prevention of “avoidable” events and, in the case of treatment-related procedures, to improve efficiency and outcomes such that the net effect is fewer overall resources consumed per episode of care (e.g., efficiency in surgeries; reductions in avoidable hospital readmissions; etc.).[5, 13, 18, 19]

Regarding the last point, on “population health,” there has been some political uncertainty as to whether this will continue to rise in importance.  In recent years, there has been a shift in U.S. health care markets to a broader, population-based perspective when assessing the costs and benefits of medical innovation.  Cost effectiveness analysis and budget impact analysis results can look quite different when viewed from the perspective of a health system or integrated delivery system, and can look even more different when viewed through the perspective of a broadly-defined bundled payment for a given episode of care.  These organizational innovations were spurred on by some aspects of the Affordable Care Act (“ACA,” also known as Obamacare).  A critical question is whether an unraveling of the ACA will affect these organizational innovations, and if so, then how might such changes alter the way that we evaluate the costs and benefits of health care innovations.  The best estimates so far are that, in general, the trend toward population-based care will continue.  The main reason is the counterfactual: in the absence of population-based care, cost increases are not sustainable and meaningful improvements in productivity and efficiency are for the most part achievable.   The past incremental approach to efficiency improvement and cost reduction has largely been exhausted; further incrementalism will only yield small marginal improvements in efficiency and productivity.  These economic forces will greatly outweigh any political maneuvering around the institutions created under the ACA; components of the ACA driving population health may get renamed but the conceptual foundation and incentives will not.

This brings us back to the importance of conducting purchaser research in advance of a push toward commercialization.  Purchaser research gives manufacturers an opportunity to gain a sense of VAC perspectives in advance of finalizing the go-to-market value story.[20-22]  It can be used to evaluate not just the strength of clinical and economic evidence, but also how the overall story around that evidence can be shaped to most effectively resonate with VACs.  In some cases, this might just be a straightforward presentation of the top-line clinical and economic findings.  However, in other cases there may be a need to probe purchasers with hypothetical scenarios in order to “pressure test” or otherwise fine-tune a preliminary value proposition.  At Avalon Health Economics, we have a developed a straightforward approach to conducting purchaser and payer research, designed to deliver rich insights in a short period of time at a reasonable cost.  The approach is evidence-based, as we have developed it based on our close monitoring of literature and reports on trends and methods in payer and purchaser research.  Good purchaser/payer research typically includes three distinct and important steps; we briefly review these below.

First, and perhaps most important, we develop what we refer to as a “preliminary vale proposition,” or PVP.  Many device manufacturers have already developed version of PVPs, but from our experiences few undertake an exhaustive approach to include all possible value pathways, including secondary value metrics associated with VBP.  A critical part of the PVP is to gather and summarize all relevant published literature, and present that literature in such a way as to begin to lay out a compelling economic value story and to map all relevant value pathways. This is very important because it is better to test evidence-based value propositions (rather than aspirational value stories) with purchasers during purchaser research, as these are the stories device makers will want to eventually bring in front of the VACs.

Second, it is important to identify appropriate key opinion leaders (KOLs) to interview. KOLs should represent some diversity of settings, ranging from large integrated delivery networks (IDNs) to smaller community hospitals.  In many cases, medical devices have payer and health plan implications as well; in such cases, KOLs should include at least two different types of payer in the mix (e.g., large national payers and smaller regional payers).  Though it is often difficult to determine a priori, KOLs should have broad knowledge of therapeutic areas and facility purchasing decisions.  Most of the larger hospitals and health systems have developed standard operating procedures for their VACs, and members are generally able to extend their expertise across therapeutic areas.  Finally, ideal KOLs should be currently serving on VACs, or having recently served on these types of committees.  This requires a “double blind” approach, where a consultant (like Avalon) acts as an intermediary and conducts the research knowing only minimal information about the KOL (e.g., name, title, and organization), and the KOL knowing only “white labeled” (and de-identified) information about the novel intervention in question.  The intermediary does not share KOL-identifying information to the medical device maker, nor does the intermediary share enough information with the KOL to enable direct identification of the novel intervention.

The third and final step is to conduct interviews with KOLs.  When we first began doing this type of work, in advance of interviews we used the PVPs to develop detailed survey instrument. However, we have observed over time that KOLs, given their high level of expertise, are prone to engage in detailed discussions that quickly deviate “off script,” and that these deviations are often where value insights are gained.[20]  As a result, we now approach payer and purchaser research with a general outline of “trigger” questions that prompt KOLs to think about and comment on a particular broad theme (e.g., surgeon choice of implantable devices, the importance of VBP at their institution, etc.).  We usually send these guiding questions to KOLs in advance, which allows them to provide more detail during the interview.

In sum, the most important take-away point from this discussion is that given the increasing trends in the use of VBP by payers, hospital reliance on their VACs to stretch the supply chain budget and maximize value, and the growing trend to provider integration, accountable care, and population health, the need to understand VAC perspectives prior to the initiation of a commercialization strategy is paramount.  What we have outlined here is a broad overview on this necessity, and how medical device makers can go about conducting productive and meaningful payer and purchaser research.

(John Schneider, PhD, Sabrina Chmelir, Jacie Cooper, and Shawn Davies, MA)


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