Consider Who Will Pay Early in Product Development

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By Joyce E. Cutler

Oct. 7 — Drug and diagnostic sponsors need to consider how their products will be paid for in the early stages of development to help gather the evidence needed to get marketing and reimbursement approval, panelists said Oct. 7 during a personalized medicine conference.

Think early on, before clinical trials and investments begin, about who is going to be asked to pay for genetic tests, targeted treatments and drugs and what information the payers need to make reimbursement decisions, said Anita Chawla, managing principal for economic and strategy consulting firm the Analysis Group in Boston.

“The general acknowledgement is that payers’ expectations are high,” Chawla said.

Evidence development is essential, Chawla said. A sustainable business strategy must be supported by data that address information needs of multiple stakeholders.

When discussing commercialization, “think about payers. Consider all the stakeholders here,” Chawla said during a panel of the Business of Personalized Medicine summit in South San Francisco, Calif. Personalized medicine accounts for differences in people’s genes, environment and lifestyle to determine optimal treatment for individual patients.

“Increasingly I think we’re going to see patients involved in all those decisions, and people want to see evidence.”

Government Payers Key

The government’s focus is on reimbursement, said Judith Waltz, with Foley & Lardner LLP in San Francisco and former assistant regional counsel in the Department of Health and Human Services.

Reimbursement “regulatory policies need to be considered in a very early stage in your product development at a time when you’re still able to figure out your clinical trial needs, at a time when you don’t have to rush to get your product to market,” Waltz said.

A company seeking reimbursement for pregnancy-related therapies, for example, won’t find a ready audience in Medicare although Medicaid pays for around 60 percent of all pregnancies in the U.S., Waltz said.

More companies are probably considering reimbursement earlier in the process, in part from investor community push, she said. “You need to plan ahead for this. Government moves very slowly.”

Know Who Pays for Coverage

Medicaid and Medicare together provide health insurance coverage for more than three in 10 Americans, the Kaiser Family Foundation said. The biggest players in the market are employers, paying for 48 percent of health insurance coverage, compared to Medicaid’s 16 percent and Medicare’s 15 percent, Waltz said.

The mechanism for setting a product's price is sometimes unknown and ever evolving, “which is very challenging when you are trying to build a model for this business,” said Perry Dimas, general manager for AmerisourceBergen Corp.’s Premier Source, which works with diagnostics providers.

Having a realistic business strategy is important “because all too often you get funding but you may have overpromised on where you are” in the development process, making investors unhappy “because they thought you were ready to go,” Dimas said.

Regulation, Reimbursement Issues

Early interaction with the payer community is essential as is being aware of regulatory requirements, said Dimas.

“I know a lot of people are out there saying, ‘we’re going to break all the rules.’ And I think 23andMe was a case” that showed a health-care start up does have to comply with regulations, Dimas said.

The Food and Drug Administration in 2013 told the genetic-testing company backed by Google Inc. to stop selling services that were meant to detect health conditions and disease risks. 23andMe eventually gained FDA clearance for its platform, and is planning to bring back its health analysis by the end of the year.

“I like to be on the cutting edge. I just don’t like to be the first one because they tend to go down,” Dimas said.

Payers Filling Regulatory Void

The increase in genetic testing and personalized therapies hasn’t been met with a corresponding increase in FDA oversight and guidance, leaving additional gaps in the growing area, said David Nixon, chief executive officer of genetics benefits managing company InformedDNA in St. Petersburg, Fla.

With a lack of FDA oversight over genetic tests, health plans are “playing the de facto regulatory role,” said Nixon. “As a society, we put them in that position by not having that regulatory framework, they now have to be the referees for what gets paid,” creating a source of friction.

Compounding that lack of regulatory framework is lack of training for front-line physicians who are unprepared to order and interpret genetic tests, Nixon said.

“As you talk about getting your pricing right and all those things, make sure that you maintain your white hat because once you get a bad reputation, they know it and you’re over with. You don’t get a lot of second chances,” said Nixon. “The bad actors are contaminating the pool we all want to swim in, so playing by the rules is in your best interest.”

To contact the reporter on this story: Joyce Cutler in San Francisco at

To contact the editor responsible for this story: Randy Kubetin at


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