Why Clinical And Commercial Development Must Be Integrated Fully And Early For FDA And Reimbursement Success
By Kent McKinney, MPH, Joseph L. Mailman School of Public Health, Columbia University
I can only imagine the uncomfortable conversations happening around boardrooms across the country. Consider this hypothetical but entirely plausible scenario: The CEO of a midsize biopharmaceutical company, poised for the successful market adoption of a recently-launched product, turns to the CCO for an update. Wondering how to deliver the bad news, she explains that there has been a setback involving Medicare coverage. To complicate matters, she knows it may spill over into the commercial health plan access as well. The coverage issue originates from the company’s decision to file for approval of an oral cardiovascular drug under a 505(b)(2) approval pathway instead of an NDA. None of the senior executives around the table, including the heads of R&D and regulatory, could adequately explain it. Each department head was highly skilled at managing their areas in preparation for the drug’s launch, but they failed at cross-departmental communication and planning.
Assigning blame to an individual in this situation is a natural tendency, but any blame should be evenly spread out among several departments. With clearer alignment and communication upstream in the clinical development, regulatory, and commercial development processes, the major misstep could’ve been avoided.
Two Distinct Evidentiary Standards Must Be Considered
The tension originates from two separate and distinct evidentiary standards. While FDA approval pathways are designed to evaluate safety and efficacy, Medicare coverage and reimbursement decisions, made principally by the Centers for Medicare and Medicaid Services (CMS), are based upon a drug’s or device’s ability to fit into a Medicare benefit category by demonstrating that it is reasonable and necessary to treat or diagnose a disease. The reasonable and necessary criteria often require a broader evidentiary framework that may include clinical utility, real-world effectiveness, and economic value. When clinical development programs are not designed to address both FDA and CMS evidentiary standards, an evidence misalignment gap emerges, often leading to delayed access, suboptimal payment, and the need for costly post-market evidence generation.
For example, in our hypothetical scenario described above, the company, eager to launch a new oral, small molecule cardiovascular drug, opted for FDA approval through a limited data pathway option — a 505(b)(2) as opposed to a full NDA. The 505(b)(2) represents a regulatory arbitrage mechanism, enabling efficiency and cost savings through selective evidence reuse. As such, a 505(b)(2) application is defined by its partial reliance on external evidence, including prior regulatory findings and published literature, rather than the independent generation of a full evidentiary package. Under this approval pathway, the sponsor may use data from a similar product to supplement its own clinical data, thereby, in certain cases, greatly reducing the time and expense required for an FDA approval. While the company may feel a sense of accomplishment by expediting the time of approval by choosing the 505(b)(2) pathway as opposed to a full NDA, the reimbursement realities may catch up further downstream in the commercialization process.
One Problem With Several Permutations
While our 505(b)(2) example reflects one very common approval-reimbursement mishap, there are several other permutations that can be equally problematic. Consider that there are five FDA approval pathways for a drug or biologic depending on molecular size and complexity, absence or presence of an in-market reference product, and other similar factors. With a similar number of medical device approval pathways, it’s easy to envision that without a consistent top-down effort across key organizational functions, the likelihood of a successful product launch is low.
CMS has very complex responsibilities, when considering the agency’s role in overseeing the healthcare regulatory environment on behalf of its beneficiaries while responsibly protecting the Medicare Trust Fund. If we can conceive of this tremendous responsibility, we can understand its need to scrutinize new products entering the marketplace in search of coverage and reimbursement.
While not fully expressed in this article, there are other hierarchical approval add-ons that may be applied to FDA approval. One such add-on is Accelerated Approval, which a manufacturer may ask for as part of an FDA filing. While it is the sponsor’s choice to request an Accelerated Approval pathway, it is up to CMS’s discretion to approve it. Under such approval, sponsors design their clinical trials based on clinical surrogacy, which is confirmed after approval through post-marketing confirmatory trials. CMS’ growing concern of reasonableness and necessity is complicated when considering a drug approved under the Accelerated Approval pathway that has not clearly demonstrated that it works.
What Sponsors Need To Do Now
Thankfully, there is hope for sponsors seeking coverage and reimbursement of their products in Medicare without a clearly thought-out reimbursement strategy. In situations such as the one described, sponsors may need to reconfigure their data to support a strong argument that eliminates CMS concerns about the limited data pathway. Accordingly, sponsors may wish to construct a true picture of the product’s outcomes, adherence, and site of care shifting to lower-cost settings when meeting with CMS. Depending on the severity of the miscue, it could mean $20 million to $40 million to redo clinical trials and run it back through the FDA — plus an undetermined amount of lost opportunity sales associated with delays.
Rather than saving face, to promote the greatest likelihood for complete commercial success, pharmaceutical and medical device companies should create governance committees several years out from product launch to share clinical trial development. These committees should consist minimally of clinical development, reimbursement strategy, medical affairs, regulatory, and market access executives tasked with defining objectives, regulatory filing, and commercialization access goals. By clearly communicating multi-departmental goals and objectives, planning teams may not only mitigate the disastrous effects of non-communication but proactively own and direct the correct clinical trials and reimbursement strategy required for seamless FDA approval and Medicare reimbursement.
About The Author:
Kent McKinney, MPH, serves on the faculty of the Joseph L. Mailman School of Public Health at Columbia University, where his research focuses on the health insurance marketplace and the market forces that influence patient access and affordability of coverage. With more than 30 years of senior executive experience in pharmaceutical and medical device commercialization, Kent has extensive expertise aligning product development pipelines and in-line portfolios with FDA approval, reimbursement strategy, and market access execution. He has successfully led numerous product launches across complex therapeutic areas.