Economic implications of potential changes to regulatory and reimbursement policies for medical devices

Abstract

OBJECTIVE: To evaluate the impact of regulatory scenarios on the financial viability of medical device companies. DESIGN: We developed a model to calculate the expected net present value of a hypothetical product throughout preclinical development, clinical testing, regulatory approval, and postmarketing. We tested 3 scenarios: (1) the current regulatory environment; (2) a scenario in which medical devices are subject to the same evidence standards required for pharmaceuticals; and (3) a scenario consistent with the Coverage with Evidence Development: Coverage with Study Participation (CSP) policy proposed by the Centers for Medicare and Medicaid Services, whereby Medicare will pay for beneficiaries to receive new devices that are not currently determined to be "reasonable and necessary" if the patients participate in clinical studies or registries. MEASUREMENTS AND MAIN RESULTS: When applying assumptions consistent with the implantable cardioverter-defibrillator market, the net present value at the start of development was an estimated $553 million in the current regulatory environment, $322 million in the pharmaceutical scenario, and $403 million in the CSP scenario. Sensitivity analyses showed that the device industry would likely be profitable in all 3 scenarios over a range of assumptions. CONCLUSIONS: The environment in which the medical device industry operates is financially attractive. Furthermore, when compared with the alternative of applying the same evidence standards for pharmaceuticals to medical devices, the CSP policy offers improved financial incentives for medical device companies. © 2007 Society of General Internal Medicine.