Navigating the Regulatory and Reimbursement Landscape The Second Annual Medical Device Regulatory, Reimbursement and C

1. Navigating the Regulatory and Reimbursement Landscape The Second Annual Medical Device Regulatory, Reimbursement and Compliance Congress - March 28-30, 2007 Philip J. Phillips, MBA Director, Medical Device Practice BECKER &ASSOCIATES CONSULTING, INC. 2001 Pennsylvania Avenue NW, Suite 950 Washington, DC 20006 Tel: 202-822-1850 Email: phil.phillips@becker-consult.com www.becker-consult.com

2. Realities of the Landscape • Economic profitability drives technology development • Regulation: a “double edged sword” • Impedes innovation, but credentials products • Regulatory burden usually reflects knowledge of technology and the estimated risk/benefit • Existing payment systems adequately address most new medical technologies • Do not require new coverage decisions or coding for payment as often integral to existing procedures • Bundled payments absorbs costs of technology • Breakthrough technology creates the challenges BECKER CONSULTING

3. Breakthrough Technology • Clinically different from existing diagnosis / treatment options • Frequently subject to highest level of FDA regulation • Trials usually subject to IDE requirements (“significant risk”) • Often Class III devices, subject to PMA requirements • Frequently subject to post market studies • Often subject to CMS coverage, coding and payment processes • Significant to Medicare population, thus warranting careful evaluation • Costs may exceed payment under existing code structure, triggering the need for a new code • Coverage decisions require evidence BECKER CONSULTING

4. Challenges for Innovation • Raising capital and navigating R&D cycles • Developing optimal regulatory and reimbursement strategies • Navigating FDA and OUS regulatory bodies • Determining payors and payments • Synchronizing regulatory and reimbursement efforts • Concurrent and sequential actions • Integrating measures for reimbursement evidence into clinical trials for marketing authorization BECKER CONSULTING

5. Strategic Analysis Framework Explanation for profitability Measurable indicators or causes Root conditions Market Attractiveness • Direction Competition from Rival • Entry Threats • Competition from Substitutes • Supplier Bargaining Power • Buyer Bargaining Power • Regulatory Pressures Market Economics and Opportunities The Market The firm’s value-creation proposition matches the firm’s resources and capabilities to market opportunities Firm’s Strategy for Creating Economic Value (“Value-Creation Proposition”) Economic Profitability Competitive Advantage or Disadvantage • Cost Position in Served Market • Benefit Position in Served Market Firm’s Resources and Capabilities The Firm and its Position in the Market Courtesy of Ken Homa BECKER CONSULTING

6. Drug Phase II Phase III NDA/BLA FDA Launch Device Pilot Pivotal PMA Define eligible patients Potential Post-Marketing Trials Design clinical trial to incorporate coverage and payment criteria Advocacy Group Development / Launch Planning / Publication Strategy Legislative Monitoring Informal / Formal Meetings with Payers Payer Education Hospital Procedure Coding CPT / HCPCS Collect Cost / Health Economic Data Evaluate Cost Effectiveness Applications for New Technology Payments Timing Strategic Actions Clinical Marketing Coverage Coding Payment Adapted from D&MD Publications BECKER CONSULTING

7. FDA and CMS • Mission statements • FDA: “protecting” and “advancing” public health, “speed innovations” and dissemination of “accurate, science-based information” • CMS: “effective, up-to-date health care coverage” and “promote quality care” • Different laws and regulations • Standards for decision-making • “reasonable assurance of S&E” • “reasonable and necessary” • Administrative procedures and processes • Time and resource requirements • Confidentiality of information BECKER CONSULTING

8. FDA and CMS(Continued) • Cultural differences • Same parent agency, different geographic locations • Organizations do not easily communicate • Sponsors must independently coordinate requirements • Motivational factors • Fulfilling missions and meeting statutory obligations • Agency-specific goals • FDA: premarket goals linked to MDUFMA • CMS: internal BECKER CONSULTING

9. Case Study New Technology Intraocular Lenses (NTIOLs) • SSAA 1994: instructed DHHS to develop and implement process for determining payment • Established 42 CFR Part 414 Subpart F • Defined the terms of the process • Established $50 payment adjustment for NTIOLs • Annual review and approval process • 5-year payment period for adjustment BECKER CONSULTING

10. Case Study (continued) • Eligibility • FDA approved lenses • “claims of specific clinical advantage and superiority over existing IOLs with regard to reduced risk of intraoperative or postoperative complications or trauma, accelerated postoperative recovery, reduced induced astigmatism, improved postoperative visual acuity, more stable postoperative vision, or other comparable clinical advantages.” BECKER CONSULTING

11. Case Study (continued) • The NTIOL process • Notice and comment rule-making • Annual FR solicitation of applications • Review process • Confirm FDA approval for the labeling • CMS review of the evidence based studies supporting FDA approval • Determination and designation of NTIOLs • Effective 30 days after final notice BECKER CONSULTING

12. Case Study (continued)) • Interesting observations • Initiated through Congressional action • Implementation reflects FDA and CMS views • Little opportunity for collaboration between agencies • Less than optimal efficiency • Sequential process • FDA retains (possibly expands) regulatory authority • CMS duplicates evaluation of evidence underlying FDA approved labeling • The overall process can be successfully navigated BECKER CONSULTING

13. Conclusions • Strategic planning is essential to gaining FDA clearance and optimal payment structure • FDA and CMS can be successfully navigated • Take the time to understand each agency • Enlist expert support as needed • Do not focus on FDA and ignore the reimbursement landscape BECKER CONSULTING