Pharmaceutical & Medical

Device Innovations
Health is a fundamental human right, as stated in the
Declaration of Human Rights and the Sustainable Development
Goals of the United Nations. Achieving equality in access to
medicines is crucial to reduce mortality and promote the
health of populations (Khachigian, 2020; Lichtenberg, 1998).

On 1 June 2020, the European Commission published a

roadmap for a pharmaceutical strategy for Europe, which was
subsequently adopted in November 2020.

The overall goal of the initiative is to 'help ensure Europe's

supply of safe and affordable medicines to meet patients'
needs and support the European pharmaceutical industry to
remain an innovator and world leader'.
The ability to produce an impact on patients' health through innovation rests on
two fundamental conditions: i) the ability to develop new products that are more
effective than the existing therapeutic options (innovation); ii) the possibility for
patients to have access to them (access).

The ability to achieve these two conditions is the result of a complex interaction
among several actors over long periods of time. In the discovery of new
medicines both public and private actors play a role, although they respond to
different incentives. On the other hand, the private sector dominates in the late
stages of development of new products.

Pharmaceutical research and development (R&D) processes tend to be lengthy

and costly (Wouters et al., 2020; DiMasi et al., 2016), meaning that a private
investor would only undertake the process if there exists an expectation of
sufficient return on investment. Under the system that is by far most widely used
globally, intellectual property rights (IPR) play a key role in incentivising
innovation for private companies, by granting a monopoly to the patent holder.
• The key role played by prices under this system
means the two key conditions mentioned
above – innovation and access (availability and
affordability) – may be hard to reconcile. This
makes it challenging to find a balance between
providing sufficient incentives to invest in R&D
(dynamic efficiency) and ensuring that price
levels are such to ensure products are available
and affordable (static efficiency).
The system of remuneration of innovation mainly based on patents and regulatory
exclusivities (henceforth referred to as exclusivities), is widely adopted on a global
scale and led to remarkable results in terms of patients' outcomes (Lichtenberg,
2022). However, it is not without problems. Among the most widely discussed
issues of the current system are:

• Innovation is driven by market size (Dubois et al., 2015; Acemoglu & Linn, 2004)
and is less likely to occur when economic returns are expected to be small (Iizuka &
Uchida, 2017)). As a result, therapeutic areas characterised by small patient
populations (e.g., rare diseases), high uncertainty (e.g., Alzheimer and dementia),
or limited ability to pay (e.g., neglected tropical diseases) may experience unmet
medical needs (UMN). 1

This may lead to a misalignment between industry's R&D priorities and public
health goals; • There is discussion on what a fair level of profitability for the
pharmaceutical industry should be. However, even if there were a consensus on
this point, estimating actual returns is more complicated than in other sectors for
several reasons. Firstly, a sufficiently precise estimate of the costs of each specific
R&D process is needed. However, this is difficult to achieve, because there are
costs that are common to several R&D processes and the industry retains a clear
information advantage vis-à-vis the regulator on the size of these costs
It is no surprise then that the range of available estimates of
bringing one product to the market is wide (DiMasi et al.,
2016; Wouters et al., 2020).

The few comparative estimates of profitability available tend

to indicate that returns are higher in the pharmaceutical
industry than in other sectors (Ledley et al., 2020; Thakor et
al., 2017) even after adjusting for risk. However, the size of
this difference should be interpreted with caution (Cutler,
2020). Moreover, on average, figures look more favourable
for large companies than for smaller biotech
companies(Thakor et al., 2017);
• Even more than in the past, the pharmaceutical
industry is characterised by strong interactions
between innovations, and by a high degree of
cumulativeness, so that it is difficult to assess the
contribution of each inventor to the innovation
process.
• While in the case of COVID-19 vaccines a lawsuit
was considered convenient by many companies
because of the high profits generated by these
products, in many other cases lawsuits are not
filed just because transaction costs exceed
expected returns (Williamson, 1979);
Even in those cases where a product is potentially available in the
market, access is not always granted to patients, even in cases in which
public R&D investments play a crucial role.

The issue is exacerbated by the fact that single Member States are
responsible for reimbursement and pricing decisions, giving rise to a
complex landscape where manufacturers make strategic decisions with
potentially serious implications in terms of patients' outcomes.

Missing or delayed launches in some countries have a crucial impact on

patients' access. Although the length of launch delays has decreased
over time (Büssgen & Stargardt, 2022), they are still an issue,
especially for small markets and areas where GDP per capita is
comparatively low.

Moreover, access may be unequal not only across but also within
countries, especially when co-payments are high;
A large proportion of new medicines offers limited therapeutic advance in
comparison to existing ones. Only a third of new drugs approved by the US
Food and Drugs Administration (FDA) and the European Medicines Agency
(EMA) from 2007 to 2017 have high therapeutic value, according to appraisal
by independent organisations (Hwang et al., 2020

As demonstrated by the COVID-19 pandemic, extreme and unforeseen

crises have significant impacts on people's health (roughly 7 million deaths
for COVID-19 worldwide, as of July 2023)2 as well as on healthcare and
economic systems (in 2021, global economic growth was still 3.5 % lower
than projected before the pandemic) (OECD, 2021).
Similar circumstances occur with very low probability but, when they do, they
may have tremendous impacts on public health and put health systems
under huge pressure.

The large uncertainty surrounding the occurrence of such extreme

circumstances and the related long-term perspective that is needed to build
up preparedness makes this an unattractive area for private R&D investment.
More generally, a risk of under investment in prevention vis-à-vis treatments
exists(Kremer & Snyder, 2015; Dranove, 1998).
Personalized medicine is a concept that is really pretty
appropriate for pharmaceuticals where you're essentially
taking a set of drugs and customizing them really to the
person's unique genetic makeup, or circumstance in
terms of their demographics, or other challenges you
might find out in terms of their care.

When we think about what's actually been happening this

market has actually been quite a bit of growth. We see
that 28 percent of the approvals in 2015 alone are for
personalized medicines. Even more interesting is that 35
percent of those cancer approvals were for personalized
medicines as well.
Trends in Drug Development

Personalized medicine is a concept that is really pretty appropriate

for pharmaceuticals where you're essentially taking a set of drugs
and customizing them really to the person's unique genetic
makeup, or circumstance in terms of their demographics, or other
challenges you might find out in terms of their care. When we think
about what's actually been happening this market has actually been
quite a bit of growth.

We see that 28 percent of the approvals in 2015 alone are for

personalized medicines. Even more interesting is that 35 percent of
those cancer approvals were for personalized medicines as well.
So, this is a really exciting area to see development and growth in
the space. When we think about the pharmaceutical industry just in
general and particularly a focus of prescription drugs.
So, this is a really exciting area to see development and growth in the space.
When we think about the pharmaceutical industry just in general and particularly
a focus of prescription drugs.

Looking at healthcare dollars in 2014 and roughly this breakout will be pretty
much the same as it would be going into 2018-2019 and such. Prescription
drugs counts for about a dime and hospital care is the largest share with $0.32.
Physician services then at 20 percent.

So, basically pharmaceuticals are half of what physician clinical services might
be. Home health and nursing which is growing is eight percent. Then as far as
administrative, health insurance costs, other factors $0.07.

Other which could also be diets, wellness, lots of other programs, sometimes
even stuff with sports medicine it's not reimbursed gets in there 23 percent. So,
the exciting part is that while it is a dime, some of the things that are happening
in the space, particularly we talk about the personalized medicine components
in cancer treatments can really be transformative to help really reduce long-
term hospital calls, physician costs for the benefit that comes from prescription
drugs.
One other major trend that's been going on over a period of time is the
rise in the share of generics. Generic medications, we'll talk about
this later, are essentially pharmaceutical agents that are already
branded, and their patents have generally expired, and they're being
manufactured by somebody else and their costs could be substantially
less once their patent expires, usually after 20 years.

So, if we look about the rise in this say by 2014, we find now that 9 out
of 10 of US prescriptions, nearly eighty 88 percent are with generics
worse is in 1984, this is really only about nearly 20 percent climbing to
the third in just six years and then half of the market by 2002.

So, one advantage of generics is that the price can be a lot cheaper
than that would be otherwise for say a brand-name medication
though. As we'll talk about later, the advantage of brand-name
medications a key feature, is that that is essentially how the industry
recoups and creates its R&D pipeline for creating new transformative
medications.
Benchside to Bedside
To outline some of the current challenges that are faced in drug development and
really set the stage for where some of the innovations might be going forward in the
future. For patients and health care providers, the objective here is to improve both
the quality and quantity of life through prevention, cure, treatment, diseases, and
symptoms. It's one thing to live for a long, long time, but at a certain point, usually
around age 75 to 80, most people on average, at least in the Western world, things
start to wear out.

So, one of the big concerns about this is to try to figure out ways to make sure
people's functional status, even if they make it to 85, 90, 95, is of such quality, they're
really doing quite well. Then for the industry, which is really to keep some of this stuff
and planning, is to make a product that is commercially viable on all sorts of ways,
the cost of manufacturer, the marketing cost, to make sure that things don't go out of
business. It's a pretty critical stage. Now, again, our aim here is to impact survival,
health, and quality of life, and this is a pretty exciting thing to look at here.

If we think about, say, the case of Polio in the US, this is going from a period of, say,
1950 to 2009, and just look at the number of cases here that we're looking at for
Polio. Basically, 60,000, this is the disease that afflicted, as an adult, President
Franklin Roosevelt. Even in just year-by-year here, just coming up to 35,000 and
60,000 such that when the Polio vaccine is introduced in 1955, it greatly reduced it.
It's one of the biggest success stories ever in terms of public health and prevention
and then, ultimately, by the time we get to 2000, there are zero cases.
The drug development process is very involved. We have a period of what's known
as prediscovery where literally, thousands of compounds could be looked at
for that ultimately will lead to a drug. That drug discovery process will go on,
say, initially for three to six years.

We get to a preclinical area where we now are left with 250 compounds that look
somewhat promising. There's an Investigational New Drug, IND, form that's
submitted in to the FDA to let them know what's going on.

Clinical trials then commence and then methodically being narrowing down to, say,
five compounds. Then the number of volunteers progressively gets more. Now, we
get to phase three, these are essentially folks that had the disease and don't have
the disease. It's actually a pretty balanced space. Here is really in phase one users
who volunteers.

The new drug application is then submitted and then, finally, with reviewm the drug
is then put into large scale manufacturing with post-marketing surveillance. A very
long process and to get one blockbuster drug, it could be easily a billion dollars to
go from this point to here.
So, drug discovery can take years of research that precedes
discovery of a brand new drug and it takes a lot of things in
terms of disease research, and then also the accumulated
knowledge of the researchers to get to that drug target and
move forward. Many folks are involved. Researchers are
involved, not just in one organization, though many of them,
the concentration is in the pharmaceutical industries,
pharmaceutical companies themselves.

Biotech has about 18 percent of folks and then universities,

which are responsible for training many of the scientists, and
not all the scientists that will go into these two areas, but also
the universities are under development process as well, and
either to create the drugs or to license the drugs to the
biotechnology firm or the pharmaceutical company. This
provides an overlay of how the market is evolving into
different challenges and pipeline that goes into creating
pharmaceutical agents.
Drug Development Challenges
looking at this number of compounds, a 5,000 compounds just to get to one FDA
approved drug. Great brochure to look at it here from the pharmaceutical. Research
pharmaceutical manufacturers of America.

So again, 5,000 and it could be a long process to as we are noticing here, 10 to 15

years to go, all these different stages into play. This is another way of looking at that
timetable wondering like how could all those years been so quickly you can start out
initially with the ideation. One thing to keep in mind and this we'll get to discuss a
little later, it's super important to file your patent.

As soon as you have an idea, get the patent because chances are your patent will
not necessarily get approved as you can see here for quite some time. Publication
of the idea be careful when you do that, when people do that they have to get an
idea of what they're going to be doing will not give so much of what's a way that's
actually reveals what's in the patent and jeopardizes your intellectual property claim.
So, patent can take three to four and a half, five years, and then once all that's done
you can then start the FDA approval process.

That process might not occur until where you can actually now sell your drug the
Food Drug Administration in the United States 14 to 16 years later and clearly what
you're operating here is a 20 year window for when your patent will go into
exploration, which means you really only have say between four to six years to
resell your product
Prescription drug prices can decrease significantly over time
and which is generally the rule of thumb is a cosmic generic
medicines typically up to 80 percent blasts of the brand-name
medicine.

A lot of them dollars have to be recovered obviously to pay for

drug development and future pipeline and that's why brand
name drugs are more expensive.

Just to highlight as time goes on more and more prescriptions

are being filled with generics and the good news is that
accesses going up for people and that's great.

The only concern is that what's that pipeline looks like and can
the profits being made in the space to keep the pipeline being
robust?
We're going to be focusing here on the FDA, otherwise known as
the Food and Drug Administration. So, our friend the FDA.

One thing that's key here obviously as before, a physician in the

United States can legally prescribe a drug for a patient, the drug must
be approved by the Food and Drug Administration (FDA). Until a drug
is approved by the FDA, it cannot legally be given to anyone except
through an approved clinical trial or through drug manufacturer's
compassionate-use program approved by the FDA.

There are some new as of 2018 new legislation just signed by the
President that would potentially allow a right to try to extend some of
the use of our compassion if can do. When the FDA approves a drug,
is approved for certain conditions or indications. These indications
are noted on the label to be included within the drug. The FDA
approves the language in the label, that is, the FDA approves every
word written on the label.
No matter what the drug's label says, a physician can legally
prescribe the drug for any reason. This prescribing is known as
off-label, meaning that they can prescribe the drug that is
approved but it may not necessarily be for the indications.
However, you may not be able to get insurance coverage for many
things that are off-label drug prescriptions.

If the product is considered to be a supplement instead of a drug,

it does not need to be approved by the FDA.

However, supplement manufacturers can not claim that the

supplements are intended to treat a disease or disorder. As a
result rule or rule the result, supplements are not covered by third
party payers such as insurance companies, although vitamins
maybe covered in certain circumstances.
Once the drug is approved for patients by the FDA, that drug can then essentially go
into marketing. What it needs, is to do that a National Drug Code number to get
reimbursed.

You can find more about that at this link on NDC codes. There's usually about
20,000 of them that use about 11 digits and structure. The drug manufacturer begins
to produce the drug based on an expected market size. This process may take some
time. Ingredient availability may be a problem and cause delays, especially with
these new and evolving biologic drugs

“NDC” stands for National Drug Code. It is a unique, 3-segment numeric identifier
assigned to each medication listed under Section 510 of the U.S. Federal Food,
Drug and Cosmetic Act. The first segment of the NDC identifies the labeler (i.e., the
company that manufactures or distributes the drug).
 Investigational New Drug / Phase 1 to Phase 4
Investigational New Drugs, otherwise known as INDs, are the first stage in
the process to go through the FDA. The FDA team approach to IND review
involves a regulatory project manager, some sense of knowing what the
chemistry, manufacturing, and control pieces are for the reviewer, a
pharmacology and toxicology reviewer, a clinical reviewer, and a statistical
reviewer.

In terms of looking at the submissions that go to the FDA for these INDs, it
does vary from year to year. Peak about 55 or so in 1999, and then in 2012
also another peak around that same period.

It depends upon what different agents are in the pipeline, what different
components are going through, but it's a pretty for robust pattern over the
years. In terms of the regulatory timeline, there is a preclinical phase that starts
off with the pre-pre-IND in terms of looking at different compounds and
substances.

The Pre-IND phase, and then finally when the IND is actually filed, this is when
we're getting out of just discovery. In phase one, that is where the initial, if you
will be a volunteer, where patients participate in phase two as a larger
population.
Phase three is where we get randomized clinical trials. At that point, and if there
is approval, there is then the permission to then go to the market and then sell
the drug, and then also then, track what the impact of the pharmaceutical agent
would be.

In terms of regulations as governed by the Federal Register, the FDA's primary

objective in reviewing an IND is to look at all this phases of investigation to
assure the safety and rights of its subjects.

What is the core content? The safety of the source materials, intermediates,
and final product have to be taken into consideration, any viral or
microbial contaminants have to be considered the manufacturing process,
as well as product testing for identity, purity, and potency.

All these things need to be revealed in the early stages of the development. For
pre-clinical studies, the idea is that there's a scientific basis for conducting the
clinical trial. There's a recommendation on initial safe dose and dose escalation
in humans based on some early work, identification of potential target tissues or
toxicity activity, any parameters to monitor clinically, and in patient eligibility
criteria for proceeding with the studies. There is also the pre-clinical proof-of-
concept, otherwise known as POC
POC in relevant animal models, this is bioactivity endpoints. Looking at the
extent of functional correction, the durability effect of the agent, to
determine effective dose and level range, what's the optimize route for
dosing? So, is it injectable? It could be oral. Where does it have to go in
that specification, and then collect safety data for animal models.

For toxicology, the idea is to identify, characterize, and quantify that any
potential local or systematic toxicities in relevant animal species. Look for
target organs or sites of toxicity. Look for any issues in terms of reversibility
for acute versus chronic toxicities, and then, what is the dose response
relationship?

Finally, for clinical trials, some early phase considerations, what is the
optimal dose and administration? What should be the starting dose and
how should the dose escalate over a period of time? What's the route of
administration? What's the schedule? Then, what would be that appropriate
population for that early stage study? How are you going to stagger your
dose escalation? This gives the initial set of information needed for an FDA,
IND.
One thing that is trying to make this work better is to focus on
what's known as a Global Harmonization Initiative, to really get
to a point where the regulatory regimes that are introduced for
new pharmaceutical agents can be much better standardized,
so it's not quite so pluralistic or a hodgepodge.

So, it is a very pretty picture, the human body is a little more

common than necessarily all the colors of the flag. So, when we
think about this idea of an International Conference of
Harmonization, that's IHC, what's the definition and background.
Several things to keep in mind as a joint regulatory project, the
leaders of this are the EU, Japan, and the United States. The
goal is to improve through harmonization, efficiency of
development, registration of new medicinal products as much
as possible bases on scientific consensus, and look for a
commitment by regulatory parties to implement the
harmonization recommendations.
 Global Regulatory & Harmonization
more than 70 percent of the world's population are from either Asia Pacific and
Emerging Markets, otherwise known APEM.

What we mean by that, is to specifically we're talking about Asia Pacific region,
we're including in that range of countries, India, the Philippines, South Korea,
Taiwan, obviously China, Hong Kong, Macau, all fall in that space as well. For
different emerging regions, we get to Argentina, Brazil, Chile and Mexico. For the
Middle East and North Africa, we get to Egypt, Pakistan, Saudi Arabia, and Turkey.
Sub-Saharan Africa, including South Africa. Then in Eastern Europe, Russia.

So, when we think about different models for drug regulatory assessment, there's
really two different licensing models that countries can fall in to.

The model of licensing system based upon submission of evidence, registration and
reference countries, which can include the United States and other places in
Europe.

Or the model of licensing system based upon a full assessment of new drug
applications including biological products, is going to be much more intense.
 Each of them having their different regulatory components involved. So, for
example, the USA we talked about before, the EFTA, as well as the
Pharmaceutical Research Manufacturers Association. Same idea comes
into play here, we have both industry as well as regulatory agencies
represented. The official observers for this activity, for harmonization, is the
World Health Organization as well as the European Free Trade Area, the
EFTA, and from Canada, the Health Protection Branch.

There's a Common Technical Document or CTD that has been developed

for this harmonization idea. The idea is to find things that are acceptable for
regulatory authorities within the three regions. Also, this may not define the
entire content but it gives some ideas about where the harmonization will be
most effective. The objectives here are for industry to reduce the time and
resources needed to compile applications, have an ease of preparation for
electronic submissions.

For regulatory authorities, facilitate reviews in a more timely basis, improved

communication with the applicant and simplify exchange of information
between the different Regulators.
So, we think about this harmonization now, and in the future, there
are new areas that need to be focused on as well besides just the
initial phases to get say the difference of phase one, phase two,
phase three and how they might relate using an FDA regimen to
other countries.

There's obviously post marketing programs under some ideas of

pharmacovigilance, particularly opiates issues that come up as well.
Pharmacogenomics, biomarkers and gene therapy, all major issues.

Then, a continued effort between harmonization and prevention of

new interregional disharmony. Basically, avoiding unilateral
development of requirements in specific areas and try to keep things
as consistent as possible. In terms of continuing this work with
globalizing this idea of the harmonization, there's a Global
Cooperation Group.
So, that has a wider array beyond just the three major regions. So,
we have the Asia Pacific Economic Cooperation area, we have the
Gulf Cooperation Council, we have the Emirates, in Saudi Arabia
and other places to buy counter involved.

Then, a Pan American Network for Drug Regulatory Harmonization

generally South American, that space, and then Africa as well. So,
the idea is to have essentially, there be an evolution so that this
process can go forward and make it more of a standard across the
entire global pharmaceutical market.

There's also Regulators Forum that was started in 2008 including

representatives from Australia, Brazil, China, Taiwan, India, Russia,
Singapore, South Korea; many which are not part of that
harmonization initiatives already. Their, again, their focuses are very
similar and the hope is that these things can come together to
create a truly cooperative group.
Reimbursement
There are two types of private insurance in the United States that
reimburse pharmaceuticals. There's group insurance and individual
insurance. The group insurance is often offered by employers. Usually,
this is the largest part of the insurance market, and across the entire
United States, it's about 160 million people out of roughly 300 million
people that have insurance in the United States get it through group
insurance.
These plans can either be fully insured or self-insured. The larger share
of them are going to be self-insured. With fully insured plan, the employer
or union that offers to help insurance must pay a premium to an insurance
company which has responsibility to pay all claims of the insured
members. That's the minority of the cases.

The majority or with the self-insured group plans, where the employer or
union that offers the health insurance, is its own insurer and is responsible
for paying all the claims of the insured members that have to submit them.
Self-insured plan uses an insurance company to run the plan or PBM, but
it basically is using its own cash reserves to pay for, essentially, honoring
insurance policy. Individual insurance is typically purchased on your own.
So, that's quite different
This would be more like when people talk about now the Affordable Care Act, ACA, or
the insurance exchanges that would be a marketplace, now I guess is what they're
called, that would be essentially that type of insurance design. So, common to both
types of private insurance is what's known as the PBM. This stands for Pharmacy
Benefit Manager.

This starts off by looking at consumers that are working through an insurance
company to get some sort of health policy. The issue though, is that the insurance
companies frequently find that it's too complex to manage all the pharmaceutical
benefits, so they actually then work with essentially a Pharmaceutical Benefit
Manager.

That manager acts essentially as a middleman to negotiate with the manufacturers

as a negotiated price, and then supply some of the benefit designs with the
pharmacy. So, it's actually pretty advanced. I don't know if there's rebates, and the
rebates go back to a portion to the PBM to pay for some of their services, but the
idea is that the insurance company could not easily do this on its own and is now
basically since the 1919s funds this out.
• When a new drug is approved, private
insurance companies often must decide
whether or not to cover it.
• Approved meaning by the FDA in terms of it
going into market. Once a drug is approved,
the manufacturer may meet with many
insurance companies to discuss how the drug
works and explain the costs and benefits of
the drug, sometimes academic publications.
Private insurance companies often follow
Medicare's coverage decisions but do not have
to do so
Insurance policy may have a formulary, that is if you live in the US, or lists
drugs that will be cover and may or may not include new drug on its
formulary.
Formulary may be divided into preferred drug lists with different co-
payments, meaning there's a certain amount of dollars you pay me, it could
be $5, $10, $15, and so the drug, or co-insurance, in that case it's a
percentage, say you're paying 10% or 15%.

Even if the drug is on the formulary, it may be subject to utilization

management tools such as prior authorization, meaning the physician has
to approve it before you have it, quantity limits and step therapy.

If the drug is not on the formulary, you can follow the plan's rules requests
that the plan to cover it. You have to file an appeal for that. This could be a
difficult process and take a while and may not even be simple in the end. If
you have to appeal on a denial for coverage, I understand that your
insurance company will not pay for a drug that is contraindicated for you,
meaning that if the FDA's list of the contra-indications means that they're
going to be safe for you. So, a number of things that you have an off-label,
and this is what off-label drugs aren't reimbursed.
For example, some drugs are contraindicated for people with high blood pressure, so
if you do not have high blood pressure and note to that in your appeal.
The rules for appeals depend on whether or not your plan is fully insured or self-
insured and whether you're a group plan or individual plans. Then, there could also be
some state laws that could affect your appeal as well.

There are, what is known as SPAPs or State Pharmacy Assistance Programs,

providing some drug coverage and offer discounted drugs for eligible residents in 35
states that had this design. It also depends on income and assets and resources as
well as a lack of drug coverage, prefer if you're uninsured.

Most SPAPs cover only seniors, but some cover those who are disabled and have
other needs for assistance. Finally, some SPAPs types have a benefit cap, though
there's a limit on how many drugs you can receive in that scenario. Some SPAPs
have preferred drug lists, otherwise known as PDLs and cover only certain drugs.

Other SPAPs have open formularies and generally cover almost any drug if you take
it yourself. Most of it will not cover drugs that fall into a category of Medicare Part B
drugs. They're drugs that a doctor usually must give you, and also these SPAPs have
an appeal process similar to Medicaid appeal process. Medicaid, of course, is specific
to the state, as we talked about in the healthcare marketplace module. This concludes
this lesson looking at the US pharmaceutical market for reimbursement.
 Public Insurance Market
Medicare is a federal health insurance program for all US
citizens and legal residents who have resided in this country,
the United States for a continuous period of five years, who
either are age 65 and older, or are aged 65 and disabled.

Now, there are many different parts to Medicare; there's Part A

that pays for in-patient hospital treatment, there's Medicare
Part B that pays for out-patient hospital services such as
physician office visits and some medications. Then Medicare
Part D the latest part, a new program. It's optional, but highly
suggested, provides prescription drug coverage through
private insurance plans to Medicare beneficiaries who enroll in
a plan
Marketspace
A drug is an article intended for use in the diagnosis, cure, mitigation, treatment,
or prevention of disease in man or woman and other animals, and articles other
than food intended to affect the structure of any function of the body of man or
other animals.

The other than the food piece is important to understand, because the FDA is not
just there for drugs, the F stands for food. And the origin of the laws we discussed
in the very first course goes back to the Pure Food Drug act in the early 1900s.

So the common designations of what types of drugs that the FDA is concerned
about is the prescription drugs that physicians will prescribe, actually in different
countries sometimes those are prescribed by pharmacists without the physicians
intervention.

There are over-the-counter drugs which still have to be approved by the FDA
before they're deemed to be safe but they do not require specifically a physician's
permission. And we'll talk about that later in this module. And then the other
distinction that's a major one. Again we're calling more detail, brand-name drugs
versus generic. Brand-name generally being drugs that are on patent where the
pharmaceutical company's trying to get their full profits or rents back versus
generics where they're usually off patent.
 Activity
• https://www.youtube.com/watch?
v=9sR8YQDlwqU
• https://www.youtube.com/watch?v=WkylI-
78U6c
The customers in this market are really important. The most obvious customers are
the patients. They're going to be the users of the product, and then maybe not so
obvious, but a very important customer in the pharmaceutical market are the actual
providers. The ones that are basically prescribing the technologies, the physicians
as well as the pharmacists.
 Pharma Reimbursement
• There are two types of private insurance in the
United States that reimburse pharmaceuticals.
There's group insurance and individual
insurance. The group insurance is often
offered by employers.
• Usually, this is the largest part of the insurance
market, and across the entire United States,
it's about 160 million people out of roughly
300 million people that have insurance in the
United States get it through group insurance
• These plans can either be fully insured or self-
insured. The larger share of them are going to be
self-insured.
• With fully insured plan, the employer or union
that offers to help insurance must pay a premium
to an insurance company which has responsibility
to pay all claims of the insured members.
• The majority or with the self-insured group plans,
where the employer or union that offers the
health insurance, is its own insurer and is
responsible for paying all the claims of the
insured members that have to submit them.
• Self-insured plan uses an insurance company to
run the plan or PBM, but it basically is using its
own cash reserves to pay for, essentially,
honoring insurance policy.
• Individual insurance is typically purchased on
your own. So, that's quite different. This would
be more like when people talk about now the
Affordable Care Act, ACA, or the insurance
exchanges that would be a marketplace, now
that would be essentially that type of insurance
design
• So, common to both types of private insurance is
what's known as the PBM. This stands for Pharmacy
Benefit Manager. This starts off by looking at
consumers that are working through an insurance
company to get some sort of health policy.
• The issue though, is that the insurance companies
frequently find that it's too complex to manage all
the pharmaceutical benefits, so they actually then
work with essentially a Pharmaceutical Benefit
Manager. That manager acts essentially as a
middleman to negotiate with the manufacturers as a
negotiated price, and then supply some of the
benefit designs with the pharmacy.
• When a new drug is approved, private insurance
companies often must decide whether or not to
cover it. Approved meaning by the FDA in terms
of it going into market.
• Once a drug is approved, the manufacturer may
meet with many insurance companies to discuss
how the drug works and explain the costs and
benefits of the drug, sometimes academic
publications.
Members

Individuals covered by employer’s health plan. May pay premiums or copays for drug
coverage.

Employer or Insurer

Employer or insurer pays PBM to develop preferred drug pricing & process
prescription claims. PBM returns some or all rebates to employer or insurer.

Pharmacy Benefit Manager (PBM)

Negotiates discounts and rebates from manufacturer. Contracts with pharmacy.

Manufacturer
Negotiates rebates with PBM.
Sells discounted drugs to wholesaler from core price.

Wholesaler
Negotiates price with pharmacy.

Pharmacy
Pharmacy dispenses to members & collects copays.
• The word “Medicare” is surrounded by icons
representing availability (a clock and
calendar), costs (stack of money), family
doctor (checked box), diagnostics (heart),
specialist (a doctor with checked box),
rehabilitation (stethoscope), care (hand
holding leaf), insurance (clipboard with
writing).
• What is Medicare?
• Medicare is health insurance for:
• ■ People 65 or older
• ■ Certain people under 65 with disabilities
• ■ People of any age with End-Stage Renal
Disease (ESRD) (permanent kidney failure
requiring dialysis or a kidney transplant)
• Marketspace : It's important to understand that
the FDA has a very specific definition of what they
consider to be a drug.
• And so just to understand, it is an article intended
for use in the diagnosis, cure, mitigation,
treatment, or prevention of disease in man or
woman and other animals, and articles other than
food intended to affect the structure of any
function of the body of man or other animals.
• The other than the food piece is important to
understand, because the FDA is not just there for
drugs, the F stands for food
• The common designations of what types of
drugs that the FDA is concerned about is the
prescription drugs that physicians will
prescribe, actually in different countries
sometimes those are prescribed by
pharmacists without the physicians
intervention.
• There are over-the-counter drugs which still
have to be approved by the FDA before they're
deemed to be safe but they do not require
specifically a physician's permission.
• Know your customers: So, the customers in
this market are really important. The most
obvious customers are the patients. They're
going to be the users of the product, and then
maybe not so obvious, but a very important
customer in the pharmaceutical market are
the actual providers.
• The ones that are basically prescribing the
technologies, the physicians as well as the
pharmacists.
a lot of increasing expenditure for pharmaceuticals. I tend to
think it's mostly because the drugs are doing a lot more than
they used to be doing in terms of really helping people out. In
terms of looking at it more at a market level, what you have
to understand is that, that expenditure is a function of both
price and the quantity, use of those medications.
And when you think about what's been driving expenditure
growth, about three-quarters of that has been due to
expanded use of different drugs, and switching to
newer more effective drugs.

For example in the 1990s there were far more effective drugs
used for depression than there really were really three, four
or five decades before. And then another part of why
expenditure growth is that we have about a quarter due to
price increases. And yes there are blockbuster drugs
or some of the more things have been cited in 2015 and '16
like the HepC drugs.

But for the most part, price increases are not substantial
 Ernie Berndt, who's an economist at MIT, cites four primary reasons for a
lot of this expenditure growth.

This notion of the importance of being unimportant sounds kind of weird. But
it's very key, if you're actually taking these pharmaceuticals, you don't want it
to rule your life.

You really would not like to be conscious of the fact you have a pill box with
12 things that you have to take every morning. And you want it to be as
simple and part of your lifestyle, the easy way as possible.

Another thing that is driving that growth is the expansion of insurance

coverage for these pharmaceuticals. What folks don't realize is that drugs
weren't really covered by private insurance until really the 1980s, and by
Medicare not until the last decade or so with the Medicare Monetization Act
in Medicare part D.

And then new product innovation clearly, any new drug that's on the
market with a patent return on investment, that can drive up some costs.

And we've also seen some extremely aggressive marketing. Keep in mind
that TV ad sales for drugs are a relatively new thing and did not exist before
 Influence Customer
• if you're trying to influence the customer, the
person who's really using this product, and
actually the physician will be prescribing it.
What are your key things that you're trying to
achieve? One is that we're definitely talking
about hope, hope to basically get a cure.
• If you really think about what pharmaceuticals
are there to do, cure is the most exciting and
wonderful thing that they could possibly do.
All the antibiotics that came on the line. Penicillin, just
tremendous products. And then if you just think about the
influence of some mental health products to bring folks, really to
have functioning lives. It may not be completely cured, but it
certainly has helped. Another thing is to enhance someone's
state. They may be at a functional status and not really where
they would like to be. Some of that could be just to have them
be functional to just be able to live their life better and out of
pain. Some of it can lead to, back to our prior side, sort of
enjoyment, personal fulfillment, and not get too weird about
it. But enhancement is part of that as well.

And then relief for folks that are in pain, particularly folks who
have cancer. They're are many diseases actually that are quite
painful as you go through them, particularly brand of life care.

Relief is just a really major piece of it. And any sort of palliative
care to really take that pain away is quite helpful.

And then another idea is, is what can you afford? Is something
too expensive? Is it priced sometimes too cheaply, actually, and
you are overusing a particular product.
Competitor Analysis
• An original drug (brand drug) is a
pharmaceutical product that is developed and
marketed under a patent or registered
trademark by a pharmaceutical company. But
it is approved after establishing the drug's
safety and effectiveness through animal and
clinical (human) studies
• A generic drug is a “bioequivalent” – a
chemical copy – of the original brand-name
medication.
• It must be made with the same active
ingredient(s), work the same way and provide
the same benefit(s) as the brand-name drug.
• Over-the-counter (OTC) medicines are those
that can be sold directly to people without a
prescription.
• OTC medicines treat a variety of illnesses and
their symptoms including pain, coughs and
colds, diarrhea, constipation, acne, and
others.
 Medical Device Innovation

Regulatory Requirements for the

Medical Device Industry
Regulations and laws are always changing and differ vastly depending on the
country or even geographical location. The laws in the places you intend to sell or
use your gadget may differ from those in other areas.

So, figuring out exactly which requirements you need is a bit tricky and depends on
the medical device regulations authority in that area. For example, the medical
device regulation in the US is the FDA, and the MDR in the EU. Both are
completely different when it comes to the details of the requirements. However, in
terms of regulatory control, both are equally effective.

Since all regulatory authorities in the world are more or less concerned about one
thing: device safety and efficacy, the requirements, while varying in degree of data
and names, are pretty similar. Especially since most of them were drawn up with
the current good manufacturing practices in mind.

Here are the top five basic and the most significant requirements you will find in
almost all regulations in some form.
Device Classification
When it comes to medical devices, classification is almost
always a requirement, no matter the regulatory authority.
Medical devices are usually classified depending on their risk
level, which is important in establishing the level of regulatory
control and the type of premarket submission necessary.

This system guarantees that proper safeguards are in place to

protect patients and maintain product quality. So, understanding
the classification system is critical for makers, regulators, and
healthcare professionals alike, whether it's a low-risk or high-
risk device.

For example, the requirements for class iii medical devices are
quite more than those for class ii devices. Class I devices,
universally, are the safest ones and, hence, require very little
clinical data.
Safety and effectiveness data

Safety and effectiveness or performance is really one of the key

requirements of any medical device. You have to do a good amount
of testing and risk analysis and ensure the device works correctly
according to its intended use before releasing it. You also have to
research the substantially equivalent devices that have been
studied before to make sure your device falls in line with those.

Extensive clinical research and testing are also carried out to

ensure the device's dependability and functionality.

Regulatory authorities may ensure that medical devices are safe

and effective and meet the highest quality and reliability standards
by meticulously adhering to these comprehensive guidelines. The
requirements are naturally higher in high risk devices.
Quality System Regulations
You have to create and maintain a good Quality Management
System (QMS) for your device, as it will undoubtedly be a part
of the regulatory criteria.

When it comes to medical devices, QMS covers the complete

lifespan of the medical device, from design and development to
manufacturing and distribution, even after it is in the market.

The QMS guarantees that all processes and activities linked to

the medical device are managed, recorded, and constantly
improved to assure product safety, efficacy, and compliance
with applicable requirements.

By establishing an effective QMS, you demonstrate your

company's commitment to quality, improve patient safety, and
meet the severe criteria of the medical device business.
Medical device listing and registration
Most regulatory authorities call for medical device listing and
registration of some form these days. In the EU, you have to
register your device and assign it a Unique Device Identifier
(UDI). The UDI is a string of numbers or letters that is unique
to each medical equipment.

This requirement is significant since it aids in the

identification and tracking of medical equipment on the
market. The point of these numbers is that medical device
manufacturers can track all devices individually. Hence,
when and if adverse events occur, the tracked device can be
pulled and the cause analyzed.
Surveillance and Vigilance
• A strong surveillance and vigilance system is
equally important as proving safety and
performance. The system ensures that
necessary actions are made to protect
patients by quickly detecting and addressing
any potential concerns or adverse events. It
entails a comprehensive approach that
includes detailed data analysis, proactive risk
management, and timely contact with
regulatory authorities and healthcare
specialists.
• Medical device failures are typically the result
of deficiencies in safety check procedures or a
lack of attention to potential risks in the
design process.
• Medical Device Design failure shows its impact
both ways for the user and the manufacturer.
The overhead cost due to recalls and extra
investment in re-designing the product over
and over can dig a hole in the developer’s
pocket.
• Here we analyze possible areas in design that
require special attention to ensure quality
products and minimum Medical Device Design
Flaws during the Medical Device
Manufacturing & Development process.
1. Not Considering Innovation & Cost balance at
the Design stage
Innovation doesn’t always need very costly or exclusive
capabilities or components. Make sure the design is flexible and,
most of the things are adaptable as per the requirements. The
components you plan for the design, the machinery/capabilities
you decide on, and the vendors you choose must have a viable
alternative so that you always have a free way to go without
compromising the quality of the Medical Device.

For instance, a client comes to us with a specific requirement to

optimize cost of the product without compromising the enclosure
design (USP of the product). In such cases the product research
& development team works on finding the best material for
enclosure which can be used for the enclosure without changing
the design.
2. Ignoring human factors in the medical device design
Nowadays, medical devices are being used in multiple avenues. It is
important to make these devices safe, easy to handle, affordable, and
accessible. Doing proper market research that unfolds relevant interests
of the end-user helps in incorporating factors that will ensure the device’s
success in the long run.

3. Missing on Material check & taking simulation process lightly

Medical Devices come in direct contact with human skin and hence
require biocompatible material. Also, the material needs to fit the RF
Transparency requirement in the case of Electronic Medical Devices.
Closely assessing the material during the R&D and effective simulation at
the initial stage ensures the high-level safety of medical devices.

4. Ignoring the component storage and shelf life

Medical Devices have highly sensitive parts and components. Their
transport, storage, and delivery eventually decide the fate of Medical
Device Manufacturing. The component management system should be
appropriately held & managed to ensure they aren’t destroyed before
they are utilized.
5. Not focusing on the aesthetics of the product
Gone are the times when looks didn’t matter in a Medical Device. With the majority of
brands focusing on the aesthetics of the medical device, it is important to strike a
balance between aesthetics and functionality. Especially, while designing a product like
fitness bands, Health watches, and Biosensor based devices it is important to ensure
that the design vibes with the targeted young users who are very particular about the
aesthetics of everything they use in their day to day lives

6. Making the design too complicated

Often, we feel the need to incorporate too many things to make a device more useful
and relevant. But, ironically it is the opposite the simpler, the better. Incorporating
unnecessary jargon technologies or just adding features that don’t add any value to the
device makes it completely futile and enhances the chances of market failure.

7. Missing out on Electrical Hazard testing

With Electronic Medical Devices, leakage current is regulated by the standard of
IEC60601-1. The medical devices in the electronics domain require measuring
functions for ensuring optimum current flows through the device and no damage occurs
even when the current exceeds certain limits. Missing on this front can lead to
compromising the safety of end-users.
8. Missing out on simulation testing for Thermal Management
Heating is an essential part of Electronic Medical Devices. The temperature of the
device surface should be lower than while it is in use. Simulation testing helps evaluate
the heating tendency of the surface
 Serious medical device malfunctions
Edwards Lifesciences monitoring platforms
American medtech company Edwards Lifesciences develops several clinical
platform devices used to monitor patient blood pressure and pulse during, and after
surgery.

In March 2019, the firm informed users of an issue affecting 11,000 of these devices
in the US after reports that fluids leaking into its AC power outlet could result in an
electrical short circuit, and cause the device to either stop working or catch fire.

The FDA said this created the risk of serious injury to patients and healthcare
professionals alike — including electrical shock, burns, cardiac arrest, or death. The
regulator added that the risk of fire increases in oxygen-enriched environments,
such as operating rooms and intensive care units.

Following the recall, Edwards LifeSciences circulated “urgent medical device safety
notification” letters informing customers of the problem, and advising them to keep
fluids and fluid bags away from the AC power connector.

Along with the letters, it sent out updated labels and provided a protective cover for
each device to decrease the risk of potential malfunctions.
 Medical Device and Pharma Convergence

• Drugs are metabolized and devices are not.

Size of markets are quite large. Pharma is
much bigger. Reimbursement policies are
different, so devices are covered by Medicare.
Prescription drug coverage is covered by
Medicare Part D, but it's not directly paid for
the same way that medical devices are and
the consumer is different. For devices,
marketing is much more focused to hospitals
and physicians.
• That medical devices as opposed to drugs.
Both are heavily subsidized by the government
for research. Both require FDA approval to
survive. Government reimbursement policy is
a critical factor in their marketing strategy.
Both need to make a cost-savings (at best), or
at least a cost focus argument for those
seeking FDA and insurance reimbursement
approval. Particularly for insurance
reimbursement approval.
Coding
Coding is the link between coverage and payment. Codes are based on
a standard alphanumeric language that describes services provided to
patients. This “language of insurers” permits automated claims
processing and review. Coding provides a standard mechanism for
payers and providers to identify diagnoses, medical services,
procedures, drugs, devices, laboratory tests, and supplies. The codes
are used on claim forms submitted to insurers to enable payers to
process and pay claims efficiently. My next blog will go into detail
about the alphanumeric language of coding and how it applies to
providers in different patient care settings.

Coverage
Coverage refers to a payors decision to provide program benefits for a
specific product or service. This coverage is usually condition on FDA
clearance, the product not deemed experimental or investigational, the
use of the product is medical necessary, and the use of the product is
appropriate for the patient in the treatment setting. Medicare and
private payers institute coverage criteria to ensure appropriate
utilization of products and services and to control costs. Limited
coverage for a technology or procedure often leads to minimal market
uptake while broader coverage allows for optimal market update.
Payment
Payment is the transfer of money from payer to provider for the provision of
health care services. Payment amounts for procedures or medical devices does
not often depend on a manufacturer’s price for a product reflect its
perceived clinical value. Importantly, payment mechanisms will vary by setting
(e.g. hospital, ambulatory surgery setting, physician office) and may be paid
separately or packaged (bundled). The payment amounts can be fixed or based
on costs. Also, several providers may be paid separately for the same service.
For example, for a procedure performed in a hospital, the hospital, the surgeon,
and an anesthesiologist could all received separate payments. This could also
be the case if radiology or imaging is involved or if more than one surgeon is
required to perform a procedure
International Classification of Diseases (ICD)
This is a global standard used for classifying diseases, symptoms, injuries,
and causes of death. ICD-10 is the 10th version of the International
Classification of Diseases that offers more codes and classifications for
updated conditions and diagnoses. These codes are owned by the World
Health Organization (WHO) and adopted by governments around the
world.

Current Procedural Terminology (CPT)

CPT codes are used in most medical settings today. Most of the medical
procedures performed in a provider’s office are coded using CPT. It is used
to describe medical services and procedures executed by physicians and
other health providers. These codes are maintained by the American
Medical Association (AMA) and are annually updated.
The CPT codes are further, divided into 3 categories: Category I, Category
II, and Category III. These are 5-digit codes and can be numeric or
alphanumeric and are used for reimbursement and billing purposes.

Healthcare Common Procedural Coding System (HCPCS)

HCPCS codes are based on CPT codes, and this system is maintained by
the Centers for Medicare & Medicaid Services (CMS). CMS is responsible
for making decisions related to additions, revisions, and deletions to the
national alpha-numeric codes. It is used for billing Medicare and Medicaid
• International Statistical Classification of
Diseases and Related Health Problems (ICD)
ICD serves a broad range of uses globally
and provides critical knowledge on the extent,
causes and consequences of human disease
and death worldwide via data that is reported
and coded with the ICD.
• Medtronic is a global producer of medical
devices and therapies, such as insulin pumps,
pacemakers, and diabetes therapies. Perhaps
best known for its revolutionary cardiac
devices, such as battery-powered and
miniature pacemakers, it also has introduced
cutting-edge products into the industry.
• 5G
• 5G technology is key to efficiently incorporating
high-speed communication between medical
devices and health infrastructure. For instance,
low network latency during AR-assisted surgeries
improves surgery quality.
• That is why medical device manufacturers are
leveraging 5G for their connected products. Its
greater bandwidth and reliability ensure minimal
lag between data collection and processing.
Additionally, it allows doctors to convert images
into holograms in real-time for more accurate
diagnosis.
• With the term competitor analysis, we refer to
a type of analysis systematically performed on
your chief competitors’ market share to
estimate their strengths and weaknesses and
keep ahead of your competitors. With a
thorough competitive analysis, a medical
practice can find its main competitor’s
strengths and weaknesses and gain in-depth
knowledge of its actual market terrain.
Basics of Competitor Analysis
An accurate competitive analysis will provide a complete picture of your competition’s
practice, other healthcare organizations in the field, and precious insights about the
market demographics.

Once your main competitors are defined, collecting data about your competitors’
services, pricing, online presence, customer reviews, and marketing strategies will
show their strengths and weaknesses. This information will be used to develop a
strategy to differentiate your company from competitors and win market share.

The key factors to consider when conducting a competitor analysis are:

Services offered. Find if your competitors offer niche treatment modalities or perhaps
the use of particular pieces of equipment in their practices.
Pricing. Evaluate the pricing strategies of competitors to determine the market rate for
similar products/services.
Online presence. Analyze the competitors’ online presence, including their websites,
social media, and customer reviews.
Customer reviews. Gather information from customers about their experiences with
the competitors.
The importance of regular competitive analysis as an essential component of broader
strategy can’t be understated. It’s an invaluable tool for keeping competitive in the
rapidly evolving healthcare industry.
Tips for Conducting a Competitor Analysis for Medical Practices
An excellent competitive analysis can be performed with simple online tools like a
Google Business Profile, Facebook, and other social media channels. Some tips for
conducting a useful competitor analysis include:

Analyze competitor websites and social media profiles. Study competitor

websites to understand their services, pricing, and marketing strategies. Analyze
their social media profiles to understand their online presence and customer
engagement.

Gather insights from patients and industry experts. Conduct surveys, focus
groups, or interviews with quite a few patients to understand their needs and
preferences. Seek insights from industry experts to understand how referring
physicians view your practice.

Understand the target audience and their needs. Identifying and understanding
the target audience is crucial for healthcare organizations as it helps tailor services
to meet patients’ specific needs and preferences.
• Medical Devices: Technologies and Global
Markets
• The global market for medical device
technologies is valued at $639.1 billion in 2021
and is estimated to grow from $676.0 billion in
2022 to $953.4 billion in 2027 with a
compound annual growth rate (CAGR)of 7.1%
for the period of 2022-2027.