Lessons from a medtech SME in the US market
More than two years ago, we featured 11 Health as our Company of the Month, reporting on the untimely death of its founder, Michael Seres. 11 Health is a UK-founded medtech business that moved to the US, in large part because it seemed easier to raise money, navigate the regulatory environment and access the payer community there than in the UK. Did that prove true?
Here, Bernhard Gilbey, now CEO of 11 Health, shares his experience and advice for other medtech companies seeking success in the US market.
Bernhard Gilbey, CEO of 11 Health & Technologies:
The 11 Health journey
Our founder, Michael, had been a long-term sufferer of Crohn’s Disease, which eventually led to intestinal failure. Michael was then lucky enough to have a bowel transplant, from which he made a successful recovery. Nonetheless, as he was recovering from the surgery, he realised that there must be a better solution for ostomy patients. As a technophile, he questioned why ostomates were forced to live in such a technology-free world, missing out on the potential benefits of using technology to manage their ostomy. As a result, he developed a system of putting sensors into a clip which attached to an ostomy bag, the sensors keeping you updated via your phone about when the bag needed emptying. Having developed the idea and an early prototype, Michael met Neelam and, together with the MedCity resources, the plan to bring technology to ostomy patients in the UK began to take shape.
Having raised investment for the development of the clip on sensor, in 2015 he raised additional money to develop a more sophisticated product and started to move the business to the US. The move had great appeal, in that it seemed much easier to raise larger amounts of finance over there, and also looked to be an easier route to gain access to hospitals, with a clearer path to reimbursement. The technology evolved further, so that the sensors were incorporated into the ostomy wearables themselves, enabling patients to be warned of a risk of dehydration, leakage and skin irritation. The new wearables received their FDA 510(k) clearance at the end of 2018.
When I joined the company, about a third of the employees were still here in the UK. Over the next 12 months, the company’s development and commercial activities moved to the US.
Michael sadly passed away in the early days of the pandemic, and I took over as CEO.
The US reimbursement system
While there is no doubt that the route to reimbursement in the US is clearer – and arguably more predictable – than, say, navigating the NHS (despite the latter being seen by those outside the UK as a single payer system, which must be easier to navigate!), the journey to reimbursement is still fraught with challenges. In the case of our products, ostomy bags are universally reimbursed as disposable, commodity products for small sums of money. How then would payers react to a technology-enabled set of wearables?
If you haven’t come across it before, the US reimbursement system for devices is largely structured around the use of HCPCS (Healthcare Common Procedure Coding System) codes. In terms of 11 Health getting reimbursed, our innovation was a medical device that, on the face of it, appeared to be capable of being broken down into an ostomy wearable and a sensor. Unhelpfully, the 510(k) application accepted by the FDA, was based on using existing ostomy wearables and sensors as predicates, a feature not lost on the Centres for Medicare and Medicaid Services (CMS), when it first looked at the 11 Health devices! CMS initially suggested that reimbursement could be forced into the existing HCPCS codes. In fact, using existing HCPCS codes would not work in practice, not least because CMS did not actually reimburse for the sensor code it suggested was appropriate!
Clearly, incorporating technology into a commodity product adds to manufacturing costs, not to mention the costs of developing the technology. To put it another way, from a successful business perspective, our technology didn’t fit within the existing coding system for ostomy bags. 11 Health would need to seek a new HCPCS code. Despite the obvious improvements in patient outcomes, gaining a new HCPCS code was a considerable challenge. As is the case with many technologies, getting the funding required to carry out the clinical trials needed to gather data for peer-reviewed publications, and demonstrating the improved patient outcomes and reductions in the overall cost of care needed to obtain your own codes… might look like an easy journey from a distance, but it most certainly is not.
A couple of things became clear to us during this process. Firstly, that a lot of people will tell you they know how to navigate the reimbursement system, but this isn’t always the case. Secondly, that whoever you’re working with needs to be able to guide you as to the right evidence to present to CMS. The evidence needed for CMS therefore needs to be consistent with the clinical trial data you are collecting.
The other thing to be aware of, is that getting a new code isn’t the end of the journey. Once you have a code, you need to gain acceptance of that code by the payers (be that CMS or commercial insurers); a process known colloquially as ‘coverage’. In other words, will the new technology be a covered benefit under, say, a health insurance policy? For context, it took us two years to gain coverage from just one of the bigger commercial insurers.
As if that wasn’t enough, even with coding and coverage, you need to secure payment. Essentially, this means an agreement on pricing.
It’s a long process…
One aspect of just getting the coding finalised that makes it so challenging, is that you need enough time to gather enough clinical data – and have it published in enough of the right places – to be able to put a credible application in front of CMS for one of their bi-annual reviews. So, if your clinical trials take two years, followed by a suitable period to analyse the data and have it written up, peer reviewed and published in the relevant journals before you put it in front of CMS for a decision (which itself takes several months), you are really looking at about four years from start to finish.
Putting all of this together, what should the key takeaways be?
It is important to have a clear plan for your reimbursement journey from the outset. This plan will inform, and be informed by:
- Your clinical trial strategy and, possibly, where you intend to carry out your trials, who your key opinion leaders (KOLs) should be, and your publications strategy
- Your regulatory strategy
- Your go-to-market strategy
- How much money is needed to take on the US market
- Your financial projections and, most particularly, your timeline to revenue in the US
What I would do differently
Looking back on things we could have done differently, a deeper analysis of the market is something that we should have done earlier in the process. This would likely have guided us to make some different decisions early on.
As you can see from the list of key takeaways, I would also have brought together three key elements to govern our strategy for landing in the United States: regulatory strategy, reimbursement strategy, and clinical trial strategy. For example, we made a decision on what our FDA strategy would be that initially resulted in a dead end for our corresponding reimbursement strategy.
A clear market analysis, coupled with a clearer picture of what our FDA and reimbursement strategies would look like, alongside the overlay of our clinical trial strategy, would have made the journey quicker and more resource-efficient. Being clear on how these things knit together before landing in the United States is crucial.
Is the grass always greener?
In terms of differences between the UK and the US, I am reminded of the old cliché about the grass always looking greener on the other side.
On the face of it, and this was how things were often seen by colleagues in the US, the UK should be a simpler, more straightforward road to adoption. You are dealing with a developed and sophisticated regulatory environment (perhaps less so since the introduction of the MDR/CA mark and Brexit!), single payer (for the most part the NHS), and an ability to include a greater range of benefits from improved patient outcomes in health economic analyses. Once you have navigated the regulatory environment and achieved NICE approval, adoption across the UK should be relatively easy.
Of course, that isn’t how things work. In contrast, the clarity of pathway in the US, the considerably greater market size, and the availability of larger investment dollars, makes the US an attractive proposition. But, as you may have gathered from the experiences I have shared above, the grass is not necessarily greener on the other side of the Atlantic.
Find the right investor
One thing that I think British and European companies might usefully think about when considering emigrating to the United States, is finding the right US investor. If you can bring in US healthcare investors at the right point, the help that they can offer in terms of navigating the landscape is incredibly valuable. They will already have a lot of key pieces of the jigsaw available to you, simply through the people that they will have worked with before. I think that there’s a lot of value to be had in the expertise available through working with the right investors.
There are several resources that you can access to begin developing your understanding of US healthcare investors, where, with a bit of digging, you can find details on which companies have taken investment, and who has invested in them.
Make the most of networking opportunities
What can also be useful, if you think far enough in advance, is that there are a lot of conferences in the US with opportunities for networking with investors who might be interested in your technology. From the conferences that I’ve attended, one set in particular stood out to me. The conferences run by Life Science Intelligence (which runs conferences in California and near London), have, in my experience, had an excellent array of investors, including – really importantly – the opportunity to speak to strategists who might also be interested in investing in and, ultimately, buying your business.
One of the benefits of attending these kinds of conferences early in your journey, is that you get to know potential investors before you actually need to raise money and you can get a good sense of what they will want to see if they were to look at investing in your technology. Certainly, many of these investors will tell you that you should speak to them early in your journey, so that they can share their thoughts on your plans with you. It is also really helpful to be able to keep them informed with your progress, so that you are a familiar name, with a proven record of progress and success, by the time you ask for an investment.
Our journey continues…
11 Health is now pursuing a different pathway to bring much-needed technology to ostomates. At least to some extent, this links back to my comment above, about undertaking the right market research at an earlier stage. Even so, 11 Health is something of a poster child for taking the vision of an inspirational patient – who understood the need that had to be addressed in a particularly personal way – and bringing it to market in the US.