A VC’s View of the Reimbursement Evolution: An Interview With Mike Carusi

It is hard to believe that just a decade ago, the topic of reimbursement was low on the priority list for product company executives and investors. Start-up CEOs saw reimbursement as something that large strategics would handle post-acquisition, and venture capitalists (VCs) rarely considered placing it on their checklist for evaluating prospective investment targets, focusing largely on product development, clinical need, market size, management team, regulatory approval, and other traditional venture criteria. Of course, this was also a time when the biggest challenge facing device companies was the FDA and its lack of transparency, accountability, and consistency, resulting in companies looking to Europe to first introduce innovative products due to the ease with which CE mark status could be obtained.

Now, however, that process has been turned on its head. Improvements at FDA, coupled with the challenges posed by the new Medical Device Regulation (MDR) in Europe have companies looking to commercialize first in the US. This regulatory progress now stands in stark contrast to the situation on the reimbursement front, which reminds many of the dark days of industry-FDA relations writ large. CMS is seen as under-resourced and often not responsive or transparent in addressing industry concerns.

This problem is also magnified by the fact that, unlike the regulatory process where companies largely deal with a single agency—FDA—reimbursement requires a scorecard to keep track of all the players involved in its tripartite process of coding, coverage, and payment. In addition to CMS, companies must interact not only with the regional Medicare Administrative Contractors (MACs) and numerous private payors, but when it comes to coding, also with the American Medical Association (AMA) and specialty clinical societies, which are both very much involved. Little wonder why reimbursement was often seen as the hot potato that start-ups looked to pass along to acquiring strategics, while investors tried to ignore it whenever possible.

As Mike Carusi of Lightstone Ventures explains here, that is no longer possible and both product companies and investors now ignore reimbursement at their peril. The regulatory improvements at FDA have taken those issues off the top of the medtech priority list, only to be replaced by reimbursement. Carusi was among the early proponents in the venture community of the importance of reimbursement, working with advocacy groups such as the Medical Device Manufacturers Association (MDMA), AdvaMed, and the National Venture Capital Association (NVCA), along with other industry leaders such as Josh Makower of Stanford Biodesign and Mark Deem of The Foundry, in an effort to get reimbursement on industry radar screens, while also working with regulators and legislators to improve the process.