How to get reimbursement for your AI medical device before regulatory approval
Launching an AI medical device startup is an adventure from the very first code to market entry. But with escalating costs threatening to slow your progress, the path to your first sale appears steep. What if there was a way to ease this financial burden and accelerate towards revenue, all before gaining regulatory approval?
The development, certification and regulatory approval costs for AI medical device (AIaMD) development are ongoing and considerable. Many companies accept these costs as part of the journey and plan their funding accordingly. This often involves diluting the ownership of the founders in exchange for crucial venture capital to reach a point where the company generates revenue. However, for a small number of AI medical device developers, working in the analytics field, there may be another pre-regulatory approval option.
AIaMD and commercial research
If your AI medical device surpasses current standards, demonstrating notable improvements in accuracy and precision that translate into time savings or enhanced detection capabilities, it could potentially be utilised in a commercial research setting prior to regulatory approval.
Time is very big money to companies developing new clinical, and particularly pharmaceutical, interventions and the ability to improve, shorten, or even âfail fastâ clinical trials is of real value to sponsor companies and their Clinical Research Organisation (CRO) partners.
Whilst it is doable, it isnât easy nor is it desirable or worthwhile for all companies.
Entering the market and developing a new AI software medical device can be tough due to various challenges. However, if you overcome these, the rewards can be significant and quickly obtained.
The challenges of pre-market AIaMD contract negotiation
The first challenge is to convince a relevant clinical influencer that your device is uniquely effective. You must clearly explain how this effectiveness leads to improved outcomes in terms of being better, faster, and more cost-effective for the company supporting your project. That will usually involve making direct contact with either someone senior on the clinical team of the sponsor company or their CRO or, alternatively and where applicable, an external Principal Investigator.
In order to be credible, claims need to be evidence-based and verifiable; peer-reviewed, published papers of early-stage trial results are an obvious source. Of course, the influencer has to be convinced, not only of the efficacy of the device but also of the developing companyâs ability to deliver the improved results cost-effectively.
Service delivery requires the emplacement of a Core Lab function within the Newco and that means acquiring supervisory and analysis staff. Not an easy thing to do when funds are tight, but there is a possible route to doing so flexibly.
Breakthrough AI software medical devices are often conceived by and initially developed by clinicians and even more usefully, academic clinicians, who have access to a pool of research fellows. Their recommended PhD fellows will be in a similar field combining both clinical expertise with research experience and credentials. In this case, zero-hour contracts are not only exploitative but enable both the Newco and the fellows to balance conflicting priorities to mutual advantage. There will be pinch points to manage and finding the right fellows from the start is key. However, it is possible and practical.
Regulatory compliance first steps
If all this starts to generate thoughts of a Newco Core Lab, then there are some other essential steps to undertake. The new Core Lab function and service delivery must be capable of withstanding rigorous vendor approval assessment and auditing by the clients and or their CROs.
That means compliance with legislation, standards and best practice, including, but not limited to, data security and privacy and Good Clinical Practice (GCP) / Good Clinical Laboratory Practice (GCLP) as a minimum (Hardian can help with these!). Fortunately, the aforementioned research fellows, if sourced from the UK, almost invariably come equipped with NHS DSP certification, renewed annually and current GCP certification which provides a sound start. Many of the ISO 13485 policies and procedures which will be required for the regulatory approval of the Newcoâs device, whether physical or software (SaMD, including AI/ML), including dealing with clients, are also applicable but developing a set of Standard Operating Procedures (SOPs) for the Core Lab function is essential. The actual achievement of ISO 13485 and ISO 27001 certification is usually not essential initially, but having robust, evidenced policies, processes and practices combined with solid progress towards relevant certification and regulatory approval is!
After all the consequences for âgetting it wrongâ can be massive for both sponsors and CROs so, even if they want or need the benefits their due diligence still needs to be robust.
Financial benefits of pre-market AIaMD commercialisation
So, what are the financial benefits of commercialising AI software for clinical trials?
Study design consultancy fees
Study protocol fees
Up front set up costs for each study
Fees for reads and QA over reads.
Study site support fees
Additional ongoing work
Itâs worth remembering that different budgetary considerations and metrics for sponsors and CROs mean that contracted fees which deliver significant value to them can represent equally significant, profitable uplifts to the income levels of a start-up or early-stage company. Those profits can be used to fund or partially fund the development of the device thus reducing the requirement to raise further development capital.
In addition, papers by the fellows further add to the credibility and publicity of the AI medical device itself and may end up as part of the literature review submitted for regulatory approval. Also, the Core Lab is a useful environment to have your device used by real people and get operational feedback before letting it loose in the world. Of course, having a pre-regulatory income stream doesnât do the company valuation any harm either.
Cautions on the pre-market route
There are some cautions to be aware of, but that is true in any course of business:
Make sure that you understand and agree with the terms of the contract. For example, applicable law and jurisdiction; most Newcos prefer, for reasons of cost, their home countryâs jurisdiction, i.e. Courts of England and Wales. Not unsurprisingly, large companies donât like changing their contract terms but, if you have got as far as negotiating with them, they are interested enough to be persuaded.
Have a clear statement of work (SoW). There appears to be an industry standard Master Services Contract to which SoWs for each study are appended. This does mean that it is easier for both parties to re-contract for further studies.
Do understand the value of what you are offering and set the pricing for elements of the contract accordingly.
Price in appropriate minimum levels of QA but offer higher levels for additional fees
Beware of âmission creepâ, usually characterised by the words âcan you justâ.
Ensure that you are not only prepared and able to carry out the contract but also prepared for it to be terminated if the study does not show promising results. However, due to the latest development techniques, that is less frequent than previously.
Be prepared for, and price in, the fact that the vendor approval and audit processes are time-consuming and irritating, but if you are prepared and have the policies, processes and evidence in place you will get through.
We expect this lesser-known route to market to become more popular with AI medical device manufacturers, especially since the FDA launched the Innovative Science and Technology Approaches for New Drugs (ISTAND) pilot to support such companies. ISTAND offers a new pathway to FDA review for novel drug development tools that may not fit into currently existing routes of evaluation, but that could potentially improve the development of new drugs (as used by Deliberate AI, for example). Others have successfully negotiated themselves in the clinical trials space in the UK and EU pre-market approval, and we have successfully supported pre-regulatory commercial reimbursement for several of Hardianâs clients. As always, get in touch if you have any questions.
Hardian Health is a clinical digital consultancy focused on leveraging technology into healthcare markets through clinical strategy, scientific validation, regulation, health economics and intellectual property.
