ARK • Disrupt

In a recent Harvard study, CRISPR gene editing transformed white fat into brown fat that burns energy and can contribute to weight loss. The engineered cells helped mice avoid weight gain and potentially diabetes, despite a high fat diet.

This study could have profound implications for CRISPR’s total available market. In the United States, more than 34 million people have diabetes and the medical costs and loss of work wages associated with it are valued at $327 billion annually. If CRISPR were to be effective in increasing insulin sensitivity, CRISPR’s total available market would expand significantly, if not exponentially.

The path to commercialize new drugs, devices, or diagnostics is arduous and expensive. Contrary to popular belief, this path does not end once the US Food and Drug Administration (FDA) approves a product. Following FDA approval, the Centers for Medicare and Medicaid Services (CMS) conducts a lengthy, secondary review to determine reimbursement. While FDA decisions take roughly 200 days, CMS coverage determinations can take more than 500 days. Without reimbursement, companies receive little to no payment unless they win private payor coverage or collect out-of-pocket payments.

Alternatively, companies can pursue local coverage determinations (LCDs), or reimbursements set by Medicare Administrative Contractors (MACs) in any of 16 US geographic regions. Such disjointed coverage often harms not only patients who must travel to get treatments that the CMS will reimburse but also companies that must fund additional clinical studies required for CMS coverage.

For innovative healthcare companies, the window between FDA approval and CMS coverage - the so-called ‘valley of death’ - can be perilous. Prior to winning CMS coverage, companies can seek New Technology Add-On Payments (NTAP). NTAP, or crosswalking strategies, give companies an opportunity to receive reimbursements similar to those for existing medical products. Often, however, innovative companies are creating therapies and devices which bear no resemblance to existing products.

In 2015, recognizing that time is money, especially for America’s most innovative and capital constrained healthcare companies, the FDA launched an expedited review process called the Breakthrough Devices Program. Breakthrough devices address severe unmet needs in innovative ways.

This week, CMS proposed a new reimbursement pathway that extends the FDA’s Breakthrough Devices Program. Medicare Coverage of Innovative Technology (MCIT) provides four years of national reimbursement for those medical products that the FDA (a) has designated as breakthrough and (b) has approved based on safety and efficacy. In our view, MCIT will provide companies with breakthrough medical products an immediate cash cushion and will give CMS beneficiaries immediate access to innovative and potentially life-saving medical products.

Produced on the first moving assembly line in 1908, the Ford Model T is famous for the speed at which it scaled. Interestingly, in its first nine years of production, Tesla has ramped at the same pace as the Model T, as shown below. After learning lessons in “production hell”, Tesla now is preparing to ramp production even faster than Ford scaled the Model T, also shown below.