Why FDA Approval Isn’t Enough for Payer Coverage
Nicole Coustier has over 20 years of experience in U.S. Reimbursement and Market Access and has helped early-stage MedTech achieve widespread reimbursement coverage in the U.S.
Securing FDA approval is a significant milestone for any medical device company. It represents years of work, validation of safety and effectiveness, and the ability to legally market the device in the United States. However, many early-stage MedTech founders are surprised to discover that FDA approval does not automatically translate into coverage or payment by insurance providers.
This disconnect between regulatory and reimbursement pathways often leads to delays in market adoption, confusion during commercialization, and frustration during sales conversations. Founders are frequently left asking: "If our product is FDA-approved, why won’t payers cover it?" The answer lies in understanding the different goals, evidence expectations, and operational considerations of regulatory bodies versus payer organizations.
This article explores those differences and outlines how early-stage companies can prepare for payer engagement in parallel with regulatory efforts to ensure more seamless market access.
Different Audiences, Different Criteria
The FDA and insurance payers serve fundamentally different roles. The FDA ensures products are safe and effective for their intended use. It is a gatekeeper of public health, tasked with protecting patients by validating product safety through clinical trials and pre-market review.
U.S. payers—including Medicare, Medicaid, and private insurers—have a different mandate. Their job is to manage risk, control costs, and ensure that medical interventions are medically necessary, cost-effective, and aligned with current standards of care.
Because of this distinction, the same body of evidence that satisfies the FDA may fall short in the eyes of a payer. For example, the FDA may approve a device based on improvements in diagnostic accuracy, but a payer may deny coverage if that improved accuracy does not translate into better outcomes or lower costs.
Understanding Payer Logic
When considering whether to cover a device, payers ask a series of questions that reflect their focus on value, clinical impact, and financial sustainability:
- Does this device meaningfully improve patient outcomes?
- Is it more effective than current treatments?
- Does it reduce hospitalizations, complications, or costs?
- Is it consistent with treatment guidelines and provider expectations?
- Does it create any unintended financial risks (e.g., increased utilization)?
This means your product must be evaluated not just through the lens of efficacy, but also through the lens of value. Even a transformative technology can be deemed “not medically necessary” if it doesn’t clearly improve on existing standards of care—or if those improvements haven’t been proven in real-world settings.
Early payer engagement is essential for understanding payer logic because it allows MedTech startups to align their clinical, regulatory, and commercialization strategies with the real-world expectations of those who control access and payment.
The Role of Evidence Beyond Approval
FDA trials are highly controlled, often conducted in ideal conditions with narrowly defined patient populations. These trials are designed to answer one central question: Is the product safe and effective?
Payers, on the other hand, want to understand how a device performs in broader, real-world settings. They are particularly interested in outcomes such as reductions in complications, readmissions, length of stay, or overall cost of care.
To address these concerns, companies must plan additional evidence development beyond regulatory trials. This can include:
- Health economics and outcomes research (HEOR)
- Registries and real-world data (RWD)
- Comparative effectiveness studies
- Post-market observational studies
The data collected from these efforts often determine whether a device is considered medically necessary and if it will be integrated into payer coverage policies.
Why Payment Pathways Matter
Even if payers are open to covering a device, there must be a clear operational pathway to payment. This is where coding, billing, and claims processing come into play.
- Does a billing code exist for the device or procedure?
- Is that code tied to a payment rate that makes adoption financially viable?
- Is the payment made to the physician, facility, or device company?
- Are there limits, edits, or site-of-service restrictions that impact reimbursement?
For example, a new cardiac monitoring device may be eligible for coverage, but if the associated billing code pays only a small amount—less than the cost of the device—providers may be reluctant to adopt it. Similarly, a device intended for use in outpatient settings may face restrictions that differ from those used in hospitals or ambulatory surgery centers.
Understanding and planning for these scenarios is a critical part of commercialization strategy.
Why Startups Miss This
Many startup teams focus their early efforts entirely on meeting FDA requirements, assuming that once regulatory approval is secured, reimbursement will naturally follow. Unfortunately, this assumption often leads to costly delays and missed opportunities.
Common pitfalls include:
- Launching without confirming if appropriate billing codes exist
- Failing to understand differences in payer decision-making across settings
- Ignoring the role of utilization management and prior authorization in coverage
- Using clinical endpoints that do not resonate with payer criteria
These mistakes are not just theoretical. Countless companies have launched clinically sound, FDA-cleared products only to face rejection at the claims level or minimal uptake due to reimbursement gaps.
How Startups Can Prepare Early
To avoid these pitfalls, founders and product teams should engage with reimbursement strategy early—ideally during product development. This doesn't require hiring a full-time expert on day one, but it does require asking the right questions and engaging with stakeholders who understand the landscape.
Steps to take include:
- Conduct a reimbursement and coding feasibility assessment during design
- Engage with market access consultants to explore billing and payment options
- Interview hospital administrators and physicians to understand potential barriers
- Include economic and coverage considerations in early clinical planning
By doing so, startups can design products that are not only safe and effective, but also financially viable and aligned with payer expectations.
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Whether it's how the multiple payer landscape works in the U.S., how to validate device or procedure coding, timelines associate with product uptake - we're happy to answer them.
