Reimbursement by Distributors: What Medical Device Manufacturers Need to Know
1. When May a Company Obtain Reimbursement Through a Distributor?
The first question is whether the relevant medical device can be reimbursed through an existing reimbursement mechanism, including established codes, coverage pathways and payment levels.
If new reimbursement mechanisms have to be developed for the device, the reimbursement task should generally not be relegated entirely to the distributor. Distributors are experts at distributing products; they are not necessarily experts in reimbursement strategy.
In some countries, the manufacturer may have only one opportunity to apply for reimbursement. If the application fails, the consequences can be significant. In such situations, reimbursement strategy should remain under the company's lead.
By contrast, if existing reimbursement mechanisms can be used without modification, transferring some reimbursement responsibilities to an experienced distributor may be appropriate.
2. Using Existing Reimbursement Mechanisms
Before assigning reimbursement responsibilities to a distributor, the manufacturer should determine whether an appropriate reimbursement pathway already exists in the target market.
- Existing mechanism: If the device can use an established reimbursement mechanism without significant modification, an experienced distributor may be able to manage certain local activities.
- New mechanism required: If new codes, coverage or payment mechanisms are required, the manufacturer should retain strategic control over the reimbursement process.
- Limited opportunities: Where local rules create only one or a limited number of opportunities to obtain reimbursement, professional reimbursement strategy becomes particularly important.
3. Reimbursement Activities That Should Remain the Company's Responsibility
Even when a distributor assumes responsibility for some reimbursement activities, certain areas should remain under the manufacturer's control.
3.1 The Billing Guide
If a Billing Guide should be issued, the manufacturer—not the distributor— should generally be responsible for it.
A Billing Guide serves two important purposes.
- It provides the manufacturer's authoritative instructions to local healthcare providers on reimbursement issues, including when to bill, whom to bill and how much to bill.
- It can help reduce the manufacturer's exposure to fraud and abuse claims if a healthcare provider or distributor incorrectly uses a reimbursement mechanism, whether accidentally or deliberately.
Keeping this information under the manufacturer's control helps ensure that reimbursement instructions remain consistent with the company's overall market access strategy.
4. Protecting the Company's Interests
Even when existing reimbursement mechanisms can be used, the manufacturer should consider whether an appropriate confirmation from the relevant authority is required.
If a distributor applies for such confirmation, the wording of the application can have important consequences. A distributor may structure an application in a way that gives the distributor—not the manufacturer— control over the reimbursement arrangement.
This can make it more difficult for the manufacturer to replace the distributor later and may delay the company's ability to launch or continue selling the product in a particular European market.
In our experience, applications have sometimes needed to be corrected so that the manufacturer's name, rather than the distributor's, was properly reflected. Such corrections can create unnecessary delays in replacing a distributor and launching a product.
5. How Manufacturers Can Avoid Distributor-Controlled Reimbursement
A manufacturer working with a distributor should establish clear responsibilities before reimbursement activities begin.
- Determine whether the product can use an existing reimbursement mechanism before assigning reimbursement responsibility.
- Keep major reimbursement strategy decisions under the manufacturer's control when new mechanisms, codes, coverage or payment arrangements are required.
- Ensure that reimbursement applications and confirmations identify the appropriate party and do not unnecessarily give the distributor control over the manufacturer's market access.
- Keep the manufacturer's Billing Guide under company control.
- Clearly define the distributor's reimbursement responsibilities and limitations in the commercial relationship.
6. Summary: When Should a Distributor Handle Reimbursement?
The issue of reimbursement should only be transferred to an experienced distributor when existing reimbursement mechanisms can be utilized appropriately.
Even in those cases, the manufacturer should remain responsible for its Billing Guide and should make sure that applications submitted by the distributor do not conflict with the company's commercial and strategic interests.
A distributor can be an important partner in bringing a medical device to market, but reimbursement should be managed in a way that preserves the manufacturer's long-term control of its product and market access strategy.
Frequently Asked Questions About Reimbursement by Distributors
Can a medical device company rely on a distributor to obtain reimbursement?
Sometimes. If an existing reimbursement mechanism can be used without significant modification, an experienced distributor may be able to manage certain local reimbursement activities. If a new reimbursement mechanism must be developed, the manufacturer should generally retain strategic control.
Which reimbursement activities should remain under the manufacturer's control?
Important strategic activities should remain under the manufacturer's control, including oversight of reimbursement applications and the manufacturer's Billing Guide.
Why should the manufacturer control its Billing Guide?
The Billing Guide provides healthcare providers with the manufacturer's instructions on reimbursement, including when to bill, whom to bill and how much to bill. It can also help reduce exposure to fraud and abuse claims resulting from inappropriate use of reimbursement mechanisms.
How can a distributor's reimbursement application affect the manufacturer?
If an application identifies the distributor in a way that gives the distributor control over the reimbursement arrangement, replacing that distributor can become more difficult and may delay market access.
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