CMS Proposes Basic Changes for Medicare Coverage, Including a New Reimbursement Pathway for FDA-designated Breakthrough Medical Devices

Wilson Sonsini Goodrich & Rosati
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On August 31, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that, if finalized, would entail changes in Medicare coverage. (“Medicare Coverage of Innovative Technology (MCIT) and Definition of ‘Reasonable and Necessary,’” 85 Fed Reg. 54327). First, CMS proposes to establish a new payment coverage pathway for innovative medical devices designated as breakthroughs by the U.S. Food and Drug Administration (FDA). The proposed Medicare Coverage of Innovative Technology (MCIT) pathway offers considerable advantages for device innovators, allowing for up to four years of national Medicare coverage for a breakthrough medical device. Second, CMS proposes to codify in regulation the “reasonable and necessary” standard key to Medicare coverage determinations. CMS would extend the definition, however, empowering Medicare beneficiaries, providers, innovators, or others wishing to gain coverage for an item or service the ability to cite evidence from commercial insurance coverage. Below we lay out specifics of the CMS proposal, its potential implications for device innovators, and the healthcare industry, more broadly. We also how industry actors can, in turn, influence CMS decision-making in these consequential areas. Interested parties have until November 2, 2020 to submit comments.

Background: Executive Order 13890

In October 2019, the President issued Executive Order (E.O.) 13890 decrying Medicare-for-all and announcing an array of directives aimed at advancing “market-based” Medicare administration. Among the latter, the Secretary of the U.S. Department of Health and Human Services was to make coverage of breakthrough devices “widely available, consistent with the principles of patient safety, market-based policies, and value for patients.” CMS states that its August 31st proposal represents a direct follow-up to E.O. 13890.

Breakthrough Devices and the Challenge of Obtaining Medicare Coverage

Eligibility for FDA’s breakthrough device designation is currently limited to approved or cleared medical devices and device-led combination products that: 1) provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions and also meet 2) at least one of the following four criteria:

(a) they represent breakthrough technology;*

(b) no approved or cleared alternative therapy exists;

(c) they offer significant advantages over existing approved or cleared alternatives; or

(d) the availability of the device is in the best interest of patients.

* The FDA sets out principles for assessing “breakthrough technology” and guidance for applying the above-listed criteria on its website: https://www.fda.gov/regulatory-information/search-fda-guidance-documents/breakthrough-devices-program

Currently, breakthrough devices are not automatically eligible for Medicare coverage upon FDA approval or clearance. Most breakthrough devices are currently subject to disparate coverage across different jurisdictions based on local coverage decisions (LCD). This, and other factors, result in unclear prospects for coverage of breakthrough devices during approximately one-year interval between FDA approval or clearance and CMS finalization of a nation coverage decision (NCD). Although an FDA-CMS parallel review pathway is available for certain breakthrough devices, this process is suited for review of innovations supported by significant clinical evidence from the outset. In practice, parallel review is infrequently invoked.

MCIT Pathway and Immediate Medicare Coverage 

The proposed MCIT pathway would confer immediate national coverage for qualified breakthrough devices from the date of FDA market authorization and continuing for up to four years. CMS has concluded that four years of allotted coverage would allow manufacturers to adequately develop clinical evidence and data regarding the benefit of the device in real-world settings to support subsequent coverage decisions.

The MCIT pathway would be unavailable for FDA-designated breakthrough devices that are statutorily excluded from Medicare coverage, do not fall into a Medicare benefit category, or are already covered (or expressly not covered) under an NCD. MCIT coverage could extend beyond the device itself, to surgery implanting the device; and related care and services costs, including the cost of treatments needed to address medical complications related to the device.

The MCIT pathway would be made available to manufacturers on an opt-in basis. CMS states that manufacturers would ideally notify CMS of their intention to access the MCIT pathway within two weeks of their product receiving breakthrough designation from FDA. Medicare coverage under the MCIT pathway would last for four years from the date of FDA market authorization.

Two-Year Lookback for Breakthrough Devices

As proposed, the MCIT pathway would confer limited retroactive benefits. Breakthrough devices that 1) received FDA market authorization no more than two calendar years prior to the date of the final rule or the effective date of the revised regulation, and 2) for which claims are submitted on or after the effective of this final rule, may access the MCIT pathway. CMS qualified this point, however; because the four-year coverage period begins on the date of FDA market authorization, devices accessing the MCIT pathway through this two-year lookback will only obtain Medicare coverage prorated for the remainder of the four years following FDA authorization.

Summary of MCIT Pathway Proposal

Voluntary participation

Manufacturers must opt-in to receive coverage

Provides automatic national Medicare coverage

Applies only to medical devices designated by FDA as breakthrough devices

Devices must be used on-label

Medicare coverage is available for four years from the date of FDA market authorization

Would allow for a two-year lookback for breakthrough devices that received FDA market authorization prior to the effective date of the final rule

Coverage could include the breakthrough device, reasonable and necessary surgery to implant the device, if implantable, related care and services costs of the device, and coverage of any reasonable and necessary treatments due to complications from the device

While manufacturers may submit comments concerning the proposed MCIT pathway, the considerations described, whether any of the existing coverage pathways should be modified to achieve the goals set out by the E.O., and alternatives to these proposals, CMS seeks the following specific comments:

  • Whether CMS should open a national coverage analysis if a Medicare Administrative Contractor (MAC) has not issued an LCD for a breakthrough device within six months of the end of the MCIT pathway?
  • Whether the MCIT pathway should also include diagnostics, drugs, and/or biologics that utilize breakthrough or expedited approaches at the FDA (for example, Breakthrough Therapy, FastTrack, Priority Review, Accelerated Approval) or include all diagnostics, drugs, and/or biologics, including data that support including these additional item categories in the MCIT pathway?
  • Whether an opt-in or opt-out approach would work best for utilizing the MCIT pathway?
    • Whether an opt-out approach would be less burdensome for stakeholders?
    • What would be the process for opting-out of the MCIT pathway?
    • Whether, once a manufacturer has opted-out of coverage, it can subsequently opt-in to MCIT?
  • Whether off-label use of breakthrough devices should be covered and, if so, under what specific circumstances and/or evidentiary support?
  • Whether a two-year lookback period should be applied for breakthrough devices that receive FDA market authorization within two years of the effective date of the final rule on MCIT?

Proposed Definition of “Reasonable and Necessary”

The Social Security Act limits Medicare coverage to items and services that are “reasonable and necessary” for the diagnosis or treatment of an illness or injury. The criteria for interpreting “reasonable and necessary” are set out in CMS’s Program Integrity Manual (PIM),  ch. 13, § 13.5.4. CMS proposes codifying these criteria in regulation. CMS proposes a major addition to the traditional criteria, which we set apart in the draft by underlining below:

“An item or service will be reasonable and necessary if it is:

(1) Safe and effective;

(2) Not experimental or investigational; 

and

(3) Appropriate for Medicare patients, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it --- 

(i) Meets all of the following criteria:

(A) Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient's condition or to improve the function of a malformed body member;

(B) Furnished in a setting appropriate to the patient's medical needs and condition;

(C) Ordered and furnished by qualified personnel;

(D) One that meets, but does not exceed, the patient's medical need; and

(E) At least as beneficial as an existing and available medically appropriate alternative;

OR

(ii) Is covered by commercial insurers, unless evidence supports that differences between Medicare beneficiaries and commercially insured individuals are clinically relevant.”

CMS proposes excluding from consideration evidence of coverage by Medicaid managed care, Medicare Advantage, and other governmental health care programs from the calculus, because those programs are not in the commercial market. CMS further proposes that the FDA designated breakthrough devices that receive market authorization would be considered “reasonable and necessary” because they meet the FDA’s “unique breakthrough devices criteria” and “are innovations that serve unmet needs.” Defining breakthrough devices as “reasonable and necessary” in this manner would enable the MCIT pathway to fast track Medicare coverage.

If finalized, integrating evidence of private payer coverage in “reasonable and necessary” determination could potentially expedite payment for Medicare items and services across the board. The device sector, in particular, has offered an enthusiastic welcome for the proposal. Although the proposal—in concept—boldly integrating market-based policies into Medicare coverage determinations, CMS’s August 31st notice takes care to omit details about the extent of change that Medicare earnestly proposes. CMS concludes its initial discussion about codifying the definition very open-endedly: “We may finalize any variation or outgrowth of the policies described in this proposal, or some combination of these options in lieu of or in conjunction with our proposed definition.”

CMS seeks comments on its proposed definition of “reasonable and necessary.” CMS specifically seeks comments related to its proposal to look to commercial payor coverage of items and services it its definition.

  • Whether to grant Medicare coverage on the basis of meeting the first and second factors and the commercial coverage basis for the third factor?
  • Whether beneficiaries, providers, innovators, or others wishing to gain coverage for an item or service demonstrate that the item or service is covered by at least one commercial insurance plan policy?
  • Whether CMS should limit its consideration of commercial plan offerings or covered lives to a subset of the commercial market in the interest of simplicity, including looking at geographic subsets, subsets based on number of enrollees, subsets based on plan type (HMO, PPO, etc.), or other subsets of plans—including utilizing a singular plan?
  • Whether, given the variation and distribution of coverage policies and access to innovations, CMS should only cover an item or service if it is covered for a majority, or a different proportion such as a plurality, of covered lives amongst plans or a majority, plurality, or some other proportion of plan offerings in the commercial market?
  • Whether CMS should adopt the least or most restrictive coverage policy, given that plan offerings may impose certain coverage restrictions on an item or service, e.g., related to clinical criteria, disease stage, or number and frequency of treatment?
  • What should be the role of MACs in reviewing commercial offerings to inform their LCDs or claim by claim decisions, which would include individual medical necessity decisions?

We encourage all interested medical device and technology companies and other stakeholders to view CMS’s proposal and request for public comments online at: https://www.federalregister.gov/documents/2020/09/01/2020-19289/medicare-program-medicare-coverage-of-innovative-technology-mcit-and-definition-of-reasonable-and.

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