• On April 10, 2024, CMS published the fiscal year (FY) 2025 Medicare Hospital Inpatient Prospective Payment Systems (IPPS) Proposed Rule, which contains several key proposals that could provide additional benefits for manufacturers seeking to apply for New Technology Add-on Payments (NTAP) for their technologies.
• Proposals include increasing the number of manufacturers eligible for a full three years of NTAP, determining those applicants in a “hold status” with the FDA will no longer be considered inactive for NTAP eligibility purposes, and increasing the add-on payment amount to 75%, up from 65%, for certain gene therapies that treat sickle-cell disease (SCD).

On April 10, 2024, the Centers for Medicare & Medicaid Services (CMS) published the fiscal year (FY) 2025 Medicare Hospital Inpatient Prospective Payment Systems (IPPS) Proposed Rule, an annual rulemaking that broadly addresses payment policies and payment rates for inpatient hospital services provided to Medicare beneficiaries. Among other topics, CMS uses the IPPS rulemaking to make New Technology Add-on Payments (NTAP) determinations for new medical technologies and services. The NTAP program, which CMS first introduced in 2001, offers manufacturers of new, groundbreaking technologies the ability to apply for NTAP designation for their drug, device, or diagnostic. This designation provides hospitals with extra payments for using the product for the two-to-three-year period after market entry; these add-on payments are often critical in a hospital’s decision to adopt new technologies that are not otherwise captured in the standard inpatient payment rate.

The FY 2025 IPPS Proposed Rule contains several key proposals that, if finalized, would improve processes for manufacturers seeking to apply for NTAP for their technologies by:

• Adjusting the timeframe for a product’s “Newness” cutoff period from April 1 to October 1.
• Proposing that applicants in a “hold status” with the FDA will no longer be considered inactive for NTAP eligibility purposes.
• Increasing the add-on payment amount to 75% for certain gene therapies that treat sickle-cell disease (SCD).

Proposal to Adjust ‘Newness’ Start Date

To qualify for a NTAP, a technology must satisfy three criteria: (1) Newness, (2) Cost, and (3) Substantial Clinical Improvement. A technology is considered “new” for two-to-three years after becoming available on the market (typically this is the date of FDA approval, although CMS has allowed for a later date in rare circumstances).

Once a technology has NTAP approval, it is eligible for 2-3 years of add-on payments. Under current policy, CMS uses a six-month window, before and after the start date of the fiscal year, to decide whether NTAP payments should be extended to a third year; a therapy will receive three years of payments if the three-year anniversary date of its market entry is in the second half of CMS’s fiscal year, or after April 1.

In the FY 2024 IPPS Final Rule, CMS began requiring most NTAP applicants to have FDA approval by May 1 of the year preceding the fiscal year for which the application is being considered (e.g., an applicant for FY 2026 must have FDA approval by May 1, 2025), a change from its previous July 1 deadline. As a result of this new policy, the only way for a product to receive 3 years of NTAP payments under current regulations is if the product receives FDA approval in the April preceding its first year of NTAP (if approved before this date, it is not eligible to be considered for NTAP; if after, it will only receive two years of NTAP payments).

To address this limitation on the number of products eligible for a third year of NTAP, starting in FY 2026, CMS is proposing to change the April 1 cutoff date to October 1 for determining when an applicant technology would be within its 2-3-year newness period. For applicant therapies approved in this current cycle (FY 2025), payments can be extended to a third year if a product’s three-year anniversary date for market entry in the U.S. is on or after October 1, rather than April 1. As a result of this policy, more new technologies will be eligible for three years of NTAP.

Proposal to Define Applicants with FDA ‘Hold Status’ as Active for NTAP Eligibility Purposes

In the FY 2024 IPPS Final Rule, CMS began requiring NTAP applicants to have FDA market authorization by the NTAP application deadline. For NTAP purposes, CMS considers FDA marketing authorization to have “active” status when it (1) has not been withdrawn; (2) is not the subject of a Complete Response Letter or FDA final decision to refuse to approve the application; and (3) is not on hold. In the FY 2025 IPPS Proposed Rule, CMS acknowledges that applications for FDA marketing authorization might go in or out of hold status throughout the FDA application process for many reasons. Due to this variability, CMS proposes to modify its policy regarding hold status, starting with applicants for FY 2026. If finalized, technologies that apply for NTAP for FY 2026 will not be considered “inactive”—and, therefore, will be eligible for NTAP consideration—if the applicant has a hold status with FDA. However, CMS will still consider applications that are withdrawn, the subject of a Complete Response Letter, or the subject of a final decision from FDA to refuse to approve the application to be “inactive” and, therefore, ineligible for NTAP.

Proposal to Increase Add-on Payment Amount for Certain Gene Therapies That Treat Sickle-Cell Disease

There are currently two pathways for NTAP applicants: Traditional and Alternative. Under the Traditional Pathway, the add-on payment amount is the lesser of 65% of the cost of the product or 65% of the cost of the case above the regular DRG payment. CMS pays for certain classes of products approved through the Alternative Pathway—Qualified Infectious Disease Products (QIDPs) and Limited Population Pathway for Antibacterial and Antifungal Drugs (LPADs)—at a higher rate of the lesser of 75% of the costs. Notably, CMS in the FY 2020 IPPS Final Rule finalized an increase from 65% to 75% for QIDPs because of the public health threat posed by antimicrobial resistance, susceptibility of Medicare beneficiaries in particular to antimicrobial resistance (due to population vulnerabilities), and hospitalizations and health expenditures associated with antimicrobial resistance. CMS made similar observations when it increased the add-on percentage to 75% for LPADs in FY 2021.

CMS in the FY 2025 IPPS Proposed Rule reiterates these considerations and proposes to increase the NTAP add-on percentage to 75% for certain gene therapies to treat sickle-cell disease (SCD), starting with any therapies approved for FY 2025. CMS explains that SCD historically has had limited treatment options and leads to costly hospitalizations. Additionally, the Biden administration identified a need to address SCD and improve patient outcomes by facilitating access to cell and gene therapies to treat SCD. Further, CMS believes that increasing the add-on amount to 75% for gene therapies used to treat SCD could incentivize use of these therapies for patients suffering from SCD. If finalized as proposed for FY 2025, the payment amount would only apply to gene therapies for SCD approved for NTAP in FY 2025.

CMS is requesting comments on this proposal and on whether the 75% add-on should be made available “only to applicants that meet certain additional criteria,” such as participation in outcomes-based pricing arrangements with purchasers or “otherwise engaging in behaviors that promote access to these therapies at lower cost.”