CMS Proposes Medicare Coverage of Certain New Medical Devices, Clarification of “Reasonable and Necessary” Definition

Saul Ewing Arnstein & Lehr LLP

On September 1, 2020, the Centers for Medicare & Medicaid Services (CMS) published in the Federal Register a proposed rule that, if finalized, would establish a Medicare coverage pathway to provide Medicare beneficiaries with faster access to new, innovative medical devices designated as “breakthrough” by the Food and Drug Administration (FDA). This proposed rule follows the October 3, 2019 Executive Order that requested CMS clarify coverage standards and consider adopting market-based policies. If/when the proposed rule is finalized, the Medicare Coverage of Innovative Technology (MCIT) pathway would begin national Medicare coverage on the date of FDA market authorization and would continue for four years. The MCIT proposal would also clarify the “reasonable and necessary” standard that CMS uses to determine whether Medicare should cover a drug, device, or biologic.

National Medicare Coverage of Breakthrough Devices

Currently, FDA authorization of a device is followed by an often lengthy and costly process to determine Medicare coverage for that device. Under the proposed rule, Medicare would provide national coverage immediately upon the date of FDA market authorization (i.e., the date the medical device receives Premarket Approval (PMA), 510(k) clearance, or the granting of a De Novo classification request) for a breakthrough device, for a period of four years. In order to qualify as a breakthrough device, the product “must provide for more effective treatment or diagnosis of a life-threatening or irreversibly debilitating human disease or condition” and must also be considered a “breakthrough technology” or provide “a treatment option when no other cleared or approved alternatives exist.” After the four-year period, CMS could reevaluate the device based on clinical and real-world evidence of improvement in health outcomes among Medicare beneficiaries.

One of CMS’s goals with the MCIT proposal is to streamline identical local coverage decisions (LCDs), “promoting equal access for seniors and helping innovators focus on getting their devices to patients and clinicians.” Under the current LCD process, 16 Medicare Administrative Contractors (MACs) make Medicare coverage decisions on the local level – 12 for Medicare Parts A and B, and four for Durable Medical Equipment (DME). Because a MAC’s decisions only apply within the MAC’s jurisdiction, absent a national Medicare coverage for an innovative product, the product could be covered by a patchwork of LCDs, meaning a senior in one area could have access to the device while a senior in a different area would not. The MCIT proposal would give breakthrough devices national coverage for four years, simultaneous with FDA authorization, meaning innovators would not need to seek coverage from MACs.

The proposed rule has a lookback aspect allowing Medicare to cover eligible breakthrough devices that FDA authorized in 2019 or 2020, giving Medicare beneficiaries immediate access to such devices.

Clarification of “Reasonable and Customary” Definition

CMS is proposing that, under the anticipated MCIT pathway, an item or service that receives a breakthrough device designation from FDA would be considered “reasonable and necessary” because breakthrough devices have met FDA's unique breakthrough devices criteria, and they are innovations that serve unmet needs. Per CMS, this application of the “reasonable and necessary” standard would ensure that the MCIT pathway can provide a fast-track to Medicare coverage of such breakthrough devices.

Under the proposed rule, CMS is revising its interpretation of the statute because of “the practical concerns that our current standards have delayed access to a unique set of innovative devices that FDA has found to be safe and effective, and we believe are ‘reasonable and necessary’ for purposes of Medicare coverage.”

Coverage Customer Service Improvement, NCD Backlog Reduction

Relatedly, CMS announced that it is implementing a customer service effort for innovators seeking coverage of their products. According to CMS, this “coordinated, one-stop-shop internal structure” will “harmonize[ ] the coverage, coding, and payment processes” and will help CMS better assist innovators as they seek to secure Medicare coverage and payment for their newly FDA-authorized products. This effort will take shape through “a new pilot project under which knowledgeable CMS staff will guide innovators through the coverage, coding, and payment processes to cut through confusion and, ultimately, help Medicare deliver critical new technologies to seniors more quickly.”

Finally, CMS also indicated that it has significantly reduced a backlog of requests for National Coverage Determinations (NCDs), some of which have been awaiting approval since 2014. In 2019, there were 11 NCD applications awaiting CMS review. By the end of 2020, CMS announced that it intends to have addressed nine of those 11.

Interested parties may submit comments on the proposed rule via regulations.gov until November 2, 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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