In its proposed update to the Physician Fee Schedule for calendar year 2014, the Centers for Medicare & Medicaid Services (CMS) suggested major revisions to its regulations governing Medicare coverage of investigational devices and the routine items and services furnished to beneficiaries during the clinical studies or trials conducted under the Food and Drug Administration (FDA) Investigational Device Exemption (IDE) regulations. In its proposal, CMS sets forth new standards that would need to be met for the costs of certain investigational devices as well as the costs of routine items and services incurred by Medicare beneficiaries participating in FDA approved IDE studies to be eligible for Medicare coverage. In addition, CMS proposes to consider and grant coverage of these investigational devices, as well as routine items and services otherwise available to Medicare beneficiaries, through a centralized review process rather than through local Medicare contractors, as it is currently performed. Revisions to this policy will be of particular interest to sponsors conducting clinical studies or trials of device technologies for which they seek Medicare coverage, as well as medical centers. Comments on the proposal may be submitted to CMS until September 6, 2013.

Background on Medicare Coverage of Investigational Devices and Associated Clinical Trial Costs -

On September 8, 1995, the FDA and CMS entered into an interagency agreement in which FDA agreed to categorize IDEs for purposes of Medicare coverage. The process was codified in regulations at 42 C.F.R. § 405.201 et seq., which describe two categories of investigational devices: (1) Category A devices and (2) Category B devices. Category A devices are “experimental” investigational devices where the “absolute risk” of the device type has not been established and FDA is unsure whether the device type can be safe and effective. This category typically encompasses only FDA Class III devices. Category B devices are “non-experimental” investigational devices where the “incremental risk” is the primary risk in question, i.e., underlying questions of safety and effectiveness of the device type have been resolved. FDA Class I, II or III devices may fall within this category.