Even I forget how slow the bureaucracy moves in Washington. In our 1Q 2020 Themes presentation in January, which seems like a lifetime ago, we highlighted a White House Executive Order that requested regulation to streamline the process for approval of innovative medical devices within a year. The same Executive Order requested a clarification of CMS's "reasonable and necessary" standard used for making coverage decisions.
Today, CMS came in a little ahead of schedule and proposed a new process for gaining Medicare coverage of devices using breakthrough technologies. It also proposed to codify a new definition of “reasonable and necessary.”
Medicare Coverage of Innovative Technology. Under the new rule, medical device approvals that take advantage of the Food & Drug Administration’s Breakthrough Technology program have the option of obtaining Medicare coverage automatically and immediately through the new Medicare Coverage of Innovative Technology pathway (MCIT), unless there is simply no applicable benefit category.
This new program represents an improvement over the rarely used parallel review process used by EXAS. Medical devices and device-led combination products that meet two criteria are eligible for the program:
- Provide more effective treatment or diagnosis of life threatening or irreversibly debilitating disease or conditions
- Satisfy one of the following:
- Represent breakthrough technology
- No approved or cleared alternatives
- Offers significant advantages over existing approved or cleared alternatives
- Availability is in best interests of patients
The MCIT coverage pathway would be voluntary at the election of the device manufacturer. There will be a four-year limit on coverage. In year three, manufacturers are expected to apply for a National or Local Coverage Decision.
The MCIT pathway will have a two year look-back. Assuming the rule is finalized December 31, 2020, any device that was approved by the FDA in 2019 and 2020 would be eligible for coverage under the MCIT program. There is no public list of approved breakthrough devices. However, we know from press reports that ArcherDx, soon to be acquired by NVTA, has received several breakthrough approvals.
The advantage the new coverage pathway provides is speed. The normal 9-12 months required by either an LCD or NCD. The other advantage is that it allows the device manufacturer to get gain Medicare reimbursement while developing more clinical evidence on the effectiveness of their product.
Changes to Definition of Reasonable and Necessary. Just as interesting are the revisions to the ‘reasonable and necessary” standard. While generally understood to mean an item (device, test, medical supply) or service that is safe and effective; not experimental or investigational; and appropriate, CMS had never codified it. Today they are proposing the Medicare will offer coverage for items and services when:
- Safe and effective
- Not experimental or investigational
- Appropriate for Medicare patients if
- Furnished according to accepted medical standards
- Furnished in an appropriate setting
- Ordered and furnished by qualified personnel
- Meets but does not exceed patient’s medical needs; and
- Is at least as beneficial as an existing and available alternative
Alternatively, an item or service can meet the definition of reasonable and necessary if, instead of being appropriate for Medicare patients it has already gained coverage by commercial insurers, except in those cases where there are relevant clinical differences between a Medicare and commercially insured patient.
This alternative definition turns the coverage process on its head. Normally, device manufacturers and test developers seek Medicare coverage first to generate revenue while they convince commercial insurers to do the same. Now CMS is saying commercial coverage will constitute prima facia evidence that the item or service is appropriate for Medicare patients. The effect should be that manufacturers and developers will have many more options to get their foot in the coverage door.
The change in definition also eliminates some of the confusion between the FDA standard of "safe and effective' and the payer standard of "reasonable and necessary" which frequently forced manufacturers and developers to conduct additional clinical trials in order to obtain a coverage decision. The gap between the two standards has led to some disparities in FDA clearance and CMS coverage. A 2013 HealthAffairs article indicated that, while CMS almost always covered FDA approved drugs, but only about 75% of devices the majority of which were 510(k) cleared.
More to come from CMS, we expect. That was a very long Executive Order.
Emily Evans
Managing Director – Health Policy
Due Diligence | Verification | Advisory
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