CMS Delays New Rule Providing Automatic Medicare Coverage of Breakthrough Devices

A CMS final rule providing for automatic Medicare coverage for new medical products cleared by the FDA as breakthrough devices under Section 510(k) was supposed to take effect on March 15, 2021. But now that CMS is under new management, the rule has been put on ice for at least 60 days pending further study. While no doubt disappointing to some manufacturers, the potential demise of the Medicare breakthrough status coverage rule is hardly unexpected. Here’s a briefing on the situation.

The Final Rule

Medicare covers only medical services and products that are “reasonable and necessary.” The Social Security Act (Section 1862((a)(1)(A), to be precise) gives the HHS Secretary authority to determine whether a particular service or product meets the standard. However, HHS has never established a formal regulation to define “reasonable and necessary.” The rule, which was finalized on Jan. 12, creates such a definition, one that would enable breakthrough devices to qualify as reasonable and necessary.

Specifically, the rule would grant national Medicare coverage of breakthrough devices for a four-year period starting on the date of FDA market authorization. Once the period ends, CMS would then re-evaluate the device based on clinical and real-world evidence of improved health outcomes to determine whether to make Medicare coverage permanent.

The idea is to give Medicare beneficiaries better access to new medical technologies. Technically, the rule applies only to devices that pass through the Medicare Coverage of Innovative Technology (MCIT) pathway, which doesn’t include laboratory developed tests (LDTs). However, CMS had made it clear that the MCIT rule would serve as a template that could be extended to breakthrough diagnostics, drugs and/or biologics that aren’t currently in the MCIT pathway.

The Biden Brake

Immediately upon taking office, the Biden administration signaled its suspicion and skepticism of the health care policies of its predecessor and imposed a blanket freeze on new regulations adopted in the regime’s final days. (To find out about the other regulations affected, see G2 Blog, How the Transition from Trump to Biden Will Affect Federal Regulation and Reimbursement,” Feb. 19, 2021). However, critics have attacked the rule for throttling CMS’ clinical scrutiny and opening the door scientifically unproven devices as part of the Trump administration’s general disdain for science and regulation. This criticism was bound to resonate with the new President who has expressed similar views on Trump policy.

Takeaway

Although the delay in implementation comes as no surprise, the final rule’s ultimate demise is by no means a forgone conclusion. On the contrary, lack of a clear Medicare coverage definition of “reasonable and necessary” has been a problem for decades, serving not only as a thorn in the side of the medical device and lab industry but also in blocking the access of Medicare patients. The attempt to address the problem also enjoys bipartisan support in Congress.

But the Biden administration refuses to be rushed. In announcing the final rule’s delay, CMS initiated a new 30-day comment period to gather public feedback on operational issues, overlapping rules, breakthrough device volume, patient protection and commercial insurance. And if the final rule does make it through, the door will be opened to extending it to LDTs. Stay tuned.