CMS to Create New Breakthrough Device Medicare Coverage Rule

There is an inherent tension between the objectives of providing Medicare beneficiaries access to difference-making new diagnostic and treatment products and ensuring that those emerging medical technologies meet standards of safety and effectiveness. That tension became abundantly clear last November when the Biden administration scrapped a rule designed to ensure Medicare coverage of newly approved breakthrough devices. However, it now appears that a reincarnated version of the rejected rule may be in the offing.

The Diagnostic Challenge

Section 1862(a)(1)(A) of the Social Security Act states that Medicare Parts A and B cover only medical items and services that are “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." The Secretary of the Department of Health and Human Services (HHS) is charged with determining which items and services are “reasonable and necessary” via its agency, the Centers for Medicare and Medicaid Services (CMS). However, HHS has never published a regulation that provides a formal definition of “reasonable and necessary.”

The Rise and Fall of the Medicare Preauthorization Coverage Rule

In January 2021, CMS published a final rule purporting to create such a definition. Specifically, an item or service would be deemed “reasonable and necessary” if it is:

• Safe and effective;
• Not experimental or investigational; and
• Appropriate for Medicare patients in terms of duration and frequency, i.e., furnished in accordance with accepted standards of medical practice in an appropriate setting by and at the order of qualified personnel that meets, but does not exceed the patient’s needs, and is at least as beneficial as an available medically appropriate alternative.

An item or service would also be considered “appropriate for Medicare patients” if it was covered by commercial insurance.

Significantly, the final rule would have provided automatic Medicare coverage of medical devices in the FDA’s Medicare Coverage of Innovative Technology (MCIT) pathway that received section 510(k) preauthorization as breakthrough devices. National Medicare coverage would have lasted four years, starting on the date of FDA 510(k) approval. After the four years came to an end, CMS would have to do a new “reasonable and necessary” evaluation by looking back at the actual clinical and real-world evidence of the device’s performance and impact on health outcomes. At that point, CMS would either issue either an affirmative or negative national coverage determination (NCD) or leave it to the Medicare Administrative Contractors (MAC) to decide via local coverage determinations (LCD) or on a claim-by-claim basis.

The point of the rule, which presumably would have been extended to laboratory tests, biologics, and other medical products and services, was to make emerging device technologies available to Medicare beneficiaries on an accelerated basis. Unfortunately for the industry, the idea of entrusting the FDA to make de facto Medicare coverage decisions drew heavy criticism from physicians, scientists, and others, particularly since the agency typically relies on short studies based on intermediate outcomes, rather than comprehensive and rigorous studies demonstrating product effectiveness and safety in granting preauthorization of new medical devices. Critics also cited manufacturers’ practice of excluding patients with comorbidities from studies designed to support application for device preauthorization. Such excluded groups often include the elderly, precisely the constituency Medicare is designed to serve.

Helping to seal its fate was that the final rule was published as part of a spate of last-minute healthcare regulations that the Trump administration pushed through in its final weeks. After initially delaying it, the new Biden administration pulled the plug on the final rule in November 2021.  

The Next Chapter

Warranted or not, the decision to kill automatic Medicare coverage of breakthrough devices left CMS back at square one. In 2022, the agency and the FDA expressed their “unwavering commitment” to ensure Medicare patients access to effective new medical diagnostics and treatments. On Oct.12, a pair of high-ranking CMS officials outlined their vision for the future in the Journal of the American Medical Association (JAMA) Internal Medicine.

“The CMS remains committed to establishing an expedited Medicare coverage pathway that achieves timely and predictable coverage of medical devices while at the same time ensuring that coverage is based on scientifically sound clinical evidence, including criteria to ensure that qualified physicians and hospitals are delivering the care,” wrote authors Lee A. Fleisher, MD, and Jonathan D. Blum, MPP, both of whom work in the agency’s Baltimore headquarters. 

The key takeaway: The CMS officials say that the agency plans to build on its previous collaborations with the FDA in the field of coverage based on evidence developed and come up with “a new proposed rule that would create an accelerated coverage pathway.” The article lists the four principles on which the new proposed rule will be based:

• As with the previous one, the process set out in the new rule will be voluntary for manufacturers and be limited to “medical devices that fall within the Medicare statute and are relevant to the Medicare population”;
• CMS may perform early evidence review of devices that have not yet received FDA marketing authorization and work with the manufacturer to determine the best Medicare coverage pathway to pursue, depending on how strong the evidence is;
• Manufacturers will also be able to ask CMS to start the coverage review process prior to FDA marketing authorization, in which case the manufacturer might have to create an additional evidence development plan to ensure appropriate safeguards are in place for Medicare beneficiaries—in effect, the new rule’s answer to the omitted comorbidities problem associated with the previous rule; and
• If CMS does require further evidence development, the agency would seek ways to make it less burdensome to manufacturers, clinicians, and patients without compromising the demand that the device meet rigorous evidence standards.

“The CMS believes that a rule guided by these principles would strike a balance between promoting access to emerging medical technologies and maintaining the protections and rigorous evidence standards that are essential to the welfare of Medicare beneficiaries,” the authors write.

Takeaway

The CMS and FDA are not giving up on tying Medicare coverage to marketing preauthorization. But they have learned their lesson and are determined to avoid the mistakes that doomed the previous rule. At the end of the day, it is all about evidence. The evidence standards required for a new medical device to meet Medicare “reasonable and necessary” coverage criteria will be far more rigorous this time around. Exactly how remains to be determined. There may also be strict timelines for decisions requiring coverage with evidence development, the CMS officials indicate. In addition to weighing overall improvements in health outcomes, the agency will “consider whether the evidence generated will help guide patients and clinicians in deciding whether to use new or emerging technologies,” Fleisher and Blum write.

Avoiding another mistake, CMS says it plans to work closely with all stakeholders in developing the new rule, including not only the FDA and manufacturers but also patient groups, clinicians, and medical societies. What Is at Stake for Laboratories: One final note. While the new rule would likely be limited to MCIT medical devices, CMS and FDA would be developing a template that it could and likely would extend to laboratory tests, biologics, and other medical items and services.