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New CMS TCET Rule Likely Won’t Hasten Medicare Coverage of Breakthrough Devices

by Glenn S. Demby | Aug 24, 2023 | CMS-nir, Essential, National Lab Reporter

Recently proposed rule seems too stringent to reduce the lag between FDA approval and Medicare coverage.

In November 2021, CMS rescinded a proposed rule that would have ensured that Medicare beneficiaries get immediate access to new lab tests and medical devices in the FDA’s Breakthrough Device program. However, the agency promised that it would come up with a different rule for expediting Medicare coverage of breakthrough devices on a more clinically sound basis.¹ CMS proposed that long-awaited rule on June 27, 2023.² Although it’s still a work in progress, the new rule seems likely to have far less impact than its predecessor in resolving the lag between FDA marketing authorization and Medicare coverage.

What’s at Stake

New medical technology offers more options to patients and provides innovative companies a highly incentivizing pathway to commercial success—but getting the thumbs-up from regulatory bodies is a crucial first step. However, securing marketing authorization from the FDA is hardly the endgame; it simply allows the company to market its device in the US. To successfully sell the product, the company must win over both the providers who use it and the insurers who pay for it. In the US, the key payer is Medicare, not only because of its tens of millions of members but also its massive influence on the coverage decisions of private payers.

The issue is that it takes years for breakthrough devices to secure Medicare coverage—if they secure it at all. The lab industry and other critics have long contended that this delay stifles innovation and denies patients access to the novel tests and products they need.

The MCIT Rule

During the Trump administration, CMS proposed the “Medicare Coverage of Innovative Technology (MCIT) and Definition of ‘Reasonable and Necessary’” rule, which would have solved the problem by requiring Medicare to cover medical devices in the FDA’s Breakthrough Device program that receive marketing authorization for at least four years.³ Under the MCIT rule, such devices would be automatically deemed to meet the “reasonable and necessary” criteria required for Medicare to cover new medical products and services under Section 1862(a)(1)(A) of the Social Security Act. CMS would perform its own “reasonable and necessary” review only after the initial four-year coverage period.⁴

Although popular with the lab and medical device industry, the MCIT plan raised concerns in scientific and regulatory communities. FDA authorization and CMS “reasonable and necessary” coverage review are completely different things, critics pointed out. A turning point came in April 2021 when the influential Medicare Payment Advisory Committee (MedPAC) published a letter calling on CMS to repeal the rule. “The Medicare program, not the FDA, should adjudicate coverage and spending determinations based on the specific needs of the Medicare population,” MedPAC wrote.⁵

Although expediting coverage for innovative new devices and services is important, MedPAC urged CMS to do it in a way that “does not abandon evidentiary requirements that ensure that such innovations do indeed improve beneficiaries’ outcomes.”⁵ The agency said it would do just that when it announced that it was not proceeding with the MCIT rule.

CMS’ New TCET Proposal for Medicare Coverage of Breakthrough Devices

CMS’s proposed rule purports to speed up Medicare coverage without compromising evidentiary requirements by creating a new Transitional Coverage for Emerging Technologies (TCET) pathway. Manufacturers whose devices—including diagnostic tests—hold FDA Breakthrough Device designation could pursue the TCET pathway to obtain Medicare coverage on an expedited basis for an anticipated three to five years.

But this rule is very different from its predecessor. The biggest difference between MCIT and TCET is that devices won’t be presumed to meet “reasonable and necessary” criteria automatically upon receiving FDA marketing authorization as they would have under MCIT. Instead, manufacturers will have to undergo strict processes to secure Medicare coverage. In the end, the new pathway won’t be much easier to navigate than the current Medicare coverage system, much of which is incorporated into the TCET rule. Here’s a breakdown of what will have to happen for new breakthrough devices to secure TCET Medicare coverage.

Stage 1. Premarket

The first set of hurdles are the premarket requirements, which didn’t exist under the MCIT rule.

CMS Acceptance

Companies will have to notify CMS of their desire to follow the TCET route approximately 12 months before the FDA’s expected decision on the underlying product submission. CMS will then have to approve the request, which won’t be easy. The proposed rule notes that, to be eligible for TCET, products must be not only be in the FDA’s Breakthrough Device program, but also:

fall within a Medicare benefit category and be separately payable (not bundled)²

not already be the subject of an existing Medicare National Coverage Determination (NCD)

not be otherwise excluded from coverage via law or regulation

CMS acknowledges that diagnostic laboratory tests would be eligible for the TCET pathway because they’re included in the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)(1)) definition of “device.”^6,7 However, the agency also says that “the majority of coverage determinations for diagnostic tests granted Breakthrough designation should continue to be determined by the MACs through existing pathways.”⁶

Overall, CMS says it expects to keep the new pathway limited to no more than five candidates per year due to “resource constraints,” prioritizing devices that have “the potential to benefit the greatest number of individuals with Medicare.”²

Evidence Review

If CMS accepts a company’s product for the TCET pathway, the company will have to undergo an Evidence Preview to present clinical evidence of the product’s effectiveness. Manufacturers can also provide feedback on the preview during an optional Evidence Preview Meeting. If the Evidence Preview identifies any gaps, manufacturers will need to develop a detailed document called an Evidence Development Plan (EDP) to address them.

Stage 2. NCD Review

If CMS approves the product for the TCET pathway, the product makes it through the premarket phase of TCET, and the FDA grants marketing authorization, the manufacturer will still have to navigate the basic Medicare National Coverage Determination (NCD) system. Specifically, TCET breakthrough products will have to undergo specialized Medicare Administrative Contractor review “[following] the NCD statutory timeframes.” Medicare coverage for breakthrough products approved through the TCET pathway is expected to last between three and five years, according to the CMS Fact Sheet explaining the new rule.⁶

Stage 3. Transition to Post-TCET Coverage

As with MCIT, Medicare coverage under the TCET pathway will transition to permanent coverage after the initial period expires. To ensure continuing coverage, the manufacturer must provide sufficient evidence to satisfy the “reasonable and necessary” standard. CMS will then perform an updated evidence review, review practice guidelines and consensus statements to assess “whether the conditions of coverage remain appropriate,” and reconsider the original NCD.⁶ Ultimately, the device may receive a new NCD that allows coverage (and may involve evidence development requirements), a non-coverage NCD, or no NCD at all (meaning that coverage decisions will be made at a local level).

Takeaway & Practical Impact

Although the major trade associations have yet to officially weigh in as of press time, the proposed TCET pathway appears far less favorable to industry than the MCIT plan it replaces. Automatic coverage of new devices upon FDA breakthrough designation was likely not stringent enough—but is the TCET rule too stringent? It incorporates evidentiary standards the MCIT lacked, but in a way that may make the pathway too onerous to offer any form of realistic relief. By the time companies make it through premarketing and the NCD process, they’re unlikely to have saved much time or money.

The X factor is the possibility that Congress will step in and resolve the expedited Medicare access pathway via a bipartisan bill (H.R. 4043, aka Ensuring Patient Access to Critical Breakthrough Products Act) that would require CMS to provide four years of automatic Medicare coverage for new medical devices that receive FDA market authorization.^8,9 Industry would likely welcome the proposed bill’s passage, but it suffers from the same flaws that caused CMS to rescind MCIT.

A third option that falls somewhere between MCIT and TCET may be a more balanced solution. One potential scenario is that CMS will revise the rule to make the TCET more user-friendly in response to the critical public feedback the agency is likely to receive during the comment period for the proposed rule. There’s also a chance of a hybrid solution emerging in the form of Congressional bills offering a pathway stricter than H.R. 4043, but less stringent than TCET.