The U.S. Centers for Medicare and Medicaid Services (CMS) capped off the month of August 2020 with one of the more significant Medicare coverage documents in recent memory. The more immediately impactful part of the proposed rule would offer immediate coverage for devices approved or cleared under the FDA’s breakthrough devices program, but the broader element of this proposed rule offers a definition for the term “reasonable and necessary,” a development that itself constitutes a breakthrough in the world of Medicare coverage of medical technology.

CMS said in an Aug. 31 press release that the proposed rule for Medicare Coverage of Innovative Technology (MCIT) would eliminate the so-called valley of death, characterized as “an unnecessary waste of resources for innovators” and “a significant problem for America’s seniors.” The agency acknowledged that applications for national coverage determinations (NCDs) have piled up at times, and that beneficiaries’ access to novel technologies has as a result lagged significantly behind FDA approval.

It might be noted that many believe the CMS’s Coverage and Analysis Group (CAG) is in need of additional resources, although the notion of user fees for the CAG has not been well received, a predicament that automatic coverage of breakthrough devices might be expected to alleviate. The CMS statement points to a backlog of national coverage determination (NCD) requests that totaled 11 in 2019, more than one of which had been in queue since 2014. Of the 11 in backlog, nine will have been processed by the end of the current calendar year, the agency vowed.

Four years for breakthrough devices, but CED may follow

Under this proposal, Medicare coverage would commence immediately upon FDA approval of a designated breakthrough device and would continue for four years. At that point, the accumulated real-world evidence (RWE) may suffice for a determination of continued coverage, a factor the agency said should prod device makers to ensure those data are collected. The CMS does not explicitly cite the RWE program in development by the Medical Device Innovation Consortium, although some stakeholders believe that the current state of outcomes measures is inadequate for many devices/indications. Device makers would be at liberty to opt out of the automatic breakthrough coverage program, however.

The CMS said that the fiscal impact of the MCIT program could range as high as $2.04 billion for fiscal 2024, although a more conservative estimate for that fiscal year is $66 million. The anticipated ranges of spending increases in FY 2021 is $9.5 million on the low end and $291.5 million on the high end, with the presumed lower and upper ranges of spending increases in the two intervening fiscal years increasing more or less proportionally from the 2021 baseline.

Any reluctance by device makers to ensure adequate data collection may be resolved by the imposition of a coverage with evidence development (CED) requirement as discussed in the associated Federal Register notice. The FR notice said the CMS seeks comment on whether the agency “should require or incentivize” data collection via clinical studies that would resemble a CED requirement, particularly given that the FDA routinely requires post-approval studies as a condition of marketing authorizations.

The CMS statement also points to the prospect that reflexive coverage of breakthrough devices would eliminate many of the headaches associated with local coverage determinations (LCDs). “MCIT breaks through this bureaucracy to help innovators and seniors alike,” the agency said, adding that the MCIT program will be applied retroactively to breakthrough devices cleared or approved by the FDA in 2019 and earlier in the current year.

In a move that seems complementary to the FDA payer communication task force, CMS is proposing to set up a “one-stop-shop internal structure that harmonizes the coverage, coding and payment processes.” However, there is little to no supplementary information about this notion in the FR notice or in the associated fact sheet. One of the more interesting passages in the FR notice is that variable coverage under the LCD program might mean that a breakthrough device “is non-covered by a local policy in Florida.” The state of Florida is under the jurisdiction of First Coast Service Options (FCSO), and while little has been said publicly about which Medicare administrative contractors (MACs) are more likely than others to deny coverage, FCSO has been the subject of some off-the-record grumbling by device makers.

Private payer coverage a factor in ‘reasonable and necessary’

Regarding the definition of reasonable and necessary, CMS said its coverage policies have long revolved around the question of whether a device or service is safe and effective, the terms the FDA uses in its premarket review mechanisms. Under this proposed framework, a device or service may be deemed reasonable and necessary if it passes a three-part test, commencing with the FDA standard of safety and efficacy. The second criterion would be that the device or service is neither investigational nor experimental, while the third criterion is whether the device or service is “appropriate.”

The question of appropriateness is in turn answered by whether a device or service is “at least as beneficial” as an appropriate and available alternative, although the use of that device or service under medical society guidelines is another factor of interest. The CMS said the existence of private payer coverage can alleviate a need to demonstrate that these other appropriateness characteristics are fulfilled, although substantial differences between Medicare beneficiaries and the related private payers’ enrollment populations may impede the use of this lever.

CMS is seeking feedback on how it might approach private payer coverage in this context, such as whether a coverage under “a singular plan” would suffice. Other benchmarks under this private payer framework might be whether a majority vs. a plurality of the assumed patient population is covered under private pay, although a geographic orientation is also under consideration. The agency is seeking feedback on the degree to which access should be restricted, a point that has proven contentious in the context of a number of device types and categories, such as transcatheter aortic valve replacement technologies.

Analysts with the Cowen Washington Research Group noted that this proposed rule had found a place in the Trump administration’s regulatory agenda since early 2019, although the notion of a radical rewrite of CMS’s coverage framework dates back at least as far as 2017. The so-called PACER/Excite paradigm was in process in 2017, although the Medical Device Manufacturers Association’s President and CEO, Mark Leahey was concerned in early 2018 about the disappearance of this proposal from the regulatory dashboard administered by the Office of Management and Budget.

Eric Assaraf, med-tech analyst with Cowen, reiterated the CMS’s acknowledgment that both NCDs and LCDs may be a year in completion, but noted that the OMB dashboard had previously listed the associated regulation as significant, meaning that the economic impact could exceed $100 million. Assaraf characterized the draft rule as “broadly positive” for industry despite that the breakthrough program captures only a small number of devices each year. He also noted that the parallel review program administered by the FDA and the CMS “requires a significant amount of clinical evidence” for both regulatory review and Medicare coverage, and thus is infrequently invoked.

As might be expected, med tech trade associations lauded the development, including MDMA’s Leahey, who said the association “has long advocated for updated coverage policies that would allow innovative therapies and technologies to get into the hands of patients and providers in an expedited manner.” Leahey said MDMA would continue to work with other stakeholders, including Congress, the White House and the CMS, “to narrow the gap between regulatory and reimbursement decisions that will bolster patient care.”

The Advanced Medical Technology Association (Advamed), said in an Aug. 31 statement that the CMS announcement “represents another significant step forward in providing access to transformational medical technologies. Advamed President and CEO Scott Whitaker said the Trump administration’s “continued focus on the value of medical technology and innovative breakthroughs will without question help to alleviate human suffering and save lives.

CMS is taking comment on the draft rule (CMS-3372-P) through Nov. 2, 2020.