Today, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to establish a Medicare coverage pathway for medical devices designated as breakthrough by the Food and Drug Administration (FDA). The new proposed Medicare Coverage of Innovative Technology (MCIT) pathway would significantly accelerate Medicare coverage of new breakthrough devices by beginning national coverage on the same date as the FDA market authorization and continuing that coverage for four years. CMS states that the proposed pathway addresses the directives set out in the October 3, 2019 Executive Order (E.O. 13890).

Comments on this rule are due on November 2, 2020.

Breakthrough Devices to Get Immediate National Coverage with FDA Market Authorization

CMS proposes that the national Medicare coverage under the MCIT pathway would begin immediately upon the date of FDA market authorization for breakthrough devices, unless the device does not have a Medicare benefit category or is excluded from coverage by statute. Medical devices must still meet the requirements in statutory definitions for the Medicare program in order to be considered for the MCIT program. For example, medical equipment for home use must meet the durability requirement in order to be covered by Medicare.

FDA’s Breakthrough Devices Program is a voluntary program for certain medical devices and device-led combination products that provide more effective treatment or diagnosis of life-threatening or irreversible debilitating diseases and conditions.[1] A device must also represent a breakthrough technology, have no approved or cleared alternatives, offer significant advantages over existing approved or cleared alternatives, or availability of which is in the best interest of patients, in order to qualify for the breakthrough device designation. Only devices with this FDA designation will be eligible for the new MCIT pathway.

Currently, devices with breakthrough designation experience Medicare coverage uncertainty (9-12 months) between the period of time from FDA market authorization and CMS finalization of a national coverage determination (NCD) or a Medicare Administrative Contractor’s (MACs) finalization of an LCD. None of the current coverage pathways offer an immediate coverage simultaneously with FDA market authorization.

During this time of coverage uncertainty, MACs make coverage determinations on a case-by-case basis and as a result, coverage varies from one MAC jurisdiction to another. The proposed MCIT creates a pathway for immediate national coverage of any breakthrough device with FDA market authorization, so long as it meets the criteria outlined in this rule.

National Coverage Under MCIT To Last Four Years

The MCIT pathway would be initiated by the device manufacturer by notifying CMS of its intention to use the pathway within two weeks of receiving breakthrough designation. Breakthrough devices that use the MCIT pathway will have four years of national coverage, starting from the date of the FDA market authorization. Breakthrough devices that have received FDA market authorization within 2 years of the effective date of the final rule will also be eligible for the MCIT pathway. However, because breakthrough devices that have already received their FDA market authorization will have a market authorization date prior to the effective date of this rule, these devices will only be eligible for the  remaining number of years of MCIT coverage after the FDA authorization date, rather than the full four years. Similarly, if a manufacturer chooses not to utilize the MCIT pathway at the same time as a breakthrough device’s market authorization, a device will not be eligible for all four years of national coverage.

Clinical Studies Not A Condition of MCIT Pathway to Coverage

Manufacturers will not be required to conduct clinical studies during coverage under the proposed MCIT pathway, which will last four years. After four years, CMS will reevaluate the coverage for the device based on the existing coverage pathways. For that reason, manufacturers will still need to develop clinical evidence needed to qualify for one of the existing coverage pathways once the four years under the MCIT pathway is concluded. CMS encourages manufacturers interested in an NCD to submit an NCD request during the third year under MCIT pathway.

Limitations to the MCIT Pathway

CMS proposes that if an NCD on a breakthrough device has already been issued, then the breakthrough device is no longer eligible for the MCIT pathway. Additionally, devices that do not fall within a Medicare benefit category and are not eligible for Medicare coverage are thus not eligible for the MCIT pathway.

At this time, CMS limits the MCIT pathway to medical devices because breakthrough medical devices are explicitly identified in the Executive Order 13890, which gave the agency one year to propose regulatory changes to streamline approval, coverage, and coding process for these innovative products.

CMS requests comments on whether any of the existing coverage pathways should be modified to achieve the goals set out by the Executive Order and whether the MCIT pathway should also include diagnostics, drugs and/or biologics that utilize the FDA breakthrough or other expedited designations.

CMS Codifies Definition of “Reasonable and Necessary” in Regulation, with a Significant Modification

Medicare program only pays for items or services that are “reasonable and necessary” for the Medicare beneficiary population. CMS makes “reasonable and necessary” determinations based on Section 1862(a)(1)(A) of the Social Security Act and has outlined these factors in the Medicare Program Integrity Manual (§13.5.4) but has never previously codified these in regulation. Currently, Medicare contractors establish local coverage determinations (LCDs) for an item or service as reasonable and necessary based on the factors listed here. However, the medical device industry has long asked for the codification of the definition of “reasonable and necessary” in regulation.

Today, CMS proposes to codify in regulations the definition of “reasonable and necessary” as stated in the Program Integrity Manual, with modification that items and services will be deemed appropriate for Medicare patients if they are covered in the commercial health insurance market.

The proposed modifications to the definition of “reasonable and necessary” are as follows in bold:

An item or service would be considered “reasonable and necessary” if it is;

• Safe and effective
• Not experimental or investigational
• Appropriate for Medicare patients (including the duration and frequency that is considered appropriate for the item or service). if it meets the following conditions;
  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
  • Furnished in a setting appropriate to the patient’s medical needs and condition;
  • Ordered and furnished by qualified personnel;
  • One that meets, but does not exceed, the patient’s medical need; and
  • At least as beneficial as an existing and available medically appropriate alternative.

If an item or service does not fulfill the existing definition of appropriate for Medicare patients under the third criteria, CMS proposes that the item or service will still satisfy this requirement if it is covered in the commercial insurance market by at least one commercial insurance plan policy.

CMS will not consider coverage policies of any other government administered health care programs, such as Medicare Advantage and Medicaid managed care, as evidence of commercial insurance coverage for an item or service. In addition, CMS may limit its consideration of a commercial plan policy to a subset of the commercial market (e.g., based on plan type, geography, number of enrollees, etc.) and may also adopt coverage restrictions for an item or service based on restrictions in commercial coverage policies.

CMS states that this proposed definition provides clarity and predictability for innovation, aligning with the goals of the MCIT and breakthrough pathways. Medicare coverage under the MCIT pathway will be reasonable and necessary because a device that meets the criteria of the FDA Breakthrough Devices Program also sufficiently meets the “reasonable and necessary” criteria.

One caveat to this proposal is that an item or service will not satisfy the third criteria if there is evidence that supports clinically relevant differences between Medicare beneficiaries and commercially insured individuals. In case of such evidence, an item or service will only be considered under the current criteria and the MACs will continue to be responsible for establishing LCDs and claim by claim decisions.

Impact of The Proposed MCIT Pathway on Medicare Spending

To demonstrate the potential impact of implementing the proposed MCIT pathway on Medicare spending, CMS shares three hypothetical scenarios:

• No-cost scenario: assumes all the devices covered under the proposed MCIT coverage pathway would be eligible for coverage in absence of the rule through a local or national coverage determination
• Low-cost scenario: assumes the new technologies would have the average cost and utilization of similar technologies included in the FY 2020 New Technology Add-on Payment (NTAP) application cycle
• High-cost scenario: assumes new technologies would receive the maximum add-on payment from the FY 2020 NTAP application cycle and the highest utilization of a device from this cycle.

Each of these scenarios assumes that an increasing number of manufacturers would utilize the pathway each year, from two manufacturers the first year to five in the fourth year. This assumption is based on the number of medical devices that received FY 2020 NTAP status and were not covered in at least one MAC jurisdiction on a national or local coverage determination, along with the impression from the FDA that the number of breakthrough devices is increasing. The table below provides the range of possible cost impacts for implementing the new pathway.

[1] Breakthrough Devices Program, Guidance for Industry and Food and Drug Administration Staff. FDA. https://www.fda.gov/media/108135/download