October 2020 |
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CMS Proposed Rule: Providing National Medicare Coverage for Approved Breakthrough Devices & Defining “Reasonable and Necessary”

Medical device companies face many economic and regulatory challenges with successfully bringing a new device to market. Two of those challenges include obtaining regulatory authorization to market a device and obtaining coverage from payors post-authorization.

FDA implemented its Breakthrough Devices Program in 2018 to help manufacturers obtain quicker authorization. The program is designed to reduce the time it takes to bring a qualifying device to market by helping manufacturers obtain regulatory approval for novel devices that treat debilitating diseases. Although several breakthrough devices have been approved since implementing the program, manufacturers have struggled to obtain national Medicare coverage for them. In fact, most of the devices have not achieved national Medicare coverage. This lack of national coverage keeps important devices out of the hands of those who need them most – Medicare beneficiaries.

On September 1, 2020, CMS published a proposed rule that would resolve this issue. The proposed rule would establish a Medicare coverage pathway for breakthrough devices that would provide immediate national coverage for them beginning on the date of FDA market authorization. CMS has dubbed this coverage pathway, “Medicare Coverage of Innovative Technology” (MCIT).[1] The proposed rule would also define “reasonable and necessary” in a way that would help industry participants obtain coverage for other items and services – not just breakthrough devices.

A.  Brief Background on FDA’s Breakthrough Devices Program and the Devices That Qualify

The Breakthrough Devices Program is generally reserved for new and innovative technology and devices that treat life-threatening or irreversibly debilitating diseases. The program is designed to provide patients and providers with timely access to devices designated by FDA as breakthrough devices by “speeding up their development, assessment, and review, while preserving the statutory standards for premarket approval, 510(k) clearance, and De Novo marketing authorization.”[2] To qualify under the program, a device must meet two criteria:

(1)  The device must provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions; and

(2)  A qualifying device must also meet one of the following:

a.  represent breakthrough technology,

b.  have no approved or cleared alternatives,

c.  offer significant advantages over existing approved devices; or

d.  the availability of the device is in the best interest of the patients.

The program has many features to streamline the regulatory review and authorization process, and the details of each feature are beyond the scope of this blog. However, the program provides expedited communication channels with FDA and, among other things, priority review of all submissions regarding the designated breakthrough devices. Participation in the program is voluntary and companies may request to receive a breakthrough device designation at any time prior to submitting the market submission. 

B.  CMS’s Proposed Rule Would Provide Immediate National Coverage for Approved Breakthrough Devices

CMS’s proposed rule would provide device manufacturers who opt into MCIT with predictable national coverage for breakthrough devices newly approved by FDA. Pursuant to the proposed rule, the MCIT pathway would provide national Medicare coverage for approved devices designated as breakthrough devices for up to four years starting on the same date the devices receive FDA market authorization. The coverage contemplated by the proposed rule would likely include the device, reasonable and necessary surgery to implant the device (if implantable), related care and service costs of the device, and coverage of any reasonable and necessary treatments due to complications arising from the device. At the end of the four-year period, de facto coverage pursuant to MCIT will no longer apply. Instead, during the four-year MCIT coverage period, manufacturers should have time to pursue traditional coverage options, including seeking a national coverage determination. CMS recommends manufacturers interested in obtaining a national coverage determination to submit the request during the third year of MCIT coverage.

C.  Defining “Reasonable and Necessary” and Inclusion of Commercial Coverage

Generally, for an item or service to be covered by Medicare, it must be “reasonable and necessary.” In addition to establishing national coverage for breakthrough devices, CMS’s proposed rule also seeks to define “reasonable and necessary.” While the MCIT only assists a subset of device manufacturers with obtaining coverage for a particular category of specialty devices, the proposed definition of “reasonable and necessary” would help other industry participants obtain Medicare coverage for a broader range of items and services based on commercial coverage.

The proposed rule defines “reasonable and necessary” items and services as those that are: (1) safe and effective; (2) not experimental or investigational; and (3) appropriate for Medicare beneficiaries. To be appropriate for Medicare beneficiaries, the item or service must either:

(1) Satisfy all of the following Criteria:

Be 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;

Be 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; OR

(2) Be covered in the commercial insurance market, except where evidence supports that there are clinically relevant differences between Medicare beneficiaries and commercial insureds.

This definition is substantially similar to the definition contained in the Medicare Program Integrity Manual, with one notable addition. CMS has proposed adding Section (b) regarding commercial coverage. Without the addition of (b), establishing an item or service as appropriate for Medicare beneficiaries – which is the third criterion of “reasonable and necessary” – can be challenging because it requires an analysis and application of many soft factors. This can be time consuming, costly, and unpredictable. Under the proposed rule, however, industry participants would be able to avoid these soft factors altogether and rely on commercial coverage to help establish an item or service as appropriate for beneficiaries. This will make it easier to obtain coverage for a broader category of items and services. Only time will tell how many doors the proposed definition would open but including commercial coverage as a basis for establishing one criterion of “reasonable and necessary” would likely open a few.

If you have questions regarding FDA’s Breakthrough Devices Program, or CMS’s proposed rule establishing the MCIT coverage pathway and defining “reasonable and necessary,” do not hesitate to contact the experienced healthcare attorneys at Elliott Sauter.

[1] The proposed rule can be found here: https://www.federalregister.gov/documents/2020/09/01/2020-19289/medicare-program-medicare-coverage-of-innovative-technology-mcit-and-definition-of-reasonable-and

[2] https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program

Author: Jordan Rose


Elliott Sauter, PLLC

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