This installation of Ropes & Gray’s podcast series Non-binding Guidance focuses on the Biden administration's recent proposal to repeal the Medicare Coverage of Innovative Technology ("MCIT") final rule, which was published in January 2021 and initially scheduled to become effective on December 15, 2021. This proposed rule, although published by the Centers for Medicare and Medicaid Services ("CMS"), relates directly to FDA regulation of medical devices because it would provide automatic Medicare coverage to products that FDA approves or authorizes under its Breakthrough Device Program. In this episode, Ropes & Gray life sciences regulatory & compliance head, Greg Levine, and health care partner, Tom Bulleit, will discuss the significance of this development—a reversal of what would've been a significant innovation for Medicare coverage and payment of new device technology—and share some pathways manufacturers of breakthrough devices can use to obtain Medicare coverage after approval while FDA and CMS collect comments on a new program to replace the MCIT program.
Greg Levine: Welcome to Non-binding Guidance, a podcast series from Ropes & Gray focused on current trends in FDA regulatory law, as well as other important developments affecting the life sciences industry. I'm Greg Levine, a partner in the firm, based in Washington, D.C., and head of Ropes & Gray's life sciences regulatory and compliance practice group. I'm joined by my colleague, Tom Bulleit, a partner in the firm's health care practice group, who's also based in Washington, D.C. Tom, thanks for joining me today.
On today's podcast, Tom and I will discuss the Biden administration's recent proposal to repeal the Medicare Coverage of Innovative Technology final rule (known in shorthand as the “MCIT final rule”), which was published in January 2021, just before the Biden administration took office. This rule is scheduled to become effective on December 15, 2021. We previously issued a Ropes & Gray client alert about this topic at the beginning of October. This is not an FDA rule—it's a rule published by the Centers for Medicare and Medicaid Services (or “CMS”)—but it relates directly to FDA regulation of medical devices because it would provide automatic Medicare coverage only if products that FDA approves or authorizes under its Breakthrough Device Program. That program, which we have covered in a previous Non-binding Guidance podcast, is designed to expedite review and marketing authorization of devices that provide for more effective treatment or diagnosis of life threatening or irreversibly debilitating human diseases or conditions. Tom, what would CMS's recent MCIT proposed rule do, and why is this a significant action?
Tom Bulleit: Well, thanks, Greg. It's still just a proposed rule, but if it's finalized in its current form, it would reverse what would've been a significant innovation for Medicare coverage and payment of new device technology, and sent us back to the longtime status quo. Let's start with what the longtime status quo looks like. Historically, FDA and Medicare have two different standards that they apply when giving their blessing to new medical devices.
FDA is charged with making sure the device is “safe and effective” for human use. In the proposed repeal, CMS says that FDA may approve a breakthrough device if there's a reasonable expectation that the device could provide a more effective treatment, based on evidence that could be clinical, animal or bench.
CMS, on the other hand, pays for medical devices that are “reasonable and necessary for the diagnosis of illness or injury, or to improve the functioning of a malformed body member.” In the proposed repeal, CMS makes the point of saying that it makes that decision with the Medicare population in mind, and the population is older and more prone to chronic conditions. And since Medicare patients tend to be under-represented in clinical trials, the FDA determination might not provide sufficient data to reach that reasonable and necessary conclusion for Medicare patients.
An example of a device that FDA clears as safe and effective, that's not payable by Medicare, could be a home-use air circulation device that removes pathogens from the air. Medicare has, in the past, determined that such a device isn't reasonable and necessary, even though it might benefit some people who are, for example, immunocompromised or asthmatic. One wonders if that decision might get revisited in light of the COVID pandemic for a new generation device, but it's an example of how FDA approval doesn't get you to Medicare coverage.
Once the device is FDA-cleared or approved, there are two main pathways to Medicare coverage:
- First is a national coverage determination, made by CMS, and applicable nationwide. That's what applies to the air filtration device I mentioned, for example. This is an all-or-nothing strategy, and because of that, it's less common.
- The second and more common is a local coverage determination, made by the individual Medicare administrative contractors—those are just health insurers that administer the Medicare claims process in different regions of the country. This is more typically what stakeholders do with new products.
In both cases, a request is submitted, there's a process for informal meetings, as well as public meetings—testimony can be taken and clinical evidence produced. In both cases, it's time-consuming, and it can often be years after a new device has been FDA-cleared that there is significant Medicare coverage.
Greg Levine: So what would the MCIT rule have done differently?
Tom Bulleit: For breakthrough technologies, the product maker could get the process to run simultaneously. CMS and FDA would coordinate, and the FDA approval or clearance would mean Medicare coverage was instantly available. This was a longtime industry goal, and I, frankly, had thought that it was the career people at CMS who were responsible for this change, and I was a little surprised when the new CMS reversed it.
Greg Levine: So, it sounds like if this program is repealed, this is taking us back to the status quo ante. What is that going to mean for manufacturers of breakthrough devices?
Tom Bulleit: The obvious answer is that nothing has changed, but the more detailed answer is that all of the difficulties of obtaining coverage after approval remain. So, let me just give you some examples.
First of all, the manufacturer obviously can plan ahead and be developing the case for coverage while approval is pending. Since clinical trials are needed for most PMAs, those data should be readily available, and if additional trials are going on during the PMA, the case can be further refined.
There's also a cottage industry of consultants, as well as law firms like ours, that work with device makers to assemble a suitable package of information to submit to a payer. This would include copies of the clinical studies, a sample letter of medical necessity, sample chart notes.
But in the meantime, providers often won't buy the device until there's evidence that Medicare, or other payers, will cover it. If it's really an innovation, there may be no CPT code—a Common Procedural Terminology code from the American Medical Association—to apply to it, which means seeking a code from the American Medical Association's Resource Utilization Committee (or the “RUC”). More likely, there may also be no HCPCS code (Healthcare Common Procedure Coding System—that's a Medicare system), which is essential for payment by Medicare, and one applies to the CMS Center for Technology Innovation for that. So, these also take time.
Greg Levine: Sounds like a dilemma. You could have a breakthrough device that gets approved, gets authorized by the FDA, but it seems like you might not be able to get payment for that device for a period of time that is potentially significant. In that case, what are the things that manufacturers of such devices can do?
Tom Bulleit: You're right, that there is this dilemma. There are a number of strategies that device makers use, some of which present risks under the Anti-Kickback Statute and the False Claims Act.
The first one is with the issue of codes. If there's no suitable CPT code, or HCPCS code, of course, the first step is to apply for those codes. While waiting, it's possible to bill “unlisted” or “miscellaneous” codes, which, just very generally, describe procedures. In the CPT pantheon, these tend to have a 999 designation. For example, CPT 33999 is “unlisted procedure: cardiac surgery,” which might apply to implanting some breakthrough cardiac assist or diagnostic device. That allows the doctor to perform the procedure with the device, but it always entails submitting this additional information—at a minimum, chart notes; often, clinical literature—to demonstrate that the device was reasonable and necessary. The procedure may still be denied as experimental, while the profession and the payers are getting used to it.
Enter the reimbursement hub, a consulting service that provides patients or providers support in getting payment. In the private pay world, that can include assisting with pre-authorizations; for private and Medicare, assistance with claim forms, collecting literature, chart notes—much the same kind of information that gets presented to CMS in seeking a HCPCS code. Hubs are popular, and most of the makers of new technology feel the need to sponsor them, but they present both anti-kickback and False Claims Act risk:
The question is, is it a free service to the doctor with a provider? There are OIG advisory opinions that say limited services are okay, but once you start saving the doctor an expense, that may be a kickback. And steering through that needle requires care in setting up and operating a reimbursement support hub.
The other issue, which is a False Claims Act issue, is the accuracy of claims. Remember, there may not be an appropriate CPT or HCPCS code, and so advising a code that doesn't fit may create a false claim, or including statements that are not true.
Another strategy is evaluation devices. The AdvaMed Code of Ethics for interactions with health care professionals, which is the industry standard for principally avoiding anti-kickback law problems in the device world's relationship with health care professionals, has this provision for evaluation devices. It says that you can provide an evaluation device for a reasonable period of time, which is unspecified, for the provider to use the device. The Medicare Open Payments Law, which is often called the Sunshine Law, says that the manufacturer doesn't have to report to the open payments database an evaluation device for the first 90 days. So effectively, this creates a sort of 90-day evaluation period window, where devices can be provided, and providers can use them. And when you do that, the messaging to the user has to include that they're not going to bill for any device that's provided for free.
Another strategy is warranties, which you could offer through an insurer or directly, and that would be limited to the cost of the device. You could pay for a replacement device, or you could cover the cost of the device. Then there are rebate programs, which are, likewise, limited to the cost of the device. A common dilemma for both of those, really, is can you offer a warranty or a rebate if payment is denied by the insurer? And there's not a straightforward answer to that. There are OIG opinions to the effect that a “reimbursement guarantee” can be a kickback—even if it's never paid out, it's an offer of remuneration to induce a purchase. A competing position may be that a safe-harbored rebate is safe-harbored, and if payment is denied for non-coverage, the inducement wasn't for a covered device at all. So, those are all a series of strategies, none of which is perfect, several of which present fraud and abuse concerns, but that are widely used in the industry, to bridge this gap between FDA approval and Medicare coverage.
Greg Levine: Interesting, thanks. It sounds like there are a variety of options, but they have to be considered quite carefully for their legal risks. What about where we're going now, in the future? Does the rationale that CMS put forth for repealing the MCIT program give us clues as to what might happen next?
Tom Bulleit: Yes, that's a really good question, and I think it does. CMS's main point in proposing this repeal was that FDA's standard for safe and effective requires clinical literature to show a reasonable expectation that the device will provide a more effective treatment, but since Medicare patients are under-represented in clinical trials, that evidence may not be convincing for the older, and often sicker, Medicare population. The Agency has indicated that if it does repeal, it will go forward with additional rule making, based on the comments it's receiving. For example, the American Association of Medical College submitted comments, including the statement that the rule did not require manufacturers to conduct post-coverage studies, to demonstrate clinical benefit to Medicare patients. That suggests a pathway that would allow simultaneous approval, but put in place a post-approval testing requirement. I guess I have a question for you, Greg: Doesn't FDA already do that for some devices?
Greg Levine: Yes, for some devices, some PMA-approved devices, in particular, FDA can mandate post-approval studies, as a condition of the approval. But generally, it's going to do that when there are some specific unanswered safety questions about a device, or they feel like there's enough evidence to allow it on the market, but they want to get better information about its safety and effectiveness profile, particularly in real world use. So, it does happen, but not all approvals have those kinds of studies. It may be that just the desire to collect data for the Medicare population, for example, that might not be something that winds up in a condition of approval order for the FDA, again, unless there's some specific concern about the risk of a device in the Medicare population. So, it may be something where there's an FDA required study, as a condition of approval, in some cases. Often, that won't be the case, but that doesn't mean that manufacturers can't do additional studies—they can always do additional studies that aren't mandated by the FDA.
Tom Bulleit: It strikes me that since FDA already has this mechanism in place, it's at least possible that when CMS and FDA get to talking about what's the next program going to look like, CMS could say, “We might be willing to sign-off on this if, when we got to the end of the process, we had good clinical evidence, but needed some additional clinical evidence with Medicare population.” So, that just strikes me that might be a pathway.
Greg Levine: That raises a question that's been out there for a number of years now, about whether there can be better coordination or cooperation between FDA and CMS, to ensure that this sort of coverage gap is narrowed, or nonexistent. That's kind of the idea of this breakthrough program, right? That would certainly be one creative thought to bring into this process. There's a comment period now, and I think some of the comments are saying, “Don't repeal the rule. We like the rule as it is.” But I think a lot of the action may be thinking about what a future program might look like on the assumption that this repeal is going to go through. So, food for thought.
Tom Bulleit: I think that's exactly right, and I think that's what's going to happen. I don't think there's any doubt that the repeal is going to go into effect. The question is just, what's next? The first rule was developed in consultation—people at CMS were talking to people at FDA about how this would work, although, it was ultimately a CMS rule. I would expect that in 2022, we'll see another proposed rule. It might not be at the beginning of the year, because they might need some time to talk to each other about what should happen next, to assimilate the comments, and so forth, but maybe towards the end of the year, we would see something that would be a next step on this breakthrough device pathway.
Greg Levine: Interesting. Well, I think that'll be our final word for today, but definitely something we will be keeping a close eye on.
Tom, thanks again for joining me today, and thank you to our listeners. For more information on this topic, and others that we discussed, please visit our website at www.ropesgray.com. And of course, if we can help you navigate any of the topics we discussed, please don't hesitate to get in touch with us. You can also subscribe to this series wherever you regularly listen to podcasts, including on Apple, Google and Spotify. Thanks for listening.
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