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In Defense of Medicare Coverage of Innovative Technologies

By Abe Sutton

On January 12th, the Centers for Medicare & Medicaid Services (CMS) finalized a prior proposal to establish Medicare coverage for breakthrough medical devices approved by the U.S. Food and Drug Administration (FDA).

While some have expressed concerns about the proposal, I believe it is a balanced attempt to encourage innovation and CMS was right to finalize it.

In this post, I give an overview of the general regulatory standards, walk through what the Medicare Coverage of Innovative Technologies (MCIT) proposal does, and lay out a case for why it deserved to be finalized.

General regulatory standards for medical devices

FDA and CMS have different standards by law for approving a medical device. FDA premarket approval for moderate- and high-risk devices focuses on if a device is safe and effective. CMS Medicare reimbursement focuses on if a device is reasonable and necessary. Historically, the major barrier to medical device innovation was FDA approval.

Following reforms by the FDA, and the passage of the 21st Century Cures Act, industry complaints shifted to focus on CMS. The FDA now has a breakthrough medical device pathway for devices that provide “for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions” and either represent breakthrough technology, lack approved alternatives, offer significant advantages over approved alternatives, or are in the best interest of patients.

In this context, industry players complained about a valley of death in medical devices innovation where, after a breakthrough device has been approved, manufacturers are still unable to be reimbursed for it and patients cannot access it, as it has not been shown to be reasonable and necessary. This delayed the payoff of medical device innovation, which reduced investment in medical device research and development.

What Medicare Coverage of Innovative Technologies changes

Under MCIT, CMS will now allow manufacturers to elect at any point within two years of receiving breakthrough designation to start receiving Medicare coverage for a four-year period.

This will ensure earlier reimbursement and patient access, while preserving device manufacturers’ incentive to collect additional data to prove the device is reasonable and necessary, and ensure permanent access to Medicare.

Notably, the two-year period in which device manufacturers can elect to start their four-year coverage is a change from the proposed rule. The proposal started coverage from the date breakthrough designation is given.

By creating this coverage period, CMS is streamlining local coverage determinations for innovative devices, eliminating some of the current variation Medicare beneficiaries covered by different Medicare Administrative Contractors experience.

CMS also defined “reasonable and necessary” as: “(1) safe and effective, (2) not experimental or investigational, and (3) appropriate for the Medicare patients.”

Why finalizing Medicare Coverage of Innovative Technologies was correct

Policy makers have traditionally sought to balance safety and innovation when regulating medical devices. MCIT largely avoids this tradeoff, as it is a Medicare policy decision, rather than an FDA policy decision. Even those who believe the 510(k) pathway needs to be revisited should not be concerned about this rule. Unlike the safety concerns raised by sidestepping FDA’s premarket approval pathway, sidestepping CMS’ normal procedures does not directly endanger safety; it primarily impacts federal resources. It also does not undermine objective analysis due to the time-limited nature of MCIT approval.

Safety

Adrianna McIntyre and Rachel Sachs have a valid point when they observe that MCIT compounds safety issues caused by weak post-market surveillance for devices. However, to address this complaint, an ideal policy would not require undoing MCIT, but rather would require strengthening post-market surveillance.

Federal expenditures

MCIT essentially functions as a subsidy for truly innovative medical devices, defined as those recognized as breakthrough devices by the FDA. These devices will gain reimbursement earlier than other devices, and may claim reimbursement for a limited period of time that they would never have ultimately qualified for.

By moving up the date that devices are reimbursed, and ensuring reimbursement for a limited time period, CMS is incentivizing additional medical device innovation. In the wake of COVID-19, the case for encouraging additional medical innovation is stronger than ever. Medical device innovation should be encouraged alongside pharmaceutical innovation.

Science and objective analysis

While Peter Bach expressed concern following the proposed rule that it would undermine “science and objective analysis,” the time limited nature of MCIT approval should mitigate this concern. Device manufacturers should still have an incentive to gather additional data in order to gain permanent approval after the four-year MCIT approval expires. The major change this rule makes is that it makes it easier for device manufacturers to gather the needed data, while moving up the date they can earn revenue and patients can access their devices.

Conclusion

Due to the time-limited nature of MCIT approval, the rule does not do the harm its critics allege. As the case for encouraging medical innovation is stronger than ever, CMS was wise to move forward with the MCIT proposal. The Biden administration would be well served not to undo this rule, either via the Congressional Review Act or by suspending the rule prior to its legal effective date.

While serving at the White House the author contributed to early policy development that led to MCIT.

Abe Sutton

Abe Sutton

Abe Sutton is a J.D. Candidate at Harvard Law School in the Class of 2022. From 2017 until 2019, Sutton focused on health policy with the federal government, serving at the National Economic Council, Domestic Policy Council and Department of Health and Human Services. In these roles, he coordinated health policy across the federal government, with a focus on the shift to paying-for-value within Medicare, increasing choice and competition in health care markets, and updating the federal government’s approach to kidney care. Prior to that, Sutton was a consultant with McKinsey & Company where he worked with clients in the health sector. He holds undergraduate degrees in political science, management, and health care management and policy from the Wharton School and the College at the University of Pennsylvania. He has been named to Forbes 30 Under 30 for Law and Policy.

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