WSGR ALERT

CMS Proposes New Add-On Payment Pathway for Breakthrough Medical Devices

April 30, 2019

On April 23, 2019, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule, which describes CMS' efforts to transform "the healthcare delivery system through competition and innovation to provide patients with better value and results," including updates to Medicare payment policies under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS).1

According to CMS Administrator Seema Verma: "Transformative technologies are coming to the private market, but Medicare's antiquated payment systems have not contemplated these technologies. I am particularly concerned about cases that have been reported to the agency in which Medicare's inadequate payment has led hospitals to curtail access to needed therapies. We must continually update our policies in response to the rapid pace of advancement in medical science."2

To facilitate patient access to new medical devices, CMS is proposing an alternative new technology add-on payment pathway for devices that received clearance or approval by the Food and Drug Administration (FDA) through the Breakthrough Devices Program.

The Breakthrough Devices Program is intended to expedite the development and FDA review of devices that have been designated as breakthrough, which generally refers to new medical devices that provide more effective treatment or diagnosis of a life-threatening or irreversibly debilitating human disease or condition, and that represent a breakthrough technology for which there are no current alternatives, or that offers significant advantages over existing alternatives, or where its availability is in the best interest of patients.3 Device manufacturers can request participation in the Breakthrough Devices Program by submitting a designation request with the FDA.

While such FDA programs help to expedite market entry of new medical devices, adequate payment for such devices continues to be a rate limiting step to patient access. Under the current Medicare payment policy, "CMS requires evidence that devices represent a substantial clinical improvement for the devices to qualify for a new technology add-on payment."4 CMS acknowledges that this can be challenging for breakthrough devices coming onto the market, as real-world data regarding outcomes in different patient populations is often limited at the time of FDA clearance or approval, making it difficult for innovators to meet the requirements for add-on payment.5

CMS' current proposal for add-on payment for new devices that have obtained breakthrough designation includes:6

  • Breakthrough devices will be considered new and not substantially similar to an existing technology for the purposes of the IPPS new technology add-on payment, beginning with applications received for fiscal year 2021; and
  • Potentially waiving the substantial clinical improvement criterion for two years, which would allow breakthrough device companies to gather real-world evidence to justify Medicare reimbursement levels, as such required evidence, which is currently used to evaluate applications for the new technology add-on payment, is often limited at the time of FDA clearance or approval.7

Additionally, to facilitate patient access to all innovations, CMS proposes increasing the add-on payment from 50 percent to the lesser of: a) 65 percent of the costs of the new medical service or technology; or b) 65 percent of the amount by which the costs of the case exceed the standard diagnosis-related group (DRG) payment, beginning in fiscal year 2020. If finalized, such payment calculation will apply to all current technologies receiving add-on payments as well as all new technologies granted an add-on payment.8

The Advanced Medical Technology Association (AdvaMed) has lobbied for such provisions, arguing that such measures will address the so-called "valley of death" between product approval and reimbursement. In a statement released by AdvaMed, CEO Scott Whitaker applauded CMS' proposal, stating: "We are pleased that this rule reflects several of AdvaMed's priorities, including increasing funding for new technology add-on payments (NTAP), and making it easier for breakthrough technologies to access the Medicare program. This will help ensure that hospitals and patients have access to breakthrough innovations and care, and further incentivize transformational technologies."9

The deadline for submitting comments on the proposed rule is June 24, 2019.

For questions regarding the proposed rule or other CMS policies, healthcare laws or regulatory compliance, FDA's Breakthrough Devices Program, FDA clearance/approval pathways, or FDA compliance, please contact David Hoffmeister, James Ravitz, Georgia Ravitz, or any member of WSGR's life sciences—FDA regulatory, healthcare, and consumer products compliance practice.

Charles Andres and Eva Yin contributed to the preparation of this WSGR alert.


3 WSGR Alert, FDA Issues Draft Guidance on Breakthrough Devices Program, available at https://www.wsgr.com/WSGR/Display.aspx?SectionName=publications/PDFSearch/wsgralert-breakthrough-devices-program.htm.
5 Id.
7 CMS is considering potential revisions to the substantial clinical improvement criterion under the IPPS new technology add-on payment policy and the Outpatient Prospective Payment System (OPPS) transitional pass-through payment policy for devices policy, and seeks public comments on the type of guidance that stakeholders would find useful for future rulemaking.
8 In particular, CMS proposes continuing the new technology add-on payments for 10 of the 13 technologies currently receiving add-on payment for FY 2020, including two types of chimeric antigen receptor (CAR) T-cell therapy. The remaining three technologies, whose add-on payment will be discontinued, will no longer meet the newness criterion. Under the proposed increase to add-on payment from 50 percent to 65 percent, if finalized, the maximum add-on payments for CAR T-cell therapy for FY 2020 would increase from $186,500 to $242,450. CMS invites public comments on other payment alternatives for CAR T-cell therapy.