CMS Stops Auto Payment Coverage for FDA Breakthrough Devices

It was good while it lasted.

Since 2018, nearly 300 medical devices have received FDA breakthrough designation. The designation was a big deal. In addition to getting a smoother path to FDA approvals or clearances, the designation brought automatic expedited Centers for Medicare and Medicaid (CMS) coverage for up to four years.

That automatic CMS coverage is now over. The magical moment of harmonic convergence between CMS and the FDA has vanished like Cinderella’s coach at midnight.

Not “Reasonable and Necessary”

On November 12, 2021, CMS made good on its previously announced intention to rescind the automatic coverage rule. As we reported in early October, the agency was concerned that automatic coverage didn't meet its own definition of "Reasonable and Necessary."

Breakthrough devices, "may have unknown or unexpected risks and must first ensure such technologies improve health outcomes for Medicare beneficiaries...the kinds of clinical studies needed for FDA market authorization might not consider the differences in clinical profiles, complexities of medical conditions, or associated treatments of the diverse population of Medicare patients," stated the CMS announcement.

Alternate Paths to Coverage

Likely anticipating significant disappointment with this about face, CMS said there remains "existing and proven pathways" that allow for coverage of a specific medical device or service. "Devices may still be covered through claim-by-claim determinations, under one or more local coverage determinations, or a national coverage determination."

The agency said it plans to work with the FDA, Agency for Healthcare Research and Quality (AHRQ), medical device manufacturers, and other stakeholders "to develop an expeditious process to cover innovative devices that benefit Medicare patients," and intends to hold at least two stakeholder public meetings in the next year "to inform future policy-making in this space."

Breakthrough Device Benefits

It's worth noting that gaining the FDA's breakthrough designation still brings significant benefits, including speeding up product development and FDA assessment and review, for premarket approval, 510(k) clearance, and De Novo marketing authorization.

The designation offers manufacturers an opportunity to interact with the FDA's experts through several different program options to "efficiently address topics as they arise during the premarket review phase, which can help manufacturers receive feedback from the FDA and identify areas of agreement in a timely way," according to the FDA. Manufacturers can also expect prioritized review of their submission.

In a note to investors on November 12, Needham & Company, LLC's Senior Research Analyst Mike Matson wrote the rescission of automatic Medicare coverage is a "modest negative" for the medical device industry.

You can learn more about gaining breakthrough designation from the FDA.