Avalere recently released a report entitled “Limited Data Does Not Preclude Payer Coverage – Humanitarian Device Exemptions: A Case Study” that explores the relationship between the Food and Drug Administration’s (FDA’s) approval of a medical device and public and private payers’ determinations on whether to cover the device. Avalere found that the evidence FDA relies on in deciding whether to approve a device differs from the data and other factors that payers consider when making coverage and reimbursement determinations. As a result, the FDA’s approval of a device does not necessarily result in the device being covered or reimbursed by payers. The Avalere report is available here1.
AGG Insights for Device Manufacturers
We encourage medical device manufacturers to consider early in the development of a product not only the evidence that will be required by the FDA for approval, but also the clinical data and factors that will be evaluated by private and public payers when making their coverage and reimbursement decisions. Manufacturers often focus primarily on satisfying the requirements for FDA approval and may not recognize that different clinical data and other criteria may be needed to support payers’ coverage of the device.
FDA Regulation of Devices
The Avalere report focuses on the FDA’s regulation of the highest risk devices. Specifically, Class III devices are generally subject to a premarket approval (PMA) process, under which the FDA evaluates clinical data used to prove the safety and efficiency of the device. However, a device manufacturer may use the humanitarian device exemption (HDE) pathway if (a) a device is intended to treat or diagnose a rare disease or condition, (b) the applicant can demonstrate that there is no other way that the device could be brought to market, and (c) that there is no comparable device to meet the particular clinical need.
Devices submitted to the FDA for approval through the PMA pathway have a higher evidentiary burden than devices submitted through the HDE process. The evidence supporting PMA applications generally comes from large, randomized controlled clinical trials. These studies are conducted on a general population that has the specific disease or condition that the device treats. In contrast, the studies supporting devices under the HDE process may have smaller sample sizes and are sometimes not randomized due to the limited number of patients with the particular condition. The FDA reviews these studies to ensure that the device is safe and that its probable benefit outweighs its risks. Clinical data is helpful but is not strictly required for HDEs, and the use of the HDEs in a clinical setting must first be reviewed and approved by an institutional review board. The FDA may require sponsors to perform a post-approval study for devices approved under the PMA pathway or the HDE process.
Reimbursement of Medical Devices
Avalere explains that coverage determinations are different between public and private payers, as well as among the various private payers. Payers differ in the weight they give to the FDA’s approval of a device. Even if a device meets the higher evidentiary burden required under the PMA process, this does not necessarily result in more robust coverage of the product. Alternatively, some payers cover certain products that reach the market through the HDE pathway despite limited clinical data.
Medicare Coverage of Devices
The Centers for Medicare & Medicaid Services (CMS) administers Medicare, the federal health insurance program for individuals ages 65 and older, individuals under age 65 with certain disabilities and individuals with End-Stage Renal Disease. In general, Medicare will only cover a device if it is approved by the FDA, falls into one of the statutory benefit categories and is reasonable and necessary for the diagnosis or treatment of illness or injury
or to improve the functioning of a malformed body member. According to Avalere, “[f]or Medicare in particular, FDA-approved devices with therapeutic indications are presumed to meet this definition unless directly addressed through a Local Coverage Determination (LCD) or National Coverage Determination (NCD).” Avalere noted that unlike private payers, public payers do not maintain formal coverage policies for most devices.
Private Payer Coverage of Devices
In contrast to public payers, Avalere found that private payers are more likely to establish and rely on formal coverage policies for devices. Coverage policies may be issued in response to a provider’s request, the FDA’s approval of a device, the device being the subject of a major publication, or concerns related to fraud and abuse. Absent a specific, formal coverage policy, FDA-approved devices are typically considered non-covered. Private payers may evaluate on a case-by-case basis requests for coverage or payment for medical devices.
Avalere highlights that private payers consider FDA approval of a device as one of several factors when determining whether to cover a device. Other factors that private payers use to make their coverage determinations include: opinions by professional societies/organizations; additional clinical trials; medical similarity to PMA- approved devices; clinical outcomes when compared with existing devices; and the unmet need and severity of the condition treated by a particular device.
Avalere observed that payers rely on factors differently when evaluating devices approved under the PMA pathway and the HDE pathway. For example, some payers may only cover a new device approved under the PMA pathway if it is better, safer or more cost-effective than existing treatment options. In other words, the existing treatment options may affect payers’ coverage determinations related to a new device. In contrast, a payer may be more likely to cover a new device approved under the HDE pathway if there is an existing device that is medically similar to the new device, since the payer is more likely to have an understanding of the device use or the special need for the device within its patient population, familiarity with the device’s safety profile and an understanding of the types of relevant outcomes data.
The FDA approval process of devices is different from payers’ coverage and reimbursement decisions related to devices. Device manufacturers must obtain FDA approval to get their devices to market, and they need payers to cover and pay for the devices in order to ensure that patients have access to the products. Medical device manufacturers should be aware of the different evidentiary requirements that the FDA and payers require to best position their products to be both approved by the FDA and covered by payers.