On November 27, 2013, the Centers for Medicare & Medicaid Services (CMS) promulgated the final rule to implement the calendar year (CY) 2014 physician fee schedule (PFS), which is published in the December 10, 2013 Federal Register (78 Fed. Reg. 74230). Included in the final rule was a revision to the Medicare regulations governing coverage for items and services provided in an IDE clinical study. Under the new process, beginning on January 1, 2015 CMS will centralize the determination of whether Medicare will cover IDE devices and items and services in an IDE study. Moreover, CMS has adopted new criteria that IDE studies will have to meet to obtain Medicare coverage. These changes will substantially impact all manufacturers of devices who elect to seek Medicare coverage for their IDE studies.
Centralization of the IDE study Medicare coverage decision-making process:
Devices not approved or cleared for marketing by the Food and Drug Administration (FDA) are typically not covered under Medicare. However, certain devices that receive an IDE may be covered by Medicare when the investigational device is being used in a clinical study intended to gather data regarding the safety or effectiveness of the device itself.
In response to a clinical trial sponsor’s request for an IDE, the FDA may categorize qualifying applicant devices into one of two categories. Category A devices are those that the FDA considers to be experimental in nature and whose “absolute risk” in terms of safety or efficiency is substantially unknown. Such devices will not be covered under Medicare, but the Category A designation opens the possibility of Medicare coverage of costs for routine items and services associated with the clinical trial of the device. In contrast, Category B encompasses IDE devices for which the primary risk is considered to be “incremental” (i.e., the safety and effectiveness of the general class or type of device has already been largely resolved to the FDA’s satisfaction). IDE devices that the FDA classifies under Category B are potentially eligible for coverage under Medicare, when used in connection with a clinical trial, at a capped reimbursement rate typically tied to the reimbursement provided for existing, comparable devices.
Under the current regime — effective until 2015 — local Medicare contractors have discretion in determining whether to cover IDE studies in their jurisdictions, based on their review of information submitted by the clinical trial sponsor. Although this system provides device manufacturers with multiple opportunities to seek coverage for IDE studies from different Medicare contractors, the final rule notes stakeholders’ concern that this process has also created a concomitant lack of uniformity in Medicare coverage for IDE devices across jurisdictional lines.
Under the final rule, the IDE Medicare coverage decision will be made centrally by CMS itself, meaning that CMS’ determination to cover (or not to cover) a device under Medicare will be universally effective across jurisdictions. In addition to providing nationwide coverage and non-coverage, the centralization of the Medicare coverage decision may alleviate some degree of burden for IDE device manufacturers who previously needed to seek review from numerous different Medicare contractors. Further, CMS has indicated that once an IDE submission it receives is complete, the agency expects to issue a determination within 30 days. That may be quicker than Medicare contractor reviews currently. In addition, the centralized review process appears to allow manufacturers to make the coverage submission, whereas providers currently make the submission to the Medicare contractor.
On the other hand, centralization is not itself without disadvantages. Most notably, the new system of centralization, when coupled with CMS’ new and comparatively rigorous criteria for obtaining coverage, has the potential to increase the challenges associated with obtaining Medicare coverage for IDE devices.
Ambiguities around the transition to the new rules:
The final rule also leaves open some important questions about the transition to the new IDE coverage procedures. For example, there is some ambiguity as to the January 1, 2015 effective date: should a provider that would start using an IDE device in a study on January 2, 2015 seek approval from the local Medicare contractor or from CMS?
In another ambiguous scenario, providers in two jurisdictions might obtain coverage for an IDE device from their Medicare contractors in 2014; then in 2015, a provider in a jurisdiction whose contractor has not issued a coverage determination might seek to participate in the study. Since that provider’s submission would be made in 2015, it should be reviewed centrally by CMS. If CMS were to deny coverage, what would the impact be on the providers that previously obtained approval from their contractors?
Given the delayed start of the centralized review process, there should be time to obtain clarification on these and other implementation issues before the new procedures take effect. It is possible that CMS will issue further guidance to clarify the new system of review.
New IDE study coverage criteria:
CMS’ new rule also finalizes, with some modifications, the proposed criteria that an IDE study must meet before qualifying to obtain Medicare coverage for IDE devices and routine items and services provided in the study. In particular, CMS’ final rule creates 10 criteria that an IDE study must meet to potentially qualify for Medicare coverage:
The principal purpose of the study must be to test whether the device improves health outcomes of appropriately selected patients.
The rationale for the study must be well supported by available scientific and medical information, or intended to clarify or establish the health outcomes of interventions already in common clinical use.
The study results must not be anticipated to unjustifiably duplicate existing knowledge.
The study must be sponsored by an organization or individual capable of successfully completing the study.
The study design must be methodologically appropriate, and the anticipated number of enrolled subjects must be adequate to confidently answer the research question(s) that are being asked by the study.
The study must be in compliance with all applicable federal regulations concerning the protection of human subjects found in 21 C.F.R. parts 50, 56, 812 and 45 C.F.R. part 46.
Where appropriate, the study must not be designed to exclusively test toxicity or disease pathophysiology in healthy individuals. Studies of all medical technologies measuring therapeutic outcomes as one of their objectives may be exempt from this criterion — but only if the disease or condition being studied is life threatening and the patient has no other viable treatment options.
The study must be registered with the National Institute of Health’s National Library or Medicine’s ClinicalTrials.gov.
The study protocol must describe the method and timing of release of results on all pre-specified outcomes, including release of negative outcomes and the release should be hastened if the study is terminated early.
The study protocol must describe how Medicare beneficiaries may be affected by the device under the investigation, and how the study results are or are not expected to be generalizable to the Medicare beneficiary population. Generalizability to populations eligible for Medicare due to age, disability, or other eligibility status must be explicitly described.
While most of these criteria are largely unchanged from the proposed rule, the final rule notably omits two factors that CMS had originally proposed would entitle an IDE study that otherwise satisfied the criteria to automatic approval: that the IDE study be “pivotal” or demonstrate “superiority in study design.”1 See 78 Fed. Reg. 43282, 43345 (Jul. 19, 2013). CMS explained that its removal of the two criteria was in response to comments expressing the (mistaken) concern that satisfying one of the two criteria would be mandatory for an IDE device to receive Medicare coverage. Because CMS “did not intend . . . [to suggest that the two criteria were] absolute requirements or that IDE studies that are not pivotal or studies with noninferiority designs could not be approved,” CMS elected to omit the two criteria entirely in its final rule. 78 Fed. Reg. at 74435-36. The final rule also modifies the language of the first proposed criterion by expanding the requirement that the principal purpose of the study be to test whether the device improves health outcomes of “appropriately selected patients,” rather than the narrower original formulation, which would have required studies to have the principal purpose of improving health outcomes “in patients who are represented by the Medicare-enrolled subjects.” Id. at 74433. Despite the superficial broadening of this criterion’s scope, however, CMS indicates that it still expects “the results of all approved studies will specifically benefit the Medicare population and, as such, covered studies or trials must address how the study will affect Medicare beneficiaries if it desires to receive Medicare payment for services.” Id. Finally, the criterion requiring that studies be registered on ClinicalTrials.gov was revised to omit the proposed requirement that registration occur before enrollment of the first study subject.
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CMS’ new system of centralized IDE coverage approval and its new IDE study criteria represent a significant change from the localized Medicare contractor coverage determination that has predominated since the IDE coverage rule’s inception in 1995. CMS’ decision to delay implementation of the new rule until January 1, 2015 gives device manufacturers time to assess the ramifications of the new system, and to express concerns to CMS regarding the new process. If you have any questions regarding implementation of the new IDE Medicare coverage rules, please contact any of the lawyers listed with this alert, or the Hogan Lovells lawyer with whom you normally work.