CMS Provides New — But Limited — Pathway for Coverage of Medical Devices

In August 2024, the Centers for Medicare & Medicaid Services (CMS) established the Transitional Coverage for Emerging Technologies (TCET) pathway, intended to “accelerate patient access to beneficial medical products while generating evidence” needed to assess long-term coverage.¹ This pathway is limited to certain devices that have been designed as Breakthrough devices by the Food and Drug Administration (FDA), and CMS expects that it will be able to accommodate only five devices a year. This Advisory summarizes the main points of the final notice implementing TCET, which is substantially similar to a proposed notice that CMS issued for public comment in June 2023.²

The TCET pathway will fall within CMS’ existing National Coverage Determination (NCD) process and pathway for Coverage with Evidence Development (CED), with significant process refinements but without altering existing standards for these coverage mechanisms. One implication of this approach is that TCET coverage will be limited to Medicare participants in the studies specified for evidence development.³

CMS’ design embodies several principles: limiting the pathway to certain candidates; conducting early evidence reviews that can identify gaps in the evidence needed for Medicare coverage; engaging with manufacturers to limit the burden on manufacturers, clinicians, and patients, while maintaining rigorous evidence requirements; ensuring any CED requirement will be time-limited; and permitting manufacturers of candidate devices to opt out of TCET at several points. The notice also describes how CMS anticipates collaborating with the FDA and the Agency for Healthcare Research and Quality (AHRQ).

What Devices Can Be Included?

The TCET pathway will be limited to certain qualifying Breakthrough devices, as nominated by their manufacturers, and eligibility will be conditional on timing.

CMS notes that TCET is designed to address those devices where more evidence is needed specifically to support coverage for the Medicare patient population; other routes for Medicare coverage remain available for other devices.

Appropriate candidates for TCET pathway are devices that are:

• FDA-designated Breakthrough devices that receive FDA’s market authorization for one or more indications for use covered by the Breakthrough designation
• Determined by CMS to be within a Medicare benefit category
• Not already the subject of an existing Medicare NCD
• Not otherwise excluded from coverage through law or regulation

In response to comments requesting clarification of whether diagnostic tests could be included, CMS states that the majority of coverage determinations for diagnostic laboratory tests granted Breakthrough designation should be made by Medicare Administrative Contractors (MACs). However, the agency acknowledges that in some instances a manufacturer of a diagnostic test and CMS may agree that an NCD is appropriate. CMS encourages manufacturers of diagnostic tests believing additional evidence generation may be needed to secure Medicare coverage to contact CMS to discuss options specifically.

Eligibility Tied to Approval Timing. CMS ties the initiation of TCET to FDA market authorization. For a device to be eligible for consideration, its manufacturer would have to submit a nomination to CMS 12 months in advance of anticipated FDA market authorization, as discussed below. CMS may not accept nominations that are submitted within six months of the expected FDA market authorization. CMS will consider nominations on a quarterly basis, and if a nomination is not accepted in one quarter it will be automatically held over for consideration in the next quarter.

CMS was asked to incorporate a look-back period that would permit eligibility of devices that had received FDA market authorization recently or were expected to do so soon; CMS declines to extend eligibility in that fashion, citing operational difficulties in the context of TCET.

Eligible Devices Must Fall into an Existing Medicare Benefit Category. The agency anticipates initiating a benefit category review if the matter is open to question, but it cautions that in some instances such a review could occasion a delay. CMS declines requests to add certain benefit categories (e.g., for artificial intelligence), indicating that benefit categories are statutory.

Number of Devices. CMS expects that approximately eight devices would be nominated for TCET each year and that, based on currently available resources, the agency would be able to accommodate not more than five devices each year. CMS expects that many Breakthrough devices either will be coverable without TCET (e.g., items subject to an existing NCD) or not indicated for the Medicare population (e.g., devices for pediatric patients). CMS declines to increase the number of devices that would be accepted each year (or to extend TCET to items and services that are not Breakthrough devices), citing constraints on its administrative resources. CMS suggests it may consider expansion in the future as experience with TCET is gained and resources are available.

How CMS would prioritize which nominated devices would be included remains somewhat unclear. CMS promises to issue shortly further guidance, open for public comment, on how it would set priorities. In the meantime, CMS intends to rely on a 2013 notice that indicates prioritization would be based on the “magnitude of potential impact on the Medicare program and its beneficiaries and staffing resources.”

Outline of the TCET Process

Letter of Intent. Manufacturers would have the opportunity to submit a non-binding letter of intent generally 18 to 24 months in advance of the expected date of FDA market authorization. CMS may then engage in preparatory steps that could shorten the process, including conducting a clinical endpoint review and convening a MEDCAC.

Nomination and Evidence Preview. Manufacturers wishing to proceed would initiate the TCET process through a formal letter to CMS, generally approximately 12 months in advance of anticipated FDA market authorization. If a nomination is accepted, CMS would initiate an Evidence Preview, “a focused literature review that would provide early feedback on the strengths and weaknesses of the available evidence, including any evidence gaps.” The review would cover published studies, unpublished reports provided by the manufacturer of clinical studies supporting the FDA market authorization application, and evidence-based guidelines and consensus statements. CMS would employ a contractor, which would use standard evidence assessment tools and qualitatively synthesize the results. CMS declines to permit manufacturers to contact these contractors directly.

Evidence Development Plan. The manufacturer would then be responsible for presenting an Evidence Development Plan (EDP) describing the planned studies to address identified evidence gaps. CMS looks to have a finalized EDP not later than 90 days after FDA market authorization. Upon approval of the EDP by CMS and AHRQ, CMS would open a CED NCD review, which would proceed according to the standard NCD process. Once the NCD is final, the studies could proceed under the CED authority.

Duration of TCET Coverage. CMS contemplates a transitional coverage period of approximately five years, including a year after study completion for analysis, report drafting, and submission for peer review. However, “the duration of transitional coverage should be tied to an EDP that sufficiently addresses the material evidence gaps identified in the EP, and we will work with manufacturers to define an appropriate NCD reconsideration window.”

Preventing Possible Gaps in Coverage Before NCD Revision. CMS calls on applicant manufacturers to provide for a “continued access study” that maintains market access after the primary EDP is complete and before a decision regarding post-TCET coverage is finalized.

Post-TCET Coverage. CMS will conduct an updated evidence review within six months of the review date specified in the EDP and also examine applicable practice guidelines and consensus statements, considering whether the conditions of coverage remain appropriate.⁴ CMS would, as appropriate, open an NCD reconsideration aimed at either (1) an NCD without evidence development requirements; (2) an NCD with continued evidence development requirements; (3) a non-coverage NCD; or (4) coverage at the discretion of the MACs. 

Other Issues

Safety. To address possible safety concerns, “… CMS retains the right to reconsider an NCD at any point in time.”

Availability of Evidence Summary and Evidence Gap Analysis. If a manufacturer withdraws from the TCET pathway, CMS will publish an evidence summary without the evidence gap analysis. Similarly, only a summary of the evidence would be posted with a tracking sheet if CMS opens a national coverage analysis.

Coverage of Similar Devices.

• In instances where NCDs would apply to multiple products for the same indication, CMS will follow the existing NCD process. CMS recognizes that some technologies in the same class may have distinct risk/benefit profiles, and each will be evaluated on its own merit.
• CMS deliberately does not define “similar devices” and apparently expects to address this question on a case-by-case basis in consultation with FDA and the manufacturers.
• CMS declines to provide coverage exclusivity for first-to-market devices.

Fit-For-Purpose Studies. CMS alludes to but does not address substantively the possible use of fit-for-purpose studies in EDPs. The agency plans to furnish guidance shortly on fit-for-purpose study designs and analysis methods, emphasizing secondary use of real-world data.

Considerations for Industry

The Scope of TCET Will Be Distinctly Limited. CMS anticipates accepting up to five TCET candidates annually for the foreseeable future. How the agency expects to determine which devices to include is unclear at present.

Role of CED. For devices in the TCET pathway, coverage will be afforded under the CED paradigm, given that CMS expects that devices eligible for TCET would not yet meet Medicare’s “reasonable and necessary” standard for coverage. A key element of CED is that coverage is limited to Medicare participants in studies specified to develop evidence.

TCET Timeline. The proposed timeline for initiating the TCET pathway may not be realistic — particularly the stages that require engagement with the agency over evidence. CMS implies that, in some cases involving novel items or conflicting evidence, the time needed for completing a benefit category review or an Evidence Preview may lengthen the schedule. On the back end, depending on the circumstances, completing the EDP may require more than the five years CMS generally expects.

Benefit Category, Coding, Payment. The final notice alludes to improved coordination efforts of benefit determination, coding, and payment reviews, but CMS does not provide detail about how this will be accomplished.

TCET in Context

TCET is CMS’ second attempt at addressing an accelerated coverage pathway for Breakthrough devices. CMS regards TCET as a substitute for the Medicare Coverage for Innovative Technology (MCIT) final rule, which would have afforded all Breakthrough devices immediate coverage following market authorization for four years, without any requirement for evidence development as a condition of coverage during this period. The present administration repealed the MCIT rule in November 2021, before it took effect, citing, among other reasons, beneficiary safety concerns. In the current notice, CMS declines to extend coverage to all Breakthrough devices.

The device industry has advocated for a change in law in reaction to CMS’ posture. A bill to require the agency to in essence reinstate MCIT, H.R. 1691, was cosponsored by 87 members of the House of Representatives as of early August.

Last November, the House Energy & Commerce Health Subcommittee advanced this bill, though the full committee has yet to consider it. On June 27, 2024, the House Ways & Means Committee, responding to budget scoring concerns, reported a much more limited version of this bill. The House Ways & Means Committee version would provide for Medicare coverage for a “transitional period” of four years for certain Breakthrough devices — without invoking the CED apparatus.

• In the case of devices cleared under section 510(k) of the Federal Food, Drug, and Cosmetic Act, coverage would be limited to those cleared based on clinical trial information from trials that included Medicare beneficiaries.
• Coverage of off-label uses of included devices during the transitional period would not be covered.
• CMS could exclude a device upon determining, based on review of clinical data, that the device presents an “undue risk of harm” to Medicare beneficiaries.
• Deadlines on CMS actions: Determination of whether a device is subject to the provision would be required within six months of application from the manufacturer. CMS would be required to make a final decision on a request for a NCD prior to the end of the transitional period.

Despite bipartisan support, prospects for passage of either version remain uncertain given the bill’s cost. If sufficient offsets can be identified, we expect supporters of the legislation to push for its inclusion in a post-election funding package. Of course, if a bill along these lines were enacted, the TCET pathway would be changed materially.

If readers have further questions, Arnold & Porter professionals following these issues would be happy to fill in details and provide perspectives. Feel free to contact any of the authors listed above.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.