THE LINK BETWEEN FDA APPROVAL OF MEDICAL DEVICES AND REIMBURSEMENT

Transcription

1 1 THE LINK BETWEEN FDA APPROVAL OF MEDICAL DEVICES AND REIMBURSEMENT Association of Corporate Counsel Legal Quick Hit September 6, 2011 Maria E. Gonzalez Knavel Partner Foley & Lardner LLP

2 2 I. FDA Approval II. III. IV. Overview CMS Coverage Determination Coding and Payment Designing Clinical Studies V. FDA and CMS Announced Parallel Review of Medical Products VI. VII. Practical Tips Questions

3 3 FDA Approval The Food and Drug Administration (FDA) defines a medical device as: An instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or similar or related article, including a component part, or accessory which is: Recognized in the official National Formulary, or the United States Parmacopoeia, or any supplement to them, Intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or Intended to affect the structure or any function of the body of man or other animals, and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.

4 4 FDA Approval (cont.) Device Classifications Class I Medical Devices Medical devices presenting minimal risk of harm to the user (e.g., elastic bandages, examination gloves). Majority of such devices exempt from regulatory process based on high safety and low risk. Exempted Class I devices require no premarket notification application before marketing, but must be registered with FDA (e.g., manual stethoscopes, mercury thermometers).

5 5 FDA Approval (cont.) Class II Medical Devices Most medical devices are Class II devices (e.g., powered wheelchairs, infusion pumps). Most require premarket notification. Class III Medical Devices Usually sustain or support life, are implanted, or present potential high or unreasonable risk of injury (e.g., implantable pacemakers, breast implants). Approximately 10 percent of devices.

6 6 FDA Approval (cont.) 510(k) Notification Medical devices that are substantially equivalent to a currently approved and marketed medical device do not require premarket review and approval. Notification to FDA and demonstration that device is substantially equivalent to a predicate device. Commonly referred to as premarket notification (PMN) or 510(k) Notification. Requirements for substantially equivalent. Same intended use. Same technological characteristics. Technological characteristics do not raise question of safety and effectiveness and demonstrate the device is safe and effective as the predicate device.

7 7 FDA Approval (cont.) Clinical trials that demonstrate safety and effectiveness are not required. Most Class I and Class II devices require no more than a submission of a 510(k) notification. Premarket Application Process Class III devices require submission and approval of premarket application (PMA) before marketing and distribution.

8 8 FDA Approval (cont.) FDA approval dependent upon submission of sufficient valid scientific evidence to ensure safety and effectiveness for intended use. Investigational Device Exemption (IDE) Obtaining an IDE allows the investigational device to be used prior to approval within the context of an approved clinical trial intended to collect safety and effectiveness data for a PMA. Clinical trials are monitored by the IRBs for the facilities where the clinical trials are conducted.

9 9 FDA Approval (cont.) FDA assigns special numeric identifier to each device. FDA assigns all approved IDEs to one of two categories to assist CMS in determining coverage. Category A: Experimental/Investigational applicable to Class III devices. Category B: Non-experimental/Investigational applicable to Class I or Class II devices.

10 10 Coverage Determination Most medical devices not provided directly to patients, but part of a diagnostic or therapeutic procedure. Reimbursement determined by the policies that apply to the associated procedure. Many payors require more than just FDA approval/clearance. Many payors require clinical evidence comprised of peer review publication reports of clinical trials to obtain coverage.

11 11 Coverage Determination (cont.) Medicare Reimbursement of Clinical Trial Costs Three Alternatives Reimbursement through investigational device coverage regulation. Reimbursement through national coverage determination. Reimbursement through coverage with evidence development.

12 12 Coverage Determination (cont.) Investigational Coverage Regulations 42 C.F.R Coverage and payment for certain costs associated with nonexperimental/investigational (Category B) device trials. Device must be used in FDA approved clinical trial. Medical necessity determinations performed by Medicare Contractors. Coverage is limited to patients meeting the FDA approved IDE study protocol requirements. Local Coverage Determination (LCD) process. Payment for Category B device trial is based on, and may not exceed, the payment for a currently used device serving the same medical purposes that has FDA approval or clearance.

13 13 Coverage Determination (cont.) National Coverage Determination Medicare provides for the coverage of routine costs associated with patients enrolled in qualified clinical trials. Expands coverage beyond the Category B payment of medical device clinical trials. Coverage dependent on clinical trial meeting certain conditions. Must be for the evaluation of an item or service falling within a Medicare benefit category (e.g., physician services, durable medical equipment, diagnostic tests). Not statutorily excluded from coverage (e.g., cosmetic surgery, hearing aids).

14 14 Coverage Determination (cont.) Must have therapeutic intent. Primary purpose is to determine whether the intervention potentially improves health outcomes. Supported by available scientific and medical information or intended to clarify or establish the health outcomes of intervention already in use. Does not duplicate existing studies. Appropriate to answer the research question being asked. Sponsored by credible organization. In compliance with the regulations protecting human subjects.

15 15 Coverage Determination (cont.) Coverage With Evidence Development (CED) CED extends the coverage of selected medical procedures, contingent upon the collection of additional data. Only relevant after a formal NCD request has been initiated. Allows for coverage of FDA approved medical technology and services when improvement in health outcomes have not been conclusively demonstrated but evidence exists that coverage may provide an important patient benefit.

16 16 Coverage Determination (cont.) Two types of CED Coverage with appropriateness determination (CAD) - items or service is covered only when specific data is submitted in addition to claim data to demonstrate that the item or service was provided as specified in the NCD. Coverage with study participation (CSP) item or service is covered only after a formal NCD request has been initiated and provided in a setting in which there is a pre-specified process for gathering additional data with protection and safety measures for patients.

17 17 Coverage Determination (cont.) Covered Routine Costs Associated with Clinical Trials Items or services that are typically provided absent a clinical trial. Items and services required for the provision of the investigational item or service. Item and services required for the clinically appropriate monitoring of the effects of the item of services, or the prevention of complications. Items or services that are medically necessary for the diagnosis of treatment of complications arising from the provision of an investigational item or service.

18 18 Coverage Determination (cont.) Excluded from Routine Costs of Clinical Trials The investigational item or service itself. Items and services for which there is no benefit category, are statutorily excluded, or fall under a national non-coverage determination. Items and services customarily provided by the research sponsor free of charge. Items and services provided solely to determine trial eligibility.

19 19 Coverage Determination (cont.) FDA Approval of a Medical Device Does Not Ensure CMS Coverage. FDA s Safety and Effectiveness CMS Reasonable and Necessary Standards Medical devices approved or cleared for marketing by FDA may not be supported by clinical data demonstrating their medical benefit. FDA requires evidence of safety and accuracy of the medical devices. FDA review processes depend on the type of application under consideration (PMAs or 510(k)s).

20 20 Coverage Determination (cont.) CMS focus is on whether the medical device is considered reasonable and necessary under Section 1862(a)(1)(A) of the Social Security Act. CMS decides what items and services it can and should pay for, how to make the payment, and how much to pay. Coverage Determination is made on whether the device is reasonable and necessary to diagnose or treat an illness or injury affecting the Medicare population. Review of appropriate outcome data. - Does the device provide improved, equivalent or complimentary health outcomes in the Medicare population as compared to devices already covered by the program?

21 21 Coverage Determination (cont.) Disadvantages of Requesting an NCD Currently very few therapy and services are reimbursed under an NCD. Coverage decisions for a majority of the current novel FDA approved/cleared products are made by regional CMS contractors. New medical devices may be simply covered and reimbursed under existing codes and a negative NCD means no coverage reimbursement. NCD may be for a narrower indication than those approved by FDA. Eliminates the regional contractors discretion to approve the new device and NCD may require additional clinical studies under a CED.

22 22 Coding and Payment Coding is the nuts and bolts of reimbursement. The health care common procedure coding system (HCPCS) product codes. Is there a HCPCS code for the predicate device? If not must submit application to CMS for a new code. Currently a very long process. Applications for new HCPCS codes must be received by CMS the beginning of January of a given year, but the effective date of a new code will not be until the following January 1 st.

23 23 Coding and Payment (cont.) Current Procedural Terminology Codes (CPT) Describes nearly all physician and outpatient services. Coordinated and maintained by the American Medical Association. Determinations on new and revised codes are made by an independent CPT Editorial Panel. Updated on an annual basis effective January 1 st. Obtaining a new CPT code may take 1 to 2 years.

24 24 Coding and Payment (cont.) Special Payment Rules for New Technologies Medicare Inpatient Prospective Payment System (IPPS) New items and services are determined by an assignment to a specific DRG. Allows for separate payment of certain new technologies where specific cost, clinical superiority, and novelty criteria are met. CMS application of these criteria is very restrictive. CMS only pays a portion of the incremental costs of the new technology rather than the full incremental cost.

25 25 Coding and Payment (cont.) Medicare Outpatient Prospective Payment System (OPPS) New technologies may be assigned to establish or be assigned new technology APCs. New Technology APC Separate pass-through payments for new medical device determined to provide substantial clinical benefit and where the cost is not significant. Pass-through medical devices are paid at estimated costs for new devices for a period of two to three years. At the end of the pass-through period, payment for devices are folded into the payment for the procedure in which a device is used.

26 26 Designing Clinical Studies Meet FDA and CMS Data Needs Selection of Clinical Trials Subjects Over 65 years of age and/or disabled. Clinical trial subjects with diagnosed disease. Evidence of safety and accuracy. Evidence of improved health outcomes.

27 FDA and CMS Announced Parallel Review of Medical Products Memorandum of Understanding issued on issue in June On September 17, 2010, publication of formal notice of comment on MOU. Goals of Parallel Review Reduce the time between FDA approval and CMS coverage determinations increasing access to safe, effective and affordable medical products. Fostering medical product innovations. Improve public health by overlapping medical review of data/evidence resulting in more timely access. 27

28 28 FDA and CMS Announced Parallel Review of Medical Products (cont.) CMS will consider a limited number of requests from manufacturers of innovative medical devices for a parallel review pilot program. Criteria for inclusion in the pilot program will be announced at a later date.

29 FDA and CMS Announced Parallel Review of Medical Products (cont.) 29 What is the status of the parallel review pilot program? Uncertain. 32 comments received from industry, providers, patient advocacy groups, medical specialty societies and individuals. The comments lauded the effort but expressed concerns.

30 FDA and CMS Announced Parallel Review of Medical Products (cont.) 30 The Industry s Concerns: Reliance on the NCD process. Negative NCD jeopardizes all payments. Must allow LCD process. Risk of disclosure of trade secrets, commercial and proprietary information. Coding issues not addressed. Parallel review must be voluntary. Clinical trials meeting both FDA and CMS processes could be burdensome and expensive. CMS does not have the resources to process NCDs at a rate to keep up with FDA approvals.

31 31 Practical Tips Begin reimbursement planning early. Ensure clinical trial data will support coverage requirements. Determine the benefit category under which the item will be paid. Determine if there is a separate payment available or a bundled or packaged payment.

32 32 Practical Tips (cont.) Are established billing codes sufficient to report the use of the medical device? If not, apply and obtain codes early which may require one or two years or more to complete. Ensure labeling of device supports coverage and reimbursement determinations.

33 33 QUESTIONS