Medicare's Winding Payment Pathway for Innovative Technology

David L. WhiteDavid L. White is a Regulatory and Quality Officer for the ASN Alliance for Kidney Health, Washington, DC.

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For decades, translational researchers have increased options for treating diseases by bringing together the scientific, medical, and engineering fields to advance the understanding of biology and disease pathogenesis. For example, there are now more than 100 identified genetic causes of cellular dysfunction in patients, work that is further supported by a greater focus on data sharing across academia and industry, opening the doors to new and more individualized treatments that target disease subtypes as a personalized approach. Private investment, through licensing or venture capital, plays an important role in pushing these advances closer to the clinician and patient, with investment opportunities considering both the clinical impact and the receptiveness of the market to implement these innovations into routine practice.

This pathway for translating innovations to the patient has been clearly demonstrated in oncology, which has seen over $14 billion in private investments into the biopharmaceutical sector alone over the past 3 years. Over the same period, investments into a broader set of kidney-related innovation companies that included biopharma as well as healthcare services, diagnostics, and devices only received $2.4 billion.

This imbalance is in part why ASN made its own $25 million commitment to the Kidney Innovation Accelerator (KidneyX)—a public-private partnership between the US Department of Health and Human Services (HHS) and ASN to accelerate innovation in the prevention, diagnosis, and treatment of kidney diseases, now the ninth leading cause of death in the United States, resulting in more deaths than breast cancer. Unfortunately, kidney diseases and kidney failure are more common among Black, Hispanic or Latinx, and Native or Indigenous Americans; Asians; Hawaiians and Other Pacific Islanders; people in lower income brackets; and the elderly. These are communities that also have been disproportionately affected by the COVID-19 pandemic, exacerbating existing disparities.

Since its launch in 2018, KidneyX has run five prize competitions and supported innovators in 22 states. By accelerating the development of drugs, devices, biologics, and other therapies across the spectrum of kidney care, KidneyX seeks to improve the lives of the 37 million Americans and 850 million people worldwide currently afflicted with kidney diseases.

ASN believes payment policies within the Medicare End Stage Renal Disease (ESRD) payment bundle have long been a disincentive for innovation in dialysis care delivery, and objectively knowing the magnitude of that impact is difficult. Following the route to payment pathways for innovation in the Medicare system is also challenging. One only need look at the Transitional Add-on Payment Adjustment for New and Innovative Equipment and Supplies (TPNIES) in the ESRD bundle and the proposed rule on Medicare Coverage of Innovative Technology (MCIT) and definition of “reasonable and necessary.”

Over the past several years and again in August 2021, ASN has written to the Centers for Medicare & Medicaid Services (CMS) clarifying that there are multiple challenges to introducing innovative devices, drugs, biologics, and other therapies into the ESRD Prospective Payment System (PPS) even after the US Food and Drug Administration (FDA) has granted certain advance approvals. First, ASN maintains that there are barriers related to the use of items during the first few years after introduction. Second, there are no current policies to adjust the base bundle rate to account for new products. Third, and most notable, is the challenge raised by the definition and interpretation of substantial clinical improvement (SCI) criteria.

ASN expressed its concerns to CMS that SCIs are numerous and expansive in scope and that very few parties will consider investment in improving care of people with kidney failure if requirements continue to result in no devices receiving TPNIES payment status. In addition, the data are required to demonstrate that SCI represents a far greater outlay of resources than the approved 65% rate of reimbursement over 3 years, ASN argues. Finally, the 65% rate of reimbursement, for only 3 years, arguably abrogates the need to prove SCI to the extent posited by CMS in the discussion of the applicants in the current proposed rule. This fact is because, under TPNIES, a large portion of the financial risk associated with new technologies (35% in the first 3 years and 100% thereafter) will be shared by the dialysis providers that adopt the new technology.

A final rule on the ESRD program for calendar year 2022 and two separate TPNIES applications contained therein is expected around the time of this publication.

ASN and other members of the kidney community have expressed to CMS their concerns that if the administration fails to address these three challenges, innovation will continue to stagnate. Specifically, ASN's President Susan E. Quaggin, MD, FASN, wrote: “There needs to be an opportunity to introduce new technologies into the kidney failure space that results in a willingness for innovators to take the risk of investing in the care of kidney failure patients. ASN fears that the current proposal does not present this opportunity.” (1)

The Alliance for Home Dialysis, of which ASN is a Steering Committee member, and ASN maintain that improvements in incenter dialysis care and increases in the use of home dialysis are important for improving overall outcomes and the quality of life for people receiving maintenance dialysis. Both organizations have expressed concern that the current TPNIES criteria may not sufficiently address the issues critical to advancing home dialysis nor do they fully support the second goal of the federal government's Advancing American Kidney Health (AAKH) initiative of improving access to, and the quality of, person-centered treatment options. In addition to ASN's own comment letter to CMS, the society joined the Alliance for Home Dialysis in making several recommendations and statements of support for TPNIES and innovation payment to CMS, including extending TPNIES eligibility to at least 3 years and adjusting for providers that do not have the resources to purchase new devices and may prefer to maintain subscriptions with manufacturers or lease equipment (2).

Bills in the House and Senate would allow new and innovative devices for kidney failure that receive FDA “de novo” status to also receive an automatic 3-year add-on payment through the bundle. The de novo process provides a pathway to classify novel medical devices for which general controls alone or general and special controls provide reasonable assurance of safety and effectiveness for the intended use but for which there is no legally marketed predicate device. ASN has officially endorsed these bills.

“Reasonable and necessary”

The issue of coverage of innovative technology is the confusing story of the short-lived MCIT, or Medicare Coverage of Innovative Technology rule. Shortly before the Biden-Harris administration came into office in January 2021, the Trump administration issued a final rule creating MCIT under CMS—a new, accelerated Medicare coverage pathway for innovative products the FDA deems “breakthrough,” which the FDA approves on an expedited basis and could include devices harnessing new technologies, like implants or gene-based tests, to diagnose or treat life-threatening or irreversibly debilitating diseases or conditions like cancer and heart disease. Under the MCIT rule, Medicare could provide national coverage simultaneously with FDA approval, up to a period of 4 years. After the coverage period was over, CMS would reevaluate the device based on clinical and real-world evidence of improvement in health outcomes among Medicare beneficiaries to determine more permanent coverage. This 4-year timeline was designed to incentivize the manufacturers of these breakthrough devices to develop additional evidence regarding the applicability of their products to the Medicare population, so they might continue Medicare coverage beyond the initial 4 years, so thought the outgoing administration (3).

The new administration delayed the implementation of the final rule until December 15, 2021. However, in September 2021, CMS issued a proposed rule that “would repeal the Medicare Coverage of Innovative Technology (MCIT) and Definition of ‘Reasonable and Necessary' final rule, which was published on January 14, 2021, and would be effective on December 15, 2021” (4). The Biden administration effectively moved to “kill” a last-minute rule issued by the outgoing administration, a move that is not unusual. What was unusual to many observers was the language used by CMS to address its role in covering innovative technology versus the role of the FDA in approving these technologies. CMS wrote the following:

However, after further consideration of all public comments, we no longer agree that the FDA safety and effectiveness standards alone are sufficient to support open-ended Medicare coverage. FDA and CMS act under different statutes that have different goals and the standard for coverage (that is, a determination that a device is reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member) is not synonymous with standards for safety and efficacy standards for marketing authorization for the broader population.

Among other things, FDA conducts premarket review of certain devices to evaluate their safety and effectiveness and determines if they meet the applicable standard to be marketed in the United States. In doing so, FDA relies on scientific and medical evidence that does not necessarily include patients from the Medicare population. In general, under the Medicare statute, CMS is charged with determining whether items and services are reasonable and necessary to diagnose or treat an illness or injury or to improve the functioning of a malformed body member.

One consideration for CMS in making national coverage determinations under the reasonable and necessary statute is whether the item/service improves health outcomes for Medicare beneficiaries. It is important to determine whether Medicare beneficiaries' health outcomes are improved because these individuals are often older, with multiple comorbidities, and are often underrepresented or not represented in many clinical studies (4).

ASN had advocated for keeping and modifying MCIT. This proposed rule leaves little doubt that MCIT will be repealed and leaves many observers wondering just what the future pathway to Medicare payment for innovative technologies will look like.