The ABCs of Reimbursement for Breakthrough Devices

Since its inception, the U.S. Food and Drug Administration’s (FDA) Breakthrough Device Designation (BDD) program has become a coveted indication with medical device manufacturers. Besides giving companies a way to engage early and often with the agency for insight into a full regulatory plan, BDD allows firms to classify their technology as truly novel.
At the cross-section of BDD status are device reimbursement strategy considerations. In particular, recent changes from the Centers for Medicare & Medicaid Services (CMS) to grant additional payment — typically independent of BDD status — are often assumed to be the next and final step to establishing reimbursement for a device.

This chapter will explore reimbursement implications and considerations for BDD products and discuss key misperceptions in the field, taking into account the three key reimbursement fundamentals: coding; payer coverage; and payment. These factors are interrelated but not interdependent.

In 2016, Congressional law established the BDD program, which was published in December 2018. The program provides patients and health care providers with timely access to new medical devices and innovations, replacing the Expedited Access Pathway established in 2015. Breakthrough devices under the program receive priority review and a possible expedited path to market. All BDD requests must be made in a separate “Q-Sub” before a marketing submission. The FDA might ask for additional information (usually within 30 days) and decide on a BDD application within 60 days; companies can request to withdraw from the program at any time. The FDA may withdraw designation upon written notice if the BDD-awarded product is no longer eligible for the classification or the information submitted in the designation request contains an untrue statement or omits material information. Manufacturers with devices that have PMA, 510(k), or De Novo marketing submissions can submit BDD requests. Products, however, must meet the following criterion to be granted BDD:

Criterion 1: The device must provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human diseases or conditions.
Criterion 2: The device must meet one of the following: the device represents breakthrough technologies; no approved or cleared alternative exists for the device; the device offers significant advantages over existing approved or cleared alternatives; and device availability is in the best interest of patients.

There are many benefits of obtaining BDD, but the designation itself is not a guarantee of a more streamlined path to reimbursement or easier market access. Careful analysis of the health economic landscape is key to developing an optimized reimbursement strategy and ensuring the true benefits of breakthrough designation are realized.

Breakthrough products now have an alternate way to qualify for device pass-through payment status under the Hospital Outpatient Prospective Payment System. For applications received on or after January 1, 2020, CMS is no longer evaluating BDD products in terms of the current substantial clinical improvement criteria, and all breakthrough devices now qualify for the quarterly approval process for device pass-through payment.

Under the 2020 Inpatient Prospective Payment System (IPPS) rule, CMS finalized an alternative New Technology Add-On Payment (NTAP) eligibility pathway for transformative new devices. BDD products that receive FDA marketing authorization are considered new and not substantially similar to an existing technology. CMS acknowledges breakthrough devices will not have an adequate amount of time to demonstrate clinical improvement so BDD products do not have to meet the newness or substantial improvement criteria under the NTAP program (but they must meet cost criteria).

The new medical service or technology add-on payment policy under the IPPS provides additional payments for cases with relatively high costs involving eligible new medical services or technologies, while preserving some of the incentives inherent under an average-based prospective payment system. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. Any eligible outlier payment is added to the DRG-adjusted base payment rate, plus any new technology or medical service add-on adjustment. A medical service or technology may continue to be considered ‘‘new’’ for purposes of new technology add-on payments within two or three years, after which data begin to become available reflecting the inpatient hospital code assigned to the new service or technology.

For FY 2020, CMS agreed with comments that capping the add-on payment amount at 50% might no longer provide a sufficient incentive for use of the technology. As such, for discharges on or after October 1, 2019, CMS finalized that the add-on payment be equal to the lesser of the following under the Hospital Inpatient Prospective Payment System in Medicare Part A: 65% of the cost of the new medical services or technology or 65% of the amount by which the costs of the case exceed the standard DRG payment.
As of September 30, 2018, FDA has granted 71 BDD requests out of 100 total applications received with a final decision. An additional 26 devices from precursor programs were included, so a total of 97 devices are in the BDD program (1).

The FDA has received 13 marketing BDD submissions for FY20 — eight PMAs, three de novo clearances, and two 510(k) clearances. Of the 13 total submissions, FDA has cleared two 510(k)s, granted two de novo requests, and approved five PMAs.

The key reimbursement fundamentals are coding, coverage, and payment. Coding is used to identify what procedure or device is used on a submitted claim to a third party payer; third party payers determine coverage, based on whether the procedure or device is “medically necessary or reasonable and necessary” to treat a condition; and payment is given to a provider for a procedure or device.

Keeping these fundamentals in mind, it is important for manufacturers and providers to understand a BDD designation does not necessarily satisfy all three criteria for a device. Of the aforementioned payment methods, both NTAP and pass-through payments are temporary, and neither guarantees coverage. According to Medicare, “The fact that a drug, device, procedure, or service is assigned a HCPCS code and a payment rate under the Outpatient payment system does not imply coverage by the Medicare program, but indicates only how the product, procedure, or service may be paid if covered by the program. Medicare Administrative Contractors (MACs) determine whether a drug, device, procedure, or other service meets all program requirements for coverage. For example, MACs determine that it is reasonable and necessary to treat the beneficiary’s condition and whether it is excluded from payment” (2).

It is important manufacturers understand that NTAPs only apply to the IPPS; in other words, procedures that use technologies in the hospital inpatient setting (i.e., >24 hours), while, transitional pass-through payments only apply to the hospital Outpatient Prospective Payment System (OPPS), or procedures in an outpatient setting (<24 hours). NTAP or pass-through payments do not automatically lead to reimbursement.

Furthermore, these payment methodologies only apply to Medicare fee-for-service payment methodologies and are not necessarily applicable to provider contracts with commercial payers.

PROCEPT BioRobotics’ AquaBeam Robotic System, for example, received CMS approval for device pass-through payment starting January 1, 2020, as part of the OPPS ruling (3). Aquabeam is the first FDA-approved surgical robot providing autonomous removal of prostate tissue in men suffering from lower urinary tract symptoms due to benign prostatic hyperplasia or enlarged prostate (4). CMS had already approved NTAP for AquaBeam in its FY19 IPPS rule (5). Now AquaBeam has both NTAP for inpatient procedures and a pass-through payment for outpatient procedures. AquaBeam has the codes and the payment, but it has yet to establish positive commercial coverage. Aetna considers aquablation (AquaBeam, water jet-hydrodissection) for the treatment of benign prostatic hypertrophy experimental and investigational because the effectiveness of this intervention has not been established by peer-reviewed medical literature (6).

Likewise, the FDA gave Impulse Dynamic’s OPTIMIZER System a breakthrough device designation in March 2019 because it treats a life-threatening disease (heart failure) and addresses an unmet medical need (7). CMS followed suit and qualified the OPTIMIZER System for device pass-through payment status because it met the substantial clinical improvement criterion under the new alternative pathway (3). But even after receiving breakthrough designation and pass-through payment, the OPTIMIZER System is still considered “experimental and investigational because the effectiveness of this approach has not been established” (8).
Coding, coverage, and payment are all interrelated, and establishing reimbursement for new technologies in the United States is not a linear process. While coding is the link between coverage and payment, technology innovators should not expect payment or coverage simply because a code has been established.

The notion that reimbursement, regulatory, clinical, or evidence development strategies are separate and distinct processes is flawed. One informs the other, and these strategies should be developed and carried out in parallel.

New technology innovators are encouraged to adopt a new narrative. A reimbursement and market access strategy developed early in the product lifecycle is as important as a regulatory strategy; by not planning early, technology innovators compromise the successful commercial market adoption for their technology.

It is imperative to plan reimbursement and market access strategy early in the product lifecycle or the expedited FDA pathway. Medicare may provide additional payment in the short term, but Medicare and commercial plans will still need evidence for coverage and payment in the long term.