Device Industry Praises Medicare Reform

Originally Published MDDI February 2004

NEWSTRENDS

Erik Swain

Although not perfect, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 contains a number of positive developments for the medical device sector, according to industry experts.

The law, passed by Congress in November 2003 and signed by President Bush in December 2003 amid much controversy, contains several measures that establish or refine processes favorable to the development of innovative medical devices. These include expanded Medicare coverage for medical device clinical trials, better methods for determining payment for new laboratory tests, and more integration of disease management programs. Also included in the new law is a faster timetable for national coverage decisions and the creation of a Council for Technology and Innovation at the Center for Medicare and Medicaid Services (CMS; 
Baltimore).

“From our perspective, we believe the legislation will allow patients to have better access to new medical technologies that can save or improve their lives,” says Art Collins, chairman and CEO of Medtronic Inc. (Minneapolis). “This is vitally important, as such a small percentage of patients indicated for a number of medical technologies actually receive those therapies. In addition, the bill simplifies and speeds adequate reimbursement for medical technologies, which helps physicians and hospitals. Finally, the legislation helps medical technology companies secure timelier, adequate reimbursement for breakthrough products the industry develops.”

One of the most significant developments for the device industry is that Medicare will now cover routine patient-care costs of breakthrough device clinical trials, known as “Category A” trials. In the first few years of implementation, only treatments for immediate life-threatening conditions will be covered, but Benjamin Wallfisch, policy director for the Medical Device Manufacturers Association (MDMA; Washington, DC), notes that “most Category A treatments meet that definition anyway.” After January 1, 2010, the routine costs of all Category A trials will be covered. “Category B” trials for incremental advances already have their routine costs covered. Trials for new uses of devices already proven safe and effective, called “Category B4” trials, remain uncovered, but industry will lobby to change that.

The bill provides for a more-defined process for covering laboratory tests. “CMS will put up a list of suggested approaches and get comments,” says Ted Mannen, managing director for Aventor (Washington, DC). “It's designed to make the process of determining how much to pay for new tests more predictable and more open.”

Another significant provision sets more-reasonable thresholds for temporary add-on payments for new technologies used in inpatient settings. That will allow more firms some reimbursement before a coverage decision has been made, and enable them to better prepare their requests for coverage. 

“If you look at the technologies that qualify for this, it reduces the cost threshold by tens of thousands of dollars for some of the higher-end DRGs [diagnosis-related groups],” says Steve Ubl, executive vice president, federal government relations, for AdvaMed (Washington, DC). “It will enable everyone to look at rethinking therapies.”

The bill aims to enable more integration of disease management programs and greater use of monitoring technologies. “This could spur adoption of less-invasive technologies that lead to fewer complications and shorter hospital stays,” says Wallfisch. “The device industry is definitely supportive of this.”

Jo Ellen Slurzberg, vice president of consulting and reimbursement for Boston Healthcare Associates (Boston), notes, however, that disease management has not worked as well as expected in the private sector. “Private payers have often found that it's a big myth” that amounts to nothing more than cost shifting, she says. “In theory it's wonderful, but I haven't seen it work in the private sector.” The Health Insurance Portability and Accountability Act of 1996 could complicate matters too, she adds. 

Those concerns could be avoided if CMS and industry keep in mind that such a program “shouldn't be an excuse just to cut costs,” Mannen says. “I imagine industry will be involved in helping CMS focus on quality.”

The Council for Technology and Innovation will serve as a single point of contact for device companies, patients, and healthcare professionals on matters of coverage, coding, and payment decisions. “This establishes the device industry as a stakeholder in Medicare,” says Ubl. “It will bring greater transparency and timeliness to the coverage process.”

Attorney Grant Bagley, a partner at Arnold & Porter (Washington, DC) notes, however, that “the problem with CMS is not the point of contact but the point of action. I like this idea only if it leads to some action.”

The legislation also calls for national coverage decisions to be made in nine months, or 12 months if referred to the Medicare Coverage Advisory Committee or another outside organization. Currently, the average coverage decision takes 18 months. 

In most cases, this is a positive development, but in some cases it may not be, says Slurzberg. “The concern is that there are times when a longer review time may be warranted,” she adds. “In an effort to comply with the time frame, will it be easier for CMS to say no rather than to do two or three extra months of work on a decision?” 

One goal of the bill, to “promote consistency of local coverage decisions,” could have adverse consequences, especially for small manufacturers that have relied on getting favorable coverage decisions from one or a handful of local contractors and then trying to expand from there. 

“If more consistency between local coverage decision makers reduces local flexibility and makes it harder to get a decision at one local contractor, that could make it harder for new technologies to get in at the local level,” says Wallfisch. “This is a top concern for innovative small manufacturers because they don't truly have access to national coverage decision making. It's too high-stakes for small manufacturers with one or two products.” 

The bill's establishment of a competitive bidding process is also not favored by industry, but it does include some limits that the sector's trade associations wanted. These include restricting the process mostly to durable medical equipment, exempting Class III devices, getting industry representation on the relevant advisory panels, and requiring more than one “winner.” “We will continue to watch this to make sure it leaves enough of a favorable atmosphere to support innovation,” Wallfisch says. “It is a potential barrier. These changes are almost solely based on cost and do not look at all at downstream cost savings.” 

Ubl agrees and notes that how CMS defines the “commodity products” that are subject to the process will be crucial. “The last thing we want to see is quality rationing,” he says. “We will be aggressively working to make changes in the legislation and to exercise our due process in regards to implementation.” 

A common thread throughout the legislation, however, is making CMS and its processes less of a mystery. “Now, when CMS takes a decision to an advisory committee, it will have to publish its decision and all of the information it relied upon,” says Bagley. “It's no longer ‘we took it to unnamed experts who don't agree with you.' A lot of things will now be put out in the open, and firms will have more ability to get help during the process.”

And a common opinion among industry is that the new law is only the beginning of an improved CMS. “While this legislation represents a meaningful start, we remain hopeful that the Medicare program will focus its future efforts on delivering more dollars to direct patient care,” says Collins.

Copyright ©2004 Medical Device & Diagnostic Industry