FDA and HCFA announce new policy to pay for unapproved devices

October 25, 1995

Restrictions will limit application of policyTwo federal agencies whose regulation of medical devices has madethem the targets of industry critics have jointly developed apolicy that promises to increase the access of Medicare patientsto new

Restrictions will limit application of policy

Two federal agencies whose regulation of medical devices has madethem the targets of industry critics have jointly developed apolicy that promises to increase the access of Medicare patientsto new technology while encouraging technological development.

The Health Care Financing Administration, which administersthe Medicare program, and the Food and Drug Administration willsoon begin a cooperative effort to provide Medicare coverage forthe use of at least some uncleared and unapproved medical devicesbeing used in clinical trials. While the policy appears to bea victory for the device industry, the agencies have applied substantialrestrictions that will probably limit the policy's application.

The directive stipulates that coverage will extend only toMedicare recipients participating in clinical trials approvedby the FDA as part of a company's efforts to win regulatory clearanceor approval of the device. Further, not all medical devices beingevaluated will be eligible for coverage. First of a kind or experimentaldevices are specifically excluded, because fundamental questionsof safety and effectiveness have not been resolved, accordingto government officials. Yet, industry officials are hailing themove as an major step forward.

"It is important progress because last Dec. 28 (the government)issued a policy (stating) that it wouldn't cover anything (thatwas in clinical trials); now they have decided to cover at least70% or more of these clinical trials," said Kristen Morris,director of government affairs for the Health Industry ManufacturersAssociation. "Considering that less than a year ago theywere saying zero, it is definitely important progress."

In the past, Medicare has considered experimental any devicerequiring an investigational device exemption (IDE) as a prerequisiteto clinical trials. As a result, use of these devices could notbe reimbursed by Medicare. Under the new policy, such devicesmight be covered.

Digital mammography and ultrasound are two industry sectorsthat might benefit from the new policy. Earlier this year, theFDA stated that the manufacturers of full-view digital mammographyequipment might have to generate clinical data to show the equivalenceof this technology to conventional x-ray mammography devices.If such clinical trials are pursued, the door might be open forMedicare reimbursement of patients participating in the research.

The policy may also prove helpful for companies such as ATLof Bothell, WA, which has completed a study of the ability ofultrasound to assist in differentiating benign from malignantbreast tumors (SCAN 5/18/94). The trial included about 1000 patients,according to a company spokesperson.

ATL plans similar trials aimed at expanding the applicationsof its diagnostic ultrasound equipment. Company officials werenot available for comment, however, on how the new FDA policymight affect the conduct of these trials.

Working out the details. The specifics of the new policy remainto be worked out. Even FDA and HCFA officials are uncertain asto which devices will be covered and under what circumstances.Although major government officials, including Department of Healthand Human Services Secretary Donna Shalala, announced the policyon Sept. 14, the policy itself has not yet been released. It shouldbe published shortly in the Federal Register, however, along withthe criteria the FDA will use to decide which devices are eligible.

"We are cautious about FDA's involvement with HCFA policy,"Morris said. "We are evaluating the extent (to which) FDAshould be involved in defining what is essentially technologythat can be covered by Medicare. We also feel that setting limitationson what is next generation versus breakthrough technology (thatcannot be covered in clinical trials) may not necessarily be appropriate."

The policy will be applied mainly to next-generation technology,said Dr. Bruce Burlington, director of the FDA's Center for Devicesand Radiological Health.

"The policy as envisioned is probably going to cover someoff-label clinical investigations (as in the case of new ultrasoundapplications), but that is not the core of it," Burlingtonsaid. "The core is the evolutionary product."

Despite its limitations, the new policy is noteworthy on anumber of fronts. The availability of Medicare coverage shouldhelp recruit subjects for clinical trials, thereby assisting inthe development of new products, Burlington said.

Further, this coverage will reduce the economic burden placedon the investigators and device manufacturers conducting the trials.On a broader level, the policy is a milestone in the relationshipbetween two agencies that have kept one another at arm's lengthin the past.

"Before (this policy was under development), there wasnot any formal relationship. We simply waited for FDA to certifya device for marketing and until that happened, we consideredthe device not to be safe or effective for Medicare purposes,"said Chester Robinson, director of HCFA's Division of DurableMedical Equipment. "Given this new initiative, we startedto have direct discussions with FDA to ask if it was possibleto make some separation in these devices and, if we were to payfor some of them, which ones would be appropriate for us to payfor."

While the joint policy may launch a new era of cooperationbetween the two agencies, it does not signify any fundamentalchange in their missions, according to both Burlington and Robinson.

"You must not get the idea that FDA is going to be makingreimbursement decisions," Burlington said. "We don'tnow and we are not looking to in the future. The FDA is only inthe position of advising HCFA whether we regard a device as evolutionaryor as substantially new. HCFA will have to translate that intoreimbursement policy."

HCFA's Robinson echoed Burlington's views on the continuingseparation of the responsibilities of each agency.Whereas theFDA is focused on determining whether a device is safe and effective,HCFA must decide whether the use of a product is reasonable andnecessary.

Some critics have assailed the Medicare decision-making processas duplicating much of the process the FDA employs in making itsdecisions. They have suggested that a favorable FDA decision shouldtranslate directly into a positive Medicare reimbursement decision.But that is not how the process works, Robinson said.

"If it were that way, it would put the responsibilityon FDA to determine what is covered under Medicare, and we certainlywouldn't want to go along with that," he said.