This is only a first draft article, but welcome feedback. It's 1800 words for a trade journal called Inside Precision Medicine.
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Medicare Policy:
How It Can Boost or Block Innovation
Bruce Quinn MD
Bruce Quinn Associates
Los Angeles
Dr. Bruce Quinn, a pathologist-MBA,
is a full time consultant for companies bringing innovative new technologies
towards Medicare coverage. He holds an
MD-PhD from Stanford University and an MBA from the Kellogg program at Northwestern
University. After working in academic medicine, he’s been a strategy consultant
for Accenture, two health policy firms in Washington DC, and for his own
consulting practice based in Los Angeles and San Francisco.
In every decade, healthcare changes a lot, but we still have
enormous needs for continual innovation toward unmet needs, more effective
healthcare, better coordinated services, and cost-effectiveness. In particular, this is true in the field of
precision medicine, where genomic and proteomic sciences have made huge strides
in recent years. Bringing these technological
advances into healthcare devices and services is challenging, exciting, difficult,
and very important.
Most frequently, the policy focus for healthcare innovations
is on the FDA. This usually leads to a
perpetual ying-and-yang swing between concerns that the FDA is too strict, and
keeping innovations from patients, or too lenient, and letting unvalidated
drugs or devices slip through the cracks and into the marketplace. The tension is captured in the title of a
2011 Congressional hearing on the topic – “Impact of Medical Device Regulation
on Jobs and Patients,” (FN1) which was stimulated in part by an insightful study
of device innovation by Josh Makower MD (FN2), who now leads the Byers Center
for Biodesign at Stanford University.
Less discussed is the critical role that Medicare policies
have on device and diagnostics innovation.
Sure, Medicare pays for healthcare technologies, and makes coverage
decisions which, like FDA decisions, may be viewed as too lax by some and too
burdensome by others. The role of CMS
policies in accelerating valuable innovation is much more important than is
usually appreciated, and spans a range of national and even local Medicare
policy rules that can trip up the unwary.
Let’s look more closely at some of these policy rules, praise
the good ones, and suggest changes for rules that are dysfunctional.
National Coverage Decisions – The Value of Open-Ended
Promises
Medicare makes national coverage determinations (NCDs) via a
nine-month national comment process, led by a small number of physicians and
other professional staff in the agency’s Coverage and Analysis Group.
These professionals have written several recent national
coverage decisions with important and innovative ramifications. In 2017, CMS announced it would cover tumor
genome diagnostics with next generation sequencing for on-label indications if
they were FDA-approved. One clear
intention was to encourage developers to enter the FDA review pathway because
of the guaranteed Medicare coverage at the end of it. In a 2019 extension, CMS added coverage for
hereditary cancer tests if they were similarly FDA cleared or approved.
In a third decision, CMS created an innovative coverage category,
promising to cover any liquid biopsy tests that screen for colorectal cancer
(in place of stool tests or colonoscopy) as long as they were 74% sensitive
(catching 3 cancers in 4) and 90% specific (having about 10% false
positives). CMS ratified this coverage
position even though no such tests had yet been approved by the FDA.
Together, these decisions in three major areas of genomics
provide further coverage for several categories of important tests, each
predicated on FDA review and approval, but providing first-day coverage from
Medicare when that happens. Interestingly,
all three of these innovative decisions, which had no precedent in precision
medicine, occurred during the Trump administration.
Local Coverage Decisions – Foundational LCDs Define
Coverage Rules for Future Tests
Similar innovations have been rolled out in the last several
years at the local level as well, where
Medicare contractors work. Only about
60% of Medicare beneficiaries are still in the slowly shrinking fee-for-service
program, but its policies also apply to patients in Medicare Advantage and
Medicare Direct Contracting programs (now called REACH ACOs).
Some 80% of genomic tests in the Medicare program are
covered by contractors in the special MolDx program, which has a dedicated
staff of molecular pathologists in charge of making uniform coverage decisions
for about 30 states. Since 2018, the
vision of the MolDx program has been to broad umbrella coverage statements,
called “foundational local coverage determinations,” that define areas of
coverage as use cases for genomic tests.
The most dramatic is an LCD finalized in November, 2021,
which provides coverage for minimal residual disease monitoring for two use
cases – tumor relapse after curative surgery, and treatment monitoring. To achieve coverage, new tests just need to
meet or exceed performance criteria laid out in the LCDs, and pass a close
inspection or technological assessment by MolDx professionals. The index test was the Natera Signatera test
when used to manage colorectal cancer, but the LCD is open-ended enough to
allow coverage of future tests in lung cancer, breast cancer, and other
conditions.
It’s Not All Good News – The Demise of “MCIT”
In September 2020, CMS announced a major new regulation
called “MCIT” – Medicare Coverage for Innovative Technology. After favorable public comments, CMS
finalized the regulation in January 2021.
The theme was simple: if a device received the FDA Breakthrough Device Designation
– a process established in the 21st Century Cures bill – and goes on
to successfully complete its clinical trials and FDA review, CMS would
guarantee four years of provisional coverage for on-label applications. Unfortunately, under new leadership, CMS put
this policy on hold in Spring 2021 and canceled it by the end of the year. Fortunately, as of Spring 2022, CMS is holding
town halls on other ways it might help innovation.
MCIT was smarter than its detractors realized, as later noted
by policymakers like Scott Gottlieb MD and Joe Grogan, a physician and an
attorney, respectively, who worked at high levels in the Trump
administration. The goal of MCIT was to
boost investment in products that were highly promising and important, as
defined by others – by Congress and the FDA.
The goal was to reduce the “valley of death” between early trials and
full funding for clinical development, which is caused by two kinds of risk –
science risk (will it succeed and pass FDA) and payor risk (will it meet
uncertain payor criteria or suffer slow payor timelines). MCIT nixed the payor risk.
I think objections to MCIT were overestimated. For example, if a product had too much science
risk, it wouldn’t pass FDA muster, and might not even try for a final
review. If the product was so-so, it’s
unlikely there would have been much clinical adoption, so CMS payments would have
been few. In short, some of the
problems proposed by opponents were self-correcting. In a simple model, using reasonable timelines,
success rates, and discount rates, I found that MCIT (coupled with earned
Breakthrough Status), raised the value of a Phase I product idea by 2.5X (such
as from $15M to $36M). In contrast,
another CMS policy trick, Coverage with Evidence Development, destroyed value
and slashed the product value by half, from $15M to only $8M. Where
the rubber meets the road is when you add a new factor, how much the clinical
trials will cost. If they cost $10M, and
the product value under CED is $8M, you won’t invest, and the product dies. But under MCIT, the exact same product, with the
same odds of success, is worth $36M, so the $10M in development funds will
quickly be invested. (See how the math
works in an online article, FN3).
Two Unnecessary Headaches: Glacially Slow Local Decisions and Counterproductive
Bundling Policies
There are anti-innovative policies at CMS that could be
corrected fairly easily. For one thing,
the timeline for local coverage determinations – LCDs – has gotten far too
slow, with proposals waiting in limbo for a year or more, and the timeline for
executing a new LCD taking a year from first publication to finalization. This comes largely from a CMS decision that
even expansions in coverage – such as adding a new covered service to a relatively
minor LCD – should go through a lengthy public comment cycle in advance. In a quick Medicare fix, Congress could add
a few words to the statute and solve this recently-created problem. The slow timelines for LCD modifications has
led some contractors to issue LCDs of maddening vagueness, such as covering
microbiology genomic panels when “the test is timely and will improve care.” That’s too vague to provide a safe harbor for
test utilization, and a lightning rod for disputes in recoupment cases where
for-profit reviewers, called recovery audit contractors, will take the provider’s
money today and essentially dare him to try and get it back in court years from
now.
In the hospital outpatient setting, where much specialty
care like cancer care is delivered, CMS has been overzealous in applying
bundling rules to lab tests. Beginning
in 2014, CMS has bundled nearly all lab tests to patient visits and procedures,
such as hospital biopsies. CMS makes an
exception for tests of human DNA and RNA – but where does that leave advances
in proteomics, metabolomics, molecular pathogens, and tests that rely on
artificial intelligence? Those are all
bundled to the hospital visit, prostate biopsy, or other procedure. Soon we’ll have accurate proteomic tests for
Alzheimer’s disease, but if they are paired to a hospital neurology clinic
visit or spinal tap, the value of the test will be “bundled” inside the $100
office visit or the procedure payment.
This discourages innovation in these areas, and innovators learn to
navigate away from these areas where rules are toxic, but unmet clinical need
is high.
Awareness Will Support Change
For one thing, we need to bring some of these findings out
of the dark basement of the reimbursement policy world, and into the
daylight. When CMS makes smart decisions
that encourage innovation and improvement, at reasonable or even lower costs,
we should celebrate it and look for more opportunities like that. When CMS does stuff that’s just dysfunctional
and counterproductive, we shouldn’t let them get away with it, and we should
provide constructive feedback for fixes.
Also in the prior admininistrative, CMS established a new department, a “Technology
Coding and Pricing Group,” designed to be a forum for hearing about problems
and taking steps forward. We should all
recognize how important that kind of department and leadership is at CMS, and
support them wherever we can.
FN1
Subcommittee on Health, House Committee on Energy and
Commerce, February 17, 2011. https://www.govinfo.gov/content/pkg/CHRG-112hhrg66467/pdf/CHRG-112hhrg66467.pdf
FN2
Makower, J., Meer, A., & Denend, L. (2010)
FDA Impact on U.S. Medical Technology Innovation. 44pp. https://cdn.ymaws.com/www.medicaldevices.org/resource/resmgr/docs/FDA_impact_on_US_med_tech_in.pdf
FN3
Quinn, B. (2022) Revisiting MCIT with Numbers. MCIT Could Triple the Value of Medtech Investments. Discoveries in Health Policy (blog). http://www.discoveriesinhealthpolicy.com/2022/02/revisiting-mcit-with-numbers-mcit-could.html
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