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Good News for Medical Device Innovators

New CMS rule aims to reimburse device makers years sooner

In the folklore of entrepreneurship, clever innovations reap big rewards. Unfortunately, that is not always so.

Good News for Medical Device Innovators

For example, genuinely new and innovative medical device ideas must clear especially vexing payment hurdles not faced by devices that offer only an incremental improvement. As a result, compliance with medical device regulations can take so much time and money that some of the most inventive startups never make it all the way to the market.

Although most medical device entrepreneurs are aware of the challenges imposed by FDA regulations, many do not realize that it may take years after FDA clearance for insurance companies and the Centers for Medicare & Medicaid Services (CMS) to reimburse the cost of using an innovative new device.

Insurance companies often look to CMS approval of an innovative device before they consider whether to reimburse for it under their policies. According to a CMS Press Release:

“Under current rules, FDA approval of a device is followed by an often lengthy and costly process for Medicare coverage. The lag time between the two has been called the ‘valley of death’ for innovative products, with innovators spending time and resources on FDA approval, only to be forced to spend years of additional time and millions of dollars on the Medicare coverage process.”

The CMS process requires startups to acquire enormous amounts of outcomes data before the product can qualify for reimbursement from Medicare and Medicaid.

Outgoing HHS Secretary Alex Azar recently announced that CMS finalized the Medicare Coverage of Innovative Technology (MCIT) pathway that provides immediate reimbursement coverage for breakthrough devices approved by the FDA. The coverage starts with FDA approval and lasts 4 years, during which the company can accumulate the data needed for permanent CMS coverage.

Azar explained that “this new proposal would give Medicare beneficiaries faster access to the latest lifesaving technologies and provide more support for breakthrough innovations by finally delivering Medicare reimbursement at the same time as FDA approval.” When a company applies for FDA approval, it can simultaneously apply for MCIT.

Qualifying devices must have a Breakthrough Device Designation (BDD) under existing FDA regulations. BDDs must meet two criteria:

  1. The device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions, and
  2. The device must also meet at least one of the following:
    • Represents Breakthrough Technology,
    • No Approved or Cleared Alternatives Exist
    • Offers Significant Advantages over Existing Approved or Cleared Alternatives, or
    • Device Availability is in the Best Interest of Patients.

BDD devices can include “software as a medical device” (SAMD), including AI algorithms and other machine learning (ML) and deep learning (DL) programs. (Some applicants may also qualify for New Technology Add On Payment (NTAP) approval, which provides bonus payments for appropriate patients for the first year.)

These are complex new regulations and are not fully fleshed out yet. But they represent a significant and far more expeditious pathway to reimbursement. They may enable many device innovators to avoid the medical device valley of death. Startups with BDD-qualified devices will want to look hard at these regulations and contact the FDA, CMS, and Federal Register for details.

Avatar for David Kaplan

David Kaplan

David is a Principal Consultant at Cayenne Consulting. He works with clients in the fields of medical devices, biotechnology, elder care, consumer products and services, high-tech fish farming, and automotive products and services. David also serves as a judge and mentor for MassChallenge. View details.

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