Updated FDA Guidance Helps Device Study Sponsors Better Anticipate Coverage For Investigational Devices

On December 5, 2017, FDA published a final guidance document entitled "FDA Categorization of Investigational Device Exemption (IDE) Devices to Assist the Centers for Medicare and Medicaid Services (CMS) with Coverage Decisions" (Final Guidance).1 CMS reimbursement determinations for IDE products hinge on whether the device is deemed a Category A (experimental) or Category B (non-experimental/investigational) product. To this end, the Final Guidance further develops a longstanding dialogue between CMS and FDA, clarifying the criteria for initial categorization and the circumstances in which the categorization of an IDE product may change. Notably, the Final Guidance says that where a drug is added to a previously approved or cleared device, such a product typically would fall under Category A and thus would not receive coverage unless relevant new information is available to address initial questions of safety and effectiveness associated with addition of the drug. The Final Guidance also provides key examples of how data gathered through an Early Feasibility Study (EFS) or during a previous enrollment stage of an IDE that received a staged approval might be used to justify re-categorization of a device type from Category A to Category B. The Final Guidance provides important information that should be considered by medical technology companies developing cost recovery strategies for FDA-regulated medical device trials-particularly those with relatively long time-horizon studies.

Background

The Final Guidance builds on a regulatory framework that CMS and FDA have developed in collaboration. At a high level, devices that may be covered under Medicare include: (1) devices approved by FDA through the Pre-Market Approval (PMA) process; (2) devices cleared by FDA through the 510(k) process; (3) FDA approved IDE Category B devices; and (4) Hospital IRB-approved non-significant risk devices.2 For investigational devices that do not fall into Category B, Medicare does not reimburse for the investigational device but will pay for the routine costs associated with trials for the device.3 In September 1995, CMS (then known as the Health Care Financing Administration) published a final rule and entered into an Interagency Agreement (IA) with FDA that addressed reimbursement categorization of IDE devices.4 In the IA, CMS and FDA agreed on the criteria that FDA would use to categorize IDE devices. CMS would use these categorizations in turn to determine whether items and services were eligible for coverage under the "reasonable and necessary" threshold set by Social Security Act Section 1826(a)(1)(A).5

CMS modified the definitions of Category A and B devices through a December 10, 2013 Final Rule, published with FDA's concurrence, that centralized IDE review.6 Under the 2013 Final Rule, as codified at 42 C.F.R. 405.201(b):

"Category A (Experimental) device refers to a device for which 'absolute risk' of the device type has not been established (that is, initial questions of safety and effectiveness have not been resolved) and the FDA is unsure whether the device type can be safe and effective." "Category B (Nonexperimental/investigational) device refers to a device for which the incremental risk is the primary risk in question (that is, initial questions of safety and effectiveness of that device type have been resolved), or it is known that the device type can be safe and effective because, for example, other manufacturers have obtained FDA premarket approval or clearance for that device type." These definitions remain in place. In order to receive coverage under Medicare, an IDE study must meet certain criteria outlined in 42 C.F.R. 405.212.7 So long as CMS determines these criteria are met, if a device falls in Category A, Medicare will cover routine care items and services furnished in a FDA-approved Category A IDE study.8 For a Category B device, if CMS determines prior to the submission of the first related claim that the conditions of 42 C.F.R. 405.212 are met, Medicare will cover the IDE device itself as well as the routine care items and services furnished in an FDA-approved Category B IDE study.9

In the years following the 1995 IA, FDA expanded on this framework, issuing guidance to address categorization criteria relevant to Early Feasibility Studies (EFS) and executing a Memorandum of Understanding (MOU) with CMS to reflect both agencies' adoption of the changes under the 2013 Final Rule (the MOU supersedes the 1995 IA).

Content of the December 5, 2017 Final Guidance

The Final Guidance addresses existing gaps in this regulatory history by clarifying FDA's approach to the categorization criteria (including in the case of EFS) and by describing a pathway for changing categorization from Category A to Category B (or vice versa).

First, the Final Guidance walks through FDA's process for categorization. After receiving an IDE, FDA determines whether the sponsor has provided sufficient information to support initiation of a clinical study. If FDA determines there...