August 23, 2004

The Honorable Tommy G. Thompson

Secretary

Department of Health and Human Services

Hubert H. Humphrey Building

200 Independence Avenue, SW

Washington, DC 20201

**Docket No. 2004S-0233: Solicitation of Comments on Stimulating
Innovation on Medical Technologies**

Dear Secretary Thompson:

The Advanced Medical Technology Association (AdvaMed) is pleased to
provide these comments on the Department of Health and Human Services'
Solicitation of Comments on Stimulating Innovation in Medical
Technologies. As an industry devoted to developing life-saving and life
enhancing innovations, we look forward to working with you and your task
force to encourage further advances in patient care.

AdvaMed is the largest medical technology trade association in the
world, representing more than 1200 medical device, diagnostic products,
and health information systems manufacturers of all sizes.  AdvaMed
member firms provide nearly 90 percent of the \$75 billion of health
care technology products purchased annually in the U.S. and nearly 50
percent of the \$175 billion purchased annually around the world.
AdvaMed members range from the largest to the smallest medical
technology innovators and companies. Nearly 70 percent of our members
have fewer than \$30 million in sales annually.

We commend you for the many efforts you have already begun in the effort
to both stimulate innovation and improve patient access to technology,
including the Roadmap initiative and the Critical Path initiative.
Enclosed please find AdvaMed's recommendations for additional ways to
partner with industry to encourage investment in the development of
medical technologies as well as improve patient access to these needed
advances through streamline government regulatory and reimbursement
processes.

Sincerely,

![](media/image1.png){width="1.6083333333333334in"
height="0.4395833333333333in"}

Pamela G. Bailey

Enclosure

**THE NATIONAL INSTITUTES FOR HEALTH (NIH)**

**Basic, Applied, and Transitional Research.** Historically, NIH has
engaged primarily in basic research with an occasional foray into
applied work. Recently, Congress established the National Institute for
Biomedical Imaging and Bioengineering (NIBIB), which is the only NIH
institute whose mission includes basic research, applied research, and
translational research. The NIBIB Mission includes "promoting
fundamental discoveries, design and development, and translation and
assessment of technological capabilities in biomedical imaging and
bioengineering, enabled by relevant areas of information science,
physics, chemistry, mathematics, materials science, and computer
sciences."[^1] The NIBIB Mission also states that, "The Institute
coordinates with the biomedical imaging and bioengineering programs of
other agencies and NIH Institutes to support imaging and engineering
research with potential medical applications and facilitates the
transfer of such technologies to medical applications."[^2]

AdvaMed believes that NIBIB can play a key role in the success of the
FDA Critical Path Initiative. In the medical devices area, much of the
potential research resides in general areas of applied research that
appear to fall within the NIBIB mission. For example, as software
control becomes nearly ubiquitous in electronic devices, an effective,
efficient user interface becomes vital. Devices use fewer keys and
buttons to control more functions. There is a need for more advanced
human factors research to examine these newer interfaces, and we believe
that NIBIB should fund and otherwise encourage this work.

We also believe that with the formation of NIBIB, the medical devices
industry has a rare opportunity to develop a research agenda within NIH
that can address some of the applied research that industry would like
to see. However, we note that NIH has a long and distinguished history
of performing basic health care research. Its grant approval process was
set up to evaluate basic clinical research proposals, and the people who
participate in it are used to that paradigm. To evaluate applied
research proposals properly, NIH will need to approach them differently.
Proposals for applied work deserving of funding would likely be scored
low if one were to rate them using the same values one would use to rate
a basic research proposal. The approval process will need to be
significantly revised to refocus on proposals for applied work.

**THE FOOD AND DRUG ADMINISTRATION (FDA)**

**Feedback processes.** Due to the unique nature of medical technology
product development, particularly medical devices, AdvaMed believes that
feedback processes need more structure to encourage innovation. Feedback
processes include premarket information (e.g., data obtained from the
manufacturing process) and postmarket information (e.g. adverse event
reports). In January 2004, JAMA published an article co-authored by
Rosalie Bright of FDA that examined several methods of hospital
surveillance of adverse events.[^3] The report observed that the various
surveillance methods examined yielded different and inconsistent
results. It would be worthwhile to pursue a discussion of post market
surveillance methods while addressing feedback loops, since
manufacturers gain a great deal of useful information from postmarket
sources, both formal and informal.

A project to define the feedback paths and iterations related to medical
device development is likely to result in a better understanding of a
key element of the development process. We believe that this could lead
to postmarket reporting that would be less burdensome and more
informative than the current systems.

We also believe that better understanding of the feedback mechanism
could provide a means to create more effective postmarket studies that
would benefit all parties. A good postmarket study should be a source of
useful information for the manufacturer to use in its required risk
management system, which is intended to assist the manufacturer in
assuring the safety of current devices and guiding the development of
device enhancements.

**Guidance Documents.** Guidance documents are of great value to both
industry and FDA staff. When a good guidance document is in place, the
industry understands what the agency expects to see in a submission.
Similarly, the FDA reviewer can be comfortable that most incoming
submissions will be close to the mark in terms of appropriate content.
Historically, there has been a need for more guidance than FDA has staff
time to produce. Thus, many existing documents have fallen out-of-date
and present little value to either industry or FDA. In addition, many
existing and emerging technology areas and devices suffer from a lack of
written guidance. This lack of current guidance makes it much more
difficult for companies to provide FDA with the data and information
they expect in submissions. This slows the approval process and can act
as a significant barrier to companies just entering a particular field.

Unfortunately, the promulgation of the agency's Good Guidance Practices,
intended to bring greater transparency to the process, may have had the
inadvertent effect of slowing the development process. In recent years,
FDA staff has been much more cautious about working with industry on
guidance, even at the drafting stage. We believe that we need to develop
mechanisms to permit FDA and industry members to work together to
develop first drafts of guidance documents. Developing the first draft
is the major hurdle in developing either guidance or a standard. Once a
draft that has at least a first level of agreement is completed and made
available for public comment, the process can flow much more smoothly
and rapidly. We believe any efforts to expedite both the development of
new and the revision of existing guidance documents would have dramatic
positive impact on the development and availability of significant new
medical technologies.

**Data Summary Template.** We recommend that CDRH prepare a data summary
template for each standard that it recognizes and publish it along with
the data sheet on the recognition of that standard. This would ensure
that both manufacturers submitting a Declaration of Conformity and the
reviewer receiving it would have a common understanding of what is
required.

# IVD Issues. In a report dated March 2001, Deutsche Banc Alex. Brown estimated that "home brews"[^4] accounted for 30 percent of the nearly \$5.0 billion market for "life science reagents."[^5] Others have estimated that the market share for home brews may be even higher. Research conducted by the Task Force on Genetic Testing suggests that 55.3 percent of non-profit clinical laboratories offering genetic testing services used tests developed in-house, as did 47.8 percent of biotechnology companies providing such services.[^6] 

Most laboratories that perform genetic testing use their own tests,
which are unregulated by FDA.[^7] In fact, according to FDA, in 2000, at
least 301 clinical or research genetic tests were offered in the
U.S.,[^8] and 158 laboratories offered clinical tests.[^9] Yet at the
time, FDA had approved only six specific gene tests.[^10] With up to 80
percent of all healthcare decisions relying on clinical laboratory
tests,[^11] and up to 10 billion lab tests performed in the U.S. each
year,[^12] the risks posed by lab-made tests that lack FDA oversight
cannot be overestimated.

Tests developed and performed in labs do not require prior review by
FDA, while tests developed by manufacturers and sold to labs do.
Laboratorians believe that it is necessary to provide testing services
for newly recognized analytes and for analytes that represent niche
markets, and both laboratorians and the physicians who order tests are
unwilling to wait for tests to go through the FDA review process. This
suggests that FDA needs a much speedier process than is currently
available for enabling tests that identify new analytes to get to
market.

In many cases, particularly when home-brew tests have proliferated,
there is ample evidence of the clinical significance of the analyte.
When such evidence exists, FDA could grant marketing permission for new
diagnostics based on characterization of analytes rather than on full
clinical testing. The requirement for FDA approval would apply to both
manufacturer- and lab-developed tests. This would provide a greater
degree of FDA oversight than at present and could assure that tests,
wherever developed, comply with FDA requirements for registration and
listing, labeling and instructions for use, adverse event reporting, and
good manufacturing practices. Previously, when confronting this
challenge, FDA took the position that it lacked the resources to deal
with the influx of applications that would result. Currently, however,
FDA has the ability to collect user fees for diagnostic reviews, which
could provide the needed additional resources.

Alternatively, should FDA continue to not regulate tests developed and
performed by clinical laboratories, easing submission requirements would
enable manufacturers to obtain marketing clearance with the same type
and quantity of data that laboratories currently collect prior to
offering a new testing service. FDA would thus assure a level playing
field and would enable manufacturers, for which the FDA approval process
provides the added assurance of safety and effectiveness, an incentive
to develop new tests rapidly.

**IRB Review and Informed Consent for Certain IVD Studies.** We
recommend that FDA set guidelines for waiving IRB review and informed
consent requirements for IVD studies that utilize leftover or banked
samples that are either unidentified or unlinked. AdvaMed further
suggests that FDA waive the informed consent requirements (but not the
IRB review) for limited data or coded samples.

Historically, IVD companies have utilized leftover or banked samples to
characterize the performance of their products and to control
manufacturing processes. These samples have been collected by
laboratories when patients were referred for specific testing and have
typically been characterized by a medically accepted test or method.
There are many advantages to using these samples, particularly for those
diseases or conditions where positive samples appear infrequently, e.g.,
atypical pneumonia caused by M. pneumoniae. By using banked samples, a
company may be able quickly to demonstrate a test's sensitivity and
specificity, rather than waiting several years to enroll a large enough
number of test sites to find positive patients.

Generally, studies that utilize leftover or banked samples require
little to no personal health information to be transferred with the
sample or the test result. These studies can typically be performed on
unidentified, unlinked, limited data, or coded samples.[^13] In its
report issued in August 1999, the National Bioethics Advisory Commission
(NBAC) determined that:

-   "Research conducted with unidentified samples is not human subjects
    research and is not regulated by the Common Rule" (no IRB or
    informed consent necessary).

-   "Research conducted with unlinked samples is research on human
    subjects and is ... eligible for exemption from IRB review" (IRB
    exempts study from review, no informed consent necessary).

-   "When a study is of minimal risk, informed consent is no longer
    needed.... IRBs should operate on the presumption that research on
    coded samples is of minimal risk to the human subject if a) the
    study adequately protects the confidentiality of personally
    identifiable information obtain in the course of research, b) the
    study does not involve the inappropriate release of information to
    third parties, and c) the study design incorporates an appropriate
    plan for whether and how to reveal findings to the sources or their
    physicians should the findings merit such disclosure."

Although the NBAC report was referring to the Common Rule (45 CFR 46),
and not to FDA's IRB and Informed Consent rules (21 CFR 50 and 21 CFR
56), the same principles should apply. The two rules should be
consistent.

-   Notwithstanding our comments regarding the speed to market of new
    IVD tests, including genetic tests, there may be situations in which
    clinical validation of a molecular test is necessary or desirable to
    support a product claim. Here, it would be beneficial to identify
    new approaches to clinical validation of molecular diagnostics. Such
    approaches could include:

    a.  The use of literature to establish or bridge clinical validity
        when supported by analytical claims;

    b.  Obtaining a statistically adequate number of specimens by
        phenotype, rather than genotype;

    c.  Statistical methodologies applied to existing literature; or

    d.  The use of DNA specimens collected from previously completed
        clinical trials for prospective clinical validation by blinding
        those genotyping the specimens from the clinical data under a
        pre-specified analysis plan.

**Risk-Based Approaches for IVD Product Development.** Risk-based
approaches applied to areas of the IVD product development cycle, such
as process validation, can expedite the availability of IVDs to address
emergent diseases. Risk-based models for IVD process validation need to
be developed based on concepts such as: (1) the use of components from
other validated assays, (2) process point inspection (i.e., process
points that through FMEA are traceable to critical product quality
attributes) and test verification, in lieu of validation, or (3)
validation plans designed for post-approval validation.

**CDRH Reviewer Education Programs.** Technology is changing extremely
rapidly, and it is difficult for FDA reviewers to remain current, not
only with the technology itself, but also with the medical procedures
for which the technology is employed. There needs to be a well
understood, carefully designed system for providing the needed
educational opportunities to the CDRH reviewers. This seems to be an
ideal vehicle for collaboration among FDA, industry, and academia.

As part of the overall education/training effort, it would be worthwhile
to investigate the possibility of setting up more forums like the
National Cancer Institute's (NCI) National Forum on Biomedical Imaging
in Oncology, which NCI, FDA, and NEMA sponsor jointly. According to the
NCI website, "The National Cancer Institute (NCI) is committed to
facilitating the translation of promising new discoveries into the
clinic."[^14] The site also explains that "The National Forum on
Biomedical Imaging in Oncology (NFBIO) was created in 1999 to facilitate
partnerships with the imaging industry and government agencies to
address new biomedical opportunities and challenges in oncology, and to
focus on the regulatory, coverage, and reimbursement issues for more
developed and established technologies."[^15] We believe that it would
be fruitful to examine the possibilities of establishing similar
entities in additional specialty areas.

**Data Collection for New Uses of Devices.** In general (mammography
being an exception) FDA does not regulate the practice of medicine. This
is a long-standing principle that the FDA, the medical device industry,
and the medical profession would like to maintain. Because of this
fundamental principle, clinicians are free to apply medical products
(drugs, biologics and devices) in ways and for purposes that neither the
manufacturer nor the FDA considered during the application and approval
process (provided the physician has determined the therapy to
appropriate and necessary). In effect, this "off-label" use of medical
products often serves as a proving ground for novel device applications
(i.e., unfunded research and development).

In the spirit of the "least burdensome" principle, we recommend FDA be
open to the use of data collected from independent, formal clinical
trials to facilitate approval of new uses of existing medical devices.
This becomes particularly important when an 'off-label' use has become
so commonplace within the medical community that it has become the
standard of carethus making it impossible to enroll patients in a
randomized clinical study that seeks to enroll one-half of the patients
into a control group using an approved (yet obsolete) therapy or device.

There are circumstances in which it would be appropriate for FDA to
accept data from an independent, formal clinical trial (or multiple such
trials) to validate an off-label use, and there are circumstances where
this would not be so. We believe that FDA could improve the flow of
approvals for additional indications for already approved devices by
defining reasonable guidelines for the use of independent rather than
company-sponsored clinical trials.

**Model Development Criteria.** We propose an effort to develop criteria
to determine when models are appropriate as a substitute(s) for clinical
testing. We believe that several areas have high potential and should be
the first addressed: software, materials, toxicology, sterilization, and
statistics. As the power of computers has grown, it has driven the
complexity and sophistication of computer modeling has increased
substantially. In the appropriate circumstances, computer models could
replace clinical data collection. The challenge here is to define those
circumstances and to determine whether the cost of and the time required
for model development make it worthwhile. In some instances, a good
model could reduce both the cost of and time for an FDA approval. In
other cases, the cost of the model itself could outstrip the savings,
or, when technology is moving very rapidly, the time to develop the
model could exceed the market life of the products.

**THE CENTERS FOR MEDICARE AND MEDICAID SERVICES**

**Standards of Evidence.** AdvaMed believes that the standards of
evidence used by Medicare to make coverage determinations should be
sensitive to the unique nature of advanced medical technology innovation
and ensure patients access to quality medical care. Evidence-based
medicine is defined as the conscientious, explicit and judicious use of
current best evidence in making decisions about the care of individual
patients. The practice of evidence-based medicine integrates individual
clinical expertise with the best available external clinical evidence
from systematic research.

However, sound evidence consists of many different things. It includes
evidence from large-scale clinical trials, but it also encompasses a
broad spectrum of information available to the medical community,
including the experience of individual practitioners who provide
treatment in everyday practice. Outcomes research should be viewed by
policy decision makers as one tool among many that are available for use
by physicians and patients in making optimal practice guidelines
developed by professional medical societies or other respected
organizations. Guidelines by these professionals should be considered by
CMS in the coverage decision making process. The independent exercise of
professional medical judgment is crucial to the practice of evidence
based medicine because it enables physicians and patients to use the
best available evidence in making optimal treatment decisions for
individual patients.

When clinical evidence is generated through the most rigorous of
clinical trials, CMS should rely on that evidence and issue a Medicare
coverage determination consistent with that evidence in a timely
fashion. A single, well-designed randomized controlled trial showing
positive benefit to the Medicare population should generate sufficient
evidence in most cases to determine initial Medicare coverage for the
technology or procedure at issue. Coverage policies may be revised as
additional evidence becomes available.

Federal agencies, such as the FDA, CMS, NIH, and AHRQ, have extensive
authority with regard to the consideration, collection, and review of
evidence related to medical interventions. These agencies each have
separate and distinct mandates, but communicate regularly and routinely,
to the extent permissible by federal law. AdvaMed does not support any
activities that would disrupt or lengthen either the FDA regulatory
clearance and approval process, or the CMS national coverage process.

It is also important to stress that, as FDA and CMS communicate with one
another as part of their efforts to understand the full scope of
clinical evidence, that they also carefully preserve the confidentiality
of all company trade secrets and other proprietary data that are
provided by manufacturers. The transfer of confidential company data
from FDA to CMS should occur only at the request of the submitting
manufacturer.

**Humanitarian Use Device Designations and Humanitarian Device
Exemptions.** Technologies that have received humanitarian use device
(HUD) designations and humanitarian device exemptions (HDEs) from the
FDA involve treatments for small populations with no other viable
treatment modality. Through the HDE approval process, Congress and the
FDA explicitly have promoted the development of technologies that treat
orphan diseases. Similarly, CMS should foster innovation in the
treatment of orphan diseases through the national coverage process. By
providing prompt national coverage for HDE technologies, CMS can provide
access to care for Medicare patients who would otherwise go without
treatment.

**Coverage Issues.** Prompt coverage permits the maximum contribution of
medical therapies to society. It enables the improvement of patient
health outcomes, by generating the kind of practical clinical knowledge
and experience that is useful to gain a clear understanding of long-term
effectiveness and clinical value. Further, it provides prompt access to
medical therapies for patients and providers. The local Medicare
coverage process is an excellent example of a means to provide prompt
coverage, access, and knowledge that can better inform Medicare\'s
long-term judgments on effectiveness and value.

We support Medicare coverage in Category B device clinical trials for
both the costs of routine patient care and the medical devices under
investigation at contractor discretion. We also endorse coverage for
routine patient care costs in Category A device clinical trials
consistent with the Medicare Prescription Drug, Improvement and
Modernization Act (MMA). If CMS issues a national non-coverage decision,
CMS should permit coverage of related Category B clinical trials in
order to promote the continued development of evidence, which will
inform future agency decisions about new uses of medical technology.

Knowledge of the ultimate clinical effectiveness of many medical
treatments emerges slowly, over time, as practitioners gain experience,
understanding grows, and therapies evolve-often through gradual,
incremental adjustments and innovations in real-world practice settings.
Unless Medicare recognizes this reality of incremental innovation, it
runs the risk of forcing premature assessments that will yield premature
judgments on the value of technology that could deny patient access to
important and often cost-saving treatments. In light of this,
policymakers should be wary of Medicare coverage processes that force
early assessment and should bear in mind that the absence of conclusive
evidence does not equate to the absence of clinical value. CMS should
not make National Non-Coverage Decisions unless it has definitive
clinical information that a product or service is not effective or that
it causes patient harm.

Evidence is important in coverage decisions, but sound judgment is just
as critical especially when evidence is incomplete or evidence cannot
answer every question that may arise. Sound judgment based upon a
variety of factors-from the experiences of individual practitioners and
the perspectives of professional associations, to the needs of Medicare
beneficiaries-is essential. In light of this, AdvaMed supports CMS
flexibility in the coverage process, which allows the government to make
decisions that adapt to the dynamic, evolving nature of medical care and
patient needs. Case-by-case treatment determinations at the local level
allow physicians to meet the needs of individual patients.

**Good Guidance Practices.** The MMA requires CMS to develop guidance
documents in a manner similar to the way in which the FDA develops
guidance documents using Good Guidance Practices (\"GGPs\"). A central
purpose of the FDA GGPs is to describe how the public and the agency
will work together to develop guidance documents. For example, they set
forth (1) how and when the public may participate in guidance
development, (2) the effect of guidance on stakeholders and the agency,
and (3) an appeals process for guidance documents. To be effective,
guidance documents need to be practical for the agency and for Medicare
stakeholders. AdvaMed recommends that CMS use a public process to
develop a guidance document that lays out the agency\'s own version of
the GGPs. CMS should publicly vet a guidance document that describes how
it will develop future guidance documents.

Under the GGPs, FDA may seek input from the public prior to developing a
guidance document. AdvaMed believes that CMS\'s willingness to solicit
and listen to stakeholders\' input before publishing draft guidance (and
before the agency becomes too invested in a particular proposal) is
essential. CMS should provide stakeholders with opportunities to engage
in real-time dialogues with CMS personnel to discuss issues in need of
resolution before the agency even puts pen to paper.

These pre-proposal discussions are important because they can make the
guidance development process more efficient and effective. By seeking
public input prior to developing a draft, CMS can anticipate and address
some of the comments that might otherwise come after the development of
a draft. Public participation, including pre-proposal discussions,
invariably leads to more sensible guidance due to the insights and
experiences offered by academics, clinicians and other stakeholders.

Several avenues exist for pre-proposal collaboration, for example:

-   Public meetings, including CMS workshops, and conferences;

-   Private meetings with specific industry groups on CMS\'s premises;

-   Industry-hosted meetings that CMS attends;

-   Continuing meetings without uniform composition;

-   Meetings convened by a neutral third party; and

-   Written pre-proposal dialogue, either by e-mail or other
    correspondence.

**Temporary National Coding.** CMS should implement several key process
adjustments to HCPCS temporary coding processes:

A.  Process adjustments for requests from Medicare contractors:

    1.  Create a policy of prompt issuance -- within 90 days -- of G, K
        and Q codes for Medicare contractors that request them.

    2.  Allow contractors to work directly through the national office,
        without sign-off from the Regional Office.

    3.  If needed, temporary codes requested by Medicare contractors
        should be automatically assigned within 90 days, if a local
        policy is issued under the local medical review policy (LMRP)
        process; however, a LMRP should not be necessary in order to
        assign temporary codes.

> B. Process adjustments for requests from parties other than CMS or its
> contractors:

1)  Allow for consideration of requests for temporary codes from
    interested parties other than CMS and its contractors, including
    Medicaid state agencies, patient advocacy groups, providers and
    manufacturers.

2)  Establish a process for public posting of all coding requests and
    issuance of temporary codes for approved requests from interested
    parties other than CMS and its contractors, within 120 days of
    receipt of the request.

    C.  Process adjustments for requests from CMS and other members of
        the HCPCS Alpha-Numeric Panel:

```{=html}
<!-- -->
```
1)  Increase transparency in the development and issuance of temporary
    codes initiated by CMS or other members of the HCPCS Alpha-Numeric
    Panel, including public posting of such proposed codes and
    descriptors.

**Device Reimbursement in the Hospital Outpatient PPS.** AdvaMed is
committed to a system that ensures that relative weights and payment
rates under the hospital outpatient prospective payment system (OPPS)
include sufficient resources to account for the costs of the medical
technologies associated with the Ambulatory Payment Classification (APC)
groups, to assure Medicare beneficiaries have access to these
technologies in the outpatient setting.

The notice of proposed rulemaking, published on August 16, 2004, for the
2005 update to the OPPS, raised some issues of continuing concern. One
key issue is the coding for implantable devices, or \"c-codes,\" for
items that had, at one time, been eligible for temporary pass-through
payments. CMS had found that inconsistencies in device coding had
resulted in underpayment for certain device-related APCs, and in past
years, had screened claims out of the rate calculations that were not
correctly coded with c-codes. However, once the temporary pass-through
payment status expired, CMS prohibited hospitals from using those
c-codes, even for tracking purposes, and so lost the ability to screen
device-related claims in setting the 2005 APC rates.

AdvaMed, and the CMS Advisory Panel on APCs had recommended that CMS
address this issue by: (1) stabilizing rates to the 2004 levels with a
cost of living update, (2) utilizing external data provided by
manufacturers and other stakeholders in addition to the claims data to
adjust the actual APC rates for 2005, and (3) mandating the use of
c-codes for tracking purposes in the future. AdvaMed also recommended
stabilizing rates for other APCs to prevent deep cuts from year-to-year.

In the August 16 NPRM, CMS proposed mandating the use of only a third of
the device c-codes. Again, AdvaMed recommends that CMS mandate the use
of all c-codes to improve OPPS data on the costs and resources involved
in providing device-related services in the outpatient department. CMS
addressed the deep reductions in certain device-related APCs by
adjusting the median cost calculations to 90% of the medians used in the
2004 rates.

Many of the APCs that were subject to the adjustment to 90% of the
medians used to calculate the 2004 payments had experienced decreases in
rates from prior years, and even in 2004, had not received a
reimbursement level that recognized the full costs of the devices and
other resources required to perform these procedures. Also, a number of
device-related APCs have been underpaid from the start of the OPPS. We
are concerned that the additional proposed reductions in 2005 could
prevent many hospitals from covering their costs, translate into
significant losses for those hospitals that perform more of these
procedures, and lead to access problems for beneficiaries.

When the medians used to calculate the 2005 payments fall below the 2004
adjusted medians used to calculate the 2004 payments, or when
stakeholders present external data in response to this year\'s proposed
rule that demonstrate the insufficiency of the data used to calculate
the proposed payments or the insufficiency of the proposed payment rate,
we believe that CMS should make adjustments that more accurately
represent the cost of performing the device and technology-related
services. Such adjustments should include incorporating external data
into the median cost calculations, and continuing the rates at the
levels paid in the current year.

The August 16 NPRM moved 25 device-related procedures from current New
Technology APCs into clinical APCs. AdvaMed is concerned that the
majority (18 out of 25) of these procedures will be moved to
lower-paying APCs. Half will be reduced by at least 20%\--and in some
cases, by nearly 50%\--from current payment levels. These reductions
will not only affect access to these new services, but could have a
negative effect on other new technology in the pipeline.

We are also concerned that the approval of new device pass-through
categories has decreased significantly, with only three going forward
into 2005. This program is an important avenue for Medicare
beneficiaries to have access to new technologies, and we recommend that
the agency work with AdvaMed to improve this program.

**New Technology Add-on Payments. ** Congress established new technology
add-on payments under the Medicare inpatient prospective payment system
to ensure patient access to breakthrough technologies. The add-on
payment was designed to provide adequate payment for a new technology
during the two- to three-year period when the technology's cost data is
first being accurately collected, and CMS has not yet adjusted the DRG
relative weights to account for the new technology. Unfortunately, CMS's
conservative approach to implementing the add-on payment improvements
that Congress included in the MMA has the potential to frustrate
congressional intent. To avoid that possibility, CMS should:

-   Increase the add-on payment percentage from 50 to 80 percent of the
    difference between the standard DRG payment and the cost of the
    procedure with the new technology, as Congress suggested in MMA
    report language;

-   Start the two- to three-year add-on payment eligibility time clock
    after the issuance of an ICD-9 code, not immediately after the date
    of FDA approval;

-   Continue to allow add-on payments for a new use of an existing
    technology, so long as the technology is assigned to a different DRG
    than that to which it was originally assigned and meets the cost
    threshold and "substantial improvement" criteria;

-   Apply the following test of payment adequacy to assure that a DRG
    assignment results in an appropriate payment: The difference between
    the base payment for DRGs to which the new technology would
    otherwise be assigned and payment under the proposed new DRG
    assignment should equal or exceed the maximum add-on payment amount
    if an add-on payment were made;

-   Amend the definition of "substantial improvement" as it appeared in
    the 2001 inpatient final rule to conform to the 2001 outpatient
    rule, most notably to account for improvements in the technology
    itself and in patient quality of life;

-   Ensure that its evidence requirements for new technology add-on
    payment applications do not place special burdens on smaller
    companies, which often are responsible for developing unique
    technologies and therapies;

-   Move forward with the implementation of ICD-10 as quickly as
    possible.

**Competitive Bidding.** To address strong concerns AdvaMed members have
about competitive bidding for durable medical equipment and diagnostic
laboratory tests, AdvaMed recommends the following during the
implementation of the MMA provision:

-   Establish an independent, non-CMS advisory and oversight committee
    with significant representation from the manufacturing industry,
    patients, and practitioner advocates, to review products to be
    subject to bidding, and to identify quality standards for those
    products. In a June 2, 2004, notice published in the Federal
    Register requesting nominees to such a committee, CMS noted that it
    was seeking appoint 12 to 15 members. However, AdvaMed believes that
    limiting the committee membership to 12 to 15 individuals will
    restrict the scope of expertise and representation. Expanding the
    committee to 25 to 30 members would increase its ability to provide
    thoughtful and well-informed recommendations to CMS regarding the
    design and operation of the program, in addition to having enough
    representatives to handle what is expected to be an extremely
    demanding workload. Also, this committee should have more than one
    manufacturers\' representative The agency should present its
    implementation plan, including an identification of product codes
    and related quality measures, to this Committee, allowing sufficient
    time for committee consideration and response by the agency to the
    committee\'s comments. This committee will also participate in
    program review and evaluation.

-   Provisions should be made to assure that beneficiaries have access
    to new technologies in areas where alternatives to the fee schedule
    are implemented. Where a new technology is already covered by an
    existing HCPCS code, there should not be disincentives to access.

-   Phase-in the application of the program by starting with items that
    have been tested under the Medicare demonstration projects.

-   The bidding process between CMS and suppliers should be an open
    process, following the Federal Acquisition Rules. Requests for bids
    must include detailed specifications, with product category
    identified by HCPCS code (codes are not collapsed into broader
    categories), and standards for these products. CMS must understand
    the environment of the particular markets, and must evaluate bids on
    feasibility to provide multiple sourced, quality products and
    related services at the prices quoted. Multiple products are
    available in each product category subject to bidding to allow a
    range of products to meet patients\' needs. The methodology to
    select the winning bid and amounts to be paid by Medicare will be
    made public.

-   Suppliers whose bids are equal to, or within a specified range, of
    the winning bid will be permitted to participate in the program.
    Multiple winners must be awarded to maintain a viable competitive
    market. The number of contractors in an area needs to meet specified
    capacity for growth, and expansion in the case of supplier contract
    cancellations, or contractors leaving the program.

-   Current provisions for beneficiary choice should be preserved.
    Mechanisms will be established to assure continuity of care for
    beneficiaries.

-   The current fee schedule and DME carrier processes should be
    improved to incorporate new technology and new HCPCS codes and
    reimbursement levels based on a timely, open, transparent process.
    Since DMERCs engage in a de facto national coverage decision making
    process, the protections associated with that process should be put
    into place.

**DME Prescription Requirements.** Provisions in the August 5, 2004,
proposed rules governing the Medicare Physician Fee Schedule and
sections of the Medicare Modernization Act (MMA), establish an overly
burdensome process requiring a face-to-face visit with a physician for
prescribing, determining medical necessity, renewing prescriptions,
repairing, and replacing [all]{.underline} durable medical equipment,
prosthetics, orthotics, and supplies (DMEPOS).

We note that MMA requires a face-to-face visit with the prescribing
physician for power wheelchairs only, based on hearings and evidence
provided by CMS regarding specific fraudulent activities. Congress
directed CMS to establish other clinical criteria for the prescription
of other DME products, as appropriate. We interpreted this to mean that
CMS should examine the evidence relating to specific types of products
and carefully establish appropriate clinical criteria and procedures for
those particular products.

Currently, criteria have been established for selected items through
local coverage determinations (LCDs) and national coverage
determinations (NCDs). While we support the concept that patients who
require DMEPOS items should see their physicians regularly, we believe
that the all-encompassing approach required in the NPRM goes far beyond
Congressional intent. We believe that requiring a face-to-face visit to
prescribe [all]{.underline} DMEPOS items is overly burdensome to the
physician and the patient, and may result in reduced access and
diminished treatment. The rules also contemplate the need for a
face-to-face visit for renewing prescriptions for the DMEPOS items,
repair and replacement. Again, we believe that, while these patients
should have regular visits with their physicians, they should not be
required to have a face-to-face visit for every facet in their access to
DMEPOS items.

We strongly recommend that CMS rewrite the regulations by removing the
face-to-face visit requirement for [all]{.underline} DMEPOS items, and
work with stakeholders on more appropriate alternatives.

**THE CENTERS FOR DISEASE CONTROL AND PREVENTION (CDC)**

In several recent instances, most notably during the anthrax scare, CDC
has developed "home brew" diagnostic tests, distributed them to public
health laboratories, and required the laboratories to use only those
tests. CDC did not distribute these tests to privately owned
laboratories, nor did the Agency ask for or receive FDA clearance for
these new diagnostic tests. In all cases, there were members of the IVD
industry willing to and interested in developing similar tests. However,
the CDC actions preempted such efforts.

While we respect the need to move quickly in times of public health
emergencies, we have concerns with federal agency(s) competing with
private industry while circumventing controls that would have affected
similar products that industry developed. We recommend that HHS develop
internal interagency policies that would either require CDC to satisfy
the same requirements that apply to industry for the same activities or
preclude test development by CDC or other agencies, except in those
circumstances where industry does not or cannot develop the needed
tests.

Improvements are also urgently needed in the systems CDC uses for
sharing samples with IVD manufacturers. Easier access to samples will
improve the diagnostic testing capacity of the United States, especially
for the development of tests for emerging diseases.

[^1]: NIBIB Mission statement

[^2]: Ibid.

[^3]: Samore, Matthew H., et.al., "Surveillance of Medical
    Device--Related Hazards and Adverse Events in Hospitalized
    Patients," *JAMA.* 2004;291:325-334

[^4]: Home brews are diagnostic assays or tests created by clinical
    laboratories for use by that laboratory.

[^5]: *See* Deutsche Banc Alex. Brown, [Life Science Reagent Companies:
    Helping Decipher the Genetic Code]{.smallcaps} 9 (2001).

[^6]: National Human Genome Research Institute, *Final Report of the
    Task Force on Genetic Testing, Appendix 3. State of the Art of
    Genetic Testing in the United States: Survey of Biotechnology
    Companies and Nonprofit Clinical Laboratories and Interviews of
    Selected Organizations* 14 (1997).

[^7]: Cystic Fibrosis FAQ, Genetics & Public Policy Center,
    http://www.dnapolicy.org/cf/faq.jhtml, (last visited April 12,
    2004).

[^8]: David W. Feigal, Jr., Center for Devices and Radiological Health,
    \"Future Trends\" (July 18, 2000) (presented before the AdvaMed
    Submissions Workshop, Washington D.C.).

[^9]: *Ibid.*

[^10]: *Ibid.*

[^11]: *See* Nancy Williams, *How Reliable is Laboratory Testing?*,
    [www.labtestsonline.org/understanding/features/reliability.html]{.underline}
    (last modified May 19, 2003).

[^12]: *Ibid.*

[^13]: Limited data samples are those that include certain demographic
    information, as defined by HIPAA, but cannot reasonably be
    identified from that information. An unidentified sample is one that
    has no accompanying demographic information or identifying
    information or an individual sample that has been pooled with other
    samples so that it is no longer individually distinguishable.

[^14]: **Note:** ^∗^ indicates a topic that will also be relevant to
    Secretary Thompson's Innovation Initiative.

    ^?^ National Cancer Institute Web site:
    <http://otir.nci.nih.gov/ir/forum.html>

[^15]: *Ibid.*