the device available for use if the device was substantially more expensive than existing technology. (Use of an HDE device still requires IRB approval as described above.)

Moreover, by statute, Medicare generally limits payment to items or services that are “reasonable and necessary” for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member” (42 USC 1395y). This has generally been interpreted to mean that a service or item must be safe and effective, medically necessary and appropriate, and not experimental in order to qualify for reimbursement.

The Centers for Medicare and Medicaid Services (CMS) have approved add-on payments for some devices that have HDE approval. One is the artificial implantable heart described earlier (AbioMed, 2005). Another is the device for treatment of pulmonary air leaks mentioned in Box 7-1 (Spiration, 2009). Overall, of the seven applications for add-on payments approved between 2001 and 2008, six were for products classified as medical devices (Clyde et al., 2008).

As this report was being completed, CMS and FDA announced a memorandum of understanding to share information and expertise related to the review and use of FDA-regulated devices and other products (75 Fed. Reg. 48699). The agencies are also considering a process of parallel review that would reduce the lag between FDA marketing authorization decisions and CMS national coverage determinations (75 Fed. Reg. 57045).

The committee did not examine the coverage and reimbursement policies of state Medicaid programs or private health plans, but it did find illustrative examples of variation in health plan policies. Some private health plans have authorized coverage for specific uses of an HDE and rejected it for others. For example, Aetna will cover certain uses of total artificial heart devices and left ventricular assist devices, but it considers other uses experimental and investigational (Aetna, 2010). At least one health plan has posted a general policy on coverage that states Humanitarian Use Devices are subject to individual review and prior approval (Wellmark Blue Cross Blue Shield, 2009).

MEDICAL DEVICE RESEARCH AND DEVELOPMENT

In order to lay the foundation for the committee’s recommendations for encouraging the development of medical devices for rare diseases, it is useful to review briefly some features of medical device innovation and development. For example, breakthrough implantable devices were made possible, in part, by scientific and engineering advances in areas outside biomedicine. Creative device ideas have often originated with physicians in the clinic who are trying to address specific problems they encounter or to help a specific patient with the tools at hand. The life cycle of devices



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