Rumored Regs Could Help Payers, PBMs Streamline Digital Therapeutic Coverage

Notable changes to the way breakthrough medical devices are covered by Medicare and other payers could be coming soon, with CMS poised to make some therapeutics eligible for Medicare coverage, and some stakeholders pushing for new legislation to expand digital therapeutic coverage. In the meantime, commercial health plans and PBMs are grappling with how best to cover prescription digital therapeutics (PDTs).

Health plans and PBMs have varying approaches to digital therapeutic reimbursement. Some plans may place one digital therapeutic in the medical benefit, while others may cover PDTs as part of a pharmacy benefit. That’s because PDTs occupy a unique space in the health benefits landscape: They aren’t pharmaceuticals, but they share many characteristics of a maintenance medication in practice.

PDTs must be prescribed by a practitioner, are billed on a cyclical basis and could conceivably be slotted into a prior authorization or step therapy regime alongside pharmaceuticals. Some PDTs for rare or complex conditions could be compared to a specialty pharmacy drug or complement existing specialty pharmacy products.

Possible upcoming regulatory changes may simplify PDT reimbursement for government payers. STAT reported on April 19 that CMS officials have said that this summer they may finalize rulemaking proposed in June 2023, the Transitional Coverage for Emerging Technologies (TCET) pathway. The medical device industry has pushed CMS to speed up finalization of the pathway, which has dragged on for nearly a year.

Smoothing coverage for breakthrough devices would be good news for PDTs such as Better Therapeutics, Inc.’s cognitive behavioral therapy tailored for treating metabolic dysfunction-associated steatohepatitis (MASH), and Boehringer Ingelheim and Click Therapeutics’ CT-155, a treatment for negative symptoms of schizophrenia. Both PDTs received breakthrough device designations from the FDA this year.

Digital Therapeutics Bill Idles in Congress

Meanwhile, Congress could have its own hand in revamping PDT regulation. A bipartisan group of legislators last year introduced the Access to Prescription Digital Therapeutics Act of 2023, which would create Medicare and Medicaid benefit categories for PDTs and require CMS to establish specific coding for them. The bill, according to government affairs executives from the Academy of Managed Care Pharmacy (AMCP), wouldn’t require payers to cover or reimburse specific PDTs, but it would make PDTs eligible for the type of discretionary formulary inclusion allowed for certain classes of pharmaceuticals.

Managed care players have begun to push for Congress to work faster to consider and ultimately approve the bill, which has languished in the Senate Finance Committee since it was introduced.

The changes that the bill and TCET pathway would make are appealing to payers because the “bill creates a benefit category for prescription digital therapeutics in Medicare and Medicaid, and this benefit category is necessary in order for CMS to provide coverage and reimbursement for a PDT,” said Jennifer Mathieu, AMCP’s vice president for professional and government affairs, on April 16 during the trade group’s annual meeting in New Orleans. “Medicare/Medicaid don’t have robust flexibility to cover products outside of what’s already statutorily defined as a medical category.”

However, “there are some very specific parameters that a digital therapeutic must have in order to be part of this…benefit category,” Mathieu added. “No. 1 is the product needs to be reviewed and cleared by FDA. And it needs to be prescribed by a provider. So that sets it apart from non-prescription digital therapeutics, as well as some of the direct-to-consumer apps that I think we all have.”

In addition, Mathieu said, “I want to really stress that this does not require CMS to actually cover or reimburse for these products — it just gives them the pathway to do so that they don’t currently have.”

Mathieu also pointed out that “there is a disparity in who has that coverage, that access, and is reimbursed for [PDTs] between government programs like Medicare and Medicaid and commercial plans. There are commercial plans that are covering these.”

Mathieu added in a PDT-focused panel on April 17 that while the bill is still stalled in committee, there could be a chance of passage in “a health care package at the end of the year. It’s going to have all kinds of bits and pieces in it…we feel that is our best option” for passing PDT reform in the near term, she said.

Do PDTs Fit in Medical or Pharmacy Benefits?

While government programs have just begun to consider PDTs, it’s notable that commercial payers are struggling to implement best practices and contracting for PDTs.

“Any time we see a new technology, or a new product comes to the market, we have to determine, does it fit our existing benefit? Those benefits tend to be pretty conservative,” said James Kenney, Pharm.D., founder of JTKenney LLC, a managed care pharmacy consulting practice, during the April 17 panel. He previously was an executive at Harvard Pilgrim Health Care, now Point32 Health.

PDTs are unusual because they “don’t fit in terms of medical coverage,” Kenney said. “We’ve got two core benefits: the pharmacy benefit and the medical benefit. It [a PDT] is not a drug, typically, so you can say…probably it’s going to be on the medical benefit. But we have some of these [PDTs] obviously approved to be prescriptions…so prescription [drug-style] benefits make sense — but it’s not a drug.”

For many health plans, Kenney continued, “you’ve run into some challenges when you start looking at this. Your pharmacy and therapeutics committee looks at these and says, ‘Well, it’s really not a drug,’ and they tend to toss those…to the medical side of the house. So, first and foremost, we have to make a [coverage] determination. And each plan does this differently: What benefit are we going to consider when we evaluate this product? …How do we adjudicate a claim [and] process these products as they come through the system?”

For commercial plans, Kenney said, “right now, we don’t really have our coding scheme…that’s well-designed to handle that piece of the puzzle.”

After coverage determinations have been made, payers have to figure out how to structure contracts with the device manufacturer, said Robert O’Brien, senior vice president for specialty pharmacy at Real Endpoints, a market access consultancy.

Having been involved in both development and negotiations for PDT contracts, “I think a couple of best practices kind of come to mind” for PDT contracting, O’Brien said during the April 17 panel. “One is the contracts have to have value both ways…a lot of the time, the way that these contracts are structured…they tend to really put a lot of the risks on the manufacturer.”

O’Brien added that with prescription digital therapeutics, “there’s very unique data” concerning “being able to really monitor patient engagement, and even patient-reported outcomes. So there is a level of different endpoints and data availability that we don’t have in traditional medication. There’s a real sophistication to the contracting design, in terms of leveraging data.”
To that point, Kenney said, Harvard Pilgrim in its early PDT contracting “didn’t want to be paying for something that wasn’t adopted,” and wanted to know “whether it worked or not.”

In other words, Kenney said, the insurer decided “I don’t want to pay for adherence, I want to pay for outcome” that it could measure in claims.

That meant, Kenney said, “we agreed [with manufacturers] that the health care utilization costs had to decrease in the cohort of patients that were on [the devices]. We used very simple, high-level [measurement of] emergency department visits or hospitalizations. So in the contract, we had language that this cohort of patients had to have a decrease of a certain amount in that calculation after they had been exposed to the intervention.”

This article was reprinted from AIS Health’s biweekly publication Radar on Drug Benefits.

© 2024 MMIT
Peter Johnson

Peter Johnson

Peter has worked as a journalist since 2011 and has covered health care since 2020. At AIS Health, Peter covers trends in finance, business and policy that affect the health insurance and pharma sectors. For Health Plan Weekly, he covers all aspects of the U.S. health insurance sector, including employer-sponsored insurance, Medicaid managed care, Medicare Advantage and the Affordable Care Act individual marketplaces. In Radar on Drug Benefits, Peter covers the operations of (and conflicts between) pharmacy benefit managers and pharmaceutical manufacturers, with a particular focus on pricing dynamics and market access. Before joining AIS Health, Peter covered transportation, public safety and local government for various outlets in Seattle, his hometown and current place of residence. He graduated with a B.A. from Colby College.

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