At S2N we are often helping clients with pricing strategies for innovative devices, looking under every rock for sources of payment aligned with the anticipated benefits. For novel technologies used in the inpatient setting, the subject of New Technology add-on Payments (NTAP) often comes up as a potential option. For those not familiar with NTAP, this program was created by CMS in 2001 to provide additional payment for a 2-3 year time period on top of an existing DRG for FDA approved/cleared novel drugs and devices that are:

1)     New (harder than it seems)

2)     A substantial clinical improvement over existing technologies

3)     Costly enough that current DRG payment is inadequate

If accepted into the program, CMS reviews hospital use and costs under the temporary NTAP add-on payment to ultimately determine what if any permanent changes to DRG payments are required. Sounds simple, right? Yet only 30% of the 95 applications submitted between 2003-2018 were accepted, with devices, in particular, struggling in recent years to meet particularly the newness and substantial improvement criteria[1]. However, changes to NTAP in the CMS 2020 Final Rule, released on August 2, indicate the tides may be turning. With the intent of making device innovations more accessible to patients, CMS made the following modifications to NTAP:   

1)     Increased the add-on payment up to 65% of the cost of the new technology (as opposed to current 50%); note that CMS assumes existing DRGs can absorb some portion of the cost

2)     Added more specific guidance regarding what qualifies for the substantial clinical improvement criterion for NTAP

3)     Added a new NTAP rule for devices that are designated Breakthrough by the FDA

While the increase in the percent of the cost covered in the add-on payment and clarifications will be very helpful, the major game-changer for device innovators is the new linkage between FDA breakthrough status and NTAP.

For a bit of background on the Breakthrough Device Program, it was formalized in 2015 by the FDA as a means to provide an accelerated pathway to approval/clearance for devices meeting a high clinical unmet need. Under the newly released CMS 2020 Final Rule, starting in 2021 devices receiving Breakthrough status from FDA will be assumed to meet current NTAP newness and substantial improvement criteria, leaving only the cost test for NTAP. This could be huge— In 2018 alone, the FDA approved 71 devices for breakthrough status, more than NTAP has approved in the last 15 years[2]

So, what does this mean for your novel medical device, and what challenges may remain?

First and foremost, the path to additional inpatient reimbursement may have just gotten a whole lot more achievable if your device qualifies for FDA Breakthrough status and meets the cost criteria for NTAP, so getting that Breakthrough designation is even more compelling. This temporary reimbursement should give companies time to gain market traction and develop further clinical and economic data.  In terms of pricing strategy, you may be able to price your novel device to the evidence you plan to develop post-market without severely limiting the target accounts and uses. While this all sounds fantastic, and it is, there are definitely still a few challenges to keep in mind:

  • NTAP is temporary, and if during the payment period you haven’t achieved much uptake of your technology CMS will see little reason to make permanent DRG adjustments. Expect to invest significantly in gaining market adoption under NTAP, especially since some of the cost of your device will be borne by your hospital customers (remember CMS only picks up 65%)

  • For both clinical adoption and long-term reimbursement, you need to use that NTAP period to generate more evidence – it’s pretty much the reason CMS is opening NTAP to Breakthrough devices!

  • While the NTAP Cost criterion would seem to say shoot for the moon in terms of pricing, don’t get too far over your skis on this. If you price too high then  hospitals will not adopt because their economics will be tanked by the portion of the cost CMS is not covering, thereby lowering the chances of permanent reimbursement

Ultimately, the new NTAP rules are great news for med tech innovators with devices that qualify for FDA Breakthrough status, opening up a new opportunity for temporary additional reimbursement and a chance to accelerate adoption. To get the most out of NTAP, though, companies will need to also accelerate investment in market adoption and evidence development, with implications for fundraising and organizational growth. NTAP is also not a ticket to sky-high pricing, despite the cost criterion, although it does give companies time to “backfill” evidence to support aspirational initial pricing.  

For those of you with devices used in the outpatient setting, be patient - a similar rule is in draft form for the outpatient prospective payment system (OPPS) through the Pass-Through Payment Program.


[1] Truglio, A., and C. Livoti. "Analysis of Success Rates for the Center for Medicare and Medicaid’s New Technology Add-On Payment Program." Value in Health 21 (2018): S117-S118.