How CMS is Killing Breakthrough Medical Device Innovation

The Success Rate Problem With Breakthrough Devices

Of the almost 1,200 devices that have earned FDA’s Breakthrough Device Designation since the program began in 2016, fewer than 160 have made it to market. That’s roughly a 14% success rate for technologies designed to help people with chronic, debilitating, or life-threatening diseases. These aren’t speculative concepts – these companies have already built functioning devices, demonstrated clinical results, and worked with the FDA to earn breakthrough status. So why aren’t they reaching the patients who need them? 

What Was the FDA’s Goal With the Breakthrough Device Designation?

In 2016, the FDA established the Breakthrough Device Designation program, aiming to speed up the development and review of medical devices that offer more effective treatment or diagnosis for life-threatening or irreversibly debilitating conditions. It has made FDA engagement more accessible to groundbreaking early-stage companies and, in its early days, really gave a boost to early stage medical device companies seeking investment. Since its launch the program has granted almost 1,200 designations, successfully attracting cutting-edge innovation in areas like AI diagnostics, neuromodulation, and implantable devices. 

Unfortunately, while the FDA has sought to support breakthrough medical technologies, it hasn’t resulted in a serious uptick in breakthrough technologies hitting the market. The gap isn’t the FDA – it’s CMS. The Centers for Medicare and Medicaid Services has significant influence on insurance coverage nationwide. Private insurers often follow CMS’s lead on what they’ll cover and how much they’ll pay. Without CMS coding, coverage, and payment pathways, medical devices cannot achieve commercial viability. 

This creates a vicious cycle: investors know that even FDA-approved breakthrough devices face years of expensive reimbursement battles with uncertain outcomes. So, they avoid funding these companies in the first place – meaning most breakthrough technologies never get the early resources needed to reach market. 

Why is Reimbursement Easier for Breakthrough Drugs Than Medical Devices?

The FDA’s Breakthrough Device Designation mirrors the pharmaceutical industry’s Breakthrough Therapy Designation – both accelerate development and review for promising technologies addressing serious conditions. However, investor confidence remains significantly higher for drug programs because CMS reimbursement pathways for pharmaceuticals are far more predictable. 

Once a drug receives FDA approval, CMS coverage follows established patterns. Medicare benefit categories and billing infrastructure already exist for most drug types. HCPCS codes cover nearly all medications, and pricing methodologies are well-established, making revenue forecasting relatively reliable. 

Medical devices face a completely different reality. Even FDA approval (including breakthrough designation) doesn’t trigger any guaranteed CMS coverage, and companies often face years of navigating coding, payment, and coverage (and additional clinical trials) just to get paid for the product. Research shows that for devices requiring new Medicare coverage, the median wait time is 5.7 years, with some taking up to 7 years to achieve coverage. 

Medical device investors are famously risk-averse and a lot of this is because they know that the evidence and effort needed to build a new reimbursement pathway is too costly and they will never recoup their investment. So, the vast majority of medical devices that get funded are not breakthrough technologies, but incremental improvements on existing products with existing CMS reimbursement pathways. 

This broken reimbursement system is clearly thwarting breakthrough medical device innovation, but there have been efforts to fix it. In fact, one initiative came tantalisingly close to solving the problem. 

What Was the MCIT Program and Why did it Fail?

In 2019 I was a very excited startup exec because a new executive order would help medical devices with Breakthrough Device Designation get insurance coverage with CMS. President Trump had signed the order creating MCIT, which was designed to provide national Medicare coverage for breakthrough devices, with coverage lasting for 4 years – allowing time for those medical device companies to build more robust clinical evidence. 

Unfortunately, CMS was reluctant to implement the program and slow-walked getting it in place until the next administration was in office. 

Next came the Biden administration. They moved quickly to reverse many of their predecessor’s executive orders, and MCIT was among them. CMS immediately announced a delay in MCIT’s implementation and then rescinded the rule entirely, citing concerns that “the kinds of clinical studies needed for FDA market authorisation might not consider the differences in clinical profiles, complexities of medical conditions, or associated treatments of the diverse population of Medicare patients”. 

To be clear, I don’t fault the Biden administration for this – MCIT got swept up in the broader policy reset. But I do think established industry interests, particularly big pharma, saw an opportunity during the transition to kill a program that would have accelerated access to breakthrough medical devices. 

Is TCET a Real Solution for Breakthrough Devices?

CMS eventually created a replacement program: the Transitional Coverage for Emerging Technologies (TCET) pathway. The TCET pathway aims to expedite Medicare coverage of certain FDA-designated Breakthrough Devices, providing faster national coverage (within six months of FDA market authorisation) typically lasting 3 – 5 years. Sounds promising, right? 

Here’s the catch: CMS anticipates accepting up to five TCET candidates per year. Five. Per year. And how they determine who they will pick is completely unclear – so I’m guessing more lobbying money will be required? 

TCET officially launched in August 2024 and, despite having four quarterly review cycles since then, CMS has not announced selecting any devices for the program. 

This isn’t a solution. It’s regulatory theatre designed to give the appearance of supporting innovation while maintaining the status quo that protects established interests. 

How do CMS Policies Impact Investor Confidence?

This systematic policy failure explains why investors avoid breakthrough medical devices despite their enormous potential. Why would you invest in a company that might spend five to ten years navigating FDA approval, only to face an insurmountable reimbursement barrier? 

The risk-adjusted returns simply don’t make sense when CMS can arbitrarily decide that breakthrough technologies don’t deserve coverage. Even worse, the TCET program’s five-device annual limit means that breakthrough designation becomes meaningless for most companies. You can have FDA validation, clinical evidence, and desperate patient need, but if you’re device number six in line, you’re back to the traditional coverage determination process that can take years. 

The most frustrating part? These are exactly the technologies that could reduce long-term healthcare costs by providing more effective treatments for debilitating conditions. Instead of supporting innovations that could transform patient outcomes, CMS preserves a system that rewards expensive, ongoing treatments over potentially curative breakthrough devices. 

Who Really Pays the Price for CMS Inaction?

The real tragedy about breakthrough devices not being funded isn’t just about investment returns or regulatory efficiency. It’s about patients with life-threatening or debilitating conditions who can’t access treatments that could transform their lives. These aren’t hypothetical future innovations – they are real, clinically validated technologies that exist today but remain out of reach because of CMS’s systematic refusal to create new coverage pathways. 

For anyone at CMS or HHS reading this – I’d welcome the opportunity to contribute my experience to help fix this broken system. The current administration has a chance to restore what was taken away. Want to Make America Healthy Again? Let’s work on getting CMS to support medical device innovation. 

Disclaimer. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of Test Labs Limited. The content provided is for informational purposes only and is not intended to constitute legal or professional advice. Test Labs assumes no responsibility for any errors or omissions in the content of this article, nor for any actions taken in reliance thereon.