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Breaking Down Q1 2023 Digital Health Policy Updates

Insights and Implications on AI/ML Software, Companion Apps for Pharma, Digital Diagnostics, VR Software, Breakthrough Devices, and More

There was a barrage of activity by FDA in Digital Health at the end of 2022, including the wind-down of the Digital Health Pre-Certification program, final guidance on Clinical Decision Support Software, Mobile Medical Applications, Medical Device Data Systems, and Computer-Assisted Detection (CAD) Software, draft guidance on Cybersecurity, resource pages on Augmented Reality/Virtual Reality and Artificial Intelligence/Machine Learning (AI/ML). There were also several notable reimbursement decisions and legislative activities at the end of 2022 and into 2023, including new CPT codes and payer decisions on remote monitoring.

There has been another barrage of activity in the first part of 2023. We alluded to some of these pending updates in our 2022 roundup. Here is our overview, starting with recent FDA regulatory updates impacting digital health including AI/ML software, companion apps for pharma, and digital diagnostics, and followed by an update on reimbursement legislation and actions impacting digital health:

2023 FDA Digital Health Regulatory Round-Up:

  • Digital Health Center of Excellence: Troy Tazbaz has been appointed Director of FDA’s Digital Health Center of Excellence. He replaces Bakul Patel, the longtime Director of Digital Health Bakul Patel, who went to Google last year. Brendan O’Leary had been filling in as Acting Director. According to the FDA, “Troy will lead the DHCoE in its third phase, which is focused on continued growth of strategic partnerships, innovating regulatory frameworks for digital health, and continued harmonization with other regulators.” Mr. Tazbaz comes to the FDA by way of Oracle, where he led cloud infrastructure initiatives.
  • Change Control Plan for Artificial Intelligence/Machine Learning (AI/ML): The biggest news of 2023 at FDA CDRH is the long-anticipated release of a draft guidance Predetermined Change Control Plan (“PCCP”) for marketing submissions of AI/ML devices. FDA proposes the use of a PCCP to ensure AI/ML-enabled devices are not only safe and effective, but also able to be rapidly updated and improved in response to new data. Following the guidance document, the PCCP would communicate to users key information including: a description of the specific modifications; an explanation of the methodologies used in developing, validating, and implementing the modifications; and an assessment of the benefits and risks of the modifications. These changes relieve developers from filing a new marketing submission for an already-cleared device that evolves over time. However, the developer is still obligated to maintain documentation in the design history file (DHF) of what changes have occurred and how they affect the device.
  • Cybersecurity: On March 29, 2023, FDA announced the immediate implementation of a Refuse to Accept (RTA) policy for cyber devices. The Agency stated that it does not intend to issue RTA decisions for cyber devices that are submitted before October 1, 2023. However, any company currently developing a product meeting the definition of a cyber device should take action now to align with policy. The guidance document defines cyber devices as those that “include software validated, installed, or authorized by the sponsor as a device or in a device”, features the “ability to connect to the internet”, and “contains any such technological characteristics validated, installed, or authorized” that could be vulnerable to cyber threats. Under the policy, manufacturers are required to include in submissions (510(k), De Novo, PMA, or HDE) a plan to monitor post-market cybersecurity vulnerabilities and exploits, a description of processes and procedures to provide reasonable assurance that systems are cybersecure, and provide a software bill of materials (SBOM) covering commercial, open-source, and off-the-shelf software components. This policy reflects the increasing emphasis on cybersecurity, and we expect further rigor once the draft guidance that was published in 2022 is finalized.
  • Transition Plan for Digital Health Devices under COVID Enforcement Discretion: In early 2020, FDA put several low-risk digital health technologies under enforcement discretion to increase access during the COVID-19 public health emergency. This included digital therapeutics treating psychiatric conditions, CAD software for diagnosis and treatment monitoring of lung disease, remote digital pathology devices that could be used by pathologists at home, and some remote patient monitoring devices for COVID patients. With the formal end of the PHE coming, FDA has released guidance that announces the transition dates and requirements for these products. Manufacturers must initiate adverse event reporting on May 11, 2023, submit a 510(k) and pass acceptance review by November 7, 2023 in order to continue to market their device, and several additional requirements must be met between those two dates.
  • Digital Diagnostics: FDA launched a resource page on digital diagnostics, which are defined here as “the combination of diagnostic technologies with digital health tools, apps, software, and wireless transmission”. In other words, these are digital tools that support diagnostics such as IVDs, lab tests, and OTC lateral flow tests. There are so many other types of digital diagnostics (DDx) that are making their way through FDA review that fall outside of this definition including: digital biomarkers; AI imaging software/CAD software/digital pathology; digital-only screeners and prognostics; digital diagnostic aids; and computerized cognitive assessment aids. The hope is that a larger framework can be built around these areas as well.
  • Framework for Use of Digital Health Technologies in Drug Development: FDA released a new framework that illustrates its thinking around use of digital health technologies and tools to support drug trials, for qualification of digital biomarkers for use in trials, and remote data acquisition in drug trials, and announced that new draft guidance will be coming out in 2023 specifically for conduct of decentralized trials. Perhaps the most interesting was FDA’s announcement that it plans to release draft guidance in 2023 on Regulatory Considerations for Prescription Drug-Use-Related Software (PDURS). FDA already proposed a PDURS framework way back in 2018 that outlines promotional and regulatory requirements for branded and unbranded drug-related software, such as companion apps, but had not taken any further action on this topic. This one should have considerable impact due to the explosion of interest in companion apps and connected devices in pharma in the past couple years.
  • Clinical Decision Support Software: As mentioned, FDA issued a final guidance document at the end of 2022 to clarify the Agency’s approach to regulating CDS software functions. The document outlines FDA’s more strict interpretation of regulatory oversight of CDS software than the earlier draft version of the guidance, and as a result, has received considerable pushback from the industry. As an update, the industry group CDS Coalition has sent a citizen’s petition to ask FDA to rescind this guidance on the basis of several conflicts with Congressional law and intent.

2023 CMS/AMA Digital Health Reimbursement Roundup

  • Reimbursement of Breakthrough Devices: The bipartisan Breakthrough Bill has been reintroduced in the House as H.R. 1691. This bill would provide 4 years of automatic reimbursement for FDA-designated breakthrough devices upon FDA approval/clearance. This bill’s story has had more ups and downs than the Ross and Rachel Friends Remember, this started way back in 2018, was revised in 2019 with new language that would allow for products without a benefit category (“specified breakthrough devices”), such as software-as-a-medical device, to be covered and paid. The bills never made it through committee, but a version of this was proposed as the Medicare Coverage of Innovative Technologies (MCIT) rule in 2020, which was subsequently repealed by CMS. CMS has since been working with industry on an alternate pathway called Transitional Coverage for Emerging Technologies (TCET) and may issue another rule on this in the near future, which could render H.R. 1691 moot. Importantly, MCIT did not include the provision to cover breakthrough devices without a benefit category, so it would not have done much for digital health. The hope is that this provision will make it through either with the Breakthrough Bill or TCET.
  • Reimbursement of Prescription Digital Therapeutics: The Access to Prescription Digital Therapeutics Bill has also been reintroduced, both in the House and Senate. The bill creates a Medicare benefit category for FDA-cleared or approved prescription digital therapeutics, which would then allow reimbursement codes to be covered and paid by Medicare. There is increasing enthusiasm for this legislation due to the growing mental health and addiction crises, but also pushback due to potential economic impact.
  • Digital Health AMA/CMS Codes: The American Medical Association (AMA) approved several Category III codes that will be effective July 1, 2023, including those involving virtual reality for gait training and pharmaco-oncologic algorithmic treatment ranking. In addition, Category III codes for VR procedural dissociation services, and remote real-time motion capture-based neurorehabilitative therapy became effective January 1. The AMA continues to acknowledge the use of digital technologies in monitoring diagnostic and therapeutic interventions. CMS approved HCPCS coding for AppliedVR’s VR behavioral therapy system for pain relief but did not approve Cognoa’s Canvas Dx digital diagnostic device for neurodevelopmental/behavioral disorders. CMS’s actions underscored their belief that sole-purpose devices with digital components could qualify as durable medical equipment.
Brian Abraham
Senior Director,​ Market Access & Patient Services

Brian Abraham, Director of Revenue Management Solutions at EVERSANA™, helps medical technology and biopharma companies develop and execute strategies around coding, coverage and payment for innovative medical technology products. He has 20 years of…

Kory Dillman​
Director, Global Regulatory Consulting

With over 25 years in business and technology operations, Kory brings a wealth of experience to the ever-evolving medical device field. He partners with companies developing medical devices, leveraging his deep understanding of global…

Martin Culjat, PhD
Senior Vice President, Global Head of Digital Medicine & Regulatory Innovation

Marty Culjat, PhD is the SVP, Global Head of Digital Medicine & Regulatory Innovation at EVERSANA. In this role, he leads a cross-functional team supporting the commercialization of digital medicine products within companies ranging…