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Evidence-Based Diabetes Management September 2013

The Next Frontier for the Artificial Pancreas: Payer Coverage

Stanton R. Mehr
Make no mistake: The holy grail in the treatment of type 1 diabetes mellitus (T1DM) is a substitute for the human pancreas—or at least a system that effectively mimics its effect on insulin production and regulation. Recent developments show that we are closing in on this technological prize, and the buzz is building not only for patients who require multiple daily insulin injections, but for clinicians as well.

Many patients will want the artificial pancreas not only for the expected improvements in glycemic control but also because it promises a new level of freedom for those tied to the rigors of multiple daily injections and glucose monitoring. Once introduced to the marketplace, the real question will be: How will health plans and insurers cover these systems for possibly large populations?

Nearer the Goal Through Multiple Methods

The US Food and Drug Administration (FDA) refers to it as the “artificial pancreas device system,” of which several are under investigation. Some call it a “closed loop system” or “bionic pancreas,” but it is essentially an insulin pump connected to a continuous glucose monitor in a way that the monitor instructs the insulin pump to release (or stop releasing) hormones when needed, to ward off hyperglycemia and avoid hypoglycemia (See Not Just 1 Device, Below).

So far, the complexities of such a system have stymied manufacturers’ efforts at developing a versatile and reliable product. The ASPIRE trial results,1 announced in June 2013 at the American Diabetes Association (ADA) meeting in Chicago, signaled strong progress in this area—and maybe the beginning of the end of the journey. Patients using the investigational device had a 32% lower incidence of nocturnal hypoglycemia episodes compared with those using insulin pumps alone. Take note: The investigational product was tested against state-of-the-art treatment.

Also in June, Medtronic reported that it was beginning a trial of its “third-generation, fully automated artificial pancreas system” to test whether its use can prevent nocturnal hypoglycemia.2 This “control-to-target” device seems to be in its final stages prior to FDA submission. If successful, it and artificial pancreas systems by other makers, could be a boon to patients whose glucose levels are extremely difficult to control.

For payers, it raises rather complex questions: What will it cost? How can we pay for the technology for the patients who need it most? Insulin pumps average around $7000 plus $250 for monthly supplies. This implies the challenge: How much utilization can be expected? More than 300,000 patients today are estimated to use insulin pumps (and perhaps 10% of these have type 2 diabetes mellitus).3 Interestingly, according to a 2010 article, more patients with T1DM in the United States use insulin pumps than insulin pens.4

From the manufacturer’s point of view, the challenges of coverage remain secondary to the challenges of bringing the technology to the FDA finish line. Max Gill, MBA, senior director of health economic policy and reimbursement at Medtronic Diabetes, explained, “As we progress toward these goals, we are committed to partnering with payers to ensure access for people with diabetes.”

He predicted that “For those devices with therapy automation but not a fully ‘closed loop’ artificial pancreas system, we anticipate that payers will follow existing coverage policies for external insulin pump therapy and continuous glucose monitoring.”

Lessons of the (Recent) Past

To better consider how health plans and insurers may decide to cover an artificial pancreas system, it may be best to start with its key individual components, the pump and the continuous glucose monitor. Historically, health plans and insurers moved cautiously in covering both components. Payers (private and public) have clearly defined policies on whether they cover

insulin pumps, to what extent, and what restrictions (ie, preauthorization criteria) may affect eligibility. These policies are based on decades of experience with the device. Their experience indicates that patients who use insulin pumps optimally are highly motivated to tightly control their glycemic levels and are committed to frequently checking their blood glucose levels throughout

the day. Clearly, insulin pumps are not for every patient. In addition, the devices themselves, though becoming smaller and less conspicuous over the years, are still a bit ungainly.

“For many medical devices, there is a significant lag time between FDA approval and health plan benefit coverage,” said Allan Chernov, MD, medical director, Blue Cross Blue Shield of Texas. This provides plans and insurers a window in which to gain experience both in terms of utilization and clinicians in using the technology. Yet, state mandates on diabetes coverage may

limit how plans can manage the utilization of this technology (Figure). Private payers have by and large been required by state insurance commissioners or departments of insurance to make insulin pumps available under mandates to provide benefits to patients with diabetes (Figure). Only Alabama, Idaho, North Dakota, and Ohio do not require this coverage. Mississippi, Missouri, and Washington require that the coverage be offered. All other states mandate the coverage.5

Chernov explained, “For diabetes, many states—including Texas—have quite broad mandates for coverage of diabetes treatment, equipment, and supplies, which means we’ll probably see early adoption after FDA approval, at least in fully insured plans. Many administration-service only plans, usually those of smaller companies, will act in the same way as fully insured plans (including mandates).” On the other hand, plans that were not as bound to state mandates, like ERISA plan sponsors, may take a different view. He said, “The large, national self-insured companies are more likely to be conservative about adopting high-cost technology with limited long-term outcome data.”

Coverage of the second major component—continuous glucose monitoring—is fairly consistent among health plans (Table 1). A survey by the Juvenile Diabetes Research Foundation (JDRF) found that most major plans offer coverage, with the greatest restrictions being the need to demonstrate difficulty in reaching or maintaining goal glycemic levels, or “hypoglycemia unawareness” (or a patient’s inability to quickly recognize the onset of hypoglycemia and take appropriate action).6

Public Coverage Scenarios

However, even if one lives in a state with mandated coverage, out-of-pocket cost requirements (eg, in high-deductible plans) could mean that the patient will be picking up a large portion of them in a private plan. This also may apply to Medicare. According to the Centers for Medicare & Medicaid Services (CMS), a physician’s prescription for an insulin pump is covered under part B durable medical equipment, entitling the patient to 80% coverage, as long as the pump is obtained through a Medicare-approved supplier. The patient would be liable for the remaining 20% as well as the Medicare Part B deductible, if this is not covered by supplemental insurance. Medicare has some requirements as well for patients to obtain the pump, such as having a lab test showing little or no ability to naturally produce insulin and having been using multiple daily injections for more than 6 months. Also, patients who were using a pump before becoming Medicare eligible automatically fulfill the requirements upon reaching Medicare eligibility. Medicare also covers continuous glucose monitoring systems, assuming the patient meets eligibility criteria.

For Medicaid, a survey by the Kaiser Family Foundation revealed that restrictions applying to insulin pumps could be found only in Arizona (uncovered), Arkansas (medical supplies limited to $250 per month), and Pennsylvania (limited to home health care benefit only).7 In nearly all state Medicaid programs, prior authorization and other eligibility criteria would have to be met to receive coverage.

It is worth noting that of the states moving forward with Medicaid expansion (24 confirmed as of July 1, 2013),8   technologies like the artificial pancreas system (and even insulin pumps and continuous glucose monitors) could pose significant short-term cost challenges, not considering potential longer-term savings from avoidance of diabetes-related complications.9 Even states that cover insulin pumps will have restrictions that could affect populations who might benefit from artificial pancreas systems. Janet Sullivan, MD, medical director of the Hudson Health Plan, Tarrytown, New York, told Evidence-Based Diabetes Management that “New York State Medicaid covers insulin pumps when medically necessary.

The State may make a [separate] decision about coverage of the new technology.” She emphasized, “If New York State decides the technology should be a benefit under the Medicaid program, or has not yet made a determination, coverage will still require prior authorization for medical necessity. Denials of investigational technology are subject to external appeal in New York.”

Viewing this from another angle, of the 10 states with the highest incidence of diabetes (type 1 and type 2), only 2 are moving forward with Medicaid expansion (another, Tennessee, is trying  to create its own program to expand Medicaid; this may require a waiver from the federal government) (Table 2).8,10 What needs to be avoided, most agree, is the unintended creation of a 2-tier system, in which some states decide to cover the new technology and some do not (ie, the “haves” and “have nots”). It does not seem at this point, before the marketing of the artificial pancreas system at least, that this will be the case.

Chernov stated that “In Texas, Medicaid covers insulin pumps conditionally for patients with type 1 diabetes who meet criteria, primarily related to documented wide blood glucose fluctuations and poor control. I think it’s safe to assume that even with mandated coverage, there will be an ability to set medical necessity criteria for an artificial pancreas. There may not be  mandatory prior authorization, but it’s pretty much standard practice in the provider community now to request pre-service clinical review for high cost services rather than risk post-service claim denials. This de facto voluntary process works better than mandatory prior authorization although generally the same appeal rules and regulations apply to adverse decisions from voluntary pre-service clinical review.”

More Than the Sum of Its Parts?

Some health plans will be considering the artificial pancreas device from a perspective different from that of insulin pumps. Rather than an evolution of insulin pump technology, they may consider an artificial pancreas as an entirely new device, reflecting their much more complicated nature. In that case, would they be priced as more than the “sum of their parts?” For example, SelectHealth in Salt Lake City will view the artificial pancreas as completely new technology, according to Medical Director Kenneth Schaecher, MD. “This will require a separate technology assessment and would not be covered simply as another insulin pump,” he said.

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