Medical Device Link.

Originally Published MX November/December 2004

BUSINESS NEWS

It seems like a long time ago, but it's been less than two years since executives at Cordis Corp. (Miami Lakes, FL), a Johnson & Johnson company, astonished industry analysts by achieving almost lightning-quick reimbursement coverage determination, regulatory approval, and launch of the company's Cypher drug-eluting stent, the first such product approved for the U.S. market.

The Charité artificial disk in position. (click to enlarge)

In October, DePuy Spine (Raynham, MA), another J&J company, became the first to receive U.S. approval for an artificial spinal disk, an achievement that has been the target of more than a dozen orthopedics companies worldwide. Artificial replacements are commonly used in hips and knees, but DePuy's Charité artificial disk is the first such device to receive FDA approval. The approval permits the artificial disk to be implanted only in patients who have degenerative disk disease and who have had no relief from back pain after at least six months of nonsurgical treatment.

"The Charité artificial disk has the potential to revolutionize spine surgery," said Scott Blumenthal, MD, an orthopedic spine surgeon at the Texas Back Institute (Plano, TX) and principal investigator of the Charité artificial disk clinical trial. "Until now, spine surgery relieved pain by limiting motion. Now, for the first time, we can relieve pain and preserve motion."

Lumbar spinal fusion surgery, a common surgical treatment for low back pain or degenerative disk disease, is often effective in reducing pain, but limits range of motion and may transfer extra stress to disks above and below the fusion site. More than 200,000 of these procedures are performed in the United States each year.

The Charité artificial disk treats severe low back pain by replacing a damaged or worn out spinal disk with an artificial one. The device comprises two metallic endplates and a movable high-density plastic center that, once implanted, is designed to help align the spine and preserve its ability to move. Spinal disks maintain the position of the spine and allow for the flexibility to bend and twist.

DePuy attained worldwide rights to the Charité device through its acquisition of privately held Link Spine Group, which was purchased in 2003 for an initial payment of $325 million. At the time, the Charité device was already approved for marketing in 30 countries throughout Europe, Asia, North America, Africa, and Latin America.

DePuy officials had hoped to replicate the experience of their colleagues at Cordis by getting the Centers for Medicare and Medicaid Services (CMS; Baltimore) to rapidly approve coding for implantation of the Charité device. But in August, CMS denied the company's request to apply the diagnosis-related grouping (DRG) code for spinal fusions—which carries a price tag of roughly $10,600 per procedure—noting that implantation of an artificial disk does not involve fusion.

Instead, the agency ruled that artificial disks are currently eligible for reimbursement only under the DRG coding for excision of intervertebral disk material, at a rate less than half the expected cost of a disk replacement implant. At the same time, however, the agency created a number of new procedure codes for the implantation of artificial disks. The new codes went into effect at the beginning of October, and analysts expect that they will enable CMS to evaluate the costs related to implantation of the Charité device.

Absence of reimbursement coding will undoubtedly slow the adoption of DePuy's new product during 2005, but so far it hasn't diminished the company's marketing efforts. According to DePuy, 15 U.S. spine centers currently offer disk replacement with the Charité artificial disk, and more centers are expected within the next several months as surgeons receive training in the procedure. In the meantime, says the company, patients may have to wait several weeks or months while surgeons complete their mandatory training.

Market analysts will be watching closely to see if DePuy is able to use its first-mover advantage to capture a significant portion of the market for spinal implants, which is currently valued at more than $2.4 billion. But with a slower-than-hoped-for route to reimbursement and a host of competitors nipping at its heels, the company may not have much time to enjoy sole possession of the market.

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