Originally Published MX March/April 2005
BUSINESS NEWS
Artificial Disk Meets Reimbursement Resistance |
| The Charité artificial disk by DePuy Spine Inc. (Raynham, MA), a Johnson & Johnson company. Photo courtesy DePuy Spine |
When FDA approved the Charité artificial disk last October, some industry analysts speculated that the device could experience a rapid rate of adoption similar to those experienced by new joint-replacement technologies or drug-eluting coronary stents. To clinch their case, the experts cited pent-up demand for the device, which has been available to patients around the world for more than 17 years; the incidence of 200,000 spinal fusion surgeries performed each year in the United States; and the estimated $50 billion spent annually to treat back pain.
Despite such promising indicators, however, early reports suggest that the Charité artificial disk is running into reimbursement roadblocks—from both government and private insurers. The Centers for Medicare and Medicaid Services (CMS; Baltimore) limits reimbursement to approximately half the estimated $11,600 cost of the device. While Medicare's population of patients age 65 and over is not the target demographic for Charité, CMS's reimbursement rulings are typically seen as guidelines for the private insurance sector. The average age in clinical trials of artificial disks was 40, and the typical spinal-fusion patient is under 50.
The artificial disk was developed in the 1980s by Waldemar Link GmbH. DePuy Spine acquired the Link Spine Group in 2003 for $235 million. DePuy Spine reports that more than 5000 of the disks have been successfully implanted worldwide. More than 350 have been implanted in the United States since FDA approval.
The total cost for implanting the artificial disk—including the device, surgeon fees, and associated hospital costs—can easily exceed $50,000. Use of the disk is an alternative to lumbar spine fusion, which uses bone grafts to weld the spine's vertebrae together. Recovery from artificial disk surgery is described as faster and less painful than spinal fusion.
In a recent conference call with industry analysts, DePuy Spine acknowledged that it was "disappointed" with the reimbursement decisions that have so far been issued by CMS and private insurers. The company said it expected Charité to be covered by a major insurance carrier within the next few weeks, but declined to name the company.
Reimbursement resistance is apparently further exacerbated by the fact that many surgeons do not realize that Charité is now an FDA-approved device, and many insurance carriers continue to consider the use of the artificial disk to be an experimental procedure. The Charité artificial disk replacement is available in 15 spine centers in the United States, and DePuy has set up 50 comprehensive surgeon training facilities.
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| Gunderson. |
Thomas J. Gunderson, a managing director and senior medical technology research analyst with Piper Jaffray & Co. (Minneapolis), says he is not unduly surprised by the reimbursement issues confronting Charité. "These are just the normal hurdles that have to be overcome. Some Wall Street investors see the drug-eluting coronary stent market as the model for regulatory approval and insurance reimbursement, but that was a unique situation, which is not likely to be replicated every time a new medical technology comes down the pike. J&J did an outstanding job with its Cypher drug-eluting stent—moving almost simultaneously on both the regulatory and reimbursement fronts. But, as the situation with Charité attests, the manufacturer can do all the homework—but it obviously cannot control the outcome in these matters."
Other artificial spinal disks being developed for the U.S. market include the ProDisk from Synthes Inc. (Soluthurn, Switzerland), the Maverick from Medtronic Inc. (Minneapolis), and the FlexiCore from Stryker Corp. (Kalamazoo, MI).
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