EnteroMedics Switches vBloc Commercialization Strategies

The company pursues a new plan intended to drive commercial adoption of its vBloc neuromodulation weight loss therapy despite current reimbursement hurdles. 

Marie Thibault

EnteroMedics' Maestro System, which has FDA approval, CE Mark, and TGA approval, is implanted in patients to administer vBloc vagal blocking therapy for weight loss.

When it was approved by FDA a little more than a year ago, EnteroMedics’ Maestro System implant used for vBloc weight loss therapy was lauded as the first obesity device to receive agency approval in over 10 years.

The Maestro System is implanted in the patient during an outpatient procedure and works by periodically blocking signaling along the vagus nerve, which regulates the digestive system. This has been shown to lead to satiety and weight loss in patients. Patient results from the ReCharge pivotal study showed vBloc patients experienced 24.4% excess weight loss (EWL) at 12 months. Most of this weight loss appears to be sustainable, with 23.5% EWL at 18 months and 21% at two years. With obesity widely considered to be a too-common and alarming problem in the United States, the FDA approval was a major win for the company.  

With strong data and a large patient population to treat—vBloc Therapy is indicated for adults with a BMI of at least 40-45 kg/m2 or a 35-39.9 kg/m2 BMI with a related health condition, who have participated in a supervised weight management program in the past five years—it may come as a surprise to some that the company has changed tack to encourage adoption.

A major culprit? A challenging reimbursement setting, at least for now. 

vBloc Therapy does not yet have widespread national reimbursement coverage. This means that EnteroMedics must build a case for coverage gradually, possibly attaining coverage first through local and regional payers.

On an earnings call this week, Dan Gladney, who became the company's new CEO in mid-November 2015, gave more details about this year's new commercialization strategy. Last year's plan, he said, revolved around widespread efforts to add new centers and train surgeons, and patient use of the prior authorization process to try to get one-off coverage for the implant procedure. Last July, EnteroMedics launched the vBloc Access program to give patients more knowledge of insurance benefits and the reimbursement process. 

In contrast, the 2016 strategy is focused on direct-to-consumer marketing toward self-pay patients in a select number of regions, Gladney said on the earnings call. As part of this, last year EnteroMedics began working with Independent Delivery Networks (IDNs) and vBloc Institute partners. IDNs are self-insured hospital networks.

The current effort invoves 12 centers in 10 regions of the country, including large cities in California, Colorado, Connecticut, Delaware, Florida, Georgia, Minnesota, New York, Texas, and Washington, Gladney said.

According to a Seeking Alpha transcript of this week's earnings call, Gladney explained, 

Gladney added, "It wasn’t a bad strategy last year, it just wasn’t working . . . "

He said that over 1000 people have responded to the advertising, but that only a small proportion of these people will become implanted patients and that it will take three to six months for people to advance to the stage of actually setting up a surgery. Because the company is focusing on cash pay patients, any people who are screened as potential good candidates for the implant work with a "patient relationship coordinator (PRC)" to learn about the cash pay situation.

"Today, we are very happy with where patients are tracking through each step which is inline with our models and projections and hope to see the pay off of this strategy starting in the late second quarter timeframe," Gladney said, according to the transcript.

The self-paying patient strategy doesn't mean the company has abandoned its earlier approach completely. It will continue to support patients trying to attain prior authorization for the therapy, which demonstrates patient demand. By building up a larger base of implanted patients, the management team also anticipates more visibility with payers and potentially eventual reimbursement coverage.

Enteromedics has faced challenges before, including a failed clinical trial in 2009 before its ReCharge trial.

While EnteroMedics reported sales of just $149,000 for the fourth quarter of 2015, there have been some positive signs in 2016. Earlier this month, a vBloc Institute and one of the company's IDN partners, Winthrop-University Hospital, announced that it would add vBloc Therapy as a covered benefit for its approximately 8,000 employees and spouses, though it's not clear how many of those covered would actually qualify as a vBloc patient. This step made the hospital the first employer and hospital system to cover the therapy.

In January, the American Society for Metabolic and Bariatric Surgery published a position statement supporting vBloc therapy. Gladney referred to the statement on this week's call: "That really helps with the private payers. And secondly it helps with surgeons, surgeons that don't really know us very well, when we knock on their door to be able to say 'Hey, we got support of [a] society that you are part of,' that carries credibility."

In a step that took effect at the beginning of 2016, the vBloc CPT codes were classified in the outpatient category and assigned to a payment group of approximately $27,000 for the cost of the device and center expenses. This, Gladney explained to analysts on the call, means "two of three Medicare requirements are met, allowing us to turn our full attention to the third and that is securing coverage."

This commercialization strategy will be funded by proceeds from the company's recent $25 million offering of senior amortizing convertible notes—two of the offering's three tranches have closed, for $12.5 million in proceeds so far.

The management team is waiting to provide additional updates until the new strategy has gained more traction, Gladney said, which he expects to take place in the late second quarter of this year.

Marie Thibault is the associate editor at MD+DI. Reach her at [email protected] and on Twitter @medtechmarie. 

[Image courtesy of ENTEROMEDICS INC.]