Will CMS Reimbursement Spur the Artificial Heart Market?

Countermanding a policy that has existed for more than two decades, earlier this month the Centers for Medicare and Medicaid Services (CMS; Baltimore) announced a proposed policy to provide Medicare reimbursement coverage for artificial heart devices.

The CMS announcement marks the reversal of a decision dating back to 1986, by which the agency had explicitly ruled out such coverage. The proposal also started the clock running on a 30-day public comment period. A final ruling on CMS coverage of artificial heart devices for Medicare beneficiaries who are enrolled in FDA-approved studies will be made by May 1.

Kerry Weems, acting CMS administrator, observed that the revised policy “relaxes a long-standing noncoverage policy, gives access to our beneficiaries, and promotes evidence development through FDA-approved studies of this advanced technology.”

Explaining its policy reversal, CMS said that there is now sufficient scientific evidence on the use of artificial hearts to allow coverage in carefully controlled clinical environments, which will enable the agency to provide faster and more effective rulings through informed decision making.

The CMS decision was not a total surprise. The announcement was largely the result of a process begun last spring and initiated by SynCardia Systems Inc. (Tucson, AZ), manufacturer of the CardioWest total artificial heart. The company formally petitioned the agency for a review of its 1986 noncoverage decision and, in August 2007, CMS agreed to reopen the matter.

If CMS approves national coverage for artificial hearts, as is widely expected, SynCardia Systems would be a major beneficiary, along with Abiomed Inc. (Danvers, MA), manufacturer of the AbioCor artificial heart.

Rodger Ford, president and CEO of SynCardia Systems, noted that “many smaller insurers use CMS reimbursement decisions as their benchmark for coverage.” Because of its potential impact beyond the Medicare program, Ford called the CMS decision “an historic step toward making the artificial heart available to most Americans.”

Michael R. Minogue, chairman, president, and CEO of Abiomed, said, “This proposed decision is a positive development for the advancement of our AbioCor program in the United States. This decision by CMS provides momentum towards making the technology available for chronic patients who require biventricular support and have no other treatment options.”

According to SynCardia, the CardioWest device is covered by half of the leading insurance companies. The AbioCor artificial heart is currently approved for reimbursement by Cigna, Humana, and HealthNet.

While both companies are major players in the artificial heart market, they are not competitors in the true sense of the term, since their respective devices are intended for very different patient populations.

CardioWest received FDA approval as a Class III device in October 2004. It also has CE mark approval for distribution in Europe. AbioCor received the much more restrictive humanitarian device exemption (HDE) from FDA in September 2006. HDE classification limits the use of the device to 4000 patients in the United States. CMS notes that evidence for each of the two devices will be considered separately, and the agency will establish somewhat different criteria for evaluating clinical outcomes.

Although initially designed as a permanent device, CardioWest is considered a temporary, yet total artificial heart. FDA has approved the device as a bridge to transplant. Patients in the intended-use population are typically in severe biventricular Class IV heart failure, and must meet the requirements for a heart transplant recipient. The optimum clinical outcomes would be successful implantation of the CardoWest device, survival to a successful transplant, and continued survival thereafter without negative effects from such adverse events as device failure, infections, excessive bleeding, or neurological consequences.

In contrast, FDA has approved the AbioCor device for destination therapy—that is, for patients who are not suitable candidates for heart transplantation, are near death from end-stage biventricular Class IV heart failure, and have exhausted all other treatment options. Optimal outcomes with the AbioCor artificial heart are successful implantation of the device, increased survival, discharge home, and no negative effects or adverse events. Since the average survival rate for these patients is 4.5 months, prolonged life is the primary measure of clinical outcomes.

The CardioWest device has been implanted in more than 700 patients, accounting for more than 120 patient years of life on the device with a 79% rate of successful bridge-to-transplant—reportedly the highest success rate of any such device on the market worldwide. SynCardia has 22 certified CardioWest implant centers worldwide, with nine additional hospitals currently undergoing the certification process.

SynCardia is actively advancing its technology to create next-generation products. “We're currently working on the development of a smaller version of the CardioWest device,” says J. David Mackstaller, SynCardia's vice president for sales and marketing. “There is a tremendous need for an artificial heart that can accommodate the pediatric population as well as women and often smaller framed Asian patients.”

Abiomed also has a smaller artificial heart in development—the AbioCor II, which CEO Minogue describes as “a second-generation device that is approximately 30% smaller than AbioMed I, and is anticipated to have a life expectancy approaching five years.” AbioMed currently has four U.S. hospitals enlisted for clinical trials, and hopes to increase the number of centers to 10 in the near future.

SynCardia's Ford says that securing eventual FDA approval of the company's smaller and more portable artificial heart drivers will result in a tremendous boost in the application range, patient appeal, and market reach of the device. In the United States, the CardioWest device is currently limited to use in hospital settings. The company's Companion universal driver system is approved for limited use under the terms of FDA's investigational device exemption (IDE), while its smaller, Portable driver is not approved and cannot be used in the United States. “Both of these drivers are already available in Europe, which enables patients to go virtually anywhere and live a much fuller and more independent lifestyle,” says Ford. A 4-lb driver for the CardioWest heart is presently in development.

Both companies say it is difficult to project market valuation figures. SynCardia estimates that candidates for the CardioWest device include up to 10,000 U.S. patients plus an additional 20,000 patients worldwide. At an average implant cost of $106,000, such a patient population could potentially yield a global market of $3.18 billion. For its part, Abiomed, with its AbioCor artificial heart device typically costing $250,000 and limited to 4000 U.S. implants per year, could create a market valuation of $1 billion.

CMS's proposed coverage decision doesn't provide much help for those seeking to figure out the future of the market for artificial heart technologies. According to Gregory Simpson, principal and medtech analyst with Stifel, Nicolaus and Company Inc. (St. Louis), “The expected CMS decision to cover artificial hearts is not that surprising, and is in keeping with the agency's reimbursement coverage of advanced devices in the heart assist and related areas.” Simpson, who covers Abiomed, thinks the decision will not have any significant near-term impact on the company. “I only see them implanting a few devices each quarter for the immediate future. Yet, the CMS decision recognizes the ongoing development of artificial hearts as a significant technological achievement which benefits any medtech company in this space. And, moving forward, if the next-generation AbioCor II performs as expected and is able to achieve a device life of five years, the company would then be in a position to see a significant increase in demand.”

Neither SynCardia nor Abiomed sees a national coverage decision by CMS as a factor that would motivate other companies to enter the artificial heart market. “The start-up and development costs might prove prohibitive, considering both the limited size and the considerable risks associated with the market,” says SynCardia's Mackstaller.

“There are many companies developing destination therapy pumps for chronic patients,” says Abiomed's Minogue. “However, we are not aware of any other company developing a fully implantable heart with no wires piercing the skin.”

Other medtech firms developing ventricular assist devices and related cardiac products include Arrow International Inc. (Reading, PA), a division of Teleflex Medical (Research Triangle Park, NC); Cardiac Assist Inc. (Pittsburgh); MicroMed Cardiovascular Inc. (Houston); Thoratec Corp. (Pleasanton, CA); and World Heart Corp. (Oakland, CA).

A favorable CMS decision on national coverage of artificial hearts is likely to encourage or even accelerate new product development at the two major players, Abiomed and SynCardia. Future developments seem destined to expand the utility of artificial heart technologies among a wider patient population worldwide. But even with the potential for a ready and expanding market—and reimbursement coverage—most industry analysts doubt there will be a rush of other medtech companies entering this complex market.

© 2008 Canon Communications LLC

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