CMS Denies Expanded Coverage for Cyberonics Neurodevice

February 1, 2007

4 Min Read
CMS Denies Expanded Coverage for Cyberonics Neurodevice

Earlier this month, the Centers for Medicare and Medicaid Services (CMS; Baltimore) declined a request by Cyberonics Inc. (Houston) to expand reimbursement for the company's implantable neurodevice to include therapy for patients with treatment-resistant depression (TRD).

After reviewing studies from the company, CMS concluded there was little evidence that patients with TRD would benefit as a direct result of VNS therapy. CMS is accepting comments on its proposed decision through March 7 and plans to finalize its ruling this spring.

Despite the CMS decision, Cyberonics insisted that the clinical evidence was on its side. "Published peer-reviewed data demonstrate that VNS therapy provides unparalleled long-term benefits for many patients who have been unable to experience relief from depressive symptoms with other available treatment options," said George E. Parker, Cyberonics' interim chief operating officer. "A recent study has shown that annual medical costs associated with the subset of patients with TRD identified in the submission to CMS average approximately $47,000."

The latest ruling throws yet another hurdle in front of the company, which has already traveled a long--and sometimes contentious--road to expand the market for its Vagus Nerve Stimulation (VNS) device, which costs about $10,000.

The VNS device was approved for TRD in February 2005, but FDA stipulated that it could not be marketed for that indication until the company had addressed agency concerns about its manufacturing operations, product labeling, and other issues. Following a series of corrective actions and improvements in the company's reporting systems, FDA notified Cyberonics in April 2005 that it was in full compliance with all of the agency's quality systems requirements and that the issues raised in the earlier warning letter were fully resolved. The VNS device received final approval for TRD in July 2005.

The April-to-July delay in granting final approval of the VNS for TRD was believed to be due, in part, to an investigation begun in May 2005 by the Senate finance committee. Late last year, Robert P. Cummins, then president and CEO of Cyberonics, and Pamela B. Westbrook, the company's CFO, resigned their positions over accounting errors uncovered during an ongoing investigation into past stock option practices.

Shares of Cyberonics plummeted nearly 10% after news of the CMS noncoverage decision was released. Some industry analysts don't expect the agency's final decision to deviate from its initial conclusion, resulting in Cyberonics grasping after a smaller share of what is already considered to be a modest market.

On February 8, Goldman Scarlato & Karon PC, a law firm with offices in Pennsylvania and Ohio, announced that it had filed a class-action lawsuit in the U.S. District Court for the Southern District of Texas on behalf of individuals who purchased Cyberonics stock between February 5, 2004, and August 1, 2006. The complaint alleges that the company failed to disclose and misrepresented material information regarding FDA review and approval of its VNS device to treat depression, the marketability of the VNS device, and medical insurance payers' coverage decisions for the device.

NIO's Lynch: Evening the field.

Zack Lynch, executive director of the Neurotechnology Industry Organization (San Francisco), says Medicare's noncoverage decision for Cyberonics likely won't have implications for other medtech companies considering depression as a possible application for neurodevices. "If a neurodevice based on a separate technology is shown in clinical trials to be effective for depression and it is priced properly, then I see no reason that CMS would not approve coverage of another neurodevice targeting depression," he says.

In other neurodevice news, FDA's panel on neurological devices recently concluded that the NeuroStar transcranial magnetic stimulation system by Neuronetics Inc. (Malvern, PA) is not substantially equivalent to electroconvulsive therapy (ECT) for the treatment of major depression. Although the panel concluded that the NeuroStar device is safer than ECT, it determined that efficacy was not adequately demonstrated in the company's existing 510(k) filing.

The company reports that it plans to work with the agency to address its existing questions. A final decision on the application is expected within the next few months.

"Neuronetics will need to invest in more trials," Lynch says. "Relative to neuropharmaceuticals, neurodevices have had a fairly easy time with FDA. Trials are smaller and have different efficacy requirements. This may be because unseen harmful effects are less likely than they are with pharmaceuticals. But it seems FDA has decided to even the field and treat these trials with the critical eye with which it views neurotech drugs."

Lynch says Northstar Neuroscience Inc. (Seattle) and Medtronic Inc. (Minneapolis) are both developing neurodevices for the potential treatment of depression. "I'm sure they are watching developments with FDA and CMS very carefully, especially in regard to clinical trial design," he says.

© 2007 Canon Communications LLC

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