Counting the Cost of New Technologies

June 1, 2003

3 Min Read
Counting the Cost of New Technologies

Originally Published MPMN June 2003


Counting the Cost of New Technologies

0303p4a.jpgIn April of this year, FDA approved Cypher, the first drug-eluting stent for commercial use in the United States. While this is newsworthy in and of itself, something else notable happened along the way to market.

Long before the ink dried on the approval paperwork, the Centers for Medicare and Medicaid Services (CMS) already had in place reimbursement guidelines for drug-eluting stents. Two new diagnosis-related groups (DRGs) for inpatients and one ambulatory payment classification for outpatients had already been drafted. The agency will now pay 17% more for drug-eluting stents than their bare counterparts.

This efficiency is noteworthy. Previously, CMS has simply assigned new products to the DRGs of predecessor technologies. Often they are given lower reimbursement rates. It can take up to four years before the agency adjusts claims data to reflect the higher costs of a new technology.

However, "In order to ensure access to [drug-eluting stent] technology for patients as rapidly as possible, the Department of Health and Human Services has taken the unprecedented step of assigning it to new DRGs prior to FDA approval," said Cordis Corp., a Johnson & Johnson Co. and the maker of Cypher.

Unprecedented, perhaps, but this case shows that it can be done. This example should set the standard for other new technologies. Having reimbursement guidelines in place as soon as the product is available will certainly speed up the adoption of new devices by hospitals and doctors. This can only improve patient care.

To make sure this happens, manufacturers can and should play an active role in helping CMS make reimbursement decisions. The decision in the case of drug-eluting stents didn't come about by accident. Cordis "worked closely with CMS for nearly two years, sharing clinical and health economic data for drug-eluting stents," according to the company.

Congress is also helping to bring about changes in the way CMS reimburses new technologies. In April, U.S. Senators Rick Santorum (R–PA) and Blanche Lincoln (D–AR) unveiled the bipartisan Medicare Innovation Responsiveness Act of 2003. Representatives Jim Ramstad (R–MN), Anna Eshoo (D–CA), and Joseph Pitts (R–PA) introduced similar legislation into the House in February.

Among other things, the new regulations will establish a Council for Technology and Innovation to improve the timeliness and coordination of coverage, coding, and payment decisions. It will also reduce the amount of time it takes Medicare to set adequate payment levels for new medical technologies.

The Cypher stent promises great benefits in the care of cardiac patients. The devices are said to reduce the rate of restenosis (reclogging of the artery) by about two-thirds when compared with a bare stent. As a result, a patient may have to endure fewer angioplasty procedures. Doctors may also be able to use the products in certain patients instead of performing much more invasive coronary artery bypass graft surgeries.

All predictions for Cypher's success are rosy. According to Johnson & Johnson's sales projections, up to 75% of U.S. cardiologists will be using Cypher within a year. There is already a waiting list of 40,000 patients.

And a recent Dow Jones report said that drug-eluting stents "could quadruple the size of the $1.5 billion U.S. stent market by 2005 . . . and add nearly $2 billion to Johnson & Johnson's sales this year alone." Other companies will soon join the market. Boston Scientific anticipates receiving FDA approval in the fourth quarter of 2003 for its Taxus stent. Analysts forecast sales in excess of $1 billion during 2004. Guidant is also expected to launch its Achieve stent sometime in 2005.

Drug-eluting stents will help untold numbers of patients. Fortunately, the devices will be available to them because of the prompt actions of CMS in ensuring proper reimbursement. The agency should strive to make this case the new standard.

Susan Wallace, Managing Editor

Copyright ©2003 Medical Product Manufacturing News

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