St. Jude Medical was confident that a novel cardiac device with proven outcomes would be adopted quickly, but is facing reimbursement's unrelenting brick wall.
Sometimes the best laid plans go awry.
After St. Jude Medical acquired CardioMEMs in 2014, then CEO Daniel Starks informed analysts that October that reimbursement would not be a problem for the novel implantable cardiac device.
After all, the Centers for Medicare and Medicaid Services had created a new technology add-on payment to cover the device meant to empower physicians monitoring heart failure patients remotely to intervene should their symptoms worsen.
Specifically Starks declared:
Our most important accomplishment with respect to market development during the third quarter is that we received from CMS -- we received approval from CMS for a New Technology Add-On Payment or NTAP that took effect October 1, 2014. The NTAP is an affirmation from CMS that CardioMEMS represents a substantial clinical improvement in the treatment of Class III heart failure patients.
The NTAP provides incremental payment of up to $8,875 in addition to the hospital specific payment rate for DRG 264, where the national base payment rate is $16,615. This level of payment is both appropriate and will help drive adoption of the CardioMEMS heart failure monitoring system since both St. Jude Medical and healthcare providers need to invest in training and infrastructure to incorporate the CardioMEMS technology successfully into an existing heart failure program.
Two years later, new CEO Michael Rousseau, who held his first conference call with analysts to discuss fourth-quarter financial results on Wednesday, finds a the reality of reimbursement to be less than rosy. Stung by a negative decision by one Medicare Administrative Contractor (MACs) — private insurers that process claims of Medicare beneficiaries as well make local coverage decisions — and a pending decision by another, Rousseau has realized that reimbursement is going to be a stumbling block to adoption.
The negative coverage decision came in mid 2015 from First Coast Medicare, which has jurisdiction in Florida, Puerto Rico and the U.S. Virgin Islands. Given the elderly population of Florida, a negative decision for a product clearly meant for sick seniors is a blow for CardioMEMS's adoption.
Since then, there have been several news articles questioning the cost of the device — the list price is said to be $18,000 — and that was followed by another MAC — Novitas Solutions — to begin the process of coverage determination, Rousseau explained on the call, according to a transcript from Seeking Alpha. Novitas has jurisdiction over 11 states including Pennsylvania, New Jersey, Texas, and Louisiana, as well as Washington, D.C., and Veterans Affairs (VA).
As a result heart failure centers have put their plans on stocking theri shelves with the CardioMEMS device on hold.
Now, St. Jude is planning a two-pronged approach to tackle the problem of reimbursement. It will not only provide clinical evidence as to how effective CardioMEMS is in lowering hospital readmissions for congestive heart failure to educate MACs and physicians nationwide, but also pursue a national coverage decision from the CMS in parallel to that effort.
A prospective study spanning a mean 31 months of follow up of patients implanted with the CardioMEMS device showing a 48% reduction in hospitalization was published in the Lancet journal in November. St. Jude will use that study to convince the MACs.
But given that submission to CMS will be made in the first quarter and the agency's response times could take 9 to 12 months, no one is expecting stellar sales this year. In fact St. Jude expects sales of CardioMEMS to be about $65 million in 2016, a simple annualization of the $16 million the product garnered in the fourth quarter. That's even lower than the $70 - 90 million the company had forecast for product sales in 2015.
[Photo Credit: Freedigitalphotos user iosphere]
|Read about the Biggest Medtech M&A Deals of 2015. And to understand industry trends, attend the MD&M West Conference, Feb. 9-11, at the Anaheim Convention Center, Anaheim, California.