Minneapolis Star Tribune
August 14, 2010
Next month, a little-known government committee will discuss whether Medicare has enough medical evidence to continue paying for a popular bone-growth product used in back surgery.
The outcome of the Medicare Evidence Development and Coverage Advisory Committee (MedCAC) in Baltimore on Sept. 22 could have a huge impact on Medtronic Inc.'s $3.5 billion spine business, according to Wells Fargo Securities analyst Larry Biegelsen. The Fridley-based medical technology company is the leading maker of a bone-growth product called Infuse, and a similar one called Amplify that's not yet approved by U.S. regulators.
Both products are used in spine fusion surgery, a procedure that involves permanently connecting bones in the spine in an effort to eliminate back pain. Last year, doctors performed 445,300 spine fusion surgeries on patients, according to the Millennium Research Group.
While MedCAC's role is advisory, it will ultimately recommend to the Centers for Medicare & Medicaid Services (CMS) whether there's enough scientific evidence to justify Medicare reimbursement for Infuse and for a competing product made by the Michigan-based orthopedics firm Stryker.
The mere fact that a MedCAC meeting has been convened should raise some concern among investors, Biegelsen wrote in a July 28 note.
MedCAC committees are generally composed of 13 to 15 experts, including those representing consumers and industry. "It is a panel of experts that advises [CMS] on the quantity and quality of evidence" regarding a technology, said CMS spokesman Donald McLeod.
Currently, there is no national policy decision on Medicare reimbursement of products like Medtronic's Infuse. But up until recently, coverage of spine fusion surgery hasn't been an issue for most patients, whether the money was coming from the nation's health plan for the elderly or from private insurers.
In the past year, however, several private insurers have pushed back on payment for spine fusion surgery as questions surfaced in the medical community about its effectiveness, as well as the cost of the procedure, which can be $25,000 to $80,000 or more.
Infuse had been a wildly successful product for Medtronic since its approval by the Food and Drug Administration in 2002 for use in the lower back, although sales have slowed in the past two years. It has also been approved for some dental uses, and for treatment in the lower leg. Currently the U.S. spine device market is valued at more than $4 billion, according to Millennium Research Group.
But CMS estimates roughly 85 percent of Infuse is used off-label -- in ways not approved by federal regulators but still legal for doctors searching for alternative ways to treat patients. In 2008, the FDA warned doctors about using Infuse off-label in the neck after receiving reports of serious complications in some patients.
Last month, an FDA advisory panel recommended approval of the Medtronic product Amplify, which uses a different surgical approach than its predecessor for patients suffering degenerative disc disease. While the FDA often follows the advice of its advisory panels to approve a product, that's not always the case.
The FDA panel vote wasn't exactly a slam-dunk for Medtronic. When considering safety, the vote was nine in favor, four against and one abstention. On effectiveness, the vote was 10 in favor, three against and one abstention. And on the issue of whether the benefits of Amplify outweigh its risks, the vote was six in favor, five against and three abstentions.
Last year, Medtronic reported about $868 million in biologics revenue, which includes Infuse sales. If approved by the FDA, Biegelsen predicts sales of both Infuse and Amplify of approximately $866 million in fiscal 2011, and $900 million in fiscal 2014.
In his report, Biegelsen said that if the FDA doesn't approve Amplify, Medicare "could choose to limit off-label use." Either way, he predicts the MedCAC meeting will be "spirited."
Medtronic spokeswoman Marybeth Thorsgaard said the company is "aware" of the MedCAC meeting. "As to Amplify, because the product has not yet been approved by the FDA, we don't want to speculate on future coverage decisions."
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