Artificial Disk Meets Reimbursement Resistance

When FDA approved the Charité artificial disk last October, some industry analysts speculated that the device could experience a rapid rate of adoption similar to those experienced by new joint-replacement technologies or drug-eluting coronary stents. To clinch their case, the experts cited pent-up demand for the device, which has been available to patients around the world for more than 17 years; the incidence of 200,000 spinal fusion surgeries performed each year in the United States; and the estimated $50 billion spent annually to treat back pain.

Charité: Promising indicators.

Despite such promising indicators, however, early reports suggest that the Charité artificial disk is running into reimbursement roadblocks—from both government and private insurers. The Centers for Medicare and Medicaid Services (CMS; Baltimore) limits reimbursement to approximately half the estimated $11,600 cost of the device. While Medicare’s population of patients age 65 and over is not the target demographic for Charité, CMS’s reimbursement rulings are typically seen as guidelines for the private insurance sector. The average age in clinical trials of artificial disks was 40, and the typical spinal-fusion patient is under 50.

Charité is manufactured by DePuy Spine Inc. (Raynham, MA), a Johnson & Johnson company. The artificial disk was developed in the 1980s by Waldemar Link GmbH. DePuy Spine acquired the Link Spine Group in 2003 for $235 million. DePuy Spine reports that more than 5000 of the disks have been successfully implanted worldwide. More than 350 have been implanted in the United States since FDA approval.

The total cost for implanting the artificial disk—including the device, surgeon fees, and associated hospital costs—can easily exceed $50,000. Use of the disk is an alternative to lumbar spine fusion, which uses bone grafts to weld the spine’s vertebrae together. Recovery from artificial disk surgery is described as faster and less painful than spinal fusion.

In a recent conference call with industry analysts, DePuy Spine acknowledged that it was “disappointed” with the reimbursement decisions that have so far been issued by CMS and private insurers. The company said it expected Charité to be covered by a major insurance carrier within the next few weeks, but declined to name the company. Describing reimbursement as “a challenge in today’s healthcare environment,” the company said it was committed to helping physicians and hospitals understand the reimbursement process and would soon release a printed guide that will include information about “coverage, prior authorization, coding, and reimbursement.”

Reimbursement resistance is apparently further exacerbated by the fact that many surgeons do not realize that Charité is now an FDA-approved device, and many insurance carriers continue to consider the use of the artificial disk to be an experimental procedure. The Charité artificial disk replacement is available in 15 spine centers in the United States, and DePuy has set up 50 comprehensive surgeon training facilities.

Gunderson: Just the normal hurdles.

According to Health Research International (Cleveland), which specializes in forecasting medical technology adoption, the spinal-care market has experienced double-digit growth over the past decade. The firm projects that spinal care will post annual average gains of 19% over the next five years, becoming a $5 billion market by 2008.

According to the Institute for Orthopedics (Chagrin Falls, OH), artificial disk replacement could capture 30–50% of the spinal fusion market over the next few years. The institute cites private insurance reimbursement as a particularly thorny issue and one that is likely to be resolved in “fits and starts.” Yet, the institute notes that as more data become available indicating that artificial disk replacement results in less job-time and wages lost than does spinal fusion, reimbursement rates should improve.

© 2005 Canon Communications LLC

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