Medtronic, Bard get additional CMS reimbursement for their drug-coated angioplasty balloons

C.R. Bard's Lutonix Drug Coated Balloon

C.R. Bard ($BCR) and Medtronic ($MDT) announced that the federal Centers for Medicare & Medicaid Services has given them new technology add-on payments for their drug-coated angioplasty balloons to help hospitals cover the costs of treating patients with the device.

The maximum bonus Medicare reimbursement will be $1,035.72 per case, applicable when the device is used for peripheral procedures in an inpatient setting, and the total device costs exceed the allowance for the device's Diagnosis Related Group (DRG).

The payment begins October 1, 2015, and is expected to last two or three years.

Under the DRG system, hospitals receive fixed payments based on the average treatment cost of patients whose condition falls in the group. The goal is to incentivize low-cost healthcare because treatments whose costs are above the average receive the same Medicare payment as those whose costs are below the average.

But CMS makes exceptions for new technologies--like Bard's Lutonix and Medtronic's In.Pact Admiral drug-coated angioplasty balloons--that it deems worthy of additional payments. Hospitals are now more likely to adopt the devices. The companies also gains implicit federal recognition of the innovative nature of their products.

Lutonix was the first device in its category and earned FDA's stringent PMA approval. In addition to physically removing peripheral lesions via standard angioplasty, the device elutes the drug paclitaxel to restore blood flow to patients with peripheral arterial disease in the legs' femoropopliteal artery. Paclitaxel is also used in drug-eluting stents for the coronary artery.

Medtronic's ($MDT) similar paclitaxel eluting In.Pact Admiral was FDA-approved soon after Bard's Lutonix.

CMS has given drug-coated angioplasty balloons favorable treatment in the past. In February, both balloons received pass-through payments granting them bonus reimbursement when used on outpatients, and the agency further increased their reimbursement in June, saying costs associated with DCBs were not included in existing reimbursement for percutaneous transluminal angioplasty, stenting, or atherectomy procedures.

The Lutonix and In.Pact are off to a fast start, according to Bard and Medtronic.

Bard's endovascular business grew 17% in the most recent quarter, excluding a certain royalty payment. "The key driver of this growth was strong Lutonix sales globally, which drove our peripheral PTA line to increase 45%," said Bard COO John Weiland during the company's Q2 earnings call.

Boston Scientific ($BSX) is helping to distribute the Lutonix in an alliance designed to keep up with Medtronic's large sales force.

"We estimate that the IN.PACT Admiral is the leading DCB in the U.S. market in just its first quarter of launch. This leadership position was attained without the benefit of having a full quarter of a combined Medtronic and legacy Covidien Peripheral sales force. We expect this DCB to drive growth in our APV (Aortic & Peripheral Vascular) division over the coming quarters through both its individual revenue contribution as well as its ability to drive share across our broader Peripheral Vascular product line through the use of multi-line contracting," said Medtronic CFO Gary Ellis during the most recent earnings call.

In a previous interview, Bard's senior vice president of science technology and clinical affairs, John DeFord said the company is enrolling patients in clinical trials to convince the FDA to expand the indication of the device to include use to treat in-stent restenosis (or recurrent narrowing at the site of a peripheral stent), PAD below the knee (about 30% of all cases), and PAD in hemodialysis patients.

The company is considering starting trials to bring its European Lutonix drug-coated balloon for use in the coronary arteries to the U.S, DeFord said. He explained that the market for such a device is quite small, since it would be used in only the 10% of coronary stent patients who experience restenosis.

- read the Bard release
- read the Medtronic release
- here's a list of other companies that also applied for the add-on payments (PDF)

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