Nevro rejected by a pair of payers but remains optimistic on reimbursement: Analyst

Senza spinal cord stimulation system--Courtesy of Nevro

A pair of regional insurers has decided that treatment using Nevro's Senza neurostimulation device is experimental and will therefore not reimburse it starting next month.

The Senza spinal cord stimulation device treats chronic pain in the back and legs without the paresthesia, or tingling sensation, caused by other SCS systems. It does so by delivering high-frequency stimulation of up to 10 kilohertz. The FDA approved it in May last year, allowing the company to use superiority labeling on the device.

Blue Cross Blue Shield Tennessee and Highmark BCBS Pennsylvania released their policy deeming Senza to be experimental in April.

The Centers for Medicare and Medicaid approved a transitional pass-through payment, or higher reimbursement, for the device based on study results showing the Senza device's superiority to a low-frequency spinal cord stimulator. This is in addition to the established reimbursement for SCS devices and could be "anywhere from zero to a couple of thousand dollars," said Nevro CEO Rami Elghandour on the Q4 2015 earnings call.

While CMS officially determines reimbursement from Medicare and Medicaid, private insurers will often follow CMS' lead.

Nevro is working to address payer concerns about the device. Leerink analyst Danielle Antalffy remains optimistic, writing in a note that there is a "high likelihood" that the payers will reverse their decision.

She pointed to an earlier negative decision from Blue Cross Blue Shield Alabama that was later overturned, "presumably" thanks to "solid clinical data." As the high-frequency stimulation remains new and unfamiliar, Antalffy expects more payers to question treatment using Senza, but is confident the device will win reimbursement on the back of its strong clinical data.

Nevro, which made its Wall Street debut in November 2014, is valued at more than $2 billion. It predicted revenue between $145 and $155 million in 2016 at this year's J.P. Morgan Healthcare Conference. It operated at a net loss of $62.4 million in 2015, but these projected revenues might just be enough to tip the company into profitability.

Special Report: 2012 Fierce 15 - Nevro