The orthopedic device market is unique in that a large portion of orthopedic procedures are considered elective. However, unlike classic elective markets, such as aesthetics, many elective orthopedic procedures can be considered medically necessary, and thus are eligible for reimbursement. Reimbursement plays a significant role in guiding device choice; due to the high cost of orthopedic procedures, many surgeons express an aversion to using non-reimbursed devices because most patients would not be able to make these payments. However, not all reimbursement is created equally, and the level of reimbursement for different treatments of the same indication can vary widely.
The reasons for differences in reimbursement are apparent in some cases. Minimally invasive spine (MIS) procedures, for example, are often reimbursed at a higher rate than open procedures due to the expensive equipment and training that is required to use MIS access systems. However, the reasons for large differences in reimbursement are not always immediately obvious. For instance, physicians receive almost twice the level of reimbursement for anterior cervical discectomy and fusion procedure (ACDF) than they do for cervical disc arthroplasty procedures, despite cervical discs being a more expensive device. Additionally, artificial cervical discs have shown mid- and long-term clinical superiority. They have lower readmission rates, lower reoperation rates, and a significant reduction in total costs paid by insurers when compared to ACDF procedures. Unlike most areas of orthopedics, artificial discs are primarily indicated for younger patients, thus Medicare reimbursement policy for a cohort aged 65+ is not a compelling precedent for private insurers to adopt. Instead, private insurers have been slow to create their own policies or continue to review cervical disc arthroplasty procedures on a case-by-case basis. According to estimates from Jeffrey Zigler, a Senior Director of Reimbursement and Health Economics at LDR (now Zimmer Biomet after a $1 billion acquisition), approximately 180 million out of 230 million privately insured Americans have access to 1-level cervical artificial discs. Physicians have reported instances where excellent candidates for the less expensive, motion-sparing procedure to implant a cervical disc only had reimbursement for fusion procedures, thus an ACDF was performed.
Novel indications for use can also have a significant impact on devices already available in the market. To use our previous example, cervical artificial discs were first approved by the FDA for 1-level procedures in 2007; however, in 2013 Mobi-C became the first device approved for 2-level procedures. This meant, without changing the device in any way, Mobi-C was able to access an entirely new sub segment of the nonfusion spinal implant market. Within 6 months of obtaining 2-level approval, the Mobi-C device went from a small player to a majority market share holder in the cervical artificial disc market. As of September 2016, the number of privately insured Americans with access to 2-level cervical disc arthroplasty has doubled to almost 100 million. However, the strong growth seen with the Mobi-C device since 2013 is not solely attributable to an increase in 2-level cervical disc arthroplasty procedures being performed. Surgeons have reported, when choosing a cervical artificial disc, a device with 1- and 2- level approval is appealing because it only requires familiarity with one set of instruments to perform either procedure. Thus, many physicians preemptively made the switch to the Mobi-C device for use in their 1-level procedures despite a higher price. In 2016, Medtronic obtained 2-level approval for their Prestige LP cervical disc, becoming the second device to be approved in this space. While this approval is expected to positively impact reimbursement policy due to the availability of additional favorable clinical data, it is unlikely that the same explosive growth will occur since the initial backlog of patients and physicians waiting for 2-level devices has already begun to be addressed. Furthermore, Mobi-C has had three years of exclusivity in this market to train surgical staff and build up relationships with healthcare providers. Surgeons report a reluctance to change from the Mobi-C device without a demonstrated need to do so, such as head-to-head data showing long term clinical superiority for an alternate device, or a purchasing contract necessitating the use of specific products.
Overall, the orthopedic device market has an interesting subset of reimbursement for elective, yet medically necessary, treatments. While there is always a steady stream of devices being introduced into this space, it is first and foremost obtaining reimbursement that encourages the use of novel devices. Additionally, in these newer markets, being first-to-market for a standout feature has the ability to greatly disrupt existing market share as competitors try to catch up. All in all, being able to introduce novel features, show strong clinical evidence, and doing so 3 years before your competition is a great way to gain traction for a new orthopedic device, and it might even get you acquired by Zimmer Biomet for $1 billion.
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