Two weeks ago, the Centers for Medicare and Medicaid Services (CMS) published its most recent ruling concerning reimbursement for the $10,600 disc replacement implant. CMS ruled that disc arthroplasty products like the soon to be approved CHARITE (JNJ’s DePuy Spine division) or the ProDisc (Synthes Spine) are only eligible for reimbursement under code 80.51, which is the code for excision of the intervertebral disc material. [Editorial note: The CHARITE lumbar artificial disc received FDA approval in October 2004 and the PRODISC-L lumbar artificial disc received FDA approval in August 2006.] At best, that code would allow for reimbursement at less than half the expected cost of a disc replacement implant.

It should be noted, CMS is only relevant for patients 65 years of age or older. Disc arthroplasty, like other motion preservation products for the spine, is aimed at younger, more active patients. And, of course, the prime age for severe back pain is between 45 and 65. So, CMS reimbursement is not a factor, at least not directly.

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Private payors, however, account for the vast majority of spinal surgery payments. That may be, in fact, the more difficult issue for disc arthroplasty manufacturers. According to the Charite clinical trial data, two year disc arthroplasty outcomes were shown to be functionally equivalent to a BAK cage. Or described in financial terms, the $10,600 Charite was functionally equivalent to the $4,800 BAK cage. Private insurers, we are certain, will ask the obvious question: If these new, expensive products are functionally equivalent, why should we reimburse at rates higher than a BAK cage?

Written by Robin Young, CFA