Devices & Diagnostics

Here’s an example of product adoption with zero reimbursement

At a recent medical device conference in San Francisco, a Medtronic executive gave an example of a device finding adoption even though the device is not reimbursed.

The Tyrx antibacterial envelope encapsulates implantable cardiac electronic devices to prevent associated infections after implantation.

The Tyrx antibacterial envelope from Medtronic encapsulates implantable cardiac electronic devices to prevent associated infections after implantation.

Reimbursement. That’s become the key factor in the adoption of new technology these days.

Investors will ask startups about reimbursement model prior to investing and so will tech assessment committees at hospitals and health systems before they agree to purchase the new product.

But this is where an old cliche — there is always an exception to the rule — is proving its point. In this case, the exception to the reimbursement rule is Medtronic’s Tyrx product.

The device is an antimicrobial envelope that encapsulates implantable cardiac electronic products such as pacemaker or defibrillator and elutes drugs to prevent infection that often occurs after implanting such devices. Over time the mesh device is fully absorbed into the body leaving no trace behind.

Medtronic acquired the technology when it bought New Jersey-based Tyrx for $160 million plus milestone payments in 2014. The product was already cleared by the FDA when the announcement was made and “there is no reimbursement to this device,” today said Jeff Farkas, senior director for health policy and payment at Medtronic at the WSGR Medical Device Conference at the Palace Hotel in San Francisco on Friday.

But Medtronic has made this a value-based care play and crafted the proposal to hospitals by assuming some financial risk as it sells a new device.

How?

Farkas said that infections from implantable devices do occur though not very often, and when they do they are expensive to treat and bad for the patient.

“Patients who get infections associated with their devices can have high mortality,” he said.

In fact, a study published in May 2016 about the Treatment of Infected Cardiac Implantable Electronic Devices found that the cost to treat a pacemaker infection ranges from more than $31,000 per patient to more than $50,000. Such infections can also result in an 8.4- to 11.6 fold increase in mortality.

In other words, while implanting such devices controlling infections associated with them is important.

What Medtronic has decided is that it encourages hospitals to buy and use Tyrx during implantable cardiac device procedures by committing to pay to treat a patient’s infection should the patient still end up with an infection following the surgery with Tyrx.

So in effect, Medtronic is providing a level of guarantee for its device and having some of its own skin in this game. [Ironically, it appears that FDA issued a warning letter on the Tyrx device in June 2016 that hasn’t been resolved, per FDA’s website. A Medtronic spokeswoman did not immediately respond to a request for clarification on the warning letter.]

Such a risk-based approach has long been advocated by healthcare experts and many such examples are coming to the fore as value-based care advances.

Other examples of OEMs assuming risk for their devices include Stryker’s unusual money-back guarantee where the orthopedics company announced last year that it is giving hospitals up to $5 million and additional refunds if its products aimed at preventing the occurrence of retained surgical sponges during surgery fails.

Photo: Medtronic

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