Drug-eluting stents: the high cost of immortality?

A revolutionary technology that promises to save thousands of lives and obviate even more open heart surgeries has hospitals in a proverbial "Catch-22": Invest in more expensive technology and lose treatment revenue, or use existing technology and raise the ire of physicians who can't get enough of the new device.

Meanwhile, the company with the only FDA-approved drug-eluting coronary stent is having problems keeping up with demand and is taking additional heat for the high price tag on its new life-saving product.

In late April, the FDA granted Miami Lakes, FL-based Cordis Corp. marketing clearance to sell the nation's first drug-eluting stent, a small device used in angioplasty procedures to prop open clogged coronary arteries. Cordis, a unit of Johnson &Johnson, has been marketing the stent in about 60 European countries since early 2002.

Cordis' Cypher Sirolimus-Eluting Coronary Stent is being hailed as the beginning of the second wave of the stent revolution and given credit as a major advancement in interventional cardiology. Few dispute those kudos. The medical community has embraced cardiac stents since they were first implanted in human arteries in 1987. Each year 800,000 angioplasty procedures are performed in the United States to open clogged coronary arteries. In between 15 percent and 30 percent of patients, the artery becomes clogged again within a year, a condition called restenosis, leading to a second procedure such as angioplasty or bypass surgery. Ironically, conventional bare metal stents themselves may cause inflammation and scar tissue formation in the walls of the coronary artery.

The drug-eluting stent, however, differs from the earlier metal stents in that it prevents restenosis via a slow-to-moderate-release drug formulation coated on the stent. Two types of drugs currently are being used: an immunosuppressive agent, sirolimus, and a chemotherapeutic drug, paclitaxel.

Availafility problems

Physician demand for the Cypher stent has been nothing short of phenomenal. Investment banking firm J.P. Morgan's recent survey revealed that close to 80 percent of the nation's cardiologists are either using or planning on using the drug-eluting stent in their heart procedures. Cordis, meanwhile, has experienced some problems keeping up with demand for the Cypher, which is currently the only such product available in this country. (J.P. Morgan foretold some of those problems in a November 2002 market report, noting that Cordis' ability to quickly ramp-up manufacturing would be one reason for slower-than-expected market adoption.)

Cordis spokesperson Terri Mueller told HPN insisted that the company is "on target with its rollout plan in the U.S." But others say two factors have contributed to issues with availability. The first blip entails the product's relatively short shelf life (six months) because of its piggybacked pharmaceutical. "In anticipation of FDA approval, we built up manufacturing capacity and because of unexpected delays, some of the product expired before we were able to release it on the market," said Mueller. "That proved to be a challenge." The second blip was simply a matter of underestimating demand. "We initially estimated that 30,000 to 40,000 patients were on a waiting list for the Cypher stent in the U.S.," she said. "The actual number turned out to be significantly higher."

Mueller said Cordis' challenges are not unique for a medical device company with theonly product on the market. "We were the first U.S. company out of the gate with this new technology and we're shouldering the burden alone for meeting customer demand," she said. "While this is good for Cordis as a business, it has been challenging to be able to provide enough product." Mueller said Cordis anticipates "some relief" in availability by fall.

Competition coming

Cordis might not have to shoulder that burden much longer. Several competitors are developing drug-eluting stents of their own, and the market promises to heat up considerably when those products begin hitting the market. Here's a look at how that market might shape up with added competition from the usual players in the stent game:

* In May 2002, Abbott Laboratories, Abbott Park, IL, signed a worldwide agreement with Minneapolis-based Medtronic Inc. to market Medtronic's proprietary next-generation stent delivery system and its current delivery platforms. In January, Medtronic began clinical trials for its Endeavor drug-eluting stent. In addition, Abbott continues to develop its own "competitively differentiated" version of a drug-coated stent.

* Boston Scientific, Natick, MA, has under FDA review its TAXUS Express2 paclitaxel-eluting coronary stent system.

* And Indianapolis-based Guidant, a company that has found itself into some high publicized hot water with another high-tech product, has hopes for its paditaxel-eluting stent, Achieve, now undergoing FDA clinical trials.

An 'expensive pill to swallow'

Only time will tell whether the drug-eluting stent's remarkable medical miracle will overshadow its current $3,200 price tag--more than triple that of a conventional bare metal stent.

Moreover, some critics of the new stent (and in some cases, Cordis' parent, J&J) calculate that drug-eluting stent makers stand to reap huge profits, most of which are tied to the device's pharmaceutical component. (The drug formulation in each stent is estimated to represent about two-thirds of the cost of the device.) According to Minna Oh, a researcher at the Massachusetts Institute of Technology, as much as 90 percent of revenues from the drugs on the stents could go back to the manufacturer as profit. One pharmaceutical firm estimates profits in the neighborhood of $1,750 per stent after royalties and licensing fees are paid by the stent maker.

Profits aside, reimbursement could sooth the financial sting of the expensive new stent, if only for some hospitals and physicians. By the time the FDA cleared the Cypher stent in April, Medicare reimbursements were already in place--a first for any new medical device. Mueller noted that most major private insurers are also providing some coverage for the new stent.

The Centers for Medicare and Medicaid Services created new DRGs for drug eluting stents, allowing an incremental reimbursement of between $1,700 and $1,800, depending on whether the patient presents with acute myocardial infarction. But according to J.P. Morgan, "this still leaves hospitals in something of a pinch, as the incremental cost of these devices is estimated at $2,600 to $3,000 per procedure, and will likely drive the hospital to cut costs in other areas, both in and out of the cath lab."

One hospital consultant who requested anonymity said Cordis based its U.S. cost structure on European pricing, which is about 20 percent higher than the expected U.S. reimbursement levels. "I don't understand why J&J was so unwilling to relent on their prices," the consultant said. "A lot of people look at J&J as the baby shampoo company, but they're not so warm and fuzzy when it comes to pricing. The bottom line is hospitals will lose money every time they put a drug-eluting stent in a patient, and if history repeats itself, Cordis won't back down on its pricing."

Meanwhile, proponents of the new stents argue that its higher acquisition cost will be offset by fewer interventions and hospital days down the road. Researchers Brett Sasseen, M.D. and Marco A. Costa, M.D., PhD, commented in a recent presentation during the American College of Cardiology's 52nd Scientific Session in Chicago that the disparity in price for the bare metal and drug-eluting stent shrinks to about $300 after one year. The physicians argued that fewer resources were utilized during the ensuing year for patients treated with a drug-eluting stent. "The question of how to tackle the initial higher cost of this new technology, however, remains unanswered," they noted.

A technological conundrum

As drug-eluting stents fulfill their promise to dramatically lower the number of patients who need angioplasty and bypass surgery, they could have an impact on the bottom line of many hospitals that rely on those heart procedures for vital revenue. This places hospitals in the unenviable position of making a decision that either impacts them financially or potentially raises the wrath of their cardiac physicians.

According to Global Information Inc., a market research firm based in West Hartford, CF, drug-eluting stents will be initially confined to patients With de novo coronary artery lesions. "But when drug-eluting stents become the standard treatment for restenosis, traditional providers in the percutaneous coronary intervention setting will face a struggle in maintaining their current usage rates," the firm points out on its website.

On the brighter side, however, the new technology may give rise to other stent-based endovascular treatments of atherosclerosis, and hence, offsetting revenues.

For the time being, implementing this remarkable new technology should be a relatively easy decision for administrators to make, says Mueller. "Most physicians and administrators will admit that they need to run a business, but doing what's right for the patient is paramount," she said. "Besides, if you had a loved one faced with an option of having a relatively minimally invasive procedure or having their chest cracked open, what would you choose?"

Added another observer who asked to remain anonymous, "Hospitals are envisioning that their cardiac cases will drop because of this, but it's a fact of life when it comes to new technology like this. It's an expensive pill for them to swallow, but are they going to say 'no' to doctors, or worse, patients?"

In its October 2002 editorial, "The price of life," Pulsus Group, a medical peer review publisher based in Oakville, Ont., Canada, sums up the classic conundrum hospitals face when investing in new technology: "Medicine is the only profession that seeks to render itself obsolete. Research advances to alleviate pain and suffering are small steps to the mythical day when disease does not exist. Immortality, however, has a dirty little secret--it is prohibitively costly."

Still, these parting words about history repeating itself: "When bypass surgery, angioplasty and coronary stents were first introduced, there were similar concerns about the costs of such procedures. This too shall pass."

John Hall is a former senior editor of Healthcare Purchasing News and a Chicago-based freelance writer specializing in healthcare.

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