Spinal fusion is a complex procedure that requires a surgeon to navigate through muscle, nerves, and organs before reaching bone. TranS1, a Raleigh, NC, medical device company, developed an alternative: a minimally invasive medical device that can fuse the lowest spinal joint in less time, at less cost, and with faster patient recovery.
TranS1, named for the S1 segment of the spine that the company’s AxiaLIF device targets, spent 15 years trying to turn its new approach to spinal fusion into a commercially successful product. But the financial obstacles proved to be too much. The company, renamed Baxano Surgical, filed for bankruptcy a year ago, leaving the future of its device in limbo.
But AxiaLIF now has new life under an old name. Snapped up at auction, AxiaLIF has become the lead product of a Denver, CO, medical device startup that also took the TranS1 name.
“It was on our radar prior to the bankruptcy,” Jeff Schell, CEO of the new TranS1, says of the device. “We knew that it needed to be preserved.”
AxiaLIF’s journey from North Carolina to Colorado shows how medical technologies sometimes can get a second crack at the market. The financial struggles leading up to the device’s sale are also instructive about recent changes in healthcare economics. At one time, FDA clearance was enough for a device to secure insurance coverage. Now, drug and device companies are drumming up new strategies to improve their chances for commercial success.
Spinal fusion has become one of the most frequently performed musculoskeletal operating room procedures in both men and women, according to the Agency for Healthcare Research and Quality. The procedure involves removing damaged disc material, replacing it with bone graft to promote growth of new bone, and inserting screws and rods to hold the joint together while the discs fuse. The surgery is intended to alleviate the lower back pain that can come from age or injury. But stabilizing the joint by fusing two vertebrae also restricts some of the patient’s normal range of motion. Spinal fusion accounted for 450,900 operations in the United States in 2012, according to AHRQ. That’s up from 316,000 procedures in 2003. And these procedures are becoming more expensive: The agency’s analysis of patient discharge data shows that the cost of spinal fusion averaged nearly $100,000 in 2012, up from $48,674 in 2003. Spinal fusion patients average hospital stays of 3.6 days.
Traditional lumbar interfusion, or LIF, reaches the spine from the patient’s abdomen, back, or side. But these surgeries can take as long as four hours, and can require months of rehabilitation afterward. AxiaLIF’s innovation is in its approach. The minimally invasive surgery accesses the spine through a small incision by the tailbone. The procedure targets the L5/S1 section of the spine—a site that’s difficult to reach with other surgical techniques because the pelvis blocks access, Schell explains. The entire AxiaLIF procedure is done through a small tube that accesses the damaged joint. The old TranS1 said that its clinical trial results showed spinal fusion procedures with its device averaged 42 minutes and in many cases, patients stayed just one night in the hospital.
Despite AxiaLIF’s apparent advantages, the device had a tough time building market traction. The old TranS1, founded in 2000 and based in Wilmington, NC, for most of its history, secured FDA clearance for AxiaLIF in 2004. Marketing approval in Europe followed shortly after. TranS1 launched the device in 2005. Two years later, a TranS1 initial public offering raised $82.5 million, most of which was pledged to commercializing AxiaLIF.
The company grew its sales at first. But revenue peaked in 2009 at $29.8 million, and sales steadily declined thereafter as the company struggled to convince insurance companies to cover the product. In some cases, payers said the surgery was unnecessary. Other payers declared AxiaLIF experimental.
Reimbursement struggles have spread across the entire healthcare sector in the last decade, says John Doyle, senior vice president of advisory services for Quintiles (NYSE: Q). Though Quintiles is widely known for providing clinical trial services for pharmaceutical companies, the Durham, NC, firm also serves medical device companies. Doyle says the days of securing insurance coverage with only regulatory approval are long gone. Healthcare reform’s emphasis on patient outcomes has led payers to call on medical device companies to clear a second hurdle—demonstrated value.
The FDA makes its decisions based on safety and efficacy, but payers look for value as compared to the current standard of care, Doyle says. Clinical trial data are not enough, in part because patient studies typically select those who are younger and healthier than those doctors treat in real life. Before covering a new device, insurers want to see … Next Page »