St. Jude's Approvals Further Roil CRT Market

The already hotly-contested high-voltage cardiac resynchronization therapy defibrillator (CRT-D) device market became even more competitive at the end of June with the long-anticipated FDA approval of two systems from St. Jude Medical Inc. This newest segment of the implantable cardioverter defibrillator (ICD) market has been among the fastest-growing medical device segments, probably second only to drug-eluting stents both in terms of annual growth rates and potential market size, driven largely by the prospect of using these devices prophylactically to treat congestive heart failure (CHF) patients.

For the past two years, Guidant Corp. and Medtronic Inc. have had this rapidly-growing market to themselves. CRT-D devices are now estimated to comprise 40-45% or nearly $1.9 billion of the total $4.7 billion US ICD market (the US market accounts for around 80% of worldwide ICD sales). Between the two early entrants, Medtronic is estimated to have a slight lead in this new product segment, which this year should grow 35-40%.

Lack of a product in this burgeoning market has hampered St. Jude Medical (SJM), not only because it can't benefit from the revenue inflow. While the company has a 16% share of the traditional (non-CRT-D) ICD market, it has only 11% of the total market including the new devices. Medtronic and Guidant, since introducing their CRT-D devices two years ago, have been putting pricing pressure on the standard ICD segment, while keeping high prices for the new products. This directly affects St. Jude Medical. With the introduction of its CRT-D devices, SJM quickly expects to be able to boost the company's share of the overall ICD market to match its 16% share in standard ICDs.

One of the big questions for St. Jude upon entering this market is its pricing strategy. Michael J. Coyle, president of St. Jude Medical's cardiac rhythm management (CRM) business, indicates that SJM plans to come in at prevailing market prices, which are in the $28,000 to low-$30,000 range. He asserts that the company will not use price to take market share nor will it seek a premium for what it considers superior technology. "We're going to try to take market share on the basis of system performance," Coyle says.

SJM believes that the company's newly-approved CRT-D devices, the Epic HF and the Atlas HF, will be able to make up for the two-year lag to market because they are significantly better than the available choices. Its confidence has as much to do with the nature of the market it is selling into and the receptivity of its customer group—electrophysiologists (EPs)—to adopting new technology, as it does with the company's own assurance regarding the new devices' innovations. "If we were coming in two years late with an incremental improvement on a pacemaker, we wouldn't expect to move much share because the market is well-served by the existing technology and well-entrenched competitors," Mike Coyle explains. But he's quick to point out that the CRT-D market is different than traditional CRM sectors.

The technology is hardly mature, leaving room for lots of innovation, he argues. Coyle points to the difference in comparative procedure times as evidence of the need to further improve CRT-D technology. Currently, it takes an experienced EP an average of one-and-a-half hours to implant a CRT-D device, while it only takes around 30 minutes for a standard ICD.

The most significant difference between the two procedures is that implanting a CRT-D device requires gaining access to the coronary sinus with a lead. This can be difficult in CHF patients because of distortions in their coronary anatomy resulting from their condition (e.g., enlarged hearts) and because many of these patients have undergone prior procedures, such as coronary artery bypass graft (CABG) surgery, which creates scar tissue that adds to the difficulty of lead placement. St. Jude Medical believes that its new QuickSite lead technology, which was approved along with the new devices, will help speed the implantation process with greater assurances of correct lead placement and lower risk of lead migration or dislodging, which are the two biggest issues facing EPs when implanting these systems.

According to Mike Coyle, "The biggest unmet clinical need in this area involves lead and lead delivery technology, and this is where we intend to play aggressively in terms of feature differentiation." Coyle says that, according to publicly available comparative clinical data, SJM's CRT-D devices have a 94% implant success rate (largely a product of accurate lead placement), while Guidant's and Medtronic's are around 89%. Similarly, fewer than one percent of St. Jude Medical's CRT-D patients had to return to the hospital because the lead migrated out of position, as compared with four percent of Guidant's and Medtronic's patients. Coyle attributes these higher success rates primarily to SJM's advanced lead technology, which he acknowledges that the company plans on selling separately at a premium price except when it is bundled as part of a CRT-D system.

In addition to its advanced lead technology, Coyle points to differentiating factors in the underlying CRT-D device systems that now give St. Jude Medical both the smallest CRT-D device, the Epic HF, and the one with the highest output, the Atlas HF. The new SJM devices are also the only products on the market, according to Coyle, that enable physicians to program the waveform settings and the shocking vectors, which enable EPs to more specifically tailor a device's output to address individual patient needs. "We're giving physicians the maximum opportunity to deal with a high defibrillation threshold patient, which is exactly what you run into with CHF patients," he says.

For all three companies in this space, reimbursement will be the most significant factor in determining whether the high level of growth is sustainable. The companies say that clinical trials indicate that a broad segment of the CHF patient population can benefit from improved survival rates by using ICD therapy. That is why, for some patient sub-groups, these device companies are arguing for prophylactic use of CRT-D systems.

The real issue here is economics. CMS reimbursement for the expanded patient populations that the CRM companies claim that their clinical data support would result in a huge increase in the number of patients using these costly devices, a budget buster of major proportions.

Each of the companies has done its own market-expansion clinical studies; indeed, this space is beginning to rival the drug-eluting stent market in terms of the ever-increasing thicket of acronyms designating the various key clinical trials. Guidant did the first major trial, MADIT-II, as well as the COMPANION study. The SCD-HeFT trial was done by the National Institutes of Health (NIH) and funded by Medtronic. And St. Jude Medical used its RHYTHM trial as the basis for its CRT-D device approvals and also conducted the DEFINITE study. "All of these market expansion studies are looking at patients who are not currently approved for reimbursement for ICD therapy, and then attempting to determine whether these patients benefit from treatment with CRT-D devices," explains Mike Coyle.

Each of the trials has different criteria in terms of the patient subsets studied that distinguish one from another. And CMS has made this process even more complex. In reviewing Guidant's MADIT-II data, CMS approved expanding coverage but essentially used its own criteria (and one that the study was never powered to look at), rather than relying on the trial's endpoints. The result: the agency effectively limited coverage to a smaller group of patients than would have been included under by applying the MADIT-II criteria. The consensus among CRM industry executives is that this represented a practical approach given the limitations of health care budgets, but was not good science, turning the idea of evidence-based medicine on its head.

The current status of the reimbursement process is that the CRM industry and CMS have agreed to adopt the SCD-HeFT clinical trial data as the benchmark going forward because this is the largest and broadest study and encompasses the patient populations of the other trials. Medtronic has submitted a petition to CMS to use this data as the basis for a decision to expand reimbursement coverage by leaving the current diagnostic-related groups (DRGs) in place, but indicating that the DRG for an ICD covers patients who meet the SCD-HeFT criteria. CMS has met individually with each of the three major CRM companies and the process is now in the public comment period, with a decision expected by early next year. Company officials seem confident that the agency will agree to some expansion of the market; the question is how far will it go.

The current pool of patients covered by the MADIT-II decision criteria is around 600,000. If SCD-HeFT becomes the standard, the market will increase to around 1.6 million patients, with the biggest increase coming from the inclusion of so-called non-ischemic patients, who are people whose heart disease is not related to coronary artery disease and a prior AMI. Instead, these patients suffer from what is termed non-ischemic cardiomyopathy, where the heart muscle is breaking down for reasons other than ischemia.

St. Jude Medical hopes to be the latest recipient of EPs willingness to adopt the newest technology, so long as the clinical data is there to support it. Yet the company has no illusions about the impermanence of any technology advantage it may currently have over its competitors, reimbursement issues notwithstanding. "We're comfortable that we should be able to take significant market share with our new CRT-D products," Mike Coyle says, "at least until our competitors are able to match the performance characteristics of these devices."