UK Stent Reimbursement Decision Could Have Broader Implications

September 12, 2007

An independent appraisal committee will meet in November to discuss a draft guidance recommending against reimbursement for drug-eluting stents in the UK. Analysts warn that, although the UK drug-eluting stent market is relatively small and the guidelines will likely be “watered down,” this action could set a precedent that spreads to other European countries and has a negative impact on devicemakers.

The UK’s National Institute for Health and Clinical Excellence (NICE) last month issued the draft guidance, which is “another hurdle for [drug-eluting stent] manufacturers,” according to analysts with Morgan Stanley.

According to NICE, the independent appraisal committee concluded that drug-eluting stents do not represent a cost-effective use of resources. The appraisal committee will use its November meeting to consider the original evidence, as well as the views and comments of formal consultees and other parties that responded to the draft guidance. After considering the feedback, the committee will prepare the final appraisal determination and submit it to the institute, NICE said.

Morgan Stanley said that, for now, it suspects the final guidance on reimbursement will likely be “less severe,” and that any spillover effect into other countries would be limited. In addition, data from “real-world” drug-eluting stent registries will probably be presented at upcoming meetings, “helping to validate the use of [drug-eluting stents] under most circumstances.”

However, “if countries begin to ignore the clinical benefits of drug-eluting stents and only focus on costs, this could become a real risk for the industry,” analysts said.

Cost Is Key Factor

Based on the draft guidance, the decision appears to come primarily from a cost-effectiveness perspective, as opposed to challenging the clinical benefits of drug-eluting stent usage, Morgan Stanley said.

The immediate effect of the guidance should be mild, as the UK drug-eluting stent market makes up a relatively small portion of the total European Union (EU) market — approximately $80 million to $100 million, the analysts said. They added that France, Italy and Spain comprise 65 percent of total sales in the EU market. Morgan Stanley estimated that the financial impact to drug-eluting stent players would be “fairly minimal” and worth a penny or less in earnings per share to Boston Scientific, Johnson & Johnson (J&J), Abbott and Medtronic.

In addition, the substitution of bare-metal stents for drug-eluting stents could partially offset some of the financial risk to companies, it added.

However, a spillover effect would magnify the financial impact on companies, as the analysts estimate the total drug-eluting stent market outside the U.S. to be $2.17 billion in 2008.

The “worst-case” outcome would be that this event leads to similar restrictions in other countries, they said. In this case, Morgan Stanley estimated that drug-eluting stent penetration outside the U.S. could decline to the 50 percent range in 2008, compared with the current estimate of 65 percent in 2007.

The research note estimated that a decline of drug-eluting stent penetration to that range would translate into approximately $600 million of total sales at risk, partially offset by a $225 million increase in bare-metal stent sales.

The company with the most earnings exposure is Boston Scientific, which recently began efforts to reduce expenses and head count, followed by the other “major stent players” — J&J, Abbott and Medtronic, the analysts said.

Boston Scientific said it is disappointed in the draft decision, adding that it plans to comment on the recommendation.

The company also said formal economic studies on its Taxus stent showed that drug-eluting stent use had favorable cost-effectiveness ratios due to reduced costs for reintervention. Boston Scientific said a 2003 guidance from NICE also found the use of drug-eluting stents in long lesion and small vessel patients to be cost effective.

“However, the current draft decision by the institute recommends that [drug-eluting stents] not be used due to results of a new cost-effectiveness analysis,” it said.

Morgan Stanley predicted that the final guidelines will propose additional guidance on restricting drug-eluting stent use in certain situations, such as low-restenosis risk cases.
This proposal “will likely not lead to catastrophic outcomes,” Morgan Stanley said. However, the analysts said that drug-eluting stent usage will most likely remain under pressure in the near future.

NICE said it expects to issue final guidance in January 2008. — April Astor