Thursday, 13 August 2015

Medtronic's Micra Pacemaker: Game-Changer, or Business As Usual?

The Incumbent Market
Pacemakers are indicated for use in some patients with arrhythmias (irregular heart beats) where electronic pacing is helpful; for example, pacemakers are the most common treatment for bradycardia (a slow heartbeat) and over 1 million are implanted each year around the world.

Pacemakers require a skilled cardiologist to implant the device under the skin near the collar bone and then affix the leads to whichever areas of the heart need pacing. The leads are a weak feature of pacemakers as they sometimes fracture, and the risk of infection from implanting a large foreign object into the body is also substantial.

Depending on the patient's particular arrhythmia, either single- or dual-chamber pacemakers are indicated. The price of a pacemaker can run from $3,000 - $7,000, but the average price seems to be about $4,000. Assuming that average price holds around the world, the pacemaker market is worth about $4 billion per year in new device sales alone.


The Disruptor
Medtronic has developed the Micra, a vitamin pill-sized 'Transcatheter Pacing System' only 1/10th the size of a traditional device. While
Medtronic Micra TPS
much of the engineering for this device has likely occurred across international borders, the Indian market and Medtronic's long-standing presence there was a big part of the company's motivation to develop this technology. 

In a 2010 TEDMED talk Dr. Oesterle, SVP for Medicine and Technology at Medtronic, explained that, "Right now, in the United States, for our population, we have somewhere in the region of 3,000 cardiologists who are trained in implanting pacemakers." By contrast, there are only about 1,000 implanters in India, for a population of more than one billion. By providing a technology that aligns better with the skill sets of more physicians, pacemaker technology can be delivered to more patients. That's good business for Medtronic. 

The benefits of the Medtronic Micra TPS include cosmetic invisibility, implantation directly into the heart, minimally invasive and easier implantation procedure, and a lead-less form factor. The device's battery life is estimated to be nearly 10 years and, once positioned, it can be easily repositioned and retrieved if necessary. The device was awarded the CE Mark in Europe after initial findings from Medtronic's global clinical trial were positive. 


Could Medtronic's Micra TPS Succeed in The U.S.?

Medtronic could go one of two marketing routes with this device. On the one hand, they could market it disruptively as a pacemaker that performs less well on some dimensions (it's only indicated for single valve right atrial fibrillation representing about 10% of those who need a pacemaker in the U.S. per year), but better on others (less invasive, less risk of lead fractures and infections, and easier to implant), and costing less than incumbent models in the hopes of expanding the market size by targeting the needs of those who've been over-served or left out altogether by existing offerings. 

In this scenario, the 'rebar' Medtronic could target initially would be the 10% of patients indicated for single-chamber rather than dual-chamber pacemakers. Over time the technology would likely progress to the point of overtaking traditional pacemakers on most relevant dimensions and provide Medtronic, and potentially St. Jude's who is also developing a lead-less pacemaker called the Nanostim, with a huge competitive advantage as the smaller form factor becomes the normal therapy for most patients indicated for heart pacing. There would also be a very attractive increase in the volume of international sales as Medtronic offers the smaller, more easily implantable device at accessible price points around the world. I also wonder whether physicians could treat arrhythmias indicating dual-chamber pacemakers by implanting two Micra devices: One in each chamber, further increasing the volume of sales. Another potential source of significantly increased volume of sales are additional pacing applications enabled by the 'deep miniaturization' research Medtronic has been doing to build Micra. Dr. Oesterle mentions some of these applications in his TEDMED speech, and they are very exciting, including things like neurological pacing for mood disorders. 

On the other hand, Medtronic faces short-term financial pressure to recoup expenses incurred in the development of Micra that could amount to over $100 million according to one observer who estimated that Medtronic will probably charge in excess of over $10,000 per device and will seek a new, higher reimbursement code from CMS. This is business as usual and it's the kind of behavior that's been driving our healthcare costs to unsustainable levels in the U.S. 

Even if the latter scenario reflects Medtronic's pricing strategy for Micra in the U.S., the company should seriously consider selling the Micra TPS at very low prices in emerging markets like India. The promise of increasing access to life-saving pacing technologies by simplifying the implantation procedure will be squandered if the price remains an insurmountable barrier for most patients. 

78 comments:

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