The Joplin Globe, Joplin, MO

Business

July 5, 2012

Insurance makes or breaks medical devices

MINNEAPOLIS — Minneapolis-based OrthoCor’s launch of a new knee brace that uses electromagnetic pulse therapy to alleviate pain and speed healing could serve as a medical technology tutorial.

Safety and effectiveness? Check.

U.S. Food and Drug Administration approval? Check.

Ample angel investment and a growing roster of impressed orthopedic doctors and happy patients? Check, check and check.

But there remains a speed bump along the way to OrthoCor Medical Inc. raking in oodles of cash for its Active Knee System: Medicare and widespread insurance company reimbursement. Until that comes, OrthoCor lingers on the verge of becoming big.

“We are right on the cusp,” said OrthoCor President and CEO John Dinusson, who added that “some” insurers are paying for the $695 device. “We are basically educating them on why they should be covering. If we get reimbursement, the patient population is huge.”

Said Dr. Joel Boyd, an orthopedic surgeon who works with professional sports teams - including the Minnesota Wild, the Minnesota Vikings and the Minnesota Lynx - and has used the device on his own knees: “You need to have insurance companies sign off on it. If you don’t, I need to have my patients pay for this.”

Thom Gunderson, an analyst with Piper Jaffray & Co., said reimbursement is the third leg of the stool for any successful medical device - one that sometimes gets overlooked. And, he said, “payers are historically and notoriously slow in paying for new technologies. You have to show them it’s in their best interest to do this.”

Without getting reimbursement, Gunderson said, even terrific new devices can disappear.

“It used to be that early investors’ first question was ’Does it work?’ ” Gunderson said. “Now, more often than not, the question is: ’Who is going to pay for it?’ ”

Dinusson said his device is a less-costly option for people who don’t want to spend thousands on a regimen of pills, injections or more invasive treatments.

But even without widespread insurance coverage, the device is selling and Dinusson said he expects to sell “millions” of his product in 2013.

The device now is in about 150 clinics. In addition, OrthoCor has sold about 2,000 devices to chiropractors - and the national market is worth a potential $370 million, Dinusson said. Fourteen NFL players have used or are using it.

In May, the company announced closing on $2.4 million in angel investment, bringing OrthoCor’s financing to about $5 million since it launched in 2007.

The focus now is selling the brace, which uses a pair of disposable “pods” to deliver heat and activate the electromagnetic therapy, nationwide. OrthoCor recently hired a national sales director to expand its reach.

And OrthoCor is expanding its product line, including over-the-counter heat-only and cold-only devices, as well as developing braces that use electromagnetic pulse therapy to treat pain in the neck, ankle, lower back and elbow.

“The thing works,” Dinusson said.

Dr. Mark Dahl of St. Croix Orthopedic heard about the device from one of his patients. He later bought one for his wife, who has arthritis, and she liked it. Then he wore one, easing his knee pain. As temporary pain relief, Dahl said “It’s a good augment. It’s not a miracle thing by any means.”

Still, he became an investor and now serves as OrthoCor’s medical adviser.

John Cretzmeyer also is convinced.

An avid runner who has run about 67,000 miles and 62 marathons in his lifetime, Cretzmeyer has also suffered degenerative damage to his knees. His right knee has been replaced; the left will have to be replaced soon. The device’s combination of pulse therapy and heat helps him stay active, he said. He bought one for each knee.

“I have used it. It has helped my recovery from all the various surgeries,” he said, adding that he is on the tennis court four days a week and works with a personal trainer three days a week.

The 63-year-old dentist and White Bear Township, Minn., resident even wears his braces at the office. “I have worn it at work. I’ve worn it at night, sleeping. I have worn it during some activities,” he said. “I am always looking for some way to get to the starting line and whatever allows me to do that, I am going to look at.”

 

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