An expansion in the volume of positive clinical data and the number of companies participating in the market has added fuel to the fire. As a result, going into 2009, expectations had been high for this market. That year, however, key segments in the US market for minimally invasive spinal fusion devices were hurt by reimbursement trouble, slowing growth. Previously forecasted to undergo a compound annual growth rate of almost 20%, the market’s growth forecast was dialed back to a rate of 12% through 2014.

Coverage Crisis
Reimbursement for procedures employing minimally invasive spinal fusion devices—comprising traditional instrumentation such as screws and rods, interbody devices (IBDs), and access instrumentation systems—typically fall under the same code as open spinal fusion surgery (a Category I reimbursement code). In 2009, however, coding changes significantly impacted the trans-sacral segment, and have taken a toll on Trans1, the sole participant in this segment. Beginning in January 2009, procedures using TranS1’s AxiaLIF were coded with a Category III classification by the American Medical Association, which is generally used for experimental procedures. Previously, the procedure had been coded under Category I reimbursement for a traditional anterior lumbar interbody fusion (ALIF). This change in coding has since caused some confusion among surgeons and facilities as to how the AxiaLIF is reimbursed. As a result, some surgeons have limited their use of the technique in their practice, and some have avoided adopting the procedure at all. TranS1 cut its earnings forecast in mid-2009, and in its recent pre-announcement of Q409 earnings results the company showed dampened revenues, which it attributed to its coding problems. Nevertheless, company executives have vowed to continue to work with physicians, the Centers for Medicare and Medicaid Services (CMS), and other payors to educate them on specifics of reimbursement.

The lateral lumbar interbody fusion segment has also been hurt by reimbursement decisions. In 2009, three major US insurance providers announced they would not provide coverage or continue to deny coverage for NuVasive’s flagship product, eXtreme Lateral Interbody Fusion (XLIF), as the procedure was deemed too experimental. Because Aetna, Cigna, and UnitedHealth Group insure approximately 100 million patients in the US, these decisions and the subsequent media hype that has followed may negatively affect the company’s sales in 2010. The procedure does benefit from CMS coverage; however, these unfavorable decisions have industry insiders and investors wondering whether other private insurance providers will soon follow suit. Indeed, unconfirmed rumors circulating on the blogosphere suggest that Blue Cross/Blue Shield is also denying coverage. Despite its reimbursement woes, NuVasive reported positive growth when it pre-announced its 2009 revenues, beating its own and analyst forecasts. Because some reimbursement announcements were made in late 2009, however, their impact may not be seen on the company’s sales until Q1 2010. As a result, 2010 should prove a pivotal year for NuVasive: if the company can continue to perform or outperform its projections, perhaps then it can overcome the concerns of its investors associated with these noncoverage decisions.

Revenue Reinforcement
As these segments struggle with reimbursement issues, other approaches and techniques will buoy revenues in the overall market for minimally invasive spinal fusion devices. Patient demand, a growing foundation of clinical data, and increasing competition will all serve to push revenues from a 2009 value of $670 million to over $1.2 billion by 2014. With an increasing number of companies and devices entering the market, aggressive marketing and promotion tactics are prompting patients to actively seek out these treatments. Touting benefits that range from reduced blood loss and trauma to faster operating and recovery times, these procedures are fast attracting patient attention. In order to meet the demand and remain competitive, more and more surgeons are learning and adopting minimally invasive surgical techniques. Additionally, the growing penetration of younger surgeons educated on the benefits of minimally invasive spinal fusions and trained in the techniques will add to the growing availability of these treatments in the US. Although the steep learning curve associated with minimally invasive spinal fusion techniques will continue to limit surgeon adoption, particularly for older surgeons, companies will continue to increase their education efforts in order to get surgeons on board.

In the coming years, positive clinical data will be crucial in terms of reversing unfavorable reimbursement decisions and spurring surgeon adoption. Clinical results supporting the efficacy of the procedures are expected to accumulate through 2014, thereby boosting surgeon uptake of minimally invasive techniques. For example, Zimmer completed its MIS MiLIF Versus Open clinical trial in June 2009, and Mazor Surgical Technologies is expected to complete its trial, A Clinical Study of the GO-LIF Approach for Lumbar Spinal Fixation, in 2010. Both studies are showcasing new minimally invasive spinal fusion procedures or approaches developed by the companies in the hopes of creating a successful niche market, much like NuVasive did with the lateral approach. Such trials will help provide the clinical data surgeons need in order to feel confidence in the procedures.

Although the market for minimally invasive spinal fusion devices is currently dominated by Medtronic Spinal & Biologics and NuVasive, changing competitive dynamics will further support revenue growth by intensifying marketing and awareness efforts. In the coming years, competition will increase, with many smaller spine players such as Alphatec Spine entering this fast-growing space. While reimbursement woes affecting NuVasive and TranS1 may curtail growth somewhat, these new competitors will be able to take advantage of the increasing physician and patient demand for minimally invasive spinal fusions. In order to succeed in this market, new competitors will have to develop easy-to-use access systems and instruments and couple their product development with ongoing physician education to minimize the steep learning curve associated with minimally invasive techniques. IQ