Dive Brief:

• Noridian, a regional Medicare rate setter, expanded its local coverage policy to cover the use of spinal cord stimulation (SCS) in patients with painful diabetic neuropathy (PDN), giving a boost to both Medtronic's and Nevro's respective attempts to grow sales. 
• Nevro, which was first to market but quickly joined by Medtronic, said in a Monday statement that around 43% of U.S. PDN patients are now covered, up from 25% at the end of last year. Rising coverage is a positive for Nevro's push to capture what it sees as a $3.5 billion to $5 billion market. "We expect to have announcements like this throughout the year," Nevro said in an emailed statement to MedTech Dive. 
• However, neither the new coverage by Noridian nor a January update from UnitedHealthcare is specific to Nevro's therapy, so the expansion also benefits Medtronic and its rival SCS device. Truist Securities analysts said the MAC announcement "is consistent with our expectation that PDN coverage expansion would be forthcoming in 2022 and beyond."

Dive Insight:

Noridian's update adds two new ICD-10 codes for PDN to a pair of documents, A57791 and A57792, that address the use of SCS in chronic pain. The Medicare Administrative Contractor (MAC) covers Medicare patients in Alaska, Arizona, California, Hawaii, Idaho, Montana, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. Nevro said the Noridian update covers around 8% of PDN patients in the U.S.

Working to capture what management sees as an "important driver" of long-term growth, Nevro needs to grow coverage of SCS in PDN to kickstart its business. The addition of Noridian coverage, which applies retroactively to procedures performed since the start of the year, keeps Nevro on track to meet analyst expectations. 

“The announcement is consistent with our expectation that PDN coverage expansion would be forthcoming in 2022 and beyond. For reference, we model FY22 and FY23 PDN revenue of $28.5M & $53M, respectively, and view these as achievable estimates," analysts at Truist Securities wrote in a note to investors.

Truist modeled $23 million and $38 million in PDN sales for 2022 and 2023, respectively, at the time of the UnitedHealthcare coverage decision. Since then, Medtronic has won approval ahead of schedule. The Truist analysts said the presence of Medtronic "will help develop the referral channel" but could also "strip away near-term ... upside optionality" for Nevro.

The arrival of Medtronic in the market means expanding coverage benefits both Nevro and its rival. At the time of the Medtronic approval, analysts said Nevro management "wants to rectify" the fact that the UnitedHealthcare coverage is not specific to their device. Yet, as it stands, neither UnitedHealthcare nor Noridian has differentiated between the Nevro and Medtronic devices in their coverage.

"Noridian's update is not exclusive to any one waveform or frequency but rather based on the overall body of evidence which supports SCS as a treatment option for these patients," a Medtronic spokesperson said in an emailed statement. "We will continue to engage with outstanding Medicare contractors and private payers to share existing clinical evidence to encourage the addition of diabetic peripheral neuropathy to their coverage policies where needed," 

Nevro put a positive spin on Medtronic's FDA approval, with CEO Keith Grossman using a conference call to discuss fourth quarter results to argue "having a second market participant raising awareness about this indication with referring doctors and patients can only be helpful in developing the referral channel and in accelerating market expansion." Grossman made the case that Nevro has the stronger data.

The challenge for Nevro now is to translate its claimed advantages into sales growth. Work to grow sales in PDN from the $4 million generated in the fourth quarter should benefit from further SCS coverage decisions. 

"We expect to have announcements like this throughout the year as we continue our activities to expand payer outreach to include spinal cord stimulation coverage for peripheral diabetic neuropathy," a spokesperson for Nevro said. "We will provide updates on those payer decisions as they arise and expect our payer coverage to increase gradually over time with a steady increase in positive coverage decisions occurring throughout the year."