Calypso Gets Florida Medicare Unit to Pay for “GPS for the Body” for Prostate Cancer

3/27/09Follow @xconomy

Calypso Medical Technologies has an expensive new technology for targeting radiation beams to cancerous prostate glands, so it shouldn’t be any surprise when insurers balk before they pay up. But Calypso got some good news this week as it persuaded an important customer, the regional Medicare unit that serves a lot of elderly men with prostate cancer in Florida, to set up a standard reimbursement practice.

The Seattle-based medical device company has gotten reports from medical centers in 12 states that they have actually gotten paid for their daily use by Medicare, the company said. Calypso also has established reimbursement from more than 13 private sector insurers, including many of the big names, like UnitedHealthcare (NYSE: UNH), Humana (NYSE: HUM), Cigna (NYSE: CI), and several regional Blue Cross/Blue Shield units.

This whole step-by-step process of reimbursement, and the time it takes, has made it clear that simply winning FDA approval may no longer be the automatic ticket to the promised land for upstart medical device and biotech companies. Calypso’s technology, which it markets as “GPS for the Body” was first approved by the FDA in August 2006. The system uses transponders implanted in the prostate, which send a signal to a base station that tells a technician precisely where the prostate is in the body in real-time.

By tracking the prostate this way, Calypso’s method is supposed see whether buildup of urine in the bladder or gas in the rectum has caused the patient to fall out of careful alignment with the radiation beams. When the beams are off track, they can zap healthy tissue nearby that makes men impotent or incontinent—which most guys I know would rather avoid.

Getting the technology to this point has taken a lot of time and money. The company has consumed about $125 million in venture capital to develop the technology since its founding in 1999, and Calypso has set a price where you might expect—high. It’s $1,200 per implantable transponder, and $400,000 to $500,000 for the base station. The business opportunity for this kind of technology is clearly high in a place like Florida, where more than 2.9 million people are age 65 or older—about one out of every six people in the state, according to the U.S. Census Bureau. That’s the age when odds of prostate cancer greatly increase, so this has to be one of Calypso’s prime markets. (The Medicare regional unit affected also includes Puerto Rico and the U.S. Virgin Islands.)

“Calypso Medical is very pleased with these latest reimbursement decisions, which affirm that national payers understand the clinical value of our technology’s critical role in optimizing radiation therapy for cancer patients,” said Peter Buck, Calypso’s vice president and general counsel, in a statement. “As the market penetration of the Calypso System continues to increase—our customer base more than doubled in 2008—reimbursement decisions are vital to expanding our footprint so that more patients can be treated with our technology.”

As I reported last week at the Invest Northwest conference in Seattle, Calypso has sold more than 70 of its systems in the U.S., more than 2,800 patients have been treated, and the radiation-locating procedure has been performed more than 112,000 times. The company has successfully convinced some big U.S. hospitals, like the Cleveland Clinic and the University of Michigan, to use the technology, even though I get the sense it hasn’t caught on the way the company had hoped. It has cut its payroll down from about 200 employees last fall to 124 this month.

Back in December, CEO Eric Meier explained to me that the company needed to make cuts because it isn’t profitable, and to conserve its cash. “We wanted to take prudent action to make sure the company is well-positioned for current and long-term success,” Meier said then. No doubt, more announcements like this one from Medicare are a key part of that plan.

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