Glaukos CEO Tom Burns on a misguided Medicare ruling

Editor’s Note: Shares of Glaukos Corp. (NYSE: GKOS), a San Clemente medical device maker and drug maker, fell by about a third to a $2 billion market cap in July on news that the Centers for Medicare and Medicaid Services (CMS) may reduce fees paid to clinics for implementing the company’s products that treat glaukoma. The following Leader Board is an edited excerpt from Chief Executive Thomas W. Burns’ Aug. 6 presentation to analysts and investors about the dispute. Shares have rebounded about 20% since his presentation. Glaukos ranks No. 14 on this week’s annual Business Journal list of medical device makers in Orange County; see page 20.

Pioneering new markets the right way as we have done in MIGS (micro-invasive glaucoma surgery), with transformative technologies that disrupt conventional treatment paradigms and improve the standard of care for the benefit of patients, is not easy and often requires herculean efforts. Since launching our original i-Stent flagship product in 2012, we have overcome many obstacles along the way, including navigating often complex and changing regulatory and reimbursement environments.

Thankfully, since those early days, we have grown from a one product, glaucoma-centric, primarily domestic organization into a global, diversified, hybrid drug and device ophthalmic leader with four FDA-approved products, a robust near and long-term pipeline of promising novel therapies across our glaucoma, corneal health, and retinal disease franchises, a significantly larger global infrastructure, and a strong balance sheet, and we have attracted incredible people to our team along the way.

We are unapologetically ambitious and confident in our future.

We continue to execute on the things within our control, but before we discuss our record second quarter and overall progress, I will spend some time addressing the CMS proposed rules for calendar year 2022.

The issuance of these proposed rules is followed by a 60-day public comment period, which will culminate in CMS’ release of the respective final rules by November and for implementation in the U.S. on Jan. 1. Therefore, the proposed rules are subject to change.

Moving to the facility fee, which is the payment that a facility receives to cover the cost of a procedure, including the cost of the devices used. The proposed rule indicates that 2022 facility fee payment rate … (for an ambulatory surgery center is) $2,516 compared to … $3,353, a proposed reduction of $837.

We estimate that approximately 80% of procedures utilizing our trabecular micro bypass devices in the U.S. are performed in the ambulatory surgery center setting.

We are extremely disappointed with CMS’s proposed 2022 rates for the new Category I codes that cover our sight-saving trabecular micro-bypass technologies when used as approved in combination with cataract surgery.

The proposed 2022 levels are well below our expectations and the ranges that were contemplated in our internal and external generated analyses.

Clearly, these proposals are unexpected, unwelcome, and are the latest example of a current system that often seems to devalue and discourage innovation.

We believe CMS’s proposed rates do not appropriately consider the associated pre-and post-operative work, training component, time nor surgical skill required for implanting our micro-bypass technologies, which as a reminder, are the smallest medical devices ever approved by the FDA and supported by approximately 200 peer-reviewed publications that highlight the technologies’ favorable safety profile and efficacy outcomes.

In fact, one could argue the proposed rule economically incentivizes the utilization of less efficient and more invasive procedures that we believe lack robust long-term safety and efficacy clinical data. In many ways, we believe the proposals punish ophthalmic surgeons who utilize our elegant, facile technologies through a proficient implant procedure, and will inevitably cause a reduction in patient’s access to these sight-saving technologies.

So where do we go from here with CMS? We were organized and prepared for downside scenarios heading into the proposed ruling and our efforts are already well underway.

These efforts include a comprehensive and coordinated response in partnership with key societies, patient advocacy groups, ophthalmic surgeons and lobbying groups.

We are well into engagement with leading ophthalmic and ASC societies, including the American Academy of Ophthalmology, the American Society of Cataract and Refractive Surgeons, the American Glaucoma Society, the Ophthalmic Outpatient Surgery Society, and the Ambulatory Surgery Center Association.

We are encouraged by the full commitment these key societies have made in advocating for change to CMS’s proposals in order to protect patient access and enable surgeons to provide the highest quality of care.

Regardless of the Final Rule outcome, we must plan strategically for scenarios where the proposed rates are finalized, which could result in headwinds to our U.S. combo-cataract MIGS business both from a volume and pricing perspective.

If I’ve learned anything since the outset of COVID, it’s that our employees and teams at Glaukos are resilient.

While we are highly disappointed in the initial CMS proposals, and we understand that the resulting uncertainty can be disconcerting for investors, we want to take this opportunity to underscore what we have told you for some time now.

And while swing factors in U.S. reimbursement may significantly impact our existing U.S. combo-cataract glaucoma business, we believe that our foundation remains strong and that our pipeline has game-changing potential.