CMS Declines Cyberonics' Formal Request to Expand Coverage of VNS Therapy

Cyberonics, Inc. today announced that the Centers for Medicare and Medicaid Services (CMS) has declined the Company’s formal request for reconsideration of its existing coverage policy for Vagus Nerve Stimulation (VNS) Therapy. On July 26, 2006, Cyberonics submitted a formal request to CMS to expand coverage of VNS Therapy to include full coverage for patients with treatment-resistant depression (TRD) who have been either previously treated with or refused treatment with electroconvulsive therapy (ECT) or previously hospitalized for depression. CMS has had a full coverage policy of VNS Therapy for pharmacoresistant epilepsy since 1999.

VNS Therapy was approved by the U.S. Food and Drug Administration (FDA) in 2005 as an adjunctive, long-term treatment for chronic or recurrent depression for patients 18 years of age or older who are experiencing a major depressive episode and have not had an adequate response to four or more adequate antidepressant treatments. Since approval, approximately 2,200 patients with TRD have been treated with VNS Therapy, and some 280 insurers have provided coverage for the treatment on a case-by-case basis.

"We are extremely disappointed by the CMS proposal to decline our request for expanded coverage of VNS Therapy to include a small subset of patients. This subset of patients is experiencing a devastating illness associated with extremely high health care utilization, costs and disability and currently VNS Therapy is the only treatment option specifically developed and approved for TRD. We will not rest until all eligible patients have full parity in access to VNS Therapy," commented George E. Parker, Cyberonics’ Interim Chief Operating Officer. "Published peer-reviewed data demonstrate that VNS Therapy provides unparalleled long-term benefits for many patients who have been unable to experience relief from depressive symptoms with other available treatment options. We encourage all who seek parity in access to treatment for those with mental health disorders to make their voices heard during this public comment period.

"Eligible patients with pharmacoresistant epilepsy have had access to VNS Therapy for almost eight years. This long-term experience has provided CMS with solid evidence that VNS Therapy provides value for Medicare beneficiaries," continued Mr. Parker. "A recent study has shown that annual medical costs associated with the subset of patients with TRD identified in the submission to CMS average approximately $47,000."

The CMS proposal is subject to a 30-day public comment period to conclude on March 7, 2007. After the formal request for reconsideration, there was an unprecedented outpouring of remarks filed to CMS supporting access to VNS Therapy for eligible patients. More than 1,800 positive comments were submitted from psychiatrists, healthcare professionals, patients with TRD and their family members, professional and advocacy organizations including the American Psychiatric Association (APA), National Alliance on Mental Illness (NAMI), Depression and Bipolar Support Alliance (DBSA) and Mental Health America, as well as approximately 20 members of the United States Congress.

"TRD is a chronic, disabling, costly and often life-threatening medical condition deserving the best treatments psychiatry has to offer. VNS Therapy is the best studied and only FDA-approved treatment for the long-term management of this difficult to treat condition," commented Scott Aaronson, M.D., Director, Clinical Research Programs, Sheppard Pratt.