Question-and-Answer Session
Operator
(Operator instructions) The first question comes from the line of Tao Levy from Deutsche Bank
Tao Levy - Deutsche Bank
On the gross margin side, you’ve given the number of SI that you sold and also your procedure growth. I would have thought maybe you would have seen some sequential improvement, excluding the deferrals, instead of just staying at 71.5%. Is there any scrap material related to the S or anything going on there?
Benjamin Gong
No, really there is not. Even though you have a higher ASP due to the higher price of the SI, the cost of producing an SI system is actually higher than it is for the S, and that’s why the gross margin was very similar even though you have a mix of SIs in the sales mix.
Tao Levy - Deutsche Bank
Aleks, you talked about the paper on prostate caner and long-term survival, have you looked at an analysis on the cost difference between the different therapies, and a question that kind of ties into that maybe for Lonnie because I’m sure he’s got a perspective on it, any thoughts on what’s going on with healthcare reform, the thoughts of comparative effectiveness, maybe having robotics a part of that?
Lonnie M. Smith
Clearly, we have. It’s interesting to me. Proton beam reimburses about $72,000 if you assume 40 treatments which is about the average, and IMRT reimburses, and these are CMS reimbursements, just under $40,000. Brachytherapy around $29,000; and surgery assuming comorbidities and complications is about $10,000. All of those include both the facility fees as well as the surgeon or the physician, and Aleks pointed out those numbers. Actually, there was a longitudinal study of a little over 3000 patients at Henry Ford and found that life expectancy over what you call conservative treatment which will be hormonal treatment or watchful waiting was 4.6 more years of life, and this is age adjusted, disease stage adjusted for radiation therapy, and 8.6 more years of life for surgery. Now, if you do a simple calculation, I’m a simple minded guy, I divide the cost by the number of years of additional expected life, and for proton beam, assuming it’s the same as other radiation therapies is about $16,000 per year of additional year of life, about $9000 for IMRT, about $6000 for seeds, and less than $1000 for surgery. So, in terms of comparative effectiveness and things like that, we’re big proponents of it, especially if it’s a level playing field, and people go into without a preset agenda. So we have some interesting days ahead, but I really do think that comparative effectiveness can lead us to a better place with healthcare both in terms of cost and outcomes.
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