Hospital Revenues an Indicator of Medical Device Industry Revenue

As key buyers of devices, how hospitals perform will provide some indication of what  those who sell medical devices are up against.  In recent years, hospitals have faced challenges on several fronts, from trying to collect from patients to the increased paperwork needed to keep up with payor demand.    To stave this off to some degree in the United States there is a trend toward consolidation in the hospital industry which results in the changes in hospital structures.   However, statistics are showing some leveling off in declining facility numbers—by 2015 the figure is estimated to be fairly stable at 5,700 hospitals in the United States. 

Revenue growth is falling at many not-for-profit hospitals, which face reimbursement pressures from Medicare, Medicaid and commercial health insurers and declining volume from a persistently sluggish economy, according to a new report from Moody's Investors Service. The median revenue growth rate for hospitals and health systems rated by Moody's was 4% in fiscal year 2010, the lowest in two decades.   This was found in their report "Hospital Revenues in Critical Condition; Downgrades May Follow."  Medicare cuts, patient volumes, new administrative challenges and uncompensated services are plauging hospitals.  

Kalorama expects medical device growth to be limited in a  similar fashion as hospitals increasingly look to transparent pricing systems and group purchasing organizations to make their device purchases.  Device companies who do not participate in these programs will come under increased government scrutiny as states and the federal government assert their influence as key payors. 

These events are covered in detail in Kalorama Information’s report The Global Market for Medical Devices, which includes profiles of companies in the industry, forecasts of the device market and regional breakouts of the device market, products in development and other information.   The report can be obtained at http://www.kaloramainformation.com/Global-Medical-Devices-6921310/

OTC Drug Sales Not Recession-Proof

Results over the past few years may put to bed the theory that OTC drug sales go up during recession. It was something broadly predicted, including in our own reports. It turns out that OTC drugs were affected by consumers having less cash in their pockets, just as much as other products were. Some of the reasons for this are complex, and some are simple. Less money in your pocket?, Skip the visit the doctor. Don't visit the doctor, don't think you need any medicine, even OTC. But there's more than that... 

Despite predictions that consumers in recessionary times would flock to cheaper OTC drugs, the world over the counter drug market grew little in the past few years. The market grew just 3.5% since 2008, according to our latest report on the subject, The World Market for Over the Counter (OTC) Drugs.

According to the report, the 78 billion-dollar market for over-the-counter pharmaceuticals behaved as many products in the recent recession: almost no sales growth in 2009, and slowly increasing but below average growth in the past two years. OTC drug products are sold worldwide and the growth rates are highly fragmented by region and type of drug category. OTC drugs largely due to differences in economic conditions, perception of self-medication, education, access to medical advice and products, demographics, product availability, and incidence of diseases and medical conditions.

There are a couple of reasons. Consumers reduced doctor visits and sought to trim all medical expenditures since 2009, which dampened the benefit from customers preferring the lower prices. Lower-priced drug store brands competed well with brand products, reducing prices paid. And increasing numbers of patients insured through Medicaid and Medicare were better able to purchase prescription products, reducing the need for OTC purchases. 

Some regions showed faster or slower growth than average, and some drug categories also showed better performance.  These segments are detailed in Kalorama Information’s report, The World Market for Over The Counter (OTC) Drugs.  


The report can be obtained at: http://www.kaloramainformation.com/Counter-OTC-Drugs-6923618/

Tough Year for Clinical Lab Services

Reimbursement woes slowed down the market for clinical laboratory services in the United States, our latest report in this market.   We have the market was worth approximately $52.1 billion in 2011, increasing at just 1% from $50.6 billion in 2010. 

The clinical lab services market includes hospital and physician labs billing for tests performed on patients in their care, and lab chains who perform services hospitals and physicians outsource, most notably LabCorp and Quest Diagnostics. The report indicated that the despite the several positive trends drive growth in this lab services - the aging and longer-living population and an increase in volumes, the recent overhaul of the fee schedule with reductions for almost all tests. 

The overall word in the industry is that this has been a difficult time for billers. The new schedules reduce most fees, which will continue to reduce revenue growth. For instance, the CPT code for FISH testing declined from $252 in 2007 to $202 in 2011.

A few positive trends were noted in our report: volume is up, and this provided what revenue growth was achieved last year. A trend toward preventive and risk factor testing has been noted in several disciplines, particularly in the areas of oncology, endocrinology, and gynecology. Physicians in these areas are taking full advantage of testing for early detection and disease prevention. Hospital length of stay’s in the United States have been reduced to approximately 4.7 days on average, compared to 5.4 days in 1995 and 4.9 days in 2000. This reduces the physician-patient contact and places a larger role on laboratories to gather, interpret, and deliver information to the physician for the purpose of monitoring a patient’s condition and overall health.

Hologic Scores Big With Gen-Probe Buy

A case of the "smaller eating the bigger" in molecular diagnostics.  News today that Bedford, MA-based Hologic will purchase molecular diagnostics giant Gen-Probe for 3.7 billion dollars, enlarging their molecular diagnostic offering and significantly increasing the size of the women's diagnostic specialist.


 According to IVD Technology article, Gen-Probe is quite a prize, especially as it adds firepower to Hologic's automated platform:

The transaction allows Hologic to combine Gen-Probe's TIGRIS and PANTHER automation platforms and extensive menu of sexually transmitted disease tests---including the APTIMA line of chlamydia/gonorrhea, HPV, and Trichomonas products---with its strong global market presence and distribution, all targeting women's health. In addition, Gen-Probe's PROCLEIX line of HIV, HCV, HBV, and West Nile Virus blood-screening products and strong partnership with Novartis provide an attractive market, with a global reach and significant growth opportunities for the combined company.

 According to Kalorama Information's last molecular diagnostic report, Gen-Probe was the third-largest competitor in molecular diagnostics, while Hologic had been (as of 2010) in eleventh place.


Kalorama's molecular diagnostic report can be purchased here: http://www.kaloramainformation.com/Molecular-Diagnostics-Potential-2879023/

EMR At The Point of Admissions: An Important Tactic

It seems simple.  Patient walks in, you hand them an iPad.  But yet the simple step can save healthcare organizations thousands of dollars of staff time.   A new trend in healthcare involves using tablet computers for patient admissions. Rather than recording or converting paper admission forms, admission staff can now hand tablets directly to patients. This type of system automatically inputs and updates patient data to a central record. This process also allows offices to present information to patients through written, video, or other interactive media formats.  

An EMR system can only be as good as its usage within the healthcare organization.  The government has its eye on that, and one of the reason it is insisting on meaningful use of EMR if they provide incentives is so that healthcare organizations will put EMR into the workflow right away. Handheld devices, Kalorama have found are the only realistic way of doing this. 

In a survey of over 20 large volumehospitals in the United States, Kalorama Information found there to be a growing use of handhelds in the delivery of healthcare—starting with admissions.  Patients have reported the use of tablet PCs as more personalized, focused and efficient—compared to paper—and as a result hospital administration have responded with future IT plans including implementing tablet PCs, purchasing integrated RFID scanners in multi-use handhelds, and purchasing mobile handheld equipment for care at off-site locations. 

Common Errors Healthcare Marketers Make

As publishers of market research information, we are analyzing companies on a regular basis and have seen certain patterns in what successful, and unsuccessful companies do.  Here are a few common errors we’ve seen over and over during the years.  

·         Misidentifying the Customer – Healthcare products operated in a market environment that can make it less than obvious as to who the customer is. Consumers may use the product, but the providers are the ones ordering their use. Payers may be the ones pulling the strings. Administrators or facility procurement  managers may have the say on equipment, tests, forumlaries. To understand market dynamics, one must correctly identify who is making the buying decision.

·         Assuming Statistics that Don’t Exist – The most elegant market model or sophisticated scenario analysis will only output data that is as good as the inputs. Be sure that the variables you want to plug into your model are data that can be reliably obtained. Like lines diverging from an angle, models built on estimates built on guesses can leave you pretty far from the truth. And all the time it took to work out the model may prove to have been wasted.

·         Overestimating Adoption Rates – Even the most efficacious technology, the most well validated theory, can take a remarkably long time to penetrate healthcare markets where everything from entrenched attitudes among physicians to risk-averse organizations can be a force for market inertia. In our line of work, some companies were quick to predict more rapid adoption of molecular diagnostics, or EMR software systems, than has actually occurred.  Forecasting scenarios must take into account the very conservative nature of the medical community. (Does anyone know what causes stomach ulcers yet – isn’t it stress?)

Some of these ideas are applied to the IVD market in a title we published a few years ago titled What's Working in IVD 

With Purchase, Nestle Leads Infant Nutrition Market

Nestle's purchase of Wyeth's nutrition unit makes it the largest provider of infant nutrition products, according to Kalorama Information's research on clinical nutrition.   (http://dealbook.nytimes.com/2012/04/23/nestle-to-buy-pfizers-nutrition-business-for-11-9-billion/, easily eclipsing Mead Johnson and Abbott.  The Swiss food giant Nestlé agreed on Monday to buy Pfizer’s infant nutrition business for $11.9 billion.    That's far more than the 1.8 billion they earned in 2010 sales.  


Nestlé said it was paying 19.8 times the Pfizer unit’s estimated pretax profit for 2012. That compares with 10 to 12 times for other recent acquisitions in the food industry, according Jon Cox, an analyst at Kepler Capital Markets in Zurich. 

Nestle is paying a premium according to the article, the price of becoming the largest provider and eliminating a competitor, according to the Times:
The large price paid is not entirely surprising.  Fast growth is expected in this market, particularly in sales to emerging markets such as India, Pakistan and China.   In our report on clinical nutrition, we detail the size of the market, what the market shares were prior to this purchase and the competitors remaining.