Dialysis: One of medicine's fastest-growing and least-loved markets

[okarol]

Dialysis: A growth market

The battle over one of medicine's fastest-growing and least-loved markets.

By THE ECONOMIST

Last update: April 19, 2010 - 5:57 PM

Dialysis -- the use of machinery to make up for malfunctioning kidneys -- is among medicine's least-loved treatments, both to endure and to administer.

Patients have to be hooked to machines for hours at a time every few days. Those providing care often find it difficult, too: as many as a fifth of their patients die each year, many of them after choosing to stop their treatment.

But it is also a fast-growing and lucrative market, and one that provides valuable lessons about making health care affordable.

Dialysis is dominated by an oligopoly. Fresenius Medical Care, the dialysis business of Germany's Fresenius, makes more than half of the dialysis machines sold in the world, followed by Gambro, a Swedish firm.

Ulf Mark Schneider, the chief executive of Fresenius, attributes his company's success to the fact that it plays to traditional German strengths. "A dialysis machine has the same number of parts as a car," he says. "Making one brings together electronics and mechanical engineering, which Germany is good at."

The real money, however, is in running dialysis clinics and administering drugs, which account for 80 percent of the cost of dialysis. The two biggest operators of dialysis clinics are Fresenius and DaVita, which bought Gambro's American clinics in 2004. Each of them runs almost a third of America's dialysis clinics.

About 2 million people receive regular dialysis to clean their blood of impurities that build up as a result of kidney failure. About a quarter of them are in America, which has one of the highest rates of dialysis in the world.

This is less because Americans are especially unhealthy (although high rates of obesity and diabetes do play a role) and more because U.S. health policy is to provide dialysis to anyone who needs it, regardless of their ability to pay or their chances of surviving much more than a few months.

It is also the world's most lucrative dialysis market, with the government spending $24 billion a year, or $71,000 a year per patient, on dialysis, and private insurers paying yet more.

But the number of patients is growing fast all over the place, as is the cost of treatment. In Britain around 3 percent of health spending is devoted to treating kidney failure.

Globally, the number of patients on dialysis is likely to double over the coming decade. Most of them will be in developing countries, where numbers are growing by 10 percent or more a year. Worsening diets are playing a part but so are rising incomes, as a result of which health systems treat people who would previously have been left to die.

With spending rising rapidly, attention is now focused on to trying to control costs. Fresenius' experience offers two lessons.

First, combining the manufacture of machines with the running of clinics has helped it dominate both markets. "The thing that other people in the industry admire about Fresenius is this one-stop shopping model," said Stephan Danner of Roland Berger, a consulting firm. Gambro is the preferred supplier for DaVita's clinics.

Second, Fresenius is ruthless about spending. Schneider, who often flies economy on business trips, is outspoken in his criticism of the pharmaceutical industry's "corptocracies," which have high overheads that need to be supported by profit margins of as much as 80 percent on expensive blockbuster drugs.

Fresenius stands to become a big beneficiary as America's health care reforms take on some of the more bloated parts of the business. At present American dialysis clinics are paid on a "cost-plus" basis for the drugs they use. That, naturally, has encouraged them to use lots of expensive ones.

Analysts at Bernstein, a research firm, note that American clinics used to favor an injected drug costing $4,100 a year over an identical oral one which was introduced to the market at a cost of $450 a year.

After languishing unused, the oral drug now costs more than the injected one. "There is negative price elasticity here: the higher the price, the more competitive the product," Bernstein's analysts observe.

The reforms will introduce a "bundled price," whereby clinics receive a set rate for providing treatment. Analysts expect drug costs to fall by at least 10 percent soon after the change, as clinics use fewer or cheaper drugs. A huge share of the savings will go to Fresenius' bottom line.


http://www.startribune.com/lifestyle/health/91542284.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUUsZ

[Rerun]

Yet, again, they do not say how much the CEO's of these companies make.

                     

[Jean]

Money, Money, Money!!!!!!

[MooseMom]

Private insurers are paying more for dialysis costs than the federal government?  I don't understand that statement because most private insurers kick you off after 30 months of treatment and Medicare has to pick you up from there.

If we believe that our medical needs are best addressed by the free market, then dialysis is going to be the perfect test of that theory.  There is big money to be made, and the market for dialysis is indeed increasing, so this is the time for innovation especially in the home dialysis market.  If we get some competitive innovators who are truly interested in providing great service along with advanced technology and don't have profit as their only raison d'etre, we could be really well served.

[Jie]

Well, the report mentioned that the government spent $75,000  a year for a dialysis patient. You know what, Fresenius is charging me more than 0.5 million dollars a year. I am doing minimum PD and do not use drugs from Fresenius. The CEO's million dollars salary a year is not paid by the government, and it is paid by me and other patients with private insurances. Fresenius increased my charge to about 70% during the past 12 months. This charge is not based on free market. No any free market can charge such a price.

[MooseMom]

Exactly, jie.  Free market principles have never applied to health care, which is why I don't understand why so many people think the "free market" should determine costs.  Never gonna happen because people do not choose to get sick in the same way they choose to buy new shoes.

[Rerun]

Free market would work if greed would not take over.  Alas.... it will not work.

The government aka Medicare needs to crack down on these dialysis centers making millions off sick people and tax payers.

[Bill Peckham]

Hemodoc has a post up on DSEN about this article

Is Dialysis Medicine’s Least Loved Treatment?                                 
By Peter Laird, MD

A recent article featured on Gary Peterson’s RenalWeb, Stakes in kidneys from The Economist, is a throwback to the days of unceremonious insolence towards dialysis treatments seen before the accolades of optimal dialysis became the standard of medical reporting in the last two years. Stakes in kidneys:

The battle over one of medicine’s fastest-growing and least loved markets:
DIALYSIS—the use of machinery to make up for malfunctioning kidneys—is among medicine’s least loved treatments, both to endure and to administer. Patients have to be hooked to machines for hours at a time every few days. Those providing care often find it difficult, too: as many as a fifth of their patients die each year, many of them after choosing to stop their treatment. But it is also a fast-growing and lucrative market, and one that provides valuable lessons about making health care affordable.

Yet, the reality of the reason why America has slipped into a dialysis free fall with poor outcomes and skyrocketing costs is clearly evident in the text of this short article that focuses on why America is the largest dialysis market in the world, it is simply a lucrative business. 

Some 2m people receive regular dialysis to clean their blood of impurities that build up as a result of kidney failure. About a quarter of them are in America, which has one of the highest rates of dialysis in the world. This is less because Americans are especially unhealthy (although high rates of obesity and diabetes do play a role) and more because American health policy is to provide dialysis to anyone who needs it, regardless of their ability to pay or their chances of surviving much more than a few months. It is also the world’s most lucrative dialysis market, with the government spending $24 billion a year, or $71,000 a year per patient, on dialysis, and private insurers paying yet more.

Thus, the business of dialysis sealed the fate of the American dialysis patient that became a commodity in the global dialysis economy instead of a cherished patient given the opportunity to live life in what was previously a universally fatal condition.  I am grateful for the nearly four years of additional life given to me by a simple machine since I started on dialysis in early 2007.  In that time I have had the joy of seeing my son enter and excel in college and a new grand child enter into this world. 

The failed American model will continue as long as biased accounts of American dialysis permeate the medical literature such as this prejudiced account.  Dialysis is perhaps the greatest gift of life ever developed by medical science.  It is time that the truth of this lifesaving advancement shine forth in the appreciation that I and millions of people the world over share for another chance to live beyond our foreshortened lives that we never would have had without the miracle of modern dialysis.  The only sadness about dialysis is how America's dialysis business model has produced untold wealth for dialysis profiteers yet at the same time failing to keep pace with the advances that are standard care in all of the other developed nations.  The way we think and talk about this treatment influences how it is delivered here in America in a less than optimal way, but at maximum profit.

[Bill Peckham]

This is the comment I left on the Economist's site:

The Economist should have done a better job with the cost numbers:
"with the government spending $24 billion a year, or $71,000 a year per patient, on dialysis, ..."

$71k/year is the total of Medicare spending on someone who uses dialysis and has Medicare as their primary insurance (about 75% of the Americans who use dialysis are Medicare primary). That $71K average includes: hospitalization, physician costs and skilled nursing costs. The average yearly cost of "dialysis", meaning the cost to Medicare of treatments received at dialysis clinics, including the drugs, is on the order of $28,000/year.

In addition, the Economist should note that given Medicare pays 80% of a set "allowed charge" that $28K implies about $35K in revenue to the provider, per Medicare beneficiary, per year.

The Economist left uninvestigated: why, after nearly 40 years, the provision of dialysis is so "unloved"? Can it really be true that the same basic treatment provided 40 years ago - three times a week/four hours at a time - is the correct dose of dialysis?

It would be remarkable if the 40 year old guess, as to the proper dose of dialysis, had stood up to rigorous scrutiny. What a guess that would have been! How fortuitous that the logistically easiest dose to provide was also the optimal clinically required dose. WOW! Sigh, if only life were like that.

Alas, that did not happened; there has been no rigorous scrutiny. In the absence of a sufficiently powered randomized controlled trial medical professionals and healthcare insurers - in large part Medicare - have been satisfied with a "difficult" procedure, with "as many as a fifth of their patients die each year, many of them after choosing to stop their treatment."

That result is a function of the dose of dialysis, not the underlying chronic kidney disease. How have we convinced ourselves that one quantity of dialysis is correct for everyone? That makes no sense. I know that treating chronic kidney disease with dialysis is hard but it does not have to be deadly.

There is a story in that, a story with economics at its heart.

Dialysis from the sharp end of the needle
tracking industry news and trends, in advocacy, reimbursement, politics and the provision of dialysis   

[Hemodoc]

What a difference 50 years makes.  In the 1960's, the uniformly fatal condition of chronic renal failure was tamed by a relatively simple machine.  If you want to see the difference it has made, talk to some of those still alive from the beginning of this noble experiment in Seattle.  Imagine the fact that there are people who were selected by the committees and are still alive today nearly 50years later.  That in itself is proof of its value that no corporate bean counter could ever fathom.

[Rerun]

Yes, it has been almost 50 years since dialysis started.  You had to put up $10,000 and that covered 2 years of dialysis.  Today that would cover 1 week..... according to what they "charge" now, having said that, that is not what they get.  But, I can send anyone a copy of my EOB to show that is what they charge.  My EOB can be from $33,000 to $44,000 per month. 

The one thing that has changed in the last 50 years is Medicare paying and dialysis turning the treatment to private companies.  Now, clinics are all over the place including in strip malls like a Master Cuts.

I don't know what to say.  I'm thankful that dialysis is here so I can live.  I'm thankful that I have the right to quit and I will someday.  It just seems natural to keep breathing for another 10 minutes even though I'm being tortured.  I wish they would tell some people "no" to dialysis when they are illegal in this country.  Maybe give them 1 treatment and send them home.  Medicare can't handle it.  I wish they would give end of life counseling to people who are old and sick, and don't know anyone.  Why put them thru dialysis?

OK I'd better stop.

[MooseMom]

Bill, I was hoping you'd chime in on this topic!

I've read many of your posts and have visited "From the sharp end of the needle", so I should probably know the answer to this, but I am tired and sick and want to take the easy way out, so I'll just ask...what can we do as mere dialysis patients who might not be au fait with advocacy to push this idea of having good dialysis as the standard and not having making profit as the priority?  Would it be possible for you to perhaps draft a letter outlining what goal we should be working toward in this regard so that we might have something to send to our Congresspeople?  The practice of dialyzing in-center 3-4 times a week simply because that is the most financially lucrative method is appalling, and we should all be working toward something better than that.  Thank you! 

[Bill Peckham]

Bill, I was hoping you'd chime in on this topic!

I've read many of your posts and have visited "From the sharp end of the needle", so I should probably know the answer to this, but I am tired and sick and want to take the easy way out, so I'll just ask...what can we do as mere dialysis patients who might not be au fait with advocacy to push this idea of having good dialysis as the standard and not having making profit as the priority?  Would it be possible for you to perhaps draft a letter outlining what goal we should be working toward in this regard so that we might have something to send to our Congresspeople?  The practice of dialyzing in-center 3-4 times a week simply because that is the most financially lucrative method is appalling, and we should all be working toward something better than that.  Thank you!

If there was a single reason I started DSEN it is/was to talk about this issue. It's an open question: How have we convinced ourselves that one quantity of dialysis is correct for everyone?

And by "we" I mean everyone, all the Ps - payers, providers, patients, physicians

To change things it's a bit of which comes first ... or rather that no one group or individual can switch without acting in unison with the others.

Take the example of every other day dialysis. There is very good, very compelling data that taking two days without any dialysis is deadly. Dialyzors are most likely to die after the "weekend" vs any other time during their dialysis schedule. So assuming people first see this as a fixable problem what can be done?

To change the provision of dialysis to allow EODD the patients have to want to do it and the other Ps have to go along. The payer has to pay. The provider has to stay open seven days a week. The doctor has to prescribe EODD. It's a big problem but I think it does have to start at CMS - they're the dialysis rule setter.

I personally think that EODD is the place to push with the sort of letter you are thinking about but today the timing isn't right. We have to wait for the final bundle rule to come out, once that happens we can strategize

[Hemodoc]

Dr. Scribner, Dr. Blagg and Dr. Kjellstrand have spent the last several decades advocating for optimal dialysis.  That is a sobering fact to know that the information on how to do dialysis better has been known for decades, but the business model has supplanted the medical model in dialysis.

[Rerun]

Although, I hate to be a HOG and suck up all the money from Medicare when its original purpose was for the aging who paid their whole life into it.  I started sucking from it when I was 45! 

The reality is we would be dead without D, and we get to live with what they can financially give us.  It would be like pouring all our financial recourses into some other malady.  And cut our treatments to save them.  If you have a starving family and only a little food you are going to divide it equally and try to spread it out.  Not just feed one fat kid.

I know if CEO's took a cut maybe we could have more dialysis, but they are not about to.  I only wish kidney failure on them.

I guess what I'm saying is we can't think that we are the most important group to give to. 

[paul.karen]

I hear where your coming from ReRun.  As well as where Bill is coming from.  The bottom line is three days a week is the pro quo.  it seems to work and has for a long time.

What we can advocate for is self dialysis, this should cut costs all around one would think.  It would free up room at clinics for the older people.
I think if one is able to do there own dialysis they should.  Maybe even be given special incentives to do so.  This would also help with what so many are talking about these days which is optimal dialysis.  When you do NXstage you do more then 3X a week. (right?)  When you do PD you do it nightly.  So better dialysis &  less costs on the system.

 

[MooseMom]

The transplant center I am registered with is in a more urban area of Chicago, and it serves a lot of minority and poorer populations.  The surgeon was telling me that for many of their patients, their first dialysis treatment is as an emergency case in a hospital, which indicates that there are a large number of people who are not getting adequate, if any, predialysis care.  Good predialysis care can stave off dialysis for several years, and it also keeps people in better shape for possible transplantation which is cheaper than dialysis for the rest of one's life.  It can also keep people in better shape to do dialysis at home.

I like the idea of financial incentives for people who choose to dialyze at home.

I can't help but wonder if the EODD model is a false economy.  It may be enough to keep people alive, but we all know that CDK comes with a LOT of side issues, and you have to wonder if more dialysis would reduce costs in other areas because you are keeping people healthier.  Spend more money for more dialysis and so less money on, say, cardiovascular complications.

Another thing that would be helpful is if employers could do more to enable dialysis patients to keep working.  I've read so many stories on this board from dialysis patients who are being forced from their jobs.  If you can still contriburte, you should be given the chance to do so.

[Sunny]

It's simply about making money. They don't really care how people feel on 3/day week dialysis or how the body tolerates it. It also seems chronic kidney disease innovation has come to a complete standstill. There is really nothing new on the horizon and no motivation to improve on things because there is so much money to be made with dialysis.

[Jie]

It's simply about making money. They don't really care how people feel on 3/day week dialysis or how the body tolerates it. It also seems chronic kidney disease innovation has come to a complete standstill. There is really nothing new on the horizon and no motivation to improve on things because there is so much money to be made with dialysis.

How about wearable artificial kidneys two to three years from now?

[Sunny]

I hope so Jie.

[Rerun]

It's simply about making money. They don't really care how people feel on 3/day week dialysis or how the body tolerates it. It also seems chronic kidney disease innovation has come to a complete standstill. There is really nothing new on the horizon and no motivation to improve on things because there is so much money to be made with dialysis.

I agree 100% Sunny.   I remember reading back in 2005 that the biokidney would be ready in 3 years.  Hmmm where is it?  If more money can be made in the artificial kidney then in dialysis then it will be invented until then we are stuck.  Transplants make them big money too with the drugs we are forced to take to keep the kidney.  They have us over a barrel.  Rats trained Rats!

[Stacy Without An E]

The sad state of affairs in the medical industry today is that there are no more cures, only treatments.  For if you cure someone, how on God's green Earth can you make money off of them?

What was the last thing we cured...polio?  That was decades ago. 

There will never be an artificial kidney.  Or kidney growth using stem cells.  Or nanotechnology that will filter out wastes on a molecular level.

Rerun's right.  We're all just bloated, fluid overloaded dollar signs just waiting to be squeezed again, and again, and again.

[MooseMom]

I've never been accused of being Little Miss Sunshine when it comes to ESRD, but I think there is a tremendous amount of money to be made in precisely those fields that are perceived to be overlooked, so I am actually quite optimistic.  One set of people may be making a shedload of money with dialysis, but another set of people can make a shedload of money marketing artificial kidneys or other technologies.  If you look at it from a purely financial point of view, since dialysis is mostly paid for by Medicare here in the US, it is a huge financial drain to the taxpayer, so there is great incentive to find other treatments and even a cure.  Unfortunately, the incidence of kidney disease is on the rise, and whichever biotech company can come up with new treatments is going to make an absolute fortune.  And as more and more families are touched by this disease, the moral imperative comes in to play, which is a good thing for all of us.