An Oligopoly Industry
The first observation, walking into the exhibit hall in Boston, Wednesday May 9th around noon was the occupancy of exhibit space by the different industry players, who had come to display their wares – new technologies, next generation shiny devices, and offerings to match and anticipate new clinical approaches to cardiac arrhythmia treatment. More than half the exhibit floor was occupied by the four large players – Medtronic, Philips, Biosense Webster (Johnson & Johnson) and Abbott.
The remainder of the floor space was inhabited by small 10x10 booths with little “bling” a strong flavor of technology start-up: Space exhibits focusing on a singular innovation, some marginal to the cardiac arrhythmia area, others with very promising ideas that, if commercialized, would enhance the area. Commercialization is the big “if” for innovation in this industry. It is achieved in one way and one way only: Through acquisition by the aforementioned four big players. So – half the exhibit floor was owned by start-ups wanting to be acquired by the other half of the exhibit floor. In a healthier industry with more choice and more organic growth, there would have been a third “village” of medium-sized companies, challengers to the “big four”. But this village was virtually non-existent.
In a healthier, industry with more choice and more organic growth, there would have been a third "village" of medium-sized companies, challengers to the "big four". But this village was virtually non-existent.
This has to worry macroeconomic, trade law, and political observers, since oligopolistic markets like this have a tendency to create dependencies and lack of choice on the part of healthcare providers and clinicians. And this, indeed, mirrors the reality in hospital electrophysiology purchasing departments, where choice is limited and reliance on a singular device manufacturer that dictates device utilization and spend is common. Not the best spot for healthcare to be in, given that this is one of the fastest growing areas.
Some of my colleagues observed that the innovations presented at this year’s Heart Rhythm Society conference were a bit different from previous years: There were fewer new technologies presented – in spite of very large exhibit booths – and recent years’ focus on new capital equipment like mapping systems (consoles, etc.) had been replaced by the launch of disposable devices. As an example, Abbott had almost their entire booth dedicated to introducing the new Advisor HD. New catheters are needed to increase safety and efficacy of procedures, but the industry needs to come up with more than incremental improvements: AF Ablation still has low penetration due to device costs, procedure complexity, and low success rates. If the cardiac arrhythmia treatment approach is to reach its potential, innovation should be focused on systems and treatment solutions that dramatically improve efficacy, reduce complexity and increase access.
Along similar lines, as a representative from a company that is focused on reducing the cost of medical devices in cardiac arrhythmia treatment, it was crystal clear that most if not all new technologies presented offered increased safety or better efficacy – usually at a higher cost. Few innovations were about reducing costs, although the arguably tallest barrier to cardiac arrhythmia treatment growth is the cost of the procedures. Such innovation strategy seems to benefit the big four’s pocket book more than the AF patient in need of curative treatment.
Few innovations were about reducing costs, although the arguably tallest barrier to cardiac arrhythmia treatment growth is the cost of the procedures. Such innovation strategy seems to benefit the big four's pocket book more than the AF patient in need of curative treatment.
Interest in Reprocessing
We experienced an increase in the overall interest in reprocessing as a strategy to reduce device costs in cardiac arrhythmia treatment. Increased interest NOT because single-use device reprocessing was seen as a great new idea – the overwhelming majority of visitors to our booth knew about reprocessing and most currently had reprocessing programs in place at their facilities. Rather, the interest in reprocessing was about “how can we do more” and “what new reprocessing technologies are on the docket”.
An unlikely group was responsible for a large part of the increased attention and visits to our booth: Medical device manufacturers. In past years, we have had dismissive or angry visits from the large manufacturers who do everything they can to reduce the impact of single-use device reprocessing in their area: Single-use device programs reduce EP Lab costs – but they reduce manufacturer sales by an equal amount. This time was different:
The large medical device manufacturers in Cardiology and Electrophysiology are beginning to approach reprocessors in a less dismissive way – to learn about what we do and sometimes to inquire about a possible future with a true integration of reprocessing into manufacturing. My guess is some of them are recognizing that their revenue growth in this high-growth procedure area is challenged by device costs that in many cases make cardiac arrhythmia treatment prohibitively expensive; a different cost equation is needed, and reprocessing just might be the key to get there.
For sales reps that have in the past frowned at reprocessing, visits to our booth were motivated by a much simpler issue: Some hospitals are starting to say, “we don’t want to buy your device, they are too expensive - come back when we can reprocess them”. Sales reps see an opportunity to break into new accounts by hinting that the products can be reprocessed. Others are seeing the fact that their products can be reprocessed as a competitive advantage and a tool to kick out their competitor. In either case – some revenue is better than no revenue. We had sales reps and marketing representatives frankly asking if we could help them penetrate accounts they couldn’t access.
We had sales reps and marketing representatives frankly asking if we could help them penetrate accounts they couldn't access.
It probably always should have been like that. But this is the first year reprocessing is being seen as a competitive strategy. Sales reps: Give us a call. We are happy to participate.
Globalization of reprocessing
Less visitors to the booth that had not heard about what reprocessing is. Our discussions at our booth indicate that the reprocessing industry is wider known and recognized both domestically and internationally than ever before. Also, the discussions were different from the past: We used to defend the safety of reprocessed single use devices and help hospitals “break down” clinical resistance. We used to help EP Lab managers understand the economic impact of reprocessing. At this year’s Hearth Rhythm Society conference, we barely talked about safety, as the safety of FDA cleared reprocessed device is well known in the industry. Clinician resistance is less frequent and most often removed with a brief educational conversation. And, finally, hospitals and EP Labs are understanding how reprocessing can reduce device costs of very expensive cardiac arrhythmia procedures, sometimes turning loss procedures into profitable procedures.
We also experienced increasing global interest in and knowledge of single-use device reprocessing in electrophysiology procedures. While single-use reprocessing has been regulated by FDA in the US for almost 20 years, Australia regulated the practice only a few years ago, Canada established regulation last year in 2017, the European Union established regulation last year as well, giving member countries a deadline of 2020 to implement EU legislation in national regulation. And Japan is moving rapidly towards regulation with this second-largest world-wide healthcare market already seeing global reprocessors collaborating with local companies to establish reprocessing practices.
Everywhere in the world, the journey to regulation takes the same path: Without regulation, hospitals simply reprocess single-use devices. As industry players, infection control specialists, clinicians and lawmakers become aware how risky this is for patient safety, the discourse shifts from cost savings (reprocessing single-use devices is less expensive than buying new ones) to patient safety. Where this produces a regulatory development, regulations force reprocessing to move from the hospitals into advanced, regulated reprocessing facilities – and this gradually shifts the discourse back from patient safety to cost savings (buying reprocessing devices, after all, is less expensive than buying new ones). Where this development towards regulation is slow, this is due to economic calculations that hospitals cannot afford to shift from risky hospital reprocessing to safe, regulated reprocessing.
Both in Japan and Europe, the Association of Medical Device Reprocessors that represents all independent reprocessing companies in the United States has played a major role, and hopefully, this will shorten the distance from risky hospital reprocessing to regulated reprocessing.
Single-use device reprocessing has always “lived in the shadows”: Better to not explain too much, because clinicians may raise questions about safety and cleanliness of reprocessed devices. At this year’s Heart Rhythm Society conference, Innovative Health took the opposite approach: Let us be open about what we do; let us be transparent; and let us make a strong statement that reprocessing in electrophysiology can make the necessary difference between the success of AF Ablation and its current marginal impact.
Let us be open about what we do; let us be transparent; and let us make a strong statement that reprocessing in electrophisiology can make the necessary different between the success of AF Ablation and its current marginal impact.
As a consequence, Innovative Health positioned single-use device reprocessing in a central location with displayed techniques and methodologies used to clean, test and sterilize devices. These were hands on displays, where clinicians could themselves test and inspect devices, interact with testing equipment, get a “feel” for reprocessed devices – and get assurance about key objections like lumen cleaning and valve integrity. Learning and seeing the “hands on” technical demonstrations sparked more scientific conversations which lead to more meaningful discussions about the R&D behind reprocessing.
Single-use device reprocessing is nothing new and the processes involved in reprocessing these devices are standardized and beyond acceptable by the industry. Visitors left with the perception that we provide safe and effective products that are substantially equivalent to original devices supported by FDA clearances – and that reprocessors have the technological and scientific wherewithal to clean and test even very complex electrophysiology devices.
In an interesting twist, Innovative Health’s display of devices, technologies and equipment also lured a couple of medical device designers and inventors to the booth, and we had very constructive discussions about device integrity, quality level, breaking points, etc.
Clearances, R&D commitment
Innovative Health received a lot of attention due to our display of FDA clearances received within a very short amount of time – 19 clearances to reprocess electrophysiology devices in just over 2 years. Booth visitors were particularly interested in hearing about the newest clearances as well as what is on the docket for immanent clearances.
Innovative Health received a lot of attention due to our display of FDA clearances received within a very short amount of time - 19 clearances to reprocess electrophysiology devices in just over 2 years.
EP Lab managers were excited to welcome the ViewFlex Xtra Diagnostic Ultrasound Catheter by Abbott to the portfolio of devices they can reprocess with Innovative Health. No other reprocessor has been able to get this clearance, and for hospitals that almost exclusively use Abbott consoles and devices, savings opportunities are substantial.
Innovative Health has achieved clearances for all electrophysiology devices that are considered part of the standard reprocessing portfolio. Therefore, as R&D efforts continue at an aggressive pace, the reprocessor will pursue clearances for devices that are more complex to clean and test. Recent FDA clearances have demonstrated Innovative Health’s ability to effectively clean and reprocess lumened devices and devices with complex valves. These are technological developments that by themselves carry promises about the reprocessability of electrophysiology devices that have traditionally not been considered reprocessable.
At the 2018 Heart Rhythm Society conference in Boston last week, we saw a shift in the kind of participants that attended the show. In the past, it was common for us to speak with groups of nurses from the same lab and learn more about their lab practices as it relates to collections, device handling, pulling devices for cases, etc. In general, there were fewer nurses, techs and “hands on” folks in attendance compared with previous years. Also, there fewer supply chain professionals in attendance. Instead, it appears that the show is becoming more and more dominated by clinicians.
While financial constraints may be the simple reason why hospitals don’t send their nursing and purchasing staff to Heart Rhythm Society, a shift in the discussion we had at the Innovative Health booth may add a different dimension: Electrophysiologists are highly trained clinicians, but while their focus is on the clinical aspects of the cardiac arrhythmia procedures, many of them are leading the discussion about economic aspects as well. This is because in electrophysiology today, healthcare economics and clinical issues are intertwined:
Electrophysiologists are passionate about the promises of AF Ablation as a curative alternative to pharmaceutical treatment. As technologies become more sophisticated, AF Ablation could become a means to provide advanced heart disease solutions to millions of Americans. Since AF Ablation is also one of the fastest growing areas of healthcare today, the progress of AF Ablation is closely monitored both from a clinical and an economic perspective.
For the electrophysiologist, the success of AF Ablation depends on his/her clinical skills as well as on the availability of appropriate technology. The challenge today is that while highly skilled electrophysiologists are successful with AF Ablation in procedures they perform, the success of AF Ablation is being hampered by the complexity of technologies, the cost of devices, and the – on average – mediocre success rates. Technologies in AF Ablation are too expensive, too complicated, and simply not advanced enough. As a result, penetration rates are slow to go up.
This means that the electrophysiologists passion for AF Ablation is restrained in terms of impact by device costs and the incremental nature of technology development. To this savvy electrophysiologist, clinical and economic factors overlap, and it was very clear in our discussions at Heart Rhythm Society that this has put the clinician in a leadership position.