Both the US and the Indian dialysis equipment markets are seeing weakened sales, the former because of lower patient count and the latter, despite huge demand, having poor access to a dialysis center or simply being unaffordable.
Delving into the trend in stock prices for the publicly traded large dialysis organizations, DaVita and Fresenius Medical Care (FMC) is alarming. Fewer patients needing dialysis, higher labor costs, and anemic reimbursement updates are all dragging down the bottom line.
“First, we expect the year-over-year change in treatment volume to be between zero and negative 3 percent due primarily to the annualization of excess mortality in 2022 and continued excess mortality through 2023. In Q4 2022, for the US dialysis segment, treatments per day were down 1.3 percent compared to the third quarter in line with our expectations. This was the result of lower patient count due to excess mortality and a higher seasonal missed treatment rate,” said Helen Giza, Chair & Chief Executive Officer, Fresenius Medical Care AG & Co. at the Q4 2022 earnings call on February 22, 2023.
The Covid-19 pandemic, entering its fourth year, has precipitated multiple adverse impacts on the business of providing dialysis to patients with end-stage kidney disease (ESKD).
Analysis of the US Renal Data System population data suggested that the population of patients with ESKD had an absolute decrease of 0.6 percent in the first year after the pandemic started and a decrease of 3.5 percent from the expected population, based on the pre-pandemic established rate of growth. Higher mortality from Covid-19 in patients with ESKD, as well as in patients with advanced chronic kidney disease (CKD), has led to fewer patients needing dialysis treatment.
Labor costs have increased significantly across all segments of the healthcare market, and dialysis staff are no exception. In a second-quarter earnings call last year, FMC had described higher staff turnover rates, and reported paying significant wage premiums to temporary staffing agencies, while it struggled with a shortage of permanent dialysis nurses.
DaVita blamed rising labor costs in its third-quarter earnings call, in which the company reported it had fallen far short of earnings’ expectations. Despite rapidly rising labor costs, the Centers for Medicare & Medicaid Services has adopted only a 3.1-percent increase in the bundled payment rate for dialysis in 2024. This will not be expected to cover the total increase in labor costs. There have already been reports of units closing due to staffing shortages.
The medium-term outlook does not suggest that these conditions will improve any time soon. The viral forecast is for continued waves of illness, with influenza and other respiratory viruses adding to the toll on top of the new Covid-19 variants. These will continue to lead to excess mortality in patients with ESKD. Although robust vaccination uptake can reduce mortality losses, the illness will still contribute to missed treatments and higher hospitalization rates, which also adversely impact dialysis units’ financial performance.
Continued pressures could trigger larger-scale changes at both companies. In October 2022, an investment firm, with a history of initiating corporate restructuring, acquired a significant stake in the parent company of FMC, Fresenius SE & Co. This led to speculation that the dialysis division may be placed up for sale. Given the approximate 40 percent share of the dialysis market held by FMC, an ownership change would be a major shakeup. DaVita is less vertically integrated than FMC and may push further into value-based CKD care to make up lost revenue from dialysis.
In the current year, Fresenius expects low- to mid-single-digit revenue growth. While 2023 will be a year of level setting, it will unlock value as the leading kidney care company. Giza expects to come out of 2023 stronger, and well positioned to drive sustainable, profitable growth with the recovery of earnings growth in 2024, and by 2025, an improved operating profit margin of 10 percent to 14 percent.
What does all this mean to nephrologists? Unit closures will probably continue. This can force patients to travel farther for life-saving care and, depending on the market, may force them to change nephrologists. Losing patients with ESKD is a significant financial hit under both fee-for-service and value-based care payment models. Joint-venture opportunities, which allow nephrologists to own a fraction of a dialysis unit, are financially more risky in such an adverse environment. Medical directorships, which are paid by the dialysis company to the physician, may also be aggressively renegotiated.
Nephrology has suffered for decades from being too dependent on dialysis as the major source of revenue. The advent of nephrology-specific, value-based care payment models under the 2019 Advancing American Kidney Health executive order had already started revaluing care of patients with earlier stages of CKD. This movement has been enhanced by the advent of new treatment options that are more effective at preserving kidney function and preventing kidney failure. Nephrology practices should continue to search for ways to diversify their income streams, including value-based care arrangements, ancillary services, and research. This will offer some protection from the anticipated continuing pressures in dialysis care.
Indian market dynamics
India’s challenges are totally different. In a Rs 4500-crore market, it is estimated that only 20 percent of the 20 million patients with chronic kidney disease get dialysis treatment. The remaining 80 percent are either living in rural areas with no access to a center, or find it too costly. And this is when a dialysis session in India costs Rs 200, as compared to Rs 2400 in the USA. In 2022, the Indian government through various programs reimbursed 15 percent of the patients.
On an annual basis, India adds 400,000 patients in need of dialysis. Mortality being 40 percent, the actual number of patients is much higher. The country is ill equipped with just 50,000 dialysis machines, 5000 centers for dialysis, and 3000 practicing nephrologists.
The Asia-Pacific region dominates the global dialysis market, with China and Southeast Asia also seeing an alarming rise in the prevalence of chronic kidney disease (CKD). Kidney transplantation has increasingly become unpopular, contributing to an increase in the number of patients on hemodialysis.
The rising incidence of noncommunicable disorders, such as diabetes, hypertension, and obesity is increasing the likelihood of end-stage renal disease (ESRD). Consequently, the lack of appropriate healthcare services, increased healthcare spending, and an ageing population fuel regional market growth. Numerous healthcare businesses are currently attempting to produce low-cost dialysis equipment that perform the treatment’s critical function.
Analysts expect a notable CAGR of 4.8 percent during the five-year period of 2022–2028. SkyQuest Technology Consulting Pvt. Ltd. estimates the global dialysis equipment market size at USD 17.87 billion in 2022, expecting it to hit USD 23.62 billion by 2028, with a notable CAGR of 4.8 percent during the five-year period, 2022–2028. This includes dialyzers and dialysis pumping machines, as well as dialysis-related items, such as blood pumps, catheters, and tubing kits.
23 percent of the global population are at risk of kidney failure and around 10 percent are suffering from kidney failure already, which is around 720 million people across the globe.
Leading global manufacturers include Baxter (US), Asahi Kasei Corporation (Japan), Fresenius Medical Care AG & Co. KGaA (Germany), DaVita (USA), Cantel Medical (Ireland), Rockwell Medical (US), JMS Co. Ltd. (Japan), Teleflex Incorporated (US), B. Braun Melsungen AG (Germany), NIPRO (Japan), Nikkiso Co. Ltd. (Japan), NxStage Medical, Inc. (US), Quanta (US), and Outset Medical, Inc. (US).
For many years, the manufacturing of dialysis machines and supplies was limited to large, privately-owned businesses. However, in recent years, the manufacturing of hemodialysis devices has exploded as small dialysis machine manufacturers, such as MITRA and Gambro have started to compete in this market. Even though several new companies have entered the market, leading suppliers of kidney dialysis equipment continue to rule this space.
The availability of the equipment is yet not keeping pace. Patients are having to wait longer for treatment, and are sometimes forced to use less effective equipment. In addition, the price of dialysis machines has been increasing rapidly over the past several years. This has made it increasingly difficult for smaller hospitals and clinics to afford dialysis facilities.
Almost all companies are experimenting with new product lines to increase their market stance. They are spending on R&D for kidney dialysis equipment to introduce new and improved products.
Poly Medicure Limited
Emerging trends in dialysis equipment
Dialysis has come a long way since its inception, and emerging trends in the field are making it easier and more efficient for patients to receive the treatment they need. One of the most significant trends is the concept of higher molecular clearance, which refers to the ability of dialysis machines to remove larger molecules from the blood. This is accomplished using advanced membranes and filtration techniques that are designed to effectively remove toxins, Fluids and other waste products from the bloodstream.
Another important trend in dialysis is the focus on the quality of water used in the process. This is particularly important given that dialysis machines rely on RO treated ultra-Pure water to perform their functions effectively. Water that is contaminated or contains impurities can lead to serious health complications for patients, which is why many dialysis centres are investing in advanced water filtration systems.
Advancements in machine technology are also playing a significant role in the evolution of dialysis treatment. One of the most notable developments in this area is the user interface, which has become more intuitive, user-friendly, and streamlined over the years. Software tools are being developed to help physicians optimize dialysis treatment based on individual patient needs, such as blood pressure, blood volume & temperature, blood composition monitors and other factors that affect treatment efficacy.
In addition to real-time data acquisition, software tools are also being developed to help manage and analyze large amounts of data generated during dialysis treatment and can be linked with Hospital information systems. These tools use advanced algorithms and machine learning techniques to identify patterns and trends in patient data, advance treatment prescriptions also helping physicians to make protocols.
Finally, there have been significant advances in the delivery of dialysis therapy itself. Innovations in conventional and hybrid dialysis therapies are providing patients with a wider range of treatment options that are tailored to their specific needs. These therapies are designed to be more effective, efficient, and comfortable for patients, which is making dialysis treatment more accessible and beneficial than ever before.
Overall, the emerging trends in dialysis reflect a commitment to innovation, patient comfort, and better health outcomes. As the field continues to evolve, it is likely that we will see even more advancements that will further improve the quality of life for patients undergoing dialysis treatment.
Baxter International Inc. continues to ride on its FDA approval for its on-demand peritoneal dialysis solution-generation technology. Fresenius Medical Care AG & Co. KGaA and Baxter Incorporated jointly possess a sizeable market share of more than 60 percent of the global kidney dialysis equipment industry. NIPRO Medical Corporation intends to expand its sales network in emerging countries, such as India and Africa.
They have also created new models that are more efficient and affordable. This has led to decreased prices for dialysis equipment, making it more accessible to more patients. In addition, manufacturers have created dialysis chairs that allow patients to remain in their own home rather than being taken to a hospital for treatment. These chairs make dialysis treatment more comfortable and cost-effective for patients.
Artificial intelligence, machine learning, robotics, and other upcoming technologies offer tremendous potential in the field of dialysis therapy. Driven by innovations in advancements, such as regenerative medicine and tissue engineering, researchers are exploring novel cell-based treatments for renal failure. Besides, the latest focus in the realm of wearable and implantable artificial kidneys has opened up new dimensions in the fight against kidney-related complications. These areas have lately come into highlight, leading to an extensive body of research into their viability, feasibility, and future prospects.
It is predicted that there will be a surge in the need for dialysis equipment services in the coming years in India and those who offer affordable and adaptable solutions will have a competitive edge in the market.