Tuesday 18 November 2014

Could Low Cost Cameras from India Disrupt $5B U.S. Ophthalmoscopy Market?

Ophthalmoscopy, or fundus photography, is the practice of taking high quality pictures of the eye for medical purposes. It is a standard part of an eye examination, and is used to screen for a wide array of conditions like macular degeneration, cancer, diabetic retinopathy, glaucoma, hypertension, or retinal detachment. In 2012, there were 105 million eye exams performed in the U.S., representing 43.8% of the adult population.

There is a range of testing quality to ophthalmoscopy. For the highest quality photos, a cutting edge deformable mirror-based adaptive optics device costing in excess of $500K might be used, but most clinics are using devices that cost anywhere from $1K to $20K for non-mydriatic (not requiring dilation of the eye) fundus cameras, as well as the slit lamp / mydriatic fundus camera configurations with prices in the $15K to $50K range. The slit lamp / mydriatic method produces higher quality photos, and is recommended for a comprehensive eye examination; however, the non-mydriatic cameras have been closing the performance gap in classic disruptive fashion, and they already comprise over half of the $220M fundus camera market. They may also be a safer device for patients.

PC: Aurolab's Slit Imager
At a price range of $1K to $500K, there's a fundus camera for every ophthalmologist in the U.S., but innovation has taken prices even lower in India. The push seems to have begun with the famous Aravind Eye Care System, which succeeded in mounting a Canon A800 camera into a slit frame in 2012 for routine eye exams. Aurolab's Slit Imager is a recent iteration of this model, and though they are careful to say the device is not a replacement for fundus cameras, their kit includes a camera + basic accessories, a professional quality eye piece for capturing photos of the anterior and posterior of the eye, and a sleeve for attachment to the slit lamp. The total cost is only $200, which seems great compared with the prices above, except for two fatal flaws. Firstly, the device requires a slit lamp, whose prices often run into the thousands of dollars. Secondly, the device is not officially approved or recommended to replace fundus camera images even in India, though I imagine it's often used to do just that. After all, something is better than nothing when a number of conditions are likely sufficiently diagnosed using a device like this. In fact, it seems likely one could use this device without a slit lamp. Even so, the U.S. ophthalmoscopy market does not seem amenable to disruption from devices like Slit Imager due to the following market characteristics:
  • Upmarket: The Incumbent View
    • Today's expensive slit lamp / mydriatic camera configurations still seem to be the backbone of thorough eye exams, and therefore a central piece of equipment in eye clinics. Dr. Cheung's May 1st post articulates the current incumbent view well, which has not even reached the point of accepting good-enough non-mydriatic cameras, not to mention a device like Slit Imager.
  • Midmarket: Disruption Today
    • The non-mydriatic cameras are closing the performance gap with the more expensive setups, and hybrid fundus cameras (allowing for both mydriatic and non-mydriatic modes) are predicted to have a faster CAGR than other segments in the coming decade. A particularly disruptive example of a non-mydriatic camera is Jedmed's portable fundus camera, which is modular enough to also function as a camera for general, dermatological, and ear, nose & throat exams. At an estimated price point of ~$2,500, this is comparably affordable to Aurolab's Slit Imager if including the cost of the slit lamp. But it is approved, more versatile, and probably provides higher quality images.
  • Downmarket: Disruption Tomorrow
    • The most exciting disruptive ophthalmoscopy innovations are occurring at price points far below even that of Slit Imager. Take EyeGo for example, a $15 ophthalmoscopic adapter for smart phones out of Stanford University. EyeGo's value proposition is very similar to Slit Imager's, which is "triaging when no other alternative is available," but this model enjoys serious advantages in terms of cost, ubiquity of devices, and seamless modularity with existing infrastructure through phones' photo management and email applications. 
Of course, current market conditions aren't everything: They are just a snapshot, and several nascent trends signal international opportunity for Indian ophthalmoscopic innovators in the coming years. Firstly--as evinced by the Aravind case above--, India is already working hard to decrease costs through substantial reengineering, but have only just begun as of 2012. Secondly, there is a large base of talented software engineers in Bangalore, and India's engineers recently put a satellite in orbit around Mars. These conditions are ripe in encouraging India to realize the true, large-scale disruptive potential within this market, namely by combining extremely low-cost, ubiquitous devices with software applications allowing for accurate diagnoses from photos patients take themselves. This technology is already emerging within certain academic settings, as in the case of eyeMITRA. An integrated product like this would profoundly change the retinal scanning market, drastically increasing the number of 'tests' performed on a routine basis, automating most of the basic spot-checking and triaging, and ensuring that the expensive and highly trained Ophthalmologists and Optometrists are utilized mostly to confirm complex diagnoses and manage complex treatment regimens.

Being in Silicon Valley, EyeGo is in a privileged geographical and cultural position to develop a SaaS platform that works well, or to form relationships with companies like eyeMITRA. On the other hand, market pressures in the U.S. may not be great enough to encourage and sustain an aggressive commercialization strategy. After all, an eye exam in the U.S. currently only costs an average of ~$50, and since nearly half of the adults in the U.S. are already getting eye exams each year, the unmet need may not be acutely painful. Therefore, my advice to innovators like EyeGo, eyeMITRA, and Aurolab is to build this disruptive product of tomorrow in markets like India first, where there is a vast need and a real market. Once the right product and business model arises from there, export the result around the world. 

Starter Question for Comments: 
  • What's stopping devices like EyeGo and Slit Imager from being widely adopted in the U.S. today? 

Wednesday 5 November 2014

How Mitra Industries Could Save Kidney Disease Patients in the U.S. over $1.7 Billion per Year

Nearly $3 billion per year is spent by U.S. patients on a form of kidney failure dialysis treatment whose cost the Indian firm Mitra Industries has decreased, with the potential to realize savings of nearly $1.9 Billion in dialysate solution alone.
Peritoneal Dialysis
Peritoneal Dialysis

End Stage Renal Disease (ESRD) is a condition requiring either a kidney transplant or an artificial process (mostly dialysis) to clean the blood as a replacement for healthy kidneys. Transplant is the best option, but of the half-million patients with ESRD in the U.S., nearly 4/5 require dialysis treatment, and nearly all of these undergo hemodialysis (HD), an extracorporeal process of removing, cleaning, and replacing the blood using machines. The remaining patients, currently ~40,000, opt for peritoneal dialysis (PD)* therapy, a process whereby a permanent catheter embedded through the abdominal cavity is used to exchange medicated dialysate with waste from the blood via the peritoneal membrane at least 3x per day. This is a process the patient manages herself. The outcomes for PD and HD are comparable, but the main advantages of PD over HD are increased patient empowerment, and cost savings. Several studies in recent years have argued convincingly for the general superiority of PD over HD on a number of relevant dimensions

With per patient costs of ~$72,000 per year in the U.S., PD does cost less than HD, which runs ~$88,000 per year. The main cost drivers for PD are the dialysate solution, requiring 1 bag per session, as well as the general management of anaemia, the latter being common to any dialysis treatment. A quick look at the prices of PD supplies on Baxter's product listings confirms their high price as each bag of solution costs ~$45, summing to a yearly cost of nearly $50,000 in solution alone for just thrice daily treatment. 

While improvements in home hemodialysis technology could change this, PD is currently the most disruptive form of dialysis. But could costs be even lower for ESRD patients opting for the low cost dialysis route? 

Mitra Industries, a manufacturing company in Transfusion Medicine & Renal Services based in New Delhi, India, has developed a novel one-bag solution (NOB) for PD that has decreased the monthly per patient cost to a shockingly low $235. Even assuming that all of this cost is attributable to solution, with thrice per day therapy, that's a per bag cost of $2.6 compared with $45 from Baxter. Other product benefits are named in their release video below. 

In my correspondence with Atul Rishi, the Country Manager for Mitra, he prefaced his introduction of the NOB by listing the environmental constraints that shaped Mitra's innovation efforts. These are: 
  • India Is a Large Country: True both in terms of area & population
  • Education: The majority of the population is not educated
  • Limited Medical Resources: Main cities have excellent facilities but smaller towns are still lacking basics, and the majority of the population in India still resides in smaller towns. For example HD machines are only available in large cities
  • No Medical Reimbursement: Only limited government employees get medical reimbursement and all private patients are self-paid, so they know the costs
  • High Medical Costs: India still imports many medical devices and medications from abroad, and distribution costs are high to reach rural patients, e.g. consider the cost of transporting sufficient quantities of the standard 2 liter bags used in PD therapy
  • High Non-Consumption: 80% to 85% of kidney failure patients go without renal therapy in India as a result of the factors above
  • Emerging Manufacturing Capability: The first indigenous designer and manufacturer of PD products in India began work only in 2000, and started manufacturing supplies nearly identical to those India had been importing from Western countries. 
When Mitra began manufacturing PD products in 2006, they did so at the same price points as the competition, but as Atul says, "[We] were constantly thinking on how to reduce cost per bag so that it is not only more economical than existing PD company bags, but also equivalent to or lower than HD monthly cost" (HD, though generally more expensive than PD in developed countries, is sometimes cheaper in developing countries, likely due to much higher resource utilization).

Innovating to the market constraints above, Mitra reduced 2 bags to 1 by reusing the solution bag as the drain bag, and thereby also eliminated the Y connector & tube. This has decreased material cost and waste, and also reduced transportation cost of materials by 15%, leading to a price point not only 95% cheaper than PD bags in the USA, but also 33% cheaper than alternatives in India. 

Whether Mitra can make the leap into the U.S. healthcare market to disrupt existing offerings with its NOB depends on many factors outside the scope of this post's analysis; however, the need for innovations such as this is especially dire at this time. Baxter, which supplies about 90% of supplies for PD patients in the U.S., limited the number of PD referrals across their entire base of customers this year, as well as announced there will be an unexpected and large shortage in supplies of peritoneal dialysis solution for patients with kidney failure in the U.S. Other U.S. manufacturers have stated they cannot make up the shortfall. Given that PD has been rapidly growing as a viable form of low-cost, effective dialysis treatment in the U.S. in recent years, the FDA would do well to consider extending import and marketing approvals to companies such as Mitra, which not only have the capacity to serve patients at scale, but have also structurally innovated their products to decrease the cost of PD therapy. Baxter may well leave the game due to the loss of margins for provision of PD equipment, but they already seem to have lost interest in this market. Should we succeed in allowing entrance to laudable innovators such as Mitra, the real winners will be the patients and payers of America.

*All subsequent use of 'PD' in this post refers more specifically to continuous ambulatory PD, as opposed to automated PD

Photo Credit: http://upload.wikimedia.org/wikipedia/commons/4/4e/Peritoneal_dialysis.gif