Seeing Clearly: Ultrasound = Future of Diagnostic Imaging

The Beauty of Ultrasound Technology

Ultrasound is an example of biomimicry par excellence; even in a field rife with bio-inspired devices and medications, it stands out for its fidelity to nature. Consider that the three main components of an ultrasound device--a transducer to emit and capture the echoes of sound waves, a computer to process this data, and a screen to display the data real-time--are also utilized by organisms that rely on ultrasound for navigation. For instance, the sperm whale uses a highly developed transductive organ to emit sonar waves deep into the ocean in order to locate its prey. Bats famously use echolocation to capture insects after dusk. Each of these organisms uses 'transducer' organs to emit and capture waves, and their brains act as both 'computers' and 'screens' that allow them to see the world with a high level of accuracy when eyesight cannot do the job. Ultrasound devices in medicine today use the same technology to view the inner body real time, and they do such an effective job of this that a Harvard research team published a report in the New England Journal of Medicine in 2014 entitled Point-of-Care Ultrasound Imaging in Medical Education: Stop Listening and Look, which encourages physicians to supplement and possibly replace the stethoscope with diagnostic ultrasonography for physical examinations.

Clinical Areas of Vscan Ultrasound by GE Healthcare

The visual results of 3D/4D ultrasound technology have reached astonishing levels of detail, as a quick Google search shows. Most of the results display fetuses, but the clinical applications for ultrasound go far beyond fetal screening to include a wide range of diagnostic and even therapeutic uses as the chart on the right shows. In fact, ultrasound as a medical imaging modality features several distinct advantages, including real-time viewing, speed and ease-of-use, no radiation exposure, and no pain. Ultrasound is also the least expensive internal imaging modality--the typical alternatives being X-ray, CT/PET scans, or MRIs--and does a particularly good job of displaying soft tissue.

Ultrasound does have certain limitations. Air or gas disrupts the waves, as do bones, so ultrasounds are not a good method for viewing the bowels or bones beyond infancy. Especially corpulent patients attenuate the image quality due to too much soft tissue mass, and sometimes patients are covered with bandages or other materials that make ultrasound infeasible. Finally, the resolution of the images is not high enough for all medical imaging purposes.

These limitations aside, there's a great deal of diagnostic and triage value that ultrasound provides across a continuum of conditions, as Dr. Janice Boughton describes in her article Real-life examples of ultrasound in the developing world on KevinMD.


Handheld Ultrasound: A Quintessential Disruptive Technology

Lower-resourced clinical settings were early to foster Point-of-Care (PoC) ultrasound. In the United States, it seems that rural, county, and inner-city hospitals were early adopters of PoC in emergency and critical care situations. Dr. Resa Lewiss, in her excellent 2014 TEDMED talk, explains that in the early 1990s, there were fewer than five fellowships in emergency PoC ultrasound.  In the early 2000s, her mentors and friends were using ultrasound for global health and disaster relief in countries such as Ethiopia, Kosovo, Sierra Leone, and Indonesia. Today there are over 90 emergency medicine ultrasound fellowships in the USA. 

Ultrasound continues gaining popularity as effective diagnostic and procedural tools.  Emerging markets will continue to play an important role in fostering disruptive ultrasound products because of the relative ratio of patient need to paucity of clinical resources.

GE Healthcare's Vscan with Dual Probe

In fact, the two best-known examples of handheld ultrasound in the world were created in India. First, GE Healthcare India created the Vscan handheld ultrasound machine in 2009 as a means of providing affordable diagnostic data to physicians in India. The Vscan is a picture perfect example of a disruptive innovation in that it performs less well on certain dimensions than incumbents, but it does a 'good enough' job in the vast majority of use cases, and it does this at a price of $7,900. This price is still high for India, but is more accessible than the $25,000 to several hundred thousand dollar price tags for incumbent models.

Not to be outdone, Philips India developed the Visiq ultra-portable ultrasound device, releasing it in 2014 at a price of about $14,500. Visiq is a similarly compact setup to Vscan, but features a larger tablet-sized screen.

There's currently a lack of indigenous innovations from India to compete with these technologies as low-cost handheld ultrasound devices, though Trivitron in Chennai has made a laptop-sized ultrasound screening device called Prosound 2. However, at a price of $20,000, Trivitron does not appear to be marketing the product to compete with Visiq and Vscan.


Disrupting the U.S. Medical Imaging Market

In a certain sense, products only have disruptive potential, and Vscan and Visiq have disruptive potential in spades. Whether a product realizes its disruptive potential depends on whether management markets it disruptively. Will GE and Philips do this outside of emerging markets? Philips is not selling or marketing Visiq in the U.S., though it does have 510(k) approval from the FDA. GE Healthcare does sell Vscans in the U.S., but I have only read about their independent use by individual doctors, or about medical schools or teaching hospitals buying them in bulk for distribution to their students as a supplement to stethoscopes. In other words, neither GE nor Philips has marketed these products disruptively yet. This is not at all surprising: GE Healthcare would LOVE to upgrade their stethoscope market to using Vscans, but their sales people and finance department would protest mightily should the Vscan team aggressively disrupt their incumbent ultrasound imaging market in wealthy countries.

MobiUS SP1 Portable Ultrasound from Mobisante

GE and Philips hesitate to disrupt themselves, but what about grassroots innovators in the U.S.? Mobisante is a company in Redmond, Washington that received FDA approval in 2011 for a smartphone-enabled ultrasound device. Mobisante's MobiUS SP1 device (shown right), is priced similarly to GE's Vscan, retailing around $8,000. The company does not seem to have incurred much on the big device makers' core medical imaging turf, perhaps opting to gain a foothold first in medical education markets. Another niche market could come from supplying numerous non-medical providers of 'keepsake' fetal images, but this market may rapidly disappear: The FDA issued a warning in December, 2014 against the non-medical use of ultrasound devices in capturing fetal images or videos for keepsake purposes. 

Whether Mobisante can succeed in the core medical imaging market depends on many factors, but primarily on the quality of the product. So, has the image quality of handheld ultrasound machines achieved parity with incumbent technologies? Dr. Eric Topol, on page 119 of his new book The Patient Will See You Now, cites a study he and colleagues conducted at Scripps showing that the image resolution from the Mobisante and Vscan devices were "as good as the standard, large ultrasound hospital machine that costs over $300,000 for performing heart imaging." With more than 125 million ultrasound studies performed in the U.S. per year according to WSJ's Laura Landro, and an average charge of $800 per study, Topol estimates that these handheld devices could save the U.S. $50 billion per year in ultrasound study costs alone if adoption of handheld ultrasound devices became routine in clinical care. And this estimate doesn't even count ultrasound's potential to disrupt the other imaging modalities, which account for an additional 450 million studies per year in the U.S.

Reenita Das, a partner with Frost & Sullivan, adds color to this in her recent Forbes article Could Plug-and-Play Be the Future of Healthcare Diagnostics?. She points out that software enhancement tools are improving ultrasound image quality to such a degree that the technology can now be used to identify and monitor cancer and other diseases. She points out that avoiding the need for painful biopsy and dangerous radiocontrast agents where possible will "significantly reduce the pain and cost of treatment for cancer patients." In view of this, ultrasound's potential to begin replacing other imaging modalities appears much larger. Its ability to do that while simultaneously lowering costs is what makes it so valuable.


Questions For Discussion

• Has the image quality of handheld ultrasound devices achieved parity with the larger, more expensive machines? 
• Can companies like Mobisante effectively target the core medical imaging market in the U.S.? 
• Could handheld ultrasound devices really save the U.S. over $50 billion per year?

ECG Tech from India Could Save U.S. $50 Million Today

Electrogardiography: A Brief Review

Electrocardiography (ECG) is a diagnostic method of recording the electrical activity of the heart. This is traditionally performed by attaching electrodes to the skin, which then pick up waveform electrical impulses generated by the polarization and depolarization of cardiac tissue. These are mapped on an electrocardiogram and interpreted to measure heart performance and health.

The use of ECGs is ubiquitous and popular among providers, and especially tertiary care hospitals. The Mayo Clinic, for example, performs about 240,000 ECG tests per year in their laboratory, and the global market for ECG machines is set to grow to over $5 billion by 2020. This growth is driven by the wide range of increasingly common conditions ECGs are able to effectively monitor, including heart arrhythmias, anginas, pericarditis, most symptoms of heart disease, the thickness of the heart's walls, the rate and regularity of heartbeats, the size and position of the chambers, and the presence of any changes to the heart's function in response to surgery, devices,  or medications.

The average cost of a provider-administered ECG test in the U.S., which is comprised of the test itself + the interpretation of results by a trained Cardiologist, is $1,750. As usual, the prices vary substantially from provider to provider, the lowest in the U.S. being $550, and the highest being $3,300.


The U.S. Market for ECG Machines

ECG machines vary in diagnostic ability, physical footprint, and price. The current market for these machines can be divided between the 'incumbent' products most of us associate with ECGs, and emerging 'disruptive' products that are portable and less expensive. The incumbents are made by about 16 manufacturers from the developed world, including Burdick, Welch Allyn, Schiller, GE, Bionet, Philips, and Nihon Kohden. They are often equipped for use with 12-leads, often include printing capabilitieg, and they are large enough to be wheeled around. They cost between $1,200 and $3,000 each.

By contrast, the disruptive class of ECGs are made by an (almost) entirely separate set of manufacturers, mostly from the developing world, including ReadMyHeart, InstantCheck, PC-80, AliveCor, ECG Check, Dimetek DiCare, MD100E, PC-80B Color, HeartCheck PEN, REKA E100, and Afib Alert; they often use 1 to 3 leads, rely solely on integrated digital displays, are handheld, and cost between $25 to $500. Dr. Grier at North Dakota State University has compiled an exceptional review of available 1-lead, handheld ECGs on his research page. Most of the 1-lead devices are from China, but some, like AliveCor, are U.S.-based companies. All of them have faced limited adoption among healthcare providers in the U.S., where the incumbent technologies are still used. As a group of physicians evaluating AliveCor stated,

". . . This device has significant limitations in the acute evaluation of chest pain associated with heart attacks. A single lead tracing will miss many real ischemic events, enough that even if it was stone cold normal it would not change our suspicion of myocardial ischemia. If there are significant elevations or depressions, it would probably raise our suspicion for myocardial ischemia, but we would still need a 12 lead ECG, begging the question of how it changes management."

Indeed most of the disruptive handheld ECGs above--at least in the U.S. context--have competed against non-consumption by offering patients and homecare nurses the ability to run ECG tests they could not run before. While additional monitoring increases the risks of false positives, the physicians above also concluded such portable testing could be useful for post-operative heart monitoring during convalescence.


A More Immediately Disruptive Class of ECG From India

India has produced a number of 12-lead handheld ECGs that may be more disruptively positioned than the 1-lead ECGs above, which begin to look like 'hobby devices' in comparison. One of the first major advances was GE's famous MAC India model released in 2007, which brought the price down to $500 from $2,000 - $10,000 for their other hospital-grade ECG machines.

GE's MAC India

In the past 8 years, other Indian companies have released 12-lead ECG devices that achieve greater portability, as well as allow for diverse methods of test data transmission, remote analysis, and storage.

Maestros Mediline launched the E UNO R-10 device in 2010 in partnership with Vodafone. The device relied heavily on Blackberry phones, and was designed mostly for remote consultation use, just as ECGs are in the U.S., except that ECG technicians in India will often travel to administer tests, the results of which are then transmitted to a centralized doctor at a hospital for interpretation. Developers have built applications allowing for use on the Android platform, but the device was not less expensive than GE's MAC India, costing about $500.

Maestro Mediline's E UNO R-10

Lifeplot CCD1 was another offering developed in Pune, India, that does not rely on any specific network or device for transmission of test results, making it potentially more versatile. Though the original model was more expensive at $2,000, LifePlot released a more advanced product just 2 years ago for only $700.

LifePlot UNIQ

The prices for these devices have likely come down, but there are less feature-rich ECG devices appearing in the Indian market from both indigenous and international sources. AliveCor has signed an exclusive agreement with the highly respected Apollo Hospitals chain to use its ECG technology for clinical tests, begging the question about whether the U.S. cardiologists' review of AliveCor's limitations above reflects incumbent biases more than solid clinical rejection, whether something is just better than nothing for India, or whether AliveCor's 1-lead technology has reached a point of relative parity with 12-lead testing. At a price point of $75, perhaps the tradeoff of some marginal performance is worth it.

AliveCor's ECG Device

The appearance of the indigenous Sanket PiE by Agatsa follows past patterns of the introduction of disruptive technology into the Indian market by foreign firms, followed by the release of indigenous versions which may or may not be better-suited for indigenous market conditions. Since Sanket is not yet available on the market, it's not clear what the price will be, but it will presumably be comparable to AliveCor.

Agatsa's Sanket PiE

One of the most immediate differences between the handheld ECGs being widely sold in India vs. those in the U.S. is that they are 12-lead ECGs, while those from Dr. Grier's page are all single-lead devices. This signals a serious disruptive position relative to traditional ECGs in the Indian market, which is a nice illustration of how the context of innovation shapes its ultimate shape. Many elements of the Indian market demand a fully functional, low-cost, handheld ECG: Sheer in-affordability of existing technology for huge numbers of needful patients, the necessity of portability for ambulatory community health workers, and a large supply of IT talent.

Would the U.S. Benefit from Adopting Indian ECG Technology? 

The U.S. market context is much different from that of India, which explains the strategies of handheld ECG devices like AliveCor, Scanadu, and Wello, which--so far--have not competed directly against incumbent technologies, preferring instead to position themselves mostly as patient-centric devices for self-use, providing only supplemental data to traditional provider-based ECG machines. This could still represent the beginnings of disruption, which often incubates in a foothold market that can sustain a nascent technology until it improves to the point of dominance across all or most of the dimensions of quality that matter to customers. At that point, the incumbent technologies quickly fade away. This is the story of transistor radios disrupting vacuum tube radios throughout the 1950s and early 1960s.

However, one of the biggest issues behind lack of serious medical adoption of handheld ECGs in the U.S. is that the alternative processes / delivery models are not yet in place for the use of these machines within provider settings, whereas in a market like India, the new devices are often competing against non-consumption, so in many cases they've had much more 'experience' in serious clinical use. What might the U.S. learn from the delivery models that have emerged around the use of these portable devices?

Adopting leaner delivery models and technology is likely where the real savings lie, but even if the U.S. were to switch over to the equivalent technology available in India today, substantial savings would immediately materialize. Just taking GE's MAC India at a $500 price point, if the average price of an incumbent machine is $2,000, and each of the 7,000 hospitals in the U.S. purchases 5 new ECG machines per year (as benchmarked against the yearly purchases of a UK hospital with 5 sites), this results in over $50 million in yearly savings on equipment costs alone, not including the lead replacement cost, which is also material judging from the UK hospital's spending.


Question for Discussion: 

• What barriers prohibit the U.S. from purchasing lower-cost ECGs for clinical use? 

GE India Could Save U.S. PET/CT Scan Patients $7.5 Billion Per Year

Cancer is abnormal cell growth with the potential to spread to other parts of the body and disrupt normal functions, resulting in illness or death. Claiming over half a million lives per year, cancer is the second leading cause of death in the United States, second only to heart disease. There are over 100 known cancers effecting humans, some being more lethal than others. In all cases, early detection is crucial for improving the chances of successful treatment.

Cancer Cells, from WebMD

Cancer detection typically involves a range of methods and tests but is broken into two stages: Screening and diagnosis. Researchers have provided cancer screening guidelines to encourage regular screenings for potential symptoms of cancer, which differ for each type. Cancer symptoms might include heightened levels of proteins or other byproducts of cancer in the blood, abnormal growths, pain, bleeding, or discoloration of tissue. If potential symptoms appear, the doctor will move towards diagnosis, ordering additional tests to gather more data. These tests can be numerous and costly, and might include PET/CT scans, ultrasound, endoscopy, and MRI for imaging; lab testing on bodily fluids to detect tell-tale biomarkers; and biopsy to collect cell samples for microscopic evaluation by a Pathologist. Using data from these tests, doctors attempt to provide a definitive diagnosis and prognosis to the patient.

Many of the tests above are very expensive, but entrepreneurs in India are working on addressing an enormous and unmet domestic need for early cancer detection through innovative, low-cost product design. For example, GE Healthcare has developed the gorgeous Discovery IQ PET/CT, representing $15 million and 3 years of R&D at its center in Bangalore. Innovating within the constraints of India, they have succeeded in creating a scanner that's 40% more affordable than comparable alternatives, is modular and scalable to allow for price discrimination, offers a unified service of detection, planning, and assessment through state of the art hardware and software, and is a beautiful machine. The cost savings have come from conducting R&D in India, from redesigning a more cost-effective machine from the ground up, and from manufacturing the machine in India.

Discovery IQ PET/CT Scanner, from GE Healthcare

Currently, India only has about 120 PET/CTs operational in the country, whereas the required number of units to adequately address patient demand is over 1,000. Judging from the CEO & President of GE South Asia Terri Bresenham's remarks on Discovery IQ, GE hopes that the price elasticity of demand for PET/CT scanners in India is flexible enough that a 40% price reduction will help to fill this gap. I hope so, but it may be that more disruptive technologies like CellMax Life may ultimately be what brings early stage cancer detection to the masses of India.

Even if the Discovery IQ does not realize substantial financial returns or market share gains in India, GE and the world can still benefit tremendously because GE has created a superior, low-cost product. Producing 50-slice equivalent CT speed imaging, the highest PET axial view available on the market, the Q.SUITE platform for improved PET quantitation, and the Q.CLEAR platform for up to 2x image improvement (SNR) + 2x improvement in PET quantitation accuracy, Discovery IQ is a PET/CT that gets the job done. Certainly there are PET/CTs that may perform better on any one of these dimensions, but does it matter? For example, some PET/CTs are now capable of taking 512 slices, but since no meaningful diagnosis accuracy improvement was found from the jump between 64-slice and 128-slice scanners, 64-slice scanners generally make for the best value. In fact, according to Niharika Midha at GlobalData, the PET/CT "Hardware has reached this plateau . . . There is only so much that can be changed to the machine."

If GE India has tightly engineered Discovery IQ for maximum value (ROI), then this device may sit at the very rim of the performance plateau, including all of the right features, but not overloaded with cutting edge technology and experimental features that price it out value-conscious procurement networks.

GE Logo and Slogan from Inroads

Given that most PET/CTs cost between $2 and $3 million, the 40% price reduction for Discovery IQ puts it between $1.2 and $2.8 million for cost of acquisition. The median prices for CT scans charged by providers hover between $700 and $900, and the U.S. government estimates that 80 million scans are performed annually. The price for PET scans is about $5,000, but only 2 million are performed annually for Oncology diagnostics. Adding these up, approximately $75 billion is spent on PET/CT imaging per year in the U.S.

Of course, only a minor portion of this total spend could be chalked up to equipment cost, so if we instead look at the lowest PET/CT scan costs, and assume the imaging centers offering such low prices are highly efficient so that the overhead and profit margins per procedure are small, we might say that the 40% equipment cost savings generated by Discovery IQ could be passed on rather directly to the end payer. The lowest prices charged for CT scans seem to be around $200, and the lowest for PET scans around $1,200. Reducing these costs by 40% and multiplying by the yearly number of procedures shows a potential costs savings of nearly $7.5 billion per year.

This begs many questions. Could GE keep the cost this low in selling to PET/CT providers in the U.S.? If not, how much of the 40% cost saving be eaten up, and by what? Would GE even want to disrupt their home PET/CT market by importing Discovery IQ? Certainly short-term financial analysts held captive by Wall Streets valuation process would balk, as would the sales force taking lower per sale commissions. On the other hand, volume can make up for decreased unit margins, and such a move may gain GE significant additional market share. Also, the modularity of Discovery IQ might result in natural price discrimination, where the highest-end clients are able to pay for additional functionality, and could widen the base of the market by making a basic PET/CT available to clinics previously unable to afford one.


What Do You Think?

• Should GE disrupt themselves by importing and commercializing Discovery IQ in the U.S.? If so, what main barriers would they face? 

India's New Health Tablet Performs 30+ PoC Diagnostic Tests

The Swasthya Slate ('Health Tablet') is a portable diagnostic device that enables users to conduct 33 diagnostics tests with a simple box, power source, test sensors, and a smart device using the Android OS. The videos on this page give an excellent view into how the testing, analysis, and reporting process works. Of the 120m or so smart phone users in India, about 80% are using an Android OS, so the technological infrastructure is already in place for Slate to quickly scale up.

Photo Credit: Swasthya Slate

Launched in March, 2014, the Slate is the work of the Public Health Foundation of India, which also manufactures the device. The project is led by Dr. Kanav Kahol, formerly a bioinformatics professor at Arizona State University. With all sensors included, the device is being manufactured in India for only $800, a price expected to drop by 20% as it further scales. At this price, the primary target customers are health ministries, agencies, and clinics who will purchase the devices for public health management, putting them into the hands of community health workers (CHWs) who canvas the country as frontline care providers. The new diagnostic processes enabled by the device show the real value it's created, described in the following steps, and enabled by the components illustrated in the photo below:

1. CHW visits village
2. CHW conducts PoC diagnostic tests within minutes per individual
3. Diagnostic box sends test results to smart device via Bluetooth
4. Smart device uploads patient EMR to secure cloud
5. Slate's data management software analyses data
6. Slate's software communicates results to stakeholders via multiple channels

Photo Credit: Forbes India

The time and cost savings resulting from this process are substantial. Not only do the patients avoid costly travel for multiple tests when needed, but Slate only charged $1.25 for a panel of 10 standard biometric tests during their pilot. Referencing the table below, this is nearly 1/20th the cost of what the government was charging before at subsidized prices for the same 10 tests. Theranos, a highly disruptive lab diagnostics company featured in an earlier post, charges in the range of the government prices, but does not appear to offer Urine Glucose tests or the more manual tests like blood pressure, temperature, ECG and Malaria. And standard laboratory diagnostic test prices are sky high in comparison, as the prices from anylabtestnow.com show. Slate's measurement accuracy performance is within 99.9% of the traditional path lab technologies, and they continue to publicly track their clinical evaluation data to improve the device's performance. 

How Transferable is the Slate Device to U.S. Healthcare? 

Theranos is valued at $9 billion because they are providing essentially the same laboratory diagnostics as traditional labs at a fraction of the cost (often 1/10th-1/20th), using less invasive methods, and at much faster speeds. Slate appears to provide PoC diagnostic test results even faster than Theranos using RDT strips, at another huge price discount (1/20th of Theranos's prices from the chart above), and in similarly non-invasive methods. They have also developed 18 apps so far to fulfill the true meaning of 'software as a service.' On the other hand, Slate only offers 33 tests, whereas Theranos is set to offer the full range of possible laboratory diagnostic tests, which number into the thousands. Convincing the medical establishment that the diagnostic results from Slate represent medical grade data would be difficult. EHRs have been slow to become truly personal due to hospital policies and HIPPA. Many of Slate's apps are culturally-bounded, and would need to be re-written.

Nevertheless, I am optimistic of Slate's potential to disrupt clinical laboratory diagnostic testing in the U.S. Here's why:

Firstly, there are encouraging signs that both the FDA and the medical establishment are beginning to approve diagnostic biometrics from wearables, and if from wearables, why not from Slate? At any rate, Theranos is operating as a CLIA-approved lab without FDA approval due to the unique classifications for laboratory diagnostics, and because Slate is already tracking their clinical evaluation data carefully and cheaply, this may not be such a large barrier even if their system does require approval. Secondly, apps are relatively easy to write. Thirdly, if Slate's battery of tests represent the most commonly ordered tests, then it could disrupt Theranos even as Theranos is disrupting Quest and LabCorp. After all, the device is affordable, portable, and modular enough for use by school nurses, the smallest retail clinics, and even by patients themselves. If a device like Slate becomes the go-to for routine diagnostic tests, how commonly will people need to level-up and go to a Walgreens to order a Theranos test that costs 10x the price, or to a hospital where the test will cost 200x the price? 

According to Dr. Kahol's Twitter feed, he has already received requests for the device from both emerging and developed health markets, such as Pakistan, South Africa, Malaysia, and the UK. Field workers from at least 8 different countries, representing both developed and emerging markets, are already using the device on a pilot basis, as this usage map shows.


Question for Comments: 

• What barriers prevent Swasthya Slate from transferring to U.S. healthcare markets, and how might you recommend they reduce these?  

$100 Stents from India in the Offing

Since the USFDA approved cardiac stents in 1994, there has been tremendous growth in their use, to where 700,000 are implanted in patients annually in the U.S. alone.  Manufacturers' sales of stents reached $5.5 billion in 2012.

In the U.S. about 50% of stent implants are for acute conditions, such as unstable angina, or chest pain caused by the buildup of plaque in the arteries surrounding the heart. The other half are for elective-use patients in stable condition. This video from the Mayo Clinic illustrates Percutaneous Coronary Intervention (PCI), the procedure for which the large majority of stents are used:

The price of stents has followed the broad pattern of decline typical among innovation life cycles. Bare Metal Stents (BMSs) were first priced wholesale around $1,600 in the early 90s, but today the average cost is around $700 each. Drug-eluting Stents (DESs) were a new model introduced in the early 2000s that have helped marginally reduce potentially fatal angioplasty complications, such as blood clotting. These were originally priced around $3,000, and now cost about $1,500 each. According to Bloomberg, "Hospitals receive an average payment of about $25,000 per stent case from private insurers . . . [and] Doctors who implant stents earn a separate fee that averages about $1,000." The stent cost, then, only comprises ~5% of the total price of implantation, not to mention the ongoing costs for the patient, including blood-thinning medications, which are prescribed as a matter of course to mitigate the risk of restenosis.

Until 2001, India imported nearly 100% of stents used, although there were successful early innovation efforts at lowering the cost of stents through indigenous innovation. A network of doctors and engineers at Care Hospitals, Mediciti Hospitals, and the Society for Biomedical Technology pioneered a low-cost coil stent patented as the Kalam-Raju in 1995, crashing the prices of imported stents by several factors, and remained about 50% less expensive, costing around $250. One of their main reasons for creating a low cost stent was that the reason for the "very low number of cardiac procedures carried out in India is poor affordability arising from the high cost of imported consumables." Depending on the report, there were about 2,000 Kalam-Raju stents implanted before mesh designs replaced the coil stents.

Kalam-Raju Coil Stent, 1995

Indian innovators have generally trailed the major OEMs in stent innovations, so the design shift from mesh to scaffolding, and the biochemical shift to drug-eluting stents have not been kind to the market for indigenous stents in India. There remains a general mistrust of locally manufactured products among large, urban hospital systems, who remain the largest buyers of stents. These developments have maintained a high import price for foreign stents in India, and some reports show patients paying up to three times the import price for stents! Needless to say, the penetration of angioplasty in the Indian market remains tragically low. Of course, the high price of consumables is not the only reason for this. Another is the very low number of cardiologists in the country.

Nevertheless, it's clear that any solution to providing stents when and where they're needed in India will require low cost, high quality stents as part of the solution. Efforts to create affordable indigenous stents have continued in India, such as Relisys' Corel+C in 2007, a collaboration between Dr. Balram Bhargava, Relisys, and Germany's CINVENTION to create a non-polymer-based DES that was both safer and 50% the cost of imported DESs. Ultra efficient cardiac care centers like Narayana continue to ensure foothold markets for indigenous stents that are 'good enough.' While some may scoff at the use of 'good enough' applied to Class 3 implantable devices where quality is at a premium, we should all keep in mind that some device features are luxuries, and that having the basic version of a device that's almost as good, but that costs multiple factors less is far more valuable to a patient whose alternative is nothing at all. And the benefits of the 'best-performing' stents are quite marginal. A recent study found the rates of late stent Thrombosis to vary only marginally from one stent type to another as follows:

• BMS stents: 1.5% 
• Old generation DES: 1.1% 
• New generation DES: .9%

Insured patients in the U.S. will pick the new generation DES every time for a .2% risk reduction, but the potential for disruptive innovation lives on in Indian healthcare, where only some 25% of the population even has access to some form of insurance, so that patients often haggle extensively with providers on costs for which they pay out of pocket. 

The implicit question of each globalhealth.care post is always, 'could this device disruptively transfer into the U.S. healthcare market?' Let's compare the prices first: 

• Avg cost of BMSs and DESs in the U.S.: $700 and $1,500
• Avg cost of BMSs and DESs in India: $200 and $500

$200 is a already a low price for a stent, but the Indian OEMs give a further 25% discount to hospitals who buy directly from them, bringing the cost to $150. Furthermore, the Indian Council of Medical Research is currently conducting a study comparing the quality of imported vs. indigenous stents made by companies like Opto Circuits India, Sahajanand, Translumina Therapeutics, Vascular Concepts, and Vasmed Technologies. If they find similar levels of clinical outcomes, this would help drive domestic uptake, and further decrease the price through economies of scale, perhaps to around $100 each. 

Hospitals using fee-for-service reimbursement may desire to purchase lower cost stents, where 'cathlabs' have become valuable sources of profit at fixed reimbursement rates. Just switching to a $500 Indian DES from a $1,500 U.S. DES would save a hospital performing 2,000 implants per year $2,000,000. In time, payers will reduce reimbursement rates as low-cost stents contribute to low-cost implant procedures, further enabled through remote surgery trends and other efficiency gains. In the meantime, it may already be the case that ACOs and other specialized surgery centers in the U.S. who are incentivized to reduce costs at or above average outcomes would be interested in offering patients a choice between a $100 BMS with a 1.5% chance of Thrombosis, or a DES for $1,500 with a .9% chance of Thrombosis.

Starter Question for Comments: 

• What's stopping low cost stents from being adopted in the U.S. today? 

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? 

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

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

Theranos: The World's Best Healthcare Company

Introduction to Theranos

Ever since their debut article in Fortune this June, in which Theranos unveiled its stature as a $9B-valued company poised to completely disrupt the $78B per year laboratory diagnostics industry, Theranos has been lavishly featured in the media as a herald of the new healthcare: Affordable, personal, transparent, and accessible. Theranos is built around a proprietary new high-complexity diagnostics lab that allows for a large range of tests (they currently list 229 on their website, but the Fortune article tells us they'll soon offer over 1,000) to be run on blood and other bodily fluids using much smaller sample sizes (70 separate tests can be run on a single sample of a few drops of blood: 1/1000th the amount of blood needed for traditional tests) for a very low cost (Theranos's prices are always 50-90% less than the Medicare reimbursement codes. For example, a standard metabolic panel would cost ~$46 at a standard lab, Medicare would reimburse $14.74, and Theranos charges only $7.27. The average price across their 229 tests is $12.92), and at exceptional speed (whereas traditional testing services would take days to return results, Theranos's labs take mere hours). The Theranos labs also require less footprint, allowing them to be housed in small corners of retail clinics, hospitals, and other existing healthcare outlets. They have signed a non-exclusive agreement with Walgreens (the pharmacy chain currently boasts over 8,200 brick-and-mortar pharmacy locations in the U.S.) to build Theranos Wellness Centers in each location as quickly as possible. They are already operating out of 39 Walgreens stores in Arizona, and 1 in Palo Alto, California. They have also inked agreements with several hospital systems, such as Intermountain Healthcare and Dignity.

Whence Theranos on Globalhealth.care? 

Before explaining why Theranos is the best healthcare company in the world, it's worth explaining why globalhealth.care is featuring Theranos in the first place; after all, the company maintains over 500 employees in a 111,000 square-ft. facility at Stanford University, and even manufacturers their labs at a 262,000 square-ft. factory in Newark, California. Their board is also unusually stacked with American civil heroes such as Henry Kissinger, William Perry, and James Mattis. Theranos is as American a company as they come, but there are good reasons to feature Theranos as the first innovation profile on a site dedicated to researching technologies originating from emerging markets. The first is that Holmes's (Elizabeth Holmes is the Founder and CEO of Theranos, a very focused and brilliant person who dropped out of Stanford's Chemistry program as a Sophomore to start this company) idea for Theranos seems to have originated from a 2003 summer internship (Holmes founded Theranos in the fall of 2003) at the Genome Institute of Singapore during their work with Roche Diagnostics to make highly affordable, accessible, and fast SARS testing kits available to the Asia-Pacific region using their nobel-prize-winning PCR technology. 

The second reason is that Theranos is such a complete example of a healthcare innovation, a standard by which all of the individual foreign technologies globalhealth.care will feature must aspire to within the transplanted context of the U.S. healthcare market. The fact is that any technological innovation in isolation is naked, and really not worth much until it is clothed in the appropriate vestments of an integrated market application and comprehensive business model that delights each of its stakeholders. Like Edison, true disruptors must invent more than just a lightbulb: They must also design and execute a workable electrical grid into which the lightbulb can integrate.

Why Theranos is the World's Best Healthcare Company

Reason 1: Theranos's Market Position in Diagnostics

Successfully designing their 'electrical grid' is the second-most important reason why Theranos is the world's best healthcare company. The first is that they may credibly become the 'gatekeeper of healthcare' by owning the market for laboratory diagnostics, the data of which already form the basis of 70-80% of clinical decisions. This number will only increase as the speed, reliability, accuracy, breadth, price, and accessibility of diagnostic information increases--all of which Theranos is accomplishing. Additionally, diagnostics is the nexus of healthcare most amenable to expanding the scope of practice of lower-cost providers for well-understood medical conditions. As another of our posts explores, this is one of the surest ways to decrease healthcare costs in the U.S. 

Reason 2: Theranos's Business Model
Every component of a good business model flows from, and seeks to balance and reconcile, the foundational stakeholder value propositions (VPs) upon which the success of the business depends. These VPs are responses to stakeholder jobs-to-be-done (JTBD). Below are some examples of the primary stakeholders, their JTBD related to lab diagnostics, and the resultant VPs that Theranos has so expertly constructed its offerings around:

• Patients
• Jobs-to-be-done (JTBD)
1. Feel less pain / fear around extracting samples
2. Pay less $$ for routine tests
3. Gain anytime access to personal health information 
• Value Propositions (VPs)
1. Proprietary, painless micro-stick technology to extract a few drops of blood
2. Pricing 50-90% less than Medicare reimbursement prices
3. Creation of theranos.me, mobile apps, and easy graphical displays to learn and track important data
• Providers
• JTBD
1. Fast, accurate test results
2. Easily place orders and follow-up orders
3. Easily consumable reporting
4. Not take up much space (hospitals)
• VPs
1. Results w/in hours instead of days; high illustrative accuracy 
2. Send samples using existing infrastructure OR send patient to Wellness Center
3. Alerts and easily consumable graphs via software
4. Theranos labs require 10x-100x less space than traditional labs 
• Payers
• JTBD
1. Pay less $ for procedures
• VP
1. Pricing 50-90% less than Medicare reimbursement prices, estimated to save Medicare / Medicaid $200B over next 10 years
• Regulators

• JTBD
1. Ensure safe, effective healthcare for the public
2. Not have to chase down irresponsible startups
• VPs
1. CLIA, FDA, WHO, and ICH certified 
2. Proactively sends FDA testing accuracy results
• Pharma
• JTBD
1. Easily track real-time results of drug trials in test patients 
• VPs
1. Creates a 'movie' of physiological reaction to drugs within patients (Glaxo-Smith Kline and Pfizer have been paying Theranos for this since 2005)
• Investors ('good' investors who are supportive of long-term returns)
• JTBD
1. Realize high return on investment
2. See cash from operations supporting increasing share of the business
• VPs
1. Has not accepted investors seeking short-term exit
2. Generating cash from operations since 2005

Challenges In Emerging Markets for Theranos

Theranos is a careful company. They were in stealth mode for 10 years making sure to nail each piece of their business model before starting to scale, and they are doing that very deliberately so far with Walgreens. Holmes has indicated that Theranos is systematically evaluating a global expansion strategy, which will probably not happen tomorrow. If it does happen, each new market will of course require an entirely new business model, or configuration among a separate set of stakeholders.

Research on the laboratory diagnostic market in India indicates that Theranos would today be a welcome innovation within this market since the vast majority of diagnostic labs in India are importing equipment from the same OEMs that supply the traditional diagnostic labs in the U.S., e.g. Siemens, Olympus, and Beckman Coulter. Because of this, even the Indian test prices are still higher than those of Theranos as the table below comparing the cost of a few Theranos and SRL Diagnostics tests shows:

But price is just one metric, and others may be just as important in emerging markets. For instance, Dr. Natarajan Sriram wrote a critical piece about existing IVDs in emerging markets, and while price was at the top of the list of criticisms, there are many additional reasons that make significant market penetration difficult for laboratory-based diagnostics. Dr. Sriram outlines important performance dimensions required for IVD products to succeed in emerging markets. While Theranos performs well on several cost and reliability metrics, there are a few that Theranos will find difficult to excel on in its current form:

1. Simple and minimum end-to-end procedure
2. Test results require no additional equipment or accessories from site of test
3. Small pack size of IVD
4. Minimal training required w/ no professional staff

Typical Rapid Diagnostic Device

Dr. Sriram's own company, the Tulip Group, oversees the R&D and production of Rapid Diagnostic Tests (RDTs), which are typically single-use applications meant to test for the presence of an infectious disease, exactly like that of Roche's PCR system for SARS in 2003. While incremental cost advantages to RDTs have been shown at high levels of a particular disease prevalence, their true advantage in emerging markets is that they satisfy the above criteria for success that Dr. Sriram outlines. 

The penetration of Theranos into emerging markets in its current form might rely on how widely held and acute the JTBD of 'help me watch a movie of my micro-biological health indicators over time' is in these markets since the OEMs already supplying the equipment will likely soon provide lower-cost lab diagnostics to achieve cost parity with Theranos. 

I wonder, might Theranos carry their genius of miniaturization a bit further to create portable laboratories, patches, or more versatile RDTs in order to succeed in emerging markets as they will succeed in the U.S.? 

RDT photo credit: http://p.globalsources.com/IMAGES/PDT/B1055265875/Diagnostic-Test-Cassette.jpg