BBI Contributing Editor
DUSSELDORF, Germany – Medica, the world's largest exhibition of medical equipment held here annually each November, offers an opportunity to evaluate a broad spectrum of new technologies and companies, and to assess important trends in the medical products market on a global scale. While this year's exhibition was notable for the absence of some major players in the laboratory products industry – including Abbott Diagnostics (Abbott Park, Illinois), Dade Behring (Deerfield, Illinois) and Bayer Diagnostics (Leverkusen, Germany) – numerous new companies, including many in the e-commerce and e-health arenas, more than compensated for the deficit. Medica is a major forum for suppliers of patient monitoring equipment, and a variety of new developments in that segment were presented. Perhaps the most important of those was the announcement of the acquisition of Agilent Technologies' (Palo Alto, California) Healthcare Solutions Group (Andover, Massachusetts) by Royal Philips Electronics (Amsterdam, the Netherlands), the parent of Philips Medical Systems (Best, the Netherlands). As shown in Table 1 on page 2, the $1.7 billion cash transaction will create the No. 2 medical equipment supplier worldwide, second only to GE Medical Systems (Waukesha, Wisconsin) in sales. The purchase price of 1.13 times sales is reasonable given the mature nature of most of Agilent's product lines, and, with the exception of ultrasound products, there is little overlap between the two companies.
Agilent Healthcare Solutions Group-Philips Medical Systems Comparison
|Company||Agilent HSG||Philips Medical Systems|
|Annual revenues||$1.5 billion||$2.8 billion|
|Number of employees||5,000||11,600|
|Product lines||Patient monitoring
|Cath lab imaging systems
MRI, CT, X-ray imaging
|Manufacturing locations||North America,
|U.S., the Netherlands,
|Parent company||Agilent Technologies||Royal Philips Electronics|
|1999 revenues||$8.3 billion||Euro 31.5 billion|
|Both companies have direct sales or sales through distribution in more than 100 countries.|
|Source: Company reports|
According toAgilentstaffers interviewed at Medica, a key issue faced byAgilent's health care group in Europe was the emerging trend toward increased bundled, turnkey purchasing by health care providers. That trend, which is considerably more advanced in the U.S., began in the United Kingdom and has now spread throughout the European Community, comprising about 20% of total purchases in the medical equipment markets in Europe. The result is an increased need for a broad product portfolio in order to remain competitive.Agilent's choice was either to make substantial new investments on its own, or to sell the Healthcare Solutions unit to a company having a complementary product line to form a combined entity with the breadth and depth to compete for large purchase contracts. Although one possible alternative was forAgilentto acquire a complementary supplier, the price tag for a company such asPhilips,Siemens Medical Systems(Munich, Germany) orGE Medical Systemswould likely have been in excess of $4 billion, putting such a deal out of reach. That leftAgilentwith the option of seeking an acquirer, andPhilipshad by far the most complementary portfolio. In addition, both companies believe there is a good cultural fit between the two organizations.Philipsalso is in the process of acquiringADAC Laboratories(Milpitas, California), further strengthening the new company's position in the imaging market. The merged company will have No. 1 market positions in cardiology imaging, patient monitoring and automated external defibrillators and hospital defibrillators worldwide, as well as the leadership position in ultrasound services. The product line overlaps in ultrasound equipment will be rationalized, according toAgilent, this spring.
The Philips-Agilent deal may mark the beginning of an additional series of consolidations in the medical equipment industry. Shortly before the announcement of the Philips-Agilent agreement on Nov. 17, an acquisition offer was made by Cardiac Science (Irvine, California) for Spacelabs Medical (Redmond, Washington). Cardiac Science, with annualized revenues of about $3.7 million, based on its most recent nine-month results, was seeking to combine its line of automatic defibrillators with Spacelabs' patient monitors. Spacelabs is the third-largest supplier of patient monitoring products. Cardiac Science later upped its offer to $143 million, but at presstime, the offer has continued to be rejected by Spacelabs. However, the trend in the medical equipment sector clearly favors supplier combinations to broaden product portfolios. Such transactions, aimed to take advantage of sales and marketing synergies, provide the most rapid route to increased competitive advantage in the global market. The likely trend will be toward continued consolidation, eliminating most if not all mid-sized suppliers in the market and leaving only a few large suppliers, along with numerous smaller niche manufacturers.
Some of the areas where niche opportunities continue to exist include products for remote monitoring (including home monitoring); less invasive or noninvasive monitors for parameters such as cardiac output or glucose; information systems products (a key focus of suppliers such as Siemens Medical Systems); and advanced EEG monitors. Information technology represents a major opportunity for systems to improve physician efficiency and reduce medical errors; products to improve communication between patients and physicians; and systems and software to improve the operational efficiency of hospitals and other health care providers.
The market environment, however, is not becoming more favorable for many smaller suppliers. In Europe, for example, the recent implementation of the Medical Device Directive has forced suppliers to invest significant sums to perform qualification testing in order to obtain the CE mark needed to remain on the market, even though the products often do not require any modifications. Some suppliers from countries in Eastern Europe are finding the new requirements to be particularly burdensome financially. At the same time, limits on health care reimbursement throughout Europe are causing average selling prices to drop, squeezing many small suppliers particularly hard. Thus, the niche players that are able to survive in the market will probably be those with unique technologies, and even those suppliers are likely to eventually be acquired as their sales grow to a level that attracts the interest of the major competitors.
Developments in critical care monitoring
As shown by the figures in Table 2 on page 3, the patient monitoring products market is mature, with most of the growth due to the critical care information systems component of the market. The global market is approximately twice the size of the U.S. market and is growing at a slightly slower rate. Leading suppliers in this market include Agilent, GE Marquette, SpaceLabs Medical, Datascope (Montvale, New Jersey), Datex-Ohmeda (Helsinki, Finland), Critikon (Tampa, Florida), Welch Allyn/Protocol (Skaneateles Falls, New York), Siemens Medical and Colin (Komaki City, Japan). One segment of opportunity in this market is products for point-of-care wireless monitoring, such as the newly launched Telemon from Agilent and the Micropaq, a patient-wearable monitor from Welch-Allyn. The $3,500 Telemon monitor transmits ECG, oxygen saturation and noninvasive blood pressure data over a wireless link to a central station, and can also be plugged into a bedside unit to allow nurses to view the information at the bedside. Welch-Allyn has developed the Micropaq for monitoring of ECG and oxygen saturation in essentially any location, with a wireless link via a Symbol Technologies FlexNet network using a relatively interference-free portion of the radio spectrum. Prices range from $2,200 to $3,500 per monitor. The monitor includes its own miniature screen so that waveforms can be viewed at the point of care. The system's rechargeable battery lasts a full shift, and the Symbol Technologies network can also be used to link data from Personal Digital Assistants and cell phones. Noninvasive blood pressure capability will be added next year. The Micropaq uses SET technology from Masimo (Irvine, California) for oxygen saturation measurement.
U.S. Patient Monitoring Products Market
|1999||$624.0 million||$198.9 million||$302 million||$1.124 billion|
|2000||$628.8 million||0.8%||$218.8 million||10.0%||$397 million||31.8%||$1.245 billion||10.7%|
|2001||$636.0 million||1.1%||$238.8 million||9.1%||$497 million||25.2%||$1.372 billion||10.2%|
|2002||$646.3 million||1.6%||$259.1 million||8.5%||$594 million||19.4%||$1.500 billion||9.3%|
|2003||$659.1 million||2.0%||$279.8 million||8.0%||$684 million||15.2%||$1.623 billion||8.2%|
|2004||$673.8 million||2.2%||$300.8 million||7.5%||$764 million||11.6%||$1.738 billion||7.1%|
|2005||$690.6 million||2.5%||$321.0 million||6.7%||$838 million||9.7%||$1.850 billion||6.4%|
|Source: The BBI Newsletter|
Another new portable monitor, although not as compact as Telemon or Micropaq, was displayed at Medica by UTAS (Kiev, Ukraine). The 3.5-kilogram UM 400 from UTAS provides ECG, heart rate, oxygen saturation, respiration rate, noninvasive blood pressure, temperature and end-tidal CO2, but does not have wireless capability. A second miniaturized monitor was exhibited by AND (Tokyo) that is targeted at applications in outpatient care, home care, dialysis clinics, and wards and nursing homes. The TM-2550 Vital Signs Monitor measures noninvasive blood pressure, oxygen saturation, and ECG, and includes a built-in printer. The monitor weighs only 1 kilogram and offers a nine-hour battery life. Yet another small monitor, providing combined 3-lead ECG and stethoscope capabilities in a single device with a 150-hour battery capacity, was introduced by Pulsonic AG (Zurich, Switzerland). The Pulsonic Sonoplus 2000 is targeted at applications in home health care and for use in hospital ward exams.
Another area of active development within the patient monitoring products sector is cardiac output monitoring systems. In addition to growing acceptance of noninvasive cardiac output monitoring technology, there are ongoing efforts in the industry to develop improved invasive monitors. For example, AorTech International plc (Bellshill, Lanarkshire, Scotland) exhibited the truCCOMS continuous cardiac output system at Medica that, along with the truCATH catheter, provides near real-time cardiac output readings using a highly compact, 2 kilogram dedicated monitor. The system was developed by AorTech Critical Care, a recently acquired unit of AorTech International. The system response time is under 10 seconds, according to the company, vs. 3-6 minutes for other types of invasive cardiac output monitors. The truCCOMS provides both continuous and injectate modes and can be pole-mounted. A modular version is also available that will plug into patient monitoring systems already installed in most hospitals from suppliers such as Agilent. The company planned to begin shipments in Europe in late December and is setting up a distribution network. AorTech is seeking partners for distribution or marketing alliances in the U.S. An important application for the truCCOMS, according to AorTech, is monitoring patients during increasingly popular off-pump coronary artery bypass procedures, where cardiac output can change very rapidly, making it important to have a measurement that is as near real-time as possible. The market for disposable catheters used for the invasive measurement of cardiac output and arterial wedge pressure is estimated at $165 million in the U.S. for 1999, but sales are forecast to decline slowly as noninvasive measurements continue to improve and capture a larger share of the market.
A noninvasive cardiac output system was exhibited at Medica by Innovision A/S (Odense, Denmark). The Innocor system uses the principle of Inert Gas Rebreathing to perform cardiac output determinations. Gas concentrations of N2O and CO2 are determined by photoacoustic spectroscopy. The reading takes less than one minute and requires only that the patient breathe through a special tube into a rebreathing bag. The Innocor analyzer thus is suitable for outpatient or physician's office use although, because it requires active and independent breathing by the patient, it cannot be used for patients on ventilators. The company hopes to obtain a CE mark by May.
Less-invasive cardiac output monitors using ultrasound technology also are available in the European market. Atys Medical (Saint Genis Laval, France) demonstrated its WAKI TO trans-esophageal Doppler cardiac output monitor at Medica for use in the intensive care unit and operating room. The system includes a portable analyzer and a reusable probe that is inserted to a depth of 35 to 40 cm from the dental arch. The WAKI device, in other configurations, can also monitor left ventricular function and, with appropriate probes, intra-cranial blood flow. Applications include assessment of brain death, detection of vasospasm, stroke diagnosis, assessment of head injury, monitoring during carotid artery surgery and monitoring during open-heart surgery.
Other suppliers of noninvasive cardiac output monitoring products include CardioDynamics International (San Diego, California), which also markets its products through GE Medical Systems in Europe, and Novametrix Medical Systems (Wallingford, Connecticut). The market for noninvasive cardiac output monitoring is continuing to grow, as opposed to the invasive monitoring segment, although at present the sales base is small. As shown in Table 3, sales of noninvasive cardiac output monitoring products in the U.S., which comprises the primary market for such products at present, are forecast to grow from about $6 million in 1999 to almost $50 million by 2005, representing a significant market but nevertheless still less than half the size of the market for invasive cardiac output monitoring products.
Noninvasive Cardiac Output Product
Sales in the U.S., 1999-2005
|Source: The BBI Newsletter|
New developments in pulse oximetry also were on display at Medica. A fetal pulse oximeter was exhibited by OB Scientific (Germantown, Wisconsin) that provides plethysmographic determinations of fetal oxygen saturation. Cost for the monitor and sensor catheter is about $24 per use. The device employs an elongated pulse oximetry sensor probe using conventional dual-wavelength measurement technology, and can also measure fetal pulse rate. Another important company in the pulse oximetry segment, Masimo, has begun direct-marketing certain pulse oximetry products in Europe, including its Radical Pulse Oximeter employing a sensor with a parabolic design to eliminate ambient noise. The meter ranges in price from $3,000 to $4,000. Masimo offers both reusable and disposable sensors in Europe, along with portable (hand-held) and bedside monitors.
Specialized niche patient monitoring products exhibited at Medica include a new on-line lactate monitor, continuous blood gas and electrolyte monitoring products and new EEG monitors. The SIRE Biosensor from Chemel AB (Lund, Sweden) can measure lactate as well as glucose and alcohol directly in liquid samples, including whole blood, with no pretreatment in less than five minutes. The SIRE (Sensor-based Injectable Recognition Elements) Biosensor can be used for biochemical analysis in clinical labs, or for ex-vivo measurements at the bedside, and is also suitable for use in quality control applications in the pharmaceutical industry, food processing, and other areas.
Continuous blood gas and electrolyte monitoring products have been on the market for some time in Europe, primarily the Paratrend system from Diametrics Medical (Ann Arbor, Michigan). Recently, new versions of the Paratrend technology have been introduced in Europe, including the Neurotrend for neurovascular monitoring and the Neotrend for neonatal monitoring. The Neurotrend is being marketed by the Codman division of Johnson & Johnson (New Brunswick, New Jersey). So far, only about four or five systems are in use in Europe. Uptake has been slow in Europe, according to Codman, because surgeons have not yet developed a firm understanding of the clinical meaning of the data provided by the system. Improved reference methods are needed in order to allow physicians to relate the Neurotrend data to more familiar parameters.
Another neurological monitoring product segment highlighted at Medica included systems for electroencephalography (EEG) and electromyography (EMG) monitoring. Key suppliers in the EEG/EMG market in Europe include Nicolet Biomedical (Madison, Wisconsin), a subsidiary of Thermo Electron (Waltham, Massachusetts); Schwind Medizin-Technik (Erlangen, Germany); Nihon Kohden (Tokyo); and Medtronic (Minneapolis, Minnesota). Some smaller players include Neuro Scan Medical Systems (Sterling, Virginia) and Micromed srl (Treviso, Italy). One of the newer systems, launched in Europe just prior to the Medica exhibition, is the Brain Quick System 98 from Micromed. The $30,000 Brain Quick system uses quantitative spectral analysis of data collected from 19 electrodes using neural network technology. Using the Smart-EEG software package, the system can automatically analyze highly complex EEG traces and provide simple outputs allowing detection of seizures or analysis of sleep patterns. A key target user is the anesthesiologist, who can use the system to rapidly detect changes in patients undergoing general anesthesia. A version of the system for adult patients is available now, with beta site evaluations continuing in Europe. A pediatric version is under development. The company initiated an expansion of its marketing efforts into the U.S. this year.
Home monitoring attracts interest in Europe
One area attracting strong interest among suppliers of patient monitoring products in Europe, as well as information system suppliers, is monitoring of patients in the home health care setting. Numerous applications have emerged, including monitoring of blood pressure for management of patients with hypertension; ECG monitoring for patients with heart disease; monitoring of respiratory parameters for patients with chronic obstructive pulmonary disease or related problems; and, most recently, patient locater systems for assisting home caregivers or nursing home staff in managing patients with Alzheimer's disease or other types of dementia.
An example of the latter technology, introduced at Medica by HomeFree Systems (Columbus, Ohio), a subsidiary of Dmatek Ltd. (Tel Aviv, Israel), is the HomeFree monitoring system. HomeFree uses a lightweight watch-style Personal Watcher that sends a continuous signal over a wireless link to a monitoring unit in the home. When the person wearing the Personal Watcher wanders out of a predetermined area, or attempts to remove the watch, a caregiver is automatically alerted. Notifications are transmitted to a caregiver's pager or cell phone, and visual and audio alarms are also available. The service is priced at $80 per month, including installation and 24-hour monitoring. A Group Monitor version is also available for nursing home use, and a number of nursing homes in the U.S. have adopted the system. It is also possible to locate a patient to within a 300-yard radius using a mobile monitoring system.
Other systems under development by companies including Siemens AG and Applied Digital Solutions (Palm Beach, Florida) provide the capability to monitor the exact location of a patient via the satellite-based global positioning system, and also provide the patient with emergency call services. The Digital Angel from Applied Digital Solutions will use a dime-sized device with the capability to measure parameters using biosensors, store that information and transmit it along with position location information to a monitoring facility. The Digital Angel device will also use a self-recharging battery that takes energy from the body or its surroundings to avoid the need for the wearer or caregiver to charge or replace batteries. Applied Digital is actively seeking joint venture partners to develop and market the technology, and expects to produce a prototype by the end of 2000.
Another remote monitoring application that is gaining in popularity in Europe is hypertension management, using wearable or portable blood pressure measurement devices that can record blood pressure readings taken at intervals by the user. Products are available from Braun GmbH (Kronberg, Germany), a unit of the Gillette (Boston, Massachusetts); Omron Healthcare (Tokyo); SHL TeleMedicine Ltd. (Tel Aviv, Israel); and TensioMed International Ltd. (Gloucestershire, United Kingdom). The TensioMed home blood pressure monitor, TensioPhone, includes an integrated telephone link that automatically forwards blood pressure readings taken by patients in their homes to the TensioCare monitoring center. Physicians can choose the frequency and format of the reports they receive from the monitoring center, and can also download all data to their own PCs. Patients can send their own data to the center, and receive a replay after the record has been analyzed for clinical abnormalities. In addition, alarms can be set to send an alert to the physician or other health care professional if the blood pressure readings exceed a preset threshold. The device also allows the patient to record when medications are taken to allow physicians to monitor compliance with prescribed regimens. Another device that provides a telephone link to send blood pressure readings to a monitoring center is the TelePress III from SHL TeleMedicine. The Braun PrecisionSensor, while not providing the telecommunications capabilities of the TensioPhone device, incorporates a unique Active Positioning System that insures correct positioning of the patient's wrist in order to improve measurement accuracy.
Medical International Research (MIR; Rome) has developed a new spirometry device that also includes a telephone link to allow specialists to monitor readings taken by patients in their homes. The SpiroTel tele-spirometer is priced at $200 to $350 depending on quantity, and has been on the market in Italy for over one year, where about 2,000 general practitioners are using the device to allow data to be captured for review in specialist consults. The device is used in France for monitoring lung transplant patients, and MIR is now expanding into Germany, the first country where reimbursement will be an issue. The SpiroTel is not yet approved by the FDA for sale in the U.S. The patient performs a test, results are stored in the unit's memory and the device is then placed on the telephone handset to transmit the data to a doctor's PC. MIR does not offer a monitoring service but instead sells devices and software to physicians or hospitals to establish their own monitoring network. The unit does not require calibration and the latest software upgrades are available over the Internet. A similar device for trans-telephonic monitoring of patients with pulmonary disease, the TeleBreather, is available from SHL TeleMedicine.
Another important segment of the market is home or remote ECG monitoring. A number of miniaturized devices are now available that allow patients to record their own ECG trace and forward it to a physician or call center for review. Key suppliers in Europe include ife Medizin & Technik (Kiel, Germany) and SHL TeleMedicine. The CardiCare device from ife Medizin & Technik is a hand-held unit about six inches in length that measures a bipolar electrocardiogram when the device touches the skin. The recorded data is displayed on a small LCD screen on the CardiCare. The device can store up to 16 minutes of data and includes capabilities for patient recognition, time and date. It is priced at 750 DM plus 350 DM for the PC software used to interface to the device and store downloaded data. Another device, the CardioBeeper, is available in Europe from SHL TeleMedicine. The CardioBeeper includes an integral 12-lead electrode pad designed for easy placement on the chest. Pushing a single button initiates an ECG measurement, and the data can then be transmitted over a telephone to a monitoring center. The main application for the CardioBeeper is to allow patients who are experiencing an event to obtain a clinical diagnosis and clinical advice remotely. SHL also sells a WatchMan device, enabling patients to send an alarm and to communicate via a microphone connected to an RF link with a monitoring center.
Uniqmed Oy (Oulu, Finland) has established the Telehealth Network for use in home care, public health service and emergency treatment. It uses portable BioUNIT monitors to measure and record 12-lead ECG, oxygen saturation, pulse and noninvasive blood pressure during an emergency or in conjunction with a house call. The data is encrypted and transferred via a global satellite network to a server in a hospital for analysis by a specialist. The physician can give consultations to a nurse at the patient site or can directly control the BioUNIT from a workstation to monitor the results of intervention.
E-commerce, IT to drive European market
A number of e-commerce and e-health companies are now in the market in Europe, pursuing applications in transaction processing, electronic patient records, online dispensing of health information and telemedicine. Electronic purchasing is one emerging trend in the biomedical industry in Europe. At present, only 3% to 5% of all purchase orders within the European bioscience market are electronically placed. However, companies such as GloMediX AG (Munich, Germany) are developing networks for electronic purchasing by hospitals, with plans to eventually expand to include sites other than hospitals, such as physician practices. GloMediX has been live since last August, and has established a network of 25 European hospitals and 20 suppliers. The company plans to derive its revenues from transaction fees of 2% to 3% charged to suppliers, plus a low hospital usage fee. Establishment of an efficient electronic procurement network in Europe is somewhat more complex than in the U.S., according to GloMediX, because of major differences between countries in health care system structure, supply chain management practices and legal requirements. The GloMediX network will not compete directly with group purchasing organizations in Europe, in part because there are relatively few, such as the Prospitalia group, that are operating effectively. The goal of GloMediX, however, is to provide more efficient transactions, increasing efficiency.
E-health companies also are emerging in the European health care market, such as InterComponentWare AG (Berlin, Germany), a unit of InterComponentWare Inc. (Mountain View, California); Gesellschaft fur Medizinische Datenverarbeitung mbH (GMD; Munich, Germany); medical net GmbH (Bonn, Germany); and GesundheitScout24 GmbH (Koln, Germany). InterComponentWare has developed the LifeSensor Internet-based electronic patient record and has just begun implementation of the system in Germany. Twenty physicians are now using the system to maintain records on 100 patients following start-up in November. Although about 70% of physicians in Germany use some type of electronic patient file, according to the company, most are not Internet-based. The cost of the service (50 Euro per month) is borne by the patient now, but InterComponentWare is working to obtain reimbursement by insurers. The company believes that, through the improved patient education advanced disease management protocols that are possible with its system, insurers will save money by avoiding unnecessary therapy and by improving outcomes. The LifeSensor system provides both public and professional portals and will eventually offer outcomes analysis services through a call center that is being established.
GMD also has developed a web-based patient record called the Virtual Patient Record, which is part of a program called E-Health Solutions. The e-health solutions product suite includes a medical workbench for generating reports, discharge letters, orders and for management of DRG requirements; a medical record and connectivity platform for the electronic patient record; and an external link for partners and users that includes the Virtual Patient Record as well as an e-business portal. The key feature of the GMD system is system-wide, web-based integration of clinical information, as well as the Virtual Patient Record that, because no actual data transfer takes place, allows for collaboration without the risk of breaching privacy issues.
Medical Net's Med Connect system is targeted at hospitals, clinics, laboratories and physician practices. The Internet-based system allows electronic transmission of medical reports using the MedSecure data encryption software. The system can process 500 lab reports in 90 seconds. Transaction costs for the Medical Net service are about 0.25 Euro vs. costs of about 2.50 Euro for conventional paper-based approaches using mail, or 1.00 Euro for fax reporting. In addition, the time to file a report is one to two minutes using Medical Net, vs. one to two hours via fax and one to two days using mail. There is a license fee of 5,000 Euro to establish the service, which can be higher for large networks, and an annual service fee of 1.5% of the license fee plus a 0.25 Euro transaction fee. Medical Net is operating its service at 160 hospitals in Australia, and serves 70% of all clinical labs in that country along with some private physicians. The company began operations in Germany in July 2000, and has since signed up 30 hospitals, 30 clinics, and two laboratories.