CDU Contributing Editor

ANAHEIM, California – The market for cardiology products has historically been characterized by rapid innovation, technological change, and an almost continuous stream of new product introductions. Recent advances in computer technology that have transformed other industries have also begun to impact the cardiology products segment, and even more dramatic changes may be in store in the future. Telemedicine has already found a niche in the management of cardiac patients, and advances in computer-based noninvasive monitoring and imaging are also changing the way in which cardiologists manage their patients. As indicated by the wide range of new products exhibited at the annual meeting of the American College of Cardiology (ACC; Bethesda, Maryland) in March, the pace of change is not likely to slow, and may well accelerate because of the entry of a number of new players in the market, particularly those companies offering Internet-based approaches to patient management.

Among the companies exhibiting new telemedicine products at the ACC meeting were ComView.com (Pleasanton, California), with a new system for sharing diagnostic imaging data between physicians via the Internet; HealthCenter Internet Services (San Francisco, California), providing Internet-based systems that effectively allow the cardiologist to extend patient management from the office into the home; and ePhysician (Mountain View, California), with a palm computer-based system that helps to automate the office visit for cardiology and other medical practices, including electronic transmission of drug prescriptions to pharmacies. An important trend is the expansion of patient management outside of the hospital and office setting into the home and other alternate sites using interactive web-based tools. Studies have demonstrated that management of patients via virtual visits, while not a universal substitute for in-person visits, can enable significant cost savings. For example, Alere Medical (San Francisco, California) has developed the DayLink system to provide home-based management of heart failure patients, and SpaceLabs Medical (Redmond, Washington), a leading provider of ECG equipment, blood pressure monitors, and spirometry systems, has established Lifeclinic.com to offer services directly to patients to help manage and prevent cardiovascular disease.

Cardiac imaging technology also is advancing, particularly in the areas of ultrasound and MR imaging. New techniques for perfusion imaging have been developed by ATL Ultrasound (Bothell, Washington), and progress in magnetic resonance imaging, including intravascular MRI, promises to allow cardiac perfusion and plaque characteristics to be assessed noninvasively. Noninvasive cardiac output monitoring is beginning to be accepted by the cardiology community as a valuable tool for patient management. Finally, e-commerce is beginning to play a role in the cardiology products market, providing new channels for marketing and distribution in the industry.

Telemedicine offers new options

Nowhere is the rapid expansion of new technologies more evident than in the telemedicine field, particularly for Internet-based applications. As shown in Table 1 on page 3, cardiology has attracted perhaps more than its share of new ventures seeking to improve the efficiency of practice management, to help move care delivery out of the hospital and into the home, and to allow physicians to access patient data regardless of their location. A number of ventures are targeting the management of heart failure as a key application, in part because the data that must be accessed from the patient is rather limited (body weight, blood pressure, general health status), and because patients with heart failure and shock comprise about 49% of all post-acute care cases discharged to home health care, according to 1998 statistics from the Health Care Financing Administration (HCFA; Baltimore, Maryland). However, other applications include management of patients with atrial fibrillation and home ECG monitoring.

ComView has launched a free eTeleCardiology Service as part of its TeleMedicine Network that allows digital images to be converted to DICOM format using a patented conversion technology, and then transmitted via the Internet. The service is accessed by physicians over the company's website, www.comview.com. According to ComView, only about 20% of hospitals now use digital imaging modalities, but the number is increasing. Furthermore, the company can convert analog image data to digital format for hospitals on a fee-for-service basis, with minimal loss of image resolution. The company plans to realize revenues from the service via sponsorship fees from medical suppliers including pharmaceutical companies and medical device firms. The sponsors will provide information on new products of interest to physicians who use the website. ComView also plans to offer additional fee-based services to physicians. It originally entered the market with a dedicated workstation for archiving and analysis of digitized radiological images, and has placed about 40 ComView systems in hospitals at prices ranging from $300,000 to $1 million. In 1999, the company introduced ViewStarPC, a free software product that allows physicians to download images from the Internet. The new version of ViewStarPC, introduced at the ACC meeting, will offer a direct Internet interface plus a gateway to the eTeleCardiology Service. The new web-based service will not offer the storage capabilities of the original ComView system, but will provide similar analytical capabilities. In addition, it will allow physicians to share images via the Internet, both with other physicians and with patients. Privately held ComView was founded in 1995, and is backed by Menlo Ventures.

A new venture that attracted considerable attention at the ACC gathering, ePhysician, is addressing the need for improved efficiency in private practice. While not focused specifically on cardiology (the CEO is a practicing gastroenterologist), the company's Palm V-based system has a number of features that cardiologists may find attractive to speed the patient management process. Using wireless Internet access, physicians can (or will be able to) order prescriptions electronically, perform scheduling, update electronic patient records, and download lab test results, patient charge data, and reports on adverse drug events. One significant benefit is the reduction in errors and callbacks for ordering of prescriptions, since drugs are ordered via a checklist rather than by handwritten notes.

An advantage of using the Palm computer as the hardware element of the system is portability. Physicians are often reluctant to use fixed-base computers for accessing data and entering reports and orders, since to do so usually interrupts the normal workflow. However, a hand-held device is compatible with the mobility requirements of most physicians. According to ePhysician, many physicians are now carrying Palm computers. The firm is planning to charge between $15 and $25 a month for the service, and will provide the Palm computer free of charge to the first 10,000 customers. ePhysician also is building an interface with most large practice management systems via a print emulation technique that will allow data to be shared. Although there are about 1,900 different practice management systems in use today, there are only about five or six large ones. The company also will seek to obtain revenues via sponsorship fees from product suppliers. ePhysician was founded in 1998, and has been funded by Benchmark as well as by Sierra Ventures in the second round. The company has attracted about $12 million in venture funding so far.

A second firm, iScribe (San Mateo, California), is developing a similar service for prescription entry using palm-top devices. The iScribe system does not yet provide direct transfer to the pharmacy, but the company will add a wireless pharmacy interface in the future. iScribe plans to derive revenues primarily from sponsor ads and transaction fees. The system also performs drug interaction and allergy assessments when filling a prescription.

A number of other companies are offering web-based services of a more general nature, targeting patients, physicians, or both. Examples include Healtheon/WebMD (Atlanta, Georgia), Healinx (Alameda, California), Cardiology Domain (Boston, Massachusetts), Salu (Portland, Oregon), and HealthCenter Internet Services.

WebMD is the best-known player in the web-based health care segment. The WebMD website offers a cardiology channel, and provides insurance eligibility checks, claims processing, lab results and orders, and prescription services. The company's strategy is to acquire a full range of Internet health care service providers, allowing the company to offer physicians a comprehensive package that extends to medical records, coding compliance, dictation and transcription services, and administrative services.

Cardiology Domain is a new venture that plans to offer Internet services to cardiologists for improving patient interaction, with the goal of maximizing practice efficiency and improving marketing of cardiology practices. The company's web site allows patients to learn more about their medical conditions, testing options, and treatment alternatives. The privately held company was founded in 1999 and employs 10 people. Revenues will be derived from sponsors who place ads on the web site, as well as from fees charged for e-mail services and transaction fees from on-line sales of medical products. Spencer King, MD, a past president of the American College of Cardiology, is a member of the board, along with a number of other leading cardiologists.

Health Center provides desktop computer applications for cardiology for the assessment of myocardial perfusion. The company started in 1992 as a supplier of imaging software for nuclear cardiology, and is now evolving its products to run on desktop computers. The company also operates a web site that is intended to allow physicians to manage patients at home once they are discharged from the hospital. Because of Health Center's original emphasis on cardiology, the company has developed a number of unique software products that, for example, can allow more effective monitoring of patients who are prone to myocardial infarction. Health Center plans to purchase software technology that will allow perfusion images to be transferred to the Internet. A key application is pictorial depiction of infarction, using techniques developed by Health Center for its original product line. However, the company will also offer web-based capabilities to manage data from a variety of imaging modalities, including intravascular ultrasound, angiography, and echocardiography, along with capabilities to provide laboratory and ECG data to physicians. Another unique application that will be offered by Health Center will be on-line, patient-specific information regarding medications, allowing a physician to write a prescription and then direct the patient to the Health Center web site for a specific disease management protocol. The goal is to continue the effect of the office visit into the home.

Salu, another web-based health care information services supplier, already has succeeded in establishing a large base of cardiologist users. The company claims that about 2,200 cardiologists and 1,500 cardiology practices are using the Salu website service at present. One important application is on-line ordering of medical products and services for cardiology practices, with Salu realizing fees to handle the transactions. Other specialties addressed by Salu's services include allergy and rehabilitation. Salu has developed capabilities to deliver personalized information on disease management to individual patients via the web.

Many Internet companies focusing on health care realized unprecedented increases in their stock price, until recently, because of the widespread investor interest in any type of web-based business. However, momentum in the sector has recently diminished, and most of the companies have experienced significant share price declines. For example, Healtheon/WebMD's share price has fallen by 77% from its peak of the past 12 months, and MedicaLogic's shares have declined 69% from their peak. The drop in share price has been quite uniform across the sector, indicating a general correction in the valuation of such companies, and not necessarily a change in investors' valuation of one particular firm. There undoubtedly is a significant market opportunity for Internet companies in health care, as indicated by statistics from Healinx (quoting results of a Harris poll) that 70 million Americans went on line in search of health care information in the year ended June 1999, and other data indicating that more than 70% of physicians use the Internet. The market is still largely untapped, however. According to another study cited by Healinx, while nearly 48% of those seeking on line health information would like to communicate with their physicians on line, only 3% actually do.

Another important issue for Internet health care companies is competition from existing health care product and service providers. Recently, Johnson & Johnson (New Brunswick, New Jersey), GE Medical Systems (Milwaukee, Wisconsin), Medtronic (Minneapolis, Minnesota), Baxter International (Deerfield, Illinois), and Abbott Laboratories (Abbott Park, Illinois) announced plans to form an independent, Internet-based company that will use web technologies to improve the efficiency of hospital purchasing and thereby reduce health care costs. A number of managed care organizations also have begun to plan joint Internet ventures aimed at improving efficiency and reducing costs. It can be argued that such companies have a better understanding of existing operations and of approaches that can succeed in the industry, and can readily acquire the needed web technologies. As opposed to creating fundamentally new ways to manage health care on the Internet, it may prove more practical to modify existing systems to take advantage of the web in those applications where it will have a significant impact.

Home monitoring for heart failure

One area within the health care market that appears particularly attractive for Internet applications is monitoring of patients in the home. A number of companies have identified home monitoring of patients with cardiovascular disease as a significant opportunity. Examples of leaders in this area include Alere Medical and LifeClinic/SpaceLabs Medical. Alere is focusing on treatment of congestive heart failure, and has developed the DayLink system along with web-accessible programs and its AlereNet technology to improve the ability to detect changes in patient condition at an earlier stage, and implement corrective measures. Alere estimates that it may be possible to reduce rehospitalizations for heart failure patients by as much as 80% from an estimated national average of two per patient per year by implementing home monitoring and web-based patient feedback. That estimate is based on a study conducted by Columbia Presbyterian Medical Center's (New York) cardiac transplant service.

With Alere's system, the physician first sets a target weight for the patient, and the DayLink automated monitor then tracks changes from the target weight on a daily basis. Body weight is an effective parameter for detecting fluid overload, and is a well-accepted tool for management of heart failure patients. Frequent monitoring is necessary for heart failure patients, since their condition can deteriorate in as little as 12 to 24 hours. The DayLink system also requests data from the patient on breathing patterns and drug use, and the information is transmitted to a database at Alere's San Francisco site. No paper charts are maintained. Nurses at the data center monitor patient status, and determine if the physician should be alerted based on alarm parameters set up initially. The physician also can review the data via the Internet. The physician can discuss needed actions with the patient via telephone while viewing patient history directly via the Internet. Alere plans to add the capability for a direct chat-line connection between physicians and patients. The company contracts with payers for the monitoring service, and contracts with Gentiva Health Services (Melville, New York), formerly a unit of Olsten Corp. and one of the leading home health care service providers in the U.S. and Canada, to install the monitoring equipment in the home. Revenues are derived from monthly payments from insurance companies for monitoring services. In the future, Alere plans to add automated prescription refill services to the system, for which the company will collect transaction fees. Patients' families also may subscribe to the AlereNet service to allow them to track status.

The market opportunity for more cost-effective products and services for management of heart failure patients is substantial. There are about 5 million patients in the U.S. alone with heart failure, and an additional 400,000 to 500,000 are diagnosed with the condition each year. On average, each patient is hospitalized twice per year at an estimated cost of about $20,000 per hospitalization. If improved management approaches save even one hospitalization, as Alere's studies indicate, managed care organizations can easily justify the cost, which runs between $75 and $125 per patient per month for the Alere service. As shown in Table 2, even a conservative estimate places the potential U.S. market opportunity at $600 million.

Cardiac Telecom has developed the HEARTLink monitoring system for automated detection of cardiac arrhythmia that allows ECG data to be transmitted to a central station. A patient module collects ECG data and transmits a single lead signal derived from three electrodes. The electrodes are configured as a ready-made pad that is easy to apply. Data from the patient module is received and analyzed by the Tele-Link Processor, a computer-sized unit that is placed in the home. When an abnormal event is detected, the processor automatically transmits the data to the central station, which is manned by trained paramedics. The HEARTLink was cleared by the FDA in November 1998. The compression algorithms developed by HEARTLink have allowed porting the complex ECG data to the Internet or to telephone lines. The company also is developing technology for compression of audio and video data.

Novinvasive imaging, monitoring advance

Another growth area within the cardiology marketplace is noninvasive imaging and monitoring products. At the ACC meeting, ATL Ultrasound presented a new development in contrast-enhanced ultrasound imaging that promises to allow physicians to obtain real-time perfusion indices. Previously, accurate perfusion indices could only be obtained by performing nuclear imaging scans. The ATL method uses imaging agents such as Optison from Mallinckrodt (St. Louis, Missouri) and a cycling power technique to obtain reperfusion measurements. The technique provides rapid answers at low cost, and can be performed using portable equipment. The method is experimental at present, since manufacturers of the contrast agents must still obtain marketing approvals. Phase III studies are under way to obtain data for a regulatory submission.

Magnetic resonance imaging (MRI) for cardiology applications is also advancing, and promises to offer yet another approach to measuring myocardial perfusion. While cardiac MR imaging may never attain the resolution needed to replace angiography, with improved contrast agents it appears possible to obtain highly accurate perfusion indices. The technique also offers the possibility of assessing fibrotic vs. normal myocardium, which could be important in determining if heart failure patients will benefit from revascularization, as well as assessing infarct size in myocardial infarction patients.

Finally, noninvasive technologies for measurement of cardiac output are gaining increased acceptance. CardioDynamics International (San Diego, California) now has over 300 placements of its BioZ and BioZ.com impedance cardiography systems worldwide. Sales increased 247% in the last fiscal year, to $7.28 million in the year ended Nov. 30, 1999, from $2.1 million in the same 1998 period Increased safety and lower cost are two key factors driving acceptance of the CardioDynamics systems. Although consumables sales represent only a small portion of total sales for the company now, it is expected that this component of sales will grow much more rapidly in the future, eventually becoming the largest source of revenue.

Another approach to non-invasive cardiac output monitoring is the NICO noninvasive cardiac output system from Novametrix Medical Systems (Wallingford, Connecticut). The NICO system monitors the patient's airway to determine cardiac output, and can measure it in patients who breathe spontaneously as well as those using mechanically assisted breathing. The system, now in use at the Texas Heart Institute and M.D. Anderson Medical Center (Houston, Texas), is targeted for use in the critical care area.