Frost: Medicare Reductions Reshape Oxygen Therapy Devices Market
June 1, 2006
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Decreasing reimbursement rates have forced health care providers and manufacturers to cut costs and increase the lifetime of
oxygen therapy devices. These market changes have slowed demand for several devices, thereby lowering unit shipments for manufacturers. According to Frost & Sullivan, to offset stalled unit sales, some manufacturers are slashing prices up to 50%.
Profit margins are declining as manufacturers struggle to comply with the revised reimbursement payments and proposed oxygen cap on rentals. Analysts said even though reimbursement cuts initially reduced the demand for oxygen devices, more efficient systems are revitalizing segments of the U.S. oxygen therapy devices market today.
Recent analysis from Frost & Sullivan found that the U.S. oxygen therapy devices markets earned revenues of $528.2M in 2005, with estimates to reach $ 885.9M by 2012.
"An increase in chronic obstructive pulmonary disease (COPD) patients boosts interest in oxygen therapy," said Frost & Sullivan industry analyst Sheila Ewing. "Thus, earlier placement of patients on oxygen intensifies demand for oxygen therapy devices." An aging population and the increased incidence of COPD are the main factors influencing an increase in patients requiring oxygen. COPD is a disease that strikes later in life, with 60 as an average age of onset.
There has been a medical movement in the last two years to push for physician awareness of COPD and earlier diagnosis. Analysts said only 50% of COPD cases are actually diagnosed, often at later stages of the disease. Oxygen therapy is also known to delay the onset of more severe symptoms and is being encouraged for earlier use in stage two of COPD.
In 2005, Medicare's reduced reimbursement payments forced manufacturers to drop prices of oxygen therapy devices and search for initiatives to counter the impact. Due to Medicare cuts, patients' out-of-pocket expenses expect to reach 30%, analysts said. In some cases, the aging population may be able to supplement their Medicare reimbursement to obtain the devices, yet many patients do not have supplemental income.
Analysts said providers anticipate up to a 20% decrease in their revenues as a result of reductions in Medicare reimbursement. Providers are restricted by severe reductions in Medicare reimbursement, but may purchase new devices if it provides a significant improvement either for patients, or in terms of maintenance cost-reduction.
"The reduction in Medicare reimbursement will not only affect the DME (durable medical equipment) providers, but significantly impact manufacturers. Providers are requesting manufacturers to share the burden of the Medicare cuts," said Ewing. "Thus, these cuts will further delay the introduction of innovative products in the market as manufacturers are forced to reduce expenses."
According to Frost & Sullivan, manufacturers can recover from the downfall by taking steps to increase the number of oxygen therapy patients through education programs for early detection of COPD.
Source: Frost & Sullivan.