Feb 8, 2011
A 2009 study by the Office of Inspector General (OIG) of the US Department of Health and Human Services found that Medicare payments for Negative Pressure Wound Therapy (NPWT) devices, which improve wound healing through a vacuum pressure system, surged 583% from 2001 to 2007, rising from $24 million to $164 million. Compared to the 83% increase in total Medicare spending over the same time period, NPWT reimbursements represent a disproportionately growing burden on the system.
NPWT first appeared commercially in 2001, with Kinetic Concepts as the sole manufacturer and supplier. For the past decade, it has been one of the hot areas of wound therapy, promising enhanced and faster healing compared to standard compresses and bandages. In clinical testing, NPWT has been proven to speed healing time by a factor of three or more. The technology enhances wound healing by creating a negative pressure vacuum over a wound, enhancing blood flow, maintaining moisture levels, and removing discharge.
For much of the early 2000s Kinetic Concepts was the only provider of NPWT devices, enjoying lofty Medicare reimbursements that averaged about $17,000 per device. The 2009 OIG study, however, compared market price for new NPWT devices and the $17,000 price tag Medicare used for reimbursements. The study found that new devices on the market cost suppliers about $3,600 per device, less than a quarter of the Medicare quote for reimbursement.
With government policy makers focused reforming healthcare to create a more affordable and sustainable, lower-cost producers will have a distinct advantage in the market for emerging wound care products. New competitors to Kinetic Concepts are emerging to compete in the space and have received increasing interest from major device manufacturers. In 2007, Smith & Nephew acquired NPWT start-up Blue Sky Medical Technologies for $110 million, buying entry to the NPWT market. In 2008, ConvaTec joined up with Boehringer Technologies to market and distribute Boehringer’s NPWT system. Increasing competition will force some price modifications in the NPWT market, but ultimately innovative low-cost options will drive growth in the market, both domestically and overseas.
With a changing regulatory environment and increasing competition, opportunity exists for innovative low-cost products with equivalent or enhanced functionality. Additionally, the major device manufacturers are keen to get into the NPWT market, as evidenced by Smith & Nephew’s acquisition of Blue Sky. Finally, there are many emerging and underserved markets where the high cost and infrastructure requirement existing product has been a barrier to entry. With several parties interested in new models, what might a low-cost option look like? And what are the implications?
Consider a new device which was invented by Danielle Zurovcik, a PhD candidate in the Precision Engineering Research Group at MIT, and recently deployed with great success during the Haitian earthquake crisis. At first glance, the invention may provoke skepticism, as it looks more like a crude plunger with a tube attached. However, when the device was tested in Haiti after the devastating earthquake last year it proved effective at holding negative pressure over open wounds, with the healing process for many patients well underway. And it costs only $3 to manufacture. Beyond the reduced cost, Zurovcik’s device design carries additional benefits, both for crisis situations as well as in remote or underserved locations. It is manually powered, requiring a pump of the bellows about every eight hours to maintain the negative pressure over the wound. This means that a patient or an attendant with minimal training can easily power and operate the device by hand, eliminating the need for an electric power connection. Furthermore, the device is light, weighing only half a pound compared to the five to 10 pounds for traditional NPWT devices.
Zurovcik’s invention clearly highlights the feasibility of a very low cost option in the NPWT device market. While it may not be suited for the US hospital market, it demonstrates that use of an NPWT device does not need to be restricted by high cost, lack of portability, and need for power. Without these constraints, the simplified but still highly effective devices can reach disaster relief efforts and emerging markets. Ultimately, this could represent 50 to 60 million new patients in low-income countries, according to an estimate from Dr. Robert Riviello at Brigham and Women’s Hospital in Boston.
Healthcare reform and rising costs have prompted scrutiny of the NPWT device market, enticing new market entrants and spurring innovation in the space. As the medical regulators crack down on the reimbursement practices of Medicare, lower-cost options will be the source of growth in the NPWT device market. Zurovcik’s work out of the labs at MIT demonstrates huge potential for new devices in wound treatment, both in established markets and low-income regions yet to benefit from NPWT devices. As the NPWT market continues to evolve, it is clear significant opportunity for innovation in the space remains in both established and emerging markets.
1. 2001 – $238 billion; 2007 – 436 billion. http://www.cbo.gov/budget/data/historical.pdf
2. Development of a Simplified Negative Pressure Wound Device. Zurovcik, Danielle R., 2004.