Guest Commentary: Dialysis Industry Consolidation Stagnates Technological Innovation

By Mel Hodge

Beyond the obvious economic effect of lack of competition in a market, there is an equally pernicious effect on technological progress. The first rule in managing a technology company is, "Always be the first one to obsolete your own product." The corollary to that rule is, "Never show your own hand until a potential competitor first shows his."

I first saw the NxStage System One in operation in a clinic nearly ten years ago. Since then the iPhone has been introduced and is now in its fourth generation! But the System One is basically unchanged in a decade - and quite properly so from a NxStage management perspective as they have watched a series of potential competitors being snatched off the market. Much better to just sit on their next generation technology and continue to reap the unexpectedly prolonged cash flow into the System One's second decade of life.

The losers from all this are the patients - past, present and future - who are denied home dialysis because the old technology is viewed as too expensive by their centers in the absence of cost-lowering competition or forced to accept the operational and clinical limitations of decade-old technology from the single available machine.

If the old AT&T were still the sole developer, manufacturer and telephone service provider, the iPhone would probably lie somewhere in the distant future. Such is the power of monopoly. But the irony here, however, is that monopoly power does not lie with its temporary beneficiary. In an industry where 80 percent of U.S. dialysis centers are for-profit ventures, two-thirds of which are owned by two companies, the larger of which is also the dominant equipment manufacturer and technology acquirer, it appears that careful inquiry into the facts is long overdue. It really is a matter of life and death. . .

Comments

[Bill Peckham]

Mel I think you're right. I think we need a way to opt out of the dialysis industrial complex.

We need to bring back Method ll to break the duopoly by allowing innovative manufactures to bring forward new machines and market directly to dialyzors.

[John Agar]

Dear Mel and Peter

A quick comment only. And, you are both right - and I deeply appreciate and concur with that beautiful piece you wrote Peter ... that lament ... so true ... 'where has the Allient gone'.

Remember, btw, that I had a little bit to do with the Allient!

My 'concern' is the seeming fixation in the US that home HD = NxStage or nothing.

Not true.

While the NxStage is indeed a good little machine (with some great features but some draw-backs, too) - and you are right, Mel, 'where is Mark II NxStage'? ... there has been no challenge, so no need for upscaled R&D - I do want to make a point ....

Here in Oz, where we do not have the NxStage ... the machine so mind-linked in the US to home HD ... we have ONLY single pass systems (and only two) Fresenius and Gambro!

Yet, in my unit, 33 of 117 do long slow frequent self-cared 5 x 8 dialysis on Fresenius machines at home (and many as lone dialysers, and all where the carers are just 'there' ... but take little or no part in the dialysis itself).

Yes, NxStage is good.

Yes, it lacks competition either from slow development of the purchased developed or from a purposeful 'purchase and shelve' ethic from the purchaser ... and I agree, the longer it goes on, the more the jury is out ... or suspect!

But ... DONT for a moment think that home dialysis depends on the NxStage ... or systems like it.

We manage, here, better than most. To sustain 30% of our patients at home for > a decade on standard machines tells me that it can be done - and 'bugger the equipment' ... its NOT the issue ... its the belief, the mindset, the grunt of the nephrology team that matters ... and not the machine.

Your target is wrong.

Your target should not be the equipment ...

The target is us!

[Peter Laird, MD]

Great point John as always. Thank you for your insight. The focus needs to be on the patient and not the machine in many ways. It is not only America that has few choices as you have noted. It is indeed the mindset especially in the American nephrology community that continue to dispute the benefits of longer, slower and more frequent dialysis. In many ways, the lack of new and upgraded machines in a competitive market is more of a symptom as you state.

I believe America would benefit greatly from having 30% or more of our patients here on home hemodialysis in its many different forms. However, if technology presented improved outcomes in a platform that is easier to use and portable, more folks would become interested. NxStage has demonstrated that there is a market for the home option in America. Perhaps one day, the technology will couple together with the right mindset to overcome our intransigent attitude toward optimal dialysis. Perhaps one day.