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. . .