02.1

Operations and Business Environment

DIALYSIS MARKET

In 2008, we consolidated our worldwide leading position in the steadily growing dialysis market. As a vertically integrated provider, we are ideally placed and have the best opportunities to sustainably strengthen our position and expand both our product and services business in the future.

THE DIALYSIS MARKET - SECTOR-SPECIFIC CONDITIONS

As a global market leader in dialysis products and dialysis services, Fresenius Medical Care considers it important to possess accurate and current information on the status and development of the global, regional and national dialysis patient population and markets for dialysis products and services. This patient population and market information is used for a variety of Company-internal and external purposes.

In order to obtain this information, Fresenius Medical Care created an internal information tool called Market & Competitor Survey (MCS). The MCS is designed to collect, analyze and communicate relevant market and competitor data on the global dialysis market. The Company determined that most other sources of information of this kind were not timely, detailed or consistent enough to fulfill the Company’s information needs in this area. Many countries offer valuable information on various aspects of ESRD and dialysis patient demographics as well as related trends through renal registries and other official organizations, such as the United States Renal Data System (USRDS) or the Japanese Society for Dialysis Therapy (JSDT). In addition, multinational renal registries such as the registry of the European Renal Association (ERA) – European Dialysis and Transplant Association (EDTA) publish data about patient demographics.

However, the following shortcomings can be observed when using renal registry data to analyze the development of dialysis patient numbers on a global scale:

  • Not all countries have a national renal registry or other organization that analyzes and publishes the number of renal patients. In 2008 only 37 countries published information either directly through a national renal registry or indirectly through a multinational organization, while more than 145 countries are reported to treat dialysis patients.
  • Some national registries that publish information on the number of dialysis patients do not cover the complete country but selected regions only.
  • A time lapse between data collection and publication by the registries is unavoidable and can be significant. A Company-internal analysis performed in August 2008 revealed that by this date only 1 out of the 37 countries with registry data had already published 2007 data, 30 had published 2006 data and 6 had published data only from 2005 or earlier.

This means that it is impossible to derive a complete and current global picture of the number of dialysis patients by consolidating renal registry data. Furthermore, renal products used for dialysis, such as dialyzers or peritonal dialysis solution bags, are generally not tracked by renal registries. As far as the Company is aware, the renal medicinal product industry does not have an offering comparable to that of databases compiled by private companies such as IMS Health for example, which supplies the pharmaceutical industry with generally accepted sales statistics on pharmaceutical products.

The MCS is therefore used within the Company as a tool to retrieve current, accurate and essential information on the dialysis market, developing trends, the market position of Fresenius Medical Care and that of its competitors. The country-by-country surveys performed at the end of each calendar year focus on the total number of patients treated for ESRD, the treatment modality selected, products used, treatment location and ESRD patient care structure. The survey has been refined over the years to facilitate access to more detailed information and to reflect changes in the development of therapies and products. Its modular design allows the information from different countries to be consolidated. The questionnaires are distributed to professionals in the field of dialysis who are in a position to provide ESRD-relevant country specific information themselves or who can coordinate appropriate input from contacts with the relevant know-how in each country. The surveys are then centrally validated by cross-referencing them with the most recent sources of national ESRD information (e.g. registry data or publications if available) and with the results of earlier surveys performed in previous years. In addition, replies are subjected to a validation process whereby input fields with related information are linked and checked for consistency. All information received is consolidated at a global and regional level as well as analyzed and reported together with publicly available information published by our competitors.

PATIENTS – A GLOBAL APPROACH

If not indicated otherwise, data are based on internal estimates based on the Market Competitor Survey (MCS) described above.

End-stage renal disease (ESRD) has a global dimension. By the end of 2008, approximately 2.300 million patients received treatment for ESRD. Around 1.770 million patients in more than 145 countries on all continents received renal replacement therapy in the form of dialysis. Approximately 530,000 kidney patients live with a transplanted kidney.

Patient numbers in different countries can be compared by using prevalence values, which express the relative number of ESRD patients per million population (p.m.p.). The country prevalence values vary significantly, spanning a range from well under 100 to more than 2,000 p.m.p.

ESRD prevalence is highest in Taiwan with around 2,420 p.m.p., closely followed by Japan with around 2,380 p.m.p. and then the usa with around 1,780 p.m.p. It averages about 960 p.m.p. in the 27 countries that make up the European Union (EU).

Table 02.1.6 PATIENTS WITH END-STAGE RENAL DISEASE (ESRD)
Number in million  
   
ESRD patients
2.300
of which dialysis
1.770
Hemodialysis (HD)
1.580
Peritoneal Dialysis (PD)
0.190
of which transplants
0.530
   
World population 6.7 billion
Table 02.1.7 GLOBAL PREVALENCE RATES
Patients per million population (p.m.p.) 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
                       
ESRD
342
326
310
295
280
265
251
237
224
212
200
Dialysis
263
249
236
224
213
202
192
182
172
163
155
                       

The much lower global average of around 340 p.m.p. is due to a variety of reasons. On the one hand we see differences in the demographics of the individual countries with respect to age, distribution of renal risk factors such as diabetes and hypertension, genetic pre-disposition towards kidney diseases and cultural habits such as diet. On the other hand access to treatment is still limited in many countries and a number of individuals with terminal renal failure do not receive treatment and therefore are not included in the p.m.p. calculation.

Mounting global prevalence values over the years indicate a relative increase in the number of people receiving care for ESRD. This may be linked to a number of factors, including an increase in diseases leading to kidney damage such as diabetes and hypertension, a general aging of populations as well as a gradual improvement in access to treatment. A comparison between national economic strength expressed as gross domestic product (GDP) and the prevalence of ESRD suggests that economic factors not only influence the demographics of the population but may also impose restrictions on treatment. There is an indication that access to treatment is restricted in countries where the GDP per capita is below a limiting value of around $10,000 per person per year. In countries with economies performing above this value, there is no correlation between economic strength and ESRD prevalence.

Chart 02.1.5 ESRD prevalence of selected countries
ESRD prevalence of selected countries

 

Table 02.1.8 PATIENTS – REGIONAL DEVELOPMENT
  2008 Change
     
North America
445,000
4 – 5 %
U.S.
370,000
3 – 4 %
Europe / MiddleEast /Africa
520,000
5 – 6 %
EU
300,000
3 – 4 %
Asia-Pacific
620,000
10 – 11 %
Japan
290,000
3 – 4 %
Latin America
185,000
7 – 8 %
WORLDWIDE
1,770,000
7 %
     

PATIENTS – REGIONAL DEVELOPMENT

By the end of 2008, the number of ESRD patients undergoing dialysis treatment had reached 1.770 million worldwide. Of these patients, approximately 21 % were treated in the U.S., 17 % in the EU and 16 % in Japan. The remaining 46 % of all dialysis patients were distributed among 120 countries in different geographical regions.

The number of dialysis patients worldwide increased by approximately 7 % in 2008 and met the growth rate we had expected. Significant regional differences remained: patient numbers grew at a below-average pace in the U.S. and Japan, as well as in Western and Central Europe. In all these regions, the prevalence of terminal kidney failure is already relatively high and patients generally have secured access to treatment, usually dialysis. Annual growth rates in economically weaker regions, however, were above average, reaching double-digit figures. The relatively high growth in these areas indicates that accessibility to treatment is still somewhat limited, albeit gradually improving.

PATIENTS – TREATMENT MODE DEVELOPMENT

Of the 1.770 million patients that underwent dialysis treatment by the end of 2008, 1.580 million were treated with hemodialysis and about 190,000 received peritoneal dialysis. In a global comparison of treatment methods, hemodialysis therefore clearly dominates. More than 89 % of all dialysis patients were treated with this method in 2008. Within the group of the 15 largest dialysis countries accounting for more than three quarters of the world dialysis population, hemodialysis is the predominant treatment method in all countries except in Mexico.

Chart 02.1.6 Hemodialysis patients 2008
Hemodialysis patients 2008

 

Chart 02.1.7 Peritoneal dialysis patients 2008
Peritoneal dialysis patients 2008

In addition to these two dialysis therapies, an alternative method for treating patients with terminal kidney failure is kidney transplantation. Approximately 530,000 kidney patients lived with a transplanted kidney at the end of 2008. However, for many years the number of donated organs worldwide has continued to be significantly lower than the number of patients on transplant waiting lists. Consequently, less than one quarter of the global ESRD population lives with a donor organ. Despite ongoing efforts by many regional initiatives to increase awareness of and willingness for kidney donation, the distribution of patients between the various treatment modes has remained nearly unchanged over the past ten years.

DIALYSIS PROVIDER BUSINESS

The global dialysis market for both the provider and product business grew by approximately 5 % to about $65 billion in 2008. The market can be segmented into dialysis products accounting for around $10.5 billion and dialysis services (including renal pharmaceuticals) valued at around $55 billion.

In 2008, the majority of all hemodialysis patients were treated in 28,000 dialysis centers worldwide, at an average of some 55 patients per center. Clear differences exist in the organizational structure of dialysis center operations, depending on whether a country’s health system is predominantly private or public. The U.S. and the European Union have 5,000 dialysis centers each. Whereas around 1 % of these dialysis centers are publicly operated in the U.S., in the EU this number is about 62 %.

In Japan, however, private nephrologists play a key role, running about 75 % of all facilities. In Eastern Europe, the last few years have seen a significant increase in the number of company-owned clinics, possibly reflecting the fact that private companies are more likely to invest in modernization and capacity extension than government bodies are.

In the U.S., the degree of concentration is already relatively high. Fresenius Medical Care and the secondlargest competitor DaVita now provide dialysis care to approximately 63 % of all dialysis patients in the U.S. Fresenius Medical Care maintained its leading position in 2008 and treated more than 122,000 patients, representing about 33 %.

Chart 02.1.8 Dialysis services worldwide
Dialysis services worldwide

 

Chart 02.1.9 Dialysis clinic operators 2008
Dialysis clinic operators 2008

 

Chart 02.1.10 Dialysis clinic operators in eastern europe
Dialysis clinic operators in eastern europe

 

Chart 02.1.11 Top 5 dialysis providers worldwide 2008
Top 5 dialysis providers worldwide 2008

 

Chart 02.1.12 Fresenius medical care 2008
Fresenius medical care 2008

The dialysis market outside the U.S. is much more fragmented. With more than 700 centers in over 30 countries treating more than 60,000 patients, Fresenius Medical Care has by far the largest and most international dialysis center network.

As in previous years, many healthcare systems continued to face increasing pressure to contain healthcare expenditure while simultaneously striving to improve treatment standards for patients. Under these conditions, reliable product supply and quality as well as innovative approaches toward optimizing patient care are key success factors for market participants. A vertically integrated dialysis provider like Fresenius Medical Care that offers not only the entire product spectrum in the dialysis sector but also high-quality treatment in dialysis clinics worldwide has excellent opportunities to continually expand its position in the current and future dialysis market. In 2008, Fresenius Medical Care continued to uphold its clear leadership as the largest private provider of dialysis care worldwide, treating 184,086 dialysis patients in 2,388 clinics.

Chart 02.1.13 Dialysis products 2008
Dialysis products 2008

 

Chart 02.1.14 Hemodialysis products 2008
Hemodialysis products 2008

 

Chart 02.1.15 Peritoneal dialysis products 2008
Peritoneal dialysis products 2008

Dialysis reimbursement systems differ from country to country and often even vary within countries. Among the factors determining reimbursement are regional conditions, the kind of treatment provided, regulatory issues and the type of care provider (public or private). Establishing reimbursement structures based on treatment quality remains a focus of discussion. The goal of this reimbursement method is to uphold the treatment quality while maintaining the current level of costs for the treatment of a dialysis patient. Fresenius Medical Care provides dialysis in more than 30 countries with different healthcare systems and reimbursement schemes. Our international experience puts us in a position to support national health systems in their endeavors to customize structures, to adapt our business according to local needs and regulations, and to act profitably.

DIALYSIS PRODUCT BUSINESS

From the entire volume of the worldwide dialysis market, which amounts to around 65 billion U.S. dollars, more than 16 %, or about 10.5 billion U.S. dollars, are generated on the market for dialysis products. The key products offered in this market include dialyzers, hemodialysis machines, concentrates and solutions, as well as peritoneal dialysis products. The three largest suppliers of dialysis products taken together held a worldwide market share of nearly 70 % in 2008. With a market share of approximately 32 %, Fresenius Medical Care was the market leader, followed by Baxter and Gambro. The market share of the remaining, mainly Japanese, product providers was in the single-digit range for each company.

The largest single product group in this market is dialyzers, of which about 180 million were needed by dialysis patients worldwide in 2008. The fact that more than 80 million of these dialyzers were produced by Fresenius Medical Care underlines our leadership in this market.

Dialyzers can be categorized as cellulose-based or synthetic- based, depending on the material used for the production of the dialysis membrane. The trend towards the use of dialyzers containing membranes made from synthetic material prevailed in 2008. At the end of 2008, the share of synthetic-membrane dialyzers in the dialyzer market was more than 80 %. Cutbacks in production capacity for cellulose-based dialyzers suggest that sales of synthetic dialyzers will grow further in the years to come. Our pioneering work in the development and production of synthetic dialyzers laid the foundation and defined the course that is now being followed by other major competitors.

Dialysis machines constitute another key segment of Fresenius Medical Care’s product business, in which we also hold a leading position. Of about 65,000 new dialysis machines sold in 2008, more than 55 % were produced by Fresenius Medical Care. We continued this development with the introduction of the series of hemodialysis machines – the 5008 in 2005 and the 5008S in 2008 – in the international market. Thanks to their innovative user interface and technologies that set new standards in dialysis, the 5008 and the 5008S found a high level of acceptance. The new machines not only reinforce our strong market position, but also provide excellent prospects for future market share growth.

Table 02.1.9 MARKET POSITION IN MAJOR PRODUCT GROUPS
  Rank 1 Rank 2 Rank 3
       
Dialyzers
Fresenius Medical Care
Gambro
Asahi
Dialysis machines
Fresenius Medical Care
Gambro
Nikkiso
Hemodialysis concentrates
Fresenius Medical Care
Fuso
Gambro
Bloodlines
Fresenius Medical Care
Gambro
Kawasumi
Peritoneal dialysis products
Baxter
Fresenius Medical Care
Pisa
       

In the U.S., our largest business region, our market share in these two product groups – dialyzers and dialysis machines – exceeded 70 % of the independent market. We define the independent market as all dialysis clinics that do not belong to a major U.S.-wide dialysis care provider, such as Fresenius Medical Care or DaVita. Sales of our 2008K dialysis machine grew by more than 14 % in 2008. This dialysis machine is the leading dialysis system in the U.S.; we have sold more than 15,000 units of this machine there. Again, dialyzers also outpaced average growth in the U.S., where we achieved record figures by selling more than 30 million dialyzers.

The number of peritoneal dialysis patients grew by about 7 % to around 190,000 worldwide; the number of patients treated with our products increased to more than 35,000. Worldwide, we hold an 18 % share of this market, which is still dominated by Baxter. Our market share in the U.S. was 26 %. Further information on our position in the home therapies market, which comprises peritoneal dialysis and home hemodialysis, can be found in the „Home Dialysis” section.

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