02.3
Non-financial Performance Indicators
PORTFOLIO EXPANSION AND GENERAL FACTORS
DIALYSIS DRUGS
Dialysis drugs significantly contribute to the horizontal expansion of our product portfolio, beyond our dialysis services and products. Thus, they are perfectly in line with our strategic orientation. Typical drugs used to treat kidney patients counteract anemia and regulate the patients’ mineral levels. The spectrum includes erythropoesis-stimulating agents (ESA), iron compounds, phosphate binders, vitamin D, and so-called calcimimetics.
The hormone erythropoietin (EPO), which is normally produced by healthy kidneys, stimulates the production of red blood cells. Since the kidneys of dialysis patients can no longer produce this endogenous hormone themselves, EPO is administered during dialysis treatment. A further component of anemia treatment are iron compounds that stimulate the blood formation of patients with reduced kidney function. Phosphate binders improve bone mineralization. Excess phosphate consumed with food is normally discharged by healthy kidneys. This filtering process can only partially be replaced through dialysis for patients with chronic kidney disease. Too much phosphate in the blood can have a number of adverse effects, such as bone disease, thyroid problems and vascular calcification. Calcimimetics are administered when the thyroid gland is hyperactive, as is often the case with dialysis patients. Calcimimetics also have a positive effect on the calcium level in the bones. Vitamin D is also very important for dialysis patients. The human body needs vitamin D to absorb sufficient calcium from food. In healthy bodies, this vitamin is then processed in the kidneys. A kidney with a limited function cannot adequately produce vitamin D. Hence, the stored calcium levels are too low.
In July 2008, Fresenius Medical Care concluded two separate and independent licensing and sales agreements, one for the U.S. market and one for selected countries in Europe and the Middle East. The agreements cover the marketing and sales of the iron compounds Venofer and Ferinject from Galenica Ltd. and its license partners. Both drugs are used to treat anemia as a result of iron deficiency in dialysis patients. Venofer is the world’s leading intravenous iron product. More information can be found in the “Events Significant for the Business Development” section.
Fresenius Medical Care’s total market volume of iron compounds in the world’s most important markets was about $800 million last year. With our cooperative agreements, we believe we are on the right track to reach our revenue goal of $400 million (excluding erythropoietin) for 2010. As part of our growth strategy, we will continue to pursue the horizontal expansion of our product portfolio. We will also strongly enhance our traditional offer (ranging from dialysis machines to laboratory services) with the integration and use of dialysis drugs.
HOME DIALYSIS
There are two kinds of home dialysis: peritoneal dialysis and home hemodialysis In 2008, around 11 % of all dialysis patients received peritoneal dialysis treatment. In recent years home hemodialysis was a niche market – at the end of 2008 only about 0.5 % of all patients worldwide received this treatment.
By the end of 2008, we treated about more than 35,000 peritoneal dialysis patients and approximated 3,500 home hemodialysis patients. This made us the world’s largest provider of home hemodialysis. Approximately 40 % of all home hemodialysis patients use our dialysis machines and dialyzers.
We expect the need for home dialysis to increase substantially – driven by growing patient numbers and increasing cost pressure. Its significance and its market share – hand-in-hand with a growing availability of adequate therapy options – could increase to around 4 % in North America in the next ten years.
Fresenius Medical Care is ideally prepared to participate in this development. With the acquisition of the U.S. company Renal Solutions, Inc. (RSI), we acquired a key technology for the expansion of home hemodialysis : the SORB technology. This technology purifies tap water for dialysis and the dialysis solution can be re-used (see the section „Research and Development”).
With the Continuum program, which we launched in 2004, we intend to further enhance the attractiveness of our range of products and services for home dialysis. We provide our patients with excellent products and comprehensive training programs to make home dialysis easier and safer. Continuum is a holistic program. In the future, patients will not only be able to choose between hemodialysis" and peritoneal dialysis, but they will be able to decide whether they would like to be dialyzed in a clinic or at home.
Home dialysis gives patients more say in how to allocate their time, but it also requires more responsibility on their part. Therefore, this kind of therapy is not suitable for all patients. We want to educate doctors, nursing staff and healthcare decision makers, but primarily patients, and assure them that home dialysis is a safe, flexible and cost-effective option for the treatment of patients with end-stage renal disease when no other severe illnesses exist. Fresenius Medical Care’s many years of experience and safe, high-quality products are convincing arguments.
LABORATORY SERVICES
Laboratory services complement Fresenius Medical Care’s service portfolio, as nephrologists require comprehensive lab tests to be able to tailor the therapy to the individual patient. The quality of the test results has a significant impact on the quality of the treatment and the quality of our patients’ lives. In 2008, our subsidiary Spectra Laboratories in the United States provided nearly 52 million laboratory services to approximately 154,000 dialysis patients, an increase of 3 % (2007: about 150,000 patients).
Last year, Spectra Laboratories invested in information technology to be able to work even more flexibly and efficiently. Furthermore, environmental tests for dialysis clinics were added to its service portfolio. As a result, our clinics can now check the quality of their water at any time. Another novelty of Spectra Laboratories’ spectrum of services is the examination of product samples from our production lines.
As part of our commitment to deliver best performance and services, Spectra Laboratories voluntarily adheres to a series of rigorous regulatory standards. This includes the requirements of organizations such as the Joint Commission on Accreditation of Healthcare Organizations and the College of American Pathologists.
NEW REIMBURSEMENT MODELS
Dialysis reimbursement structures differ from country to country, and often even within one country. As a result, reimbursement rates and systems specified by government impact on Fresenius Medical Care’s business. In the U.S., dialysis service reimbursement structures will change as from 2011. In Portugal this change was already implemented in 2008: a lump-sum reimbursement was introduced.
U.S. Terminal kidney failure is one of the few chronic illnesses whose treatment is covered by public health insurance in the U.S. The treatment of more than 80 % of all U.S. dialysis patients is financed by Medicare and Medicaid, the American healthcare programs that manage the medical care of the elderly and people with low income who do not have private health insurance. Changes to the reimbursement levels or methods of Medicare and Medicaid can therefore have a significant effect on our business in North America.
In the U.S., our most important sales market, a new and complex reimbursement system for dialysis treatment will be introduced for public healthcare patients (Medicare) as of January 1, 2011. The corresponding draft law was passed in July 2008. All products and services reimbursed according to the composite rate will be reimbursed in one lump sum in the future. The same applies to services such as the administration of certain drugs and diagnostic laboratory tests which are now reimbursed separately. The bundled reimbursement rate will be adapted to patients’ characteristics such as age and weight. Adjustments are also planned for patients whose extraordinary medical care results in extremely high costs. In addition to the implementation of inflationary adjustments, other special features of this new reimbursement system include the adherence to certain quality parameters. For example, the reimbursement rate will be decreased for dialysis clinics that do not meet certain quality standards. These standards comprise, among other things, patients’ satisfaction with the services, regulation of the hemoglobin content of the blood (anemia management), and the mineral metabolism in the bones. Before the new reimbursement system takes effect, the composite rate will be increased by 1 % in 2009 and another 1 % in 2010.
PORTUGAL. In Portugal, where Fresenius Medical Care treats about 4,200 patients in 34 dialysis centers, the Portuguese Ministry of Health and the national association of privately run dialysis centers agreed at the beginning of 2008 on a new reimbursement model for ambulatory care of hemodialysis patients. The new lump-sum reimbursement plan is a quality-oriented approach where the costs of individual dialysis services and products are no longer reimbursed, but rather a number of dialysis products and services are bundled. The aim is to achieve a more comprehensive patient care, an improved quality of care, and to boost the efficiency of the healthcare system in the dialysis area. With this new model, the fixed reimbursement per patient per week covers all necessary services and the use of dialysis products. The precondition is that certain treatment results are achieved and quality parameters maintained. Due to its high standards of quality and its proven methods of monitoring therapy results, Fresenius Medical Care is best placed to meet these requirements. For us, this reform not only means that the reimbursement rate (including the new additional services) increased by around 50 %, it also gives us additional leeway for our quality-oriented research and development work that focuses on integrated products and services for this market. However, the additional sales potential is coupled with added research expenditure.
