Posts from — October 2008

European home healthcare companies have been very aggressive and ahead of the outsourcing curve in terms of Asian sourcing. This has been born, not only as a result of optimizing their bottom lines, but out of necessity as European government pressures on reimbursement (especially in Germany) have increased dramatically.

Here is an example of the problem – and this just scratches the surface.

It is no secret that manufacturing companies as well as pure distribution companies have been competing for the volume of hundreds of thousands or perhaps millions of wheelchairs, rollator, walker or other patient aid products. Price competition has been fierce and margins, after shipping are often less than 1O%.

It is also true that products sourced in Asia are commonly quoted in US Dollars. European customers have benefited from a rising Euro over the past three years and have become complacent as to currency risk as the favorable exchange bubble continue to grow.

Three months ago 1 Euro would have bought you 1.55 US Dollars. Today 1 Euro will buy you 1.29 US Dollars. A drop of round about 20%. Check the chart.

Here is my take on this:

The Chinese are not going to be able to decrease their costs meaningfully.

The Governments are not going to raise their reimbursement prices.

The Manufacturers are not going to sell at a loss.

The Dealers are going to take a haircut.

Manufacturers or Dealers that have signed up for a low competitive bid in Germany are going to have to visit their bank for a loan.

The Banks don’t have any money to loan.

CMS (Centers for Medicare and Medicaid Services) announced that their actuarial report shows that Medicaid is set to grow 7,9% per year for the next 10 years, or roughly double the GDP rate of the US.

Good news for healthcare product manufacturers and providers if you believe the payer (reimbursement) side of the Porter model.

Of course for the more skeptical and realistic among us – watch out for the next wave of cost cutting for healthcare products and the elimination or downgrading of services.

The full report is available here.

The DES (Drug Eluding Stent) wars continue with this recently published J&J Cypher stent sponsored clinical trial.

The study showed more cardiac events, blood clots and increased intervention were required with the Medtronic Endeavor stent.

Patients had been recruited previously in the J&J Sort Out II study which had compared Cypher with the Boston Scientific Taxus DES.

Shares in J&J rose nearly 5% while Medtronic fell 2% (In these volatile market times it is difficult to attribute all of the share price movement to this study).

Coverage here and Forbes.

The two largest mobility, rehabilitation and homecare trade events will be held in October 2008. Either meetings are must attends for anyone interested in this growing industry, whether it is purely for information, seeking new business partners or getting an update on the competitive environment.

Rehacare will take place in Dusseldorf, Germany from 15-18 October 2008.

Medtrade will be held from October 27-30 in the usual venue in Atlanta, Georgia, USA.

Sibaya LifeScience will be attending the Düsseldorf Rehacare show. Sibaya contact details are here.