FDAnews Device Daily Bulletin

REIMBURSEMENT REDUCTIONS RESHAPE OXYGEN THERAPY MARKET

March 30, 2006
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Decreasing reimbursement rates have forced healthcare providers and manufacturers to cut costs and increase the lifetime of oxygen therapy devices, according to Frost & Sullivan.

These market changes have slowed demand for several devices, thereby lowering unit shipments for manufacturers, the analysts said. To offset the dull unit sales, some manufacturers are slashing prices up to 50 percent and manufacturers' profit margins are declining as they struggle to comply with the revised reimbursement payments and proposed oxygen cap on rentals, it said. Reimbursement cuts initially reduced the demand for oxygen devices; however, more efficient systems are revitalizing segments of the U.S. oxygen therapy devices market, according to research conducted by the company.

Frost & Sullivan finds that U.S. oxygen therapy devices markets earned revenues of $528.2 million in 2005 and estimates this market to reach $ 885.9 million in 2012.

"Increase in Chronic Obstructive Pulmonary Disease (COPD) patients boosts interest in oxygen therapy," said Sheila Ewing, Frost & Sullivan industry analyst. "Thus, earlier placement of patients on oxygen intensifies demand for oxygen therapy devices."

The aging population and the increased incidence of COPD are the main factors influencing the increase in COPD patients requiring oxygen. For the aging population, COPD is a disease that strikes later in life with 60 as an average age of onset.

In 2005, Medicare reduced reimbursement payments forcing manufacturers to drop prices of the oxygen therapy devices and leaving them searching for initiatives to counter the impact, analysts said. Due to Medicare cuts, patient's out-of- pocket expenses expect to rise up to 30 percent. In some cases, the aging population may be able to supplement their Medicare reimbursement to obtain the devices. However, many patients do not have supplemental income.