Round table: Ophthalmic business trends provide insight for industry’s potential

An expert panel discusses topics including current growth rates, important advances and government relations, along with the possible role these factors will play in the industry’s future success.

A note from the editors:

At the OSN Section Editor Summit, Richard L. Lindstrom, MD, OSN Chief Medical Editor, moderated a round table on the ophthalmic industry. Representatives of industry discussed current trends and their potential effects on the future. Experts who took part in the round table were Russ Trenary, chief marketing officer of Advanced Medical Optics; Kevin Buehler, senior vice president and chief marketing officer of Alcon; Julian Gangolli, president of Allergan; Tom Dunlap, vice president and general manager of Bausch & Lomb; and Tony Moses, who at the time was director of marketing, retina, for Carl Zeiss Meditec.

Richard L. Lindstrom

Richard L. Lindstrom, MD: The U.S. gross domestic product is growing at about 3% per year. Right now our inflation is about 3%. What do you see as the 5- to 10-year growth potential in ophthalmology? Is it going to increase faster than GDP, the same as GDP or slower than GDP? What do you anticipate?

Russ Trenary, Advanced Medical Optics: We think it is going to go faster than GDP. I think the cataract rate is going to remain in the low- to mid-single digits over the next 5 or years. When you get to the 10-year period, we see that rate accelerating rather quickly once the baby boomers turn 70 years old.

On the refractive surgery side, I think we have been quoted as saying that we see high single-digit growth rates. Currently, there is a tremendous number of dollars being spent on everything from $300 blue jeans to other leisure activities. We see that the choices people make in spending their dollars will shift more toward health care and perhaps away from leisure. I think there are some counterbalancing trends that should give us some hope.

Kevin Buehler, Alcon: We would agree. We have said, for our guidance, that Alcon’s top-line sales are somewhere in the 8% to 10% range.

However, we also look at the global structure and see that procedure development, especially for phaco, is probably growing faster outside of the United States. The emerging markets are contributing to our growth. So we are going to see some of that growth for Alcon coming from outside of the United States. Overall, I agree that it is going to grow faster than the GDP, but I think the other driver will be the development of new technologies. When we see new products, we see premium pricing opportunities and increased utilization.

Julian Gangolli

Dr. Lindstrom: How about pharmaceuticals?

Julian Gangolli, Allergan: There is a baseline growth rate for pharmaceuticals. I think over and above what has happened historically in ophthalmology, the “explosion in retina” is going to have two effects. I think it will push ophthalmology as an entity now. It may be more focused to a specific specialty in the short term, but I think there are some spillover implications there. I think we are going to see ophthalmology increase considerably above GDP.

Dr. Lindstrom: That is a good thing, actually. That would suggest that if we are going to grow faster, we will attract investment, and we will be able to afford to develop these new technologies.

Mr. Gangolli: And more people are going to be coming in for treatment. I think now we have got some exciting treatments for things that were not really, in powers of truth, treatable.

Influential developments

Dr. Lindstrom: On the device side, what is the major technological advance, or what are the advances, that you see having a big impact in cataract surgery?

Tom Dunlap

Tom Dunlap, Bausch & Lomb: It is probably in the refractive/cataract market, specifically the treatment of presbyopia. Right now we are focused on the next generation of truly accommodative IOL technology through a number of different design configurations – whether it is single optic, dual optic or some type of polymer shape-changing methodologies. We have good options in the marketplace, but I think we will evolve to real, true accommodative lens technologies.

Dr. Lindstrom: On the pharmaceutical side, what are you most excited about as far as clinical breakthroughs, technologies and drugs that you can apply if you look 5 or 10 years ahead?

Mr. Gangolli: In the area of glaucoma, if one particular product comes to the marketplace, it has the ability to revolutionize that marketplace. The ability for an oral product to potentially have neuroprotective effects in glaucoma is profound. There are now platforms going forward in which drugs will take a new utility in terms, like implanted drug delivery devices. I think that has the ability to change utility and improve patient compliance.

One thing that surprised me in ophthalmology was that we are still reliant on patients putting drops in their eyes and hoping they do it and hoping the drops work. The next iteration of medications are going to have to remove the patient-compliance aspect to get the best possible patient outcome, so the variable is not the patient administering the drug but the ability of the drug itself to work.

Kevin Buehler

Dr. Lindstrom: We would be happy just to get a few combination drugs, I think.

Mr. Buehler: Alcon made a formal review of all of the ophthalmology space through an external project. It allowed us to look at a number of product areas early into the development cycle as they progressed to phases 2 and 3, which I would group into two or three different categories. One is clearly the refractive-correcting IOLs. There are a number of projects, whether they are accommodation or optical accommodation options, which I think we are going to see over the next 5 to 10 years.

In the therapeutic pharmaceutical area, glaucoma is the largest therapeutic category. New chemical entities, whether they are first line or adjunct, are relatively early in development. Gene therapy is something that we all want to talk about and think about, but it is not inside of that time window. I think dry eye is another category. Both retina and dry eye should be growing at faster than 30% annual growth, and they are going to take a significant part of this ophthalmic space.

Dr. Lindstrom: That is a pretty good growth rate.

Mr. Trenary: Certainly presbyopia is going to be front and center for ophthalmology over the next decade. But I also think that when you are just looking at pure refractive correction, people have been using glasses, which they have been doing for 200 hundred years, and contact lenses, which they have been doing for a few decades; the technologies that have been utilized for refractive surgery are a few years old.

In just a 10-year period of time, we have gone from doctors talking about 20/40 or better and 20/30 or better with regard to laser vision correction to now having technologies that are good enough to fly guys on and off aircraft carriers at night. These are relatively subtle, yet important changes in the technology. But the positive effect of these technological improvements, when combined with the fact that children of refractive surgery patients will be coming in for treatment, will change the paradigm. Although we quote single-digit or high single-digit growth in refractive surgery over the next couple of decades, I do not see why the number of refractive patients cannot continue to double in a relatively short period of time.

Future outlook

Dr. Lindstrom: So we obviously want to be advocates for all of corporate America and all of medicine, but the honest truth is that, at some level, we as ophthalmologists compete with cardiology, orthopedics and every other field for resources. Do we have the research infrastructure? Do we have the access to the capital markets? Are we going to be a specialty that is being well invested in and count up at the upper tier of good news or not? Are we going to be happy in ophthalmology with the kind of dollars, research infrastructure and capability in the companies that support us?

Mr. Gangolli: Yes, I think the outlook for specialty medical groups is exciting. Typical specialty groups are dealing with very difficult-to-treat conditions, such as diabetic retinopathy and macular degeneration, which can command high prices. There are massive unmet medical needs. I think it has already been seen that the larger companies are now getting into the space. Ophthalmology competition is important because it makes sure that there are research and development bases. The bar continues to be raised so that new technologies are brought to market.

Tony Moses

Dr. Lindstrom: Are you attracting capital inside the company, and does our field have the research infrastructure to keep bringing us new things?

Tony Moses (formerly with Carl Zeiss Meditec): Yes, we think so. Overall, the infrastructure at research institutions around the world has never been more robust. But on the other hand, we have seen the warning bells from places like the National Eye Institute and the National Institutes of Health, where it is increasingly difficult to get grants. I do not think it has ever been more difficult in our history than it is today to get research grants. The challenge is to take what limited research we can get and bring it to fruition in viable, affordable products and procedures that we can take out, not just in the U.S. market, but also on a global scale. I think that is going to be one of the hallmarks of taking advantage of the research going forward. But in terms of the dollars and commitment, there is no shortfall.

Industry collaboration

Dr. Lindstrom: Do you think that industry is taking better advantage of university-industry collaboration than they did 10 or 20 years ago?

Mr. Moses: In my opinion, the company-to-company collaboration is stronger today. I have been in this business for 23 years, and I cannot remember companies working more closely together than they are today. So to me that is encouraging.

Mr. Buehler: I would agree. I feel encouraged by the level of research and development commitment. From the device standpoint and the primary ophthalmic product categories we are talking about, I think the research and development resources from the companies that are committed to the eye are sufficient to develop products. But when we start to think about products that are more systemic-oriented, like retina or glaucoma, I think we are going to have to look at a paradigm change where the oncology programs are producing some of the compounds that may have application in the eye. This external product development focus is going to have to increase. If I thought there was a gap, this would be it. But this gap can be filled through collaborations with other companies that are not in the eye industry.

Dr. Lindstrom: What makes you feel great and optimistic in the morning about our field, and what makes you nervous some nights when you go to sleep?

Mr. Trenary: Well, I think the thing that makes me feel optimistic is that the money is right. From my standpoint, the cash flow in ophthalmology is good right now. It is good within the doctors’ realm, especially compared to the Medicare cuts that took place back in the late ’80s and early ’90s. If you want a “doom and gloom” scenario, that was it. There was no refractive surgery to replace incomes or to replace the company coffers to do more research. So I think the money is right. There is a lot of critical mass with this, especially in the device area, as it pertains to new technology development. I think that is good.

Also, looking at the demographics makes me happy, overall. When you look at the span of time between when patients begin wearing contact lenses in their early teens to refractive surgery age patients to the age where patients are going to get procedures later in life, it all lines up really beautifully.

Government involvement

Russ Trenary

Mr. Trenary: Thinking about the government makes me nervous. These guys have to get out of Washington every once in a while and see what real life is about. When the government tries to interfere with the relationship between companies and doctors it makes me a little crazy. On the one hand you have the government saying, “I do not ever want to see a doctor given incentives to make money when they choose a particular product,” or “I do not ever want to see a doctor feel like they are going to choose a product or technology or move in a direction and be influenced by money.” On the other hand they have a gain-sharing project that they are about to begin with where doctors will be given direct incentives for choosing one product over another. So the contradictions in Washington are fairly frustrating, and I think that the more we can keep government out of our business so free enterprise can rule, the better off we are.

Mr. Dunlap: In terms of feeling optimistic, I go back in time and look at the past 10 or 15 years in ophthalmology. Today, industry has a very rich pipeline of new technologies. Plus, there is more investment into eye care in general. I also think about the significant reimbursement changes and what that did to the industry in terms of consolidation. It spun out a lot of innovative researchers who have since started emerging medical device companies. Living in Orange County, it seems like there are eye care companies on every street corner, and that is a good thing. So I think the richness of the product pipeline is great, and there are some significant unmet patient needs that will be addressed through a number of new, novel technologies.

On the flip side the government and the role that it plays with industry will be criticial to insure that patients have access to the best available technologies. How we conduct ourselves both as an industry and as individual practices delivering this care while setting realistic expectations for patients, I think is really important.

Dr. Lindstrom: So we need to have a better political collaboration between companies and ophthalmologists to make our agenda heard at some level?

Mr. Buehler: Along that same theme, I agree. The demographics, in addition to the need for introducing new products and the fact that the ophthalmic industry, as a whole, is committed to new product development, deliver against the clinical outcomes you are trying to get from a physician standpoint. It also delivers the profit opportunity for us to continue investing in research and development.

If we think that the reimbursement system is somehow going to get better just by us getting together and having a stronger voice, I am not sure that I agree. Clearly the opportunity is not to go the extreme route and opt out of Medicare. But one of the challenges we have is that there is one payer paying for a large portion of all of the bills. Look at spectacles, for example. The glasses that I wear, after the portion that Alcon paid for, cost over $800. We think about what the consumer is willing to place value on, and yet we are letting the government place the value on an IOL at an ASC at $150.

We have to think about the game we play with the government simply because of the portion that it pays today. There have to be opportunities for us to allow for the patient to start placing the value on the technology we deliver. We are bumping up against the $150 limit, for example, on IOLs. The question is why would I continue to invest in new technology to basically hold the share I have if there are opportunities to get greater reimbursement outside of the system?

I think the real answer is that we should not try to keep doing the same thing and looking for a different result. We have got to play a different game and let the patient start to put some value on the technology rather than it being a physician-value decision only.

Dr. Lindstrom: We need a defined contribution plan.

Competition: good or bad?

Dr. Lindstrom: Is it a good thing to see Pfizer, Genentech, Johnson & Johnson and the big pharmaceutical companies getting interested, or more interested, in ophthalmology?

Mr. Gangolli: I think it is inherently positive to have competition in the market. You get these larger companies starting to apply a lot of dollars into academics, clinical research and basic research, because at the end of the day it is the basic research that is going to spawn what is going to happen in 10 or 15 years’ time. It is difficult for a large pharmaceutical company to come in and have a product in 5 years.

So I think what the larger companies have the ability to do is take basic research, partner with academics and then take the learning and start projecting out at 10 or 15 years. You have to believe that you are in America in a free market system in which competition is imperative to it.

Third-party pressures

Dr. Lindstrom: So how much pressure are you feeling? We all worry about the regulators, and they seem to be a discouragement for all of us as far as the success of our practices and the success of our companies. But are you feeling any more or less nervous about third-party intervention from the government in a punitive fashion?

Mr. Trenary: Well, I think it has been punitive for ophthalmology since the Medicare cuts occurred back in the ’90s. There used to be 20 to 30 IOL companies just in the United States back in the late 1980s. Tremendous consolidation has occurred, so you are seeing here the only ones that are left standing. Obviously, there was a negative effect in terms of reimbursement. But for me, it is the relationship between industry and the doctor that I am the most worried about.

If the government wants to regulate what we can say and what we cannot say – if the First Amendment is out, and you have to play according to new rules – I can live with part of that because, frankly, some of the claims that are made by doctors and companies can get a little outlandish. Putting regulations around that probably makes some sense. But when they start trying to interfere with how we conduct business between company and doctor, I think it can insult your sensibilities at times, and I continue to be concerned about that.

For more information:

• Richard L. Lindstrom, MD, is the Chief Medical Editor of Ocular Surgery News. He is also in private practice at Minnesota Eye Consultants, 710 E. 24th St., Suite 106, Minneapolis, MN 55404-3810; 612-813-3600; fax: 612-813-3660.
• Russ Trenary is the chief marketing officer of Advanced Medical Optics Inc. He can be reached at 1700 E. St. Andrew Place, P.O. Box 25162, Santa Ana, CA 92799-5162; 714- 246-4947; fax: 714-246-5888.
• Kevin Buehler is the senior vice president of Alcon United States. He can be reached at 6201 S. Freeway,T 7-10, Fort Worth, Texas, 76134; 817-551-4574; fax: 817-568-7131.
• Julian Gangolli is the CVP & president of Allergan Inc. North America. He can be reached at 2525 Dupont Drive, P.O. Box 19534, Irvine, CA 92612-1599; 714- 246-5108; fax: 714- 246-5888.
• Tom Dunlap is the vice president and general manager of Bausch & Lomb. He can be reached at Tom_Dunlap@bausch.com
• Tony Moses, formerly of Carl Zeiss Meditec, is currently the vice president, marketing for NeoVista Inc. He can be reached at 47865 Fremont Boulevard, Fremont, CA 94538; 510-933-7625; fax: 510-933-7659. Carl Zeiss Meditec can be reached at 5160 Hacienda Drive, Dublin, CA 94568; 925-557-4100; Web site: www.zeiss.com.