How Consumers Will Drive Your Success

Vision correction surgery is no different than the other parts of our global economy. The two drivers are:

• technology
• the consumers paying for it.

On the reimbursed side of ophthalmology — such as the intraocular lens segment — buyers and payers are driving the development of technology and technology discontinuities.

But not so in refractive surgery.

Like disposable contact lenses in the 1970s, vision correction surgery has tapped into consumer desires, even though neither technology registered right away with the market mavens. Consumer demand will increase vision correction procedures, similar to how it has pushed computer companies from mainframes to PCs or created the overnight sensation known as the Internet marketplace.

In our field, as in others, people and new technologies are finding each other quickly.

–Thomas M. Loarie

 

Getting to the ‘Heart’ of the Matter

To put the recent growth of the refractive surgery market in perspective, consider this: It took 40 years for heart valves to achieve 200,000 procedures a year, and 20 years for angioplasty to reach 800,000 per year.

In refractive surgery? Consumers will spend $1 billion on nearly 600,000 procedures in 1999, when the laser-driven segment will be only 4 years old. This $1 billion is one-third of the predicted spending for contact lenses, which have been here since the 1950s.

Refractive laser surgery has taken off at rocket speed in the United States and, to a lesser extent, in Canada because of:

• a strong economy (more disposable income than in Europe)
• U.S. surgeons specializing (much more so than in Europe)
• few restrictions on advertising and promotion (as opposed to Europe’s more restrictive environment).

Meanwhile, refractive surgery has barely penetrated the potential market. In health care and on Wall Street, it remains an important new business.

–Thomas M. Loarie

 

Our New Law of Economics

Big companies aren’t eating the small in refractive surgery. Rather, the fast are eating the slow. New technologies are really the key to future success, leading to continual consolidation.

Small companies have strategic agility, reacting to market conditions quickly. They’re compelled to stay focused, motivated by the risk of dissolving and losing their reputations. Big companies have money, established reputations, sales power, distribution networks and marketing clout.

Both types are joined at the hip. The big need the small to innovate, while the small need the big to push the market. As a result, you can expect unusual synergies among competitors. While small companies develop new technologies, bigger companies will stand ready to acquire these technologies. The winners will be you, your patients and the leaders in product development.

–Thomas M. Loarie

 

Marketing

Is Your Plan ‘Evolving

?’

Like any other innovative new product or service, laser refractive surgery must go through the five stages of marketing evolution. Review them here and see how they might apply to your market and practice — now or in the future.

• Introduction. Consumers don’t know your service. Industry pioneers, early marketers and advertisers enthusiastically launch advertising campaigns, each anticipating strong direct response, each committed to market positioning. At this point, however, direct marketing often delivers disappointing results.

• Education. More advertisers enter the marketplace, and media interest grows. Highly competitive local and national media sources, such as newspapers, magazines, television news and talk shows, eagerly run stories about this revolutionary technology, accelerating consumer education and awareness. A satisfied customer base develops, and early signs of word-of-mouth marketing appear. Direct marketing through more targeted vehicles begins to generate moderate results.

• Credibility. With consumption reaching critical mass, word-of-mouth effectively reinforces consumer confidence. Local and national celebrity endorsements magnify industry credibility. The technology’s "new" label fades, and your target audience expands. Direct marketing creates the effects the pioneers anticipated. Marketing vehicles that reach a wider audience deliver more cost-effective results.

• Creating demand

. Consumer confidence and industry credibility exceed the threshold level. Direct marketing now plays a primary role in creating market demand. It generates the most cost-effective return, especially for those who’ve made early marketing investments to develop their market position, name awareness, internal marketing systems and personnel.

•Saturation and new technology. This stage sees industry growth leveling out and competition rising to new levels. Margins begin to shrink as dominant, high-volume players corner the lion’s share of business. Also, at this time, even newer innovations most likely surface and start to progress through these same evolutionary stages, eventually supplanting the older technology.

–William Fukui

 

How this Practice Took Off

When our Kansas City-based practice first offered refractive surgery in 1991, we had zero dollars in the budget for the new service. This year, combining facility and surgeons’ fees, we expect to have nearly a $9 million refractive surgery business.

The percentage of net revenue from these procedures has grown steadily through the years — but not at the expense of our other profit centers. In 1998, for example, we achieved about 30% growth in all of the other areas, including oculoplastics, glaucoma, retina and cataract. The rest of our practice grew because we were doing refractive surgery, not despite refractive surgery. So it’s not that we’re just robbing Peter to pay Paul. We’re enjoying growth everywhere because of new relationships we’re making through refractive surgery.

–Daniel S. Durrie, M.D.

 

As You Plan Ahead

Prepare to experience bumps on the road to refractive surgery success. At some point, economic recession is a certainty, a big factor when you consider that patients purchase vision correction surgery with disposable income.

In the early 1980s, when I worked in plastic surgery, plastic procedures fell 50% in one year. We will see the same effect when facing a recession in this industry. The efficient, well-run practices will survive, while inefficient practices won’t. So now, before the stress of a recession arrives, work on making your practice increasingly efficient.

–Thomas M. Loarie

 

Technology

What Could Hold Us Back?

Despite the consumer-driven need for increased technology in refractive surgery, newer technology will need to overcome unprecedented regulatory hurdles before benefiting your patients and practices. Such is the nature of FDA approvals these days.

In 1980, U.S. universities were responsible for 65% of the clinical research done in this country. Today, they perform only 29%.

During the past 10 years alone, the FDA has increased the rigor of clinical studies significantly, making technological development extremely expensive and risky. Our company (KeraVision) has spent nearly $100 million in developing our technology, which puts it on the radar screen as one of the most expensive development projects ever, not only in the ophthalmology industry, but in the world of medical technology.

To succeed, we must overcome risks associated with technical development, financing and market acceptance. But one of our most formidable challenges is regulatory risk, which drives costs to unprecedented heights.

In 1990, the FDA approved more than 100 PMAs. Now the agency approves about 45 per year.

Another challenge: Technology research is moving off-shore. In 1970, when I came into the industry, ideas for technologies such as the surgical stapler, hip implants and intraocular lenses came from abroad. Because of restrictions, or lack of capital in places like the former Soviet Union and the United Kingdom, these technologies developed here, where we did the clinical trials and introduced the products.

Now, because of our increased regulatory environment and the lower cost of doing first-class clinical research abroad, development goes outside the United States. It’s delayed here, while markets outside of our country use the technologies first. The transfer overseas of research by U.S. companies is a real threat to our technological prominence, not only for industry but for medicine.

–Thomas M. Loarie

 

Two Myths Worth Considering

Myth #1:

Despite the presence of many pre-approval refractive surgery modalities today, quite a gap in technology has developed between 1993 and 1999.

Myth #2:

The technology that has really delivered the refractive surgery market to us is radial keratotomy (RK), the blade-driven dinosaur of the industry today. RK established consumer understanding about what was possible. PRK rode the wave from 1993 until 1996, and now laser-assisted in situ keratomileusis (LASIK) is king, rising from 20% of all procedures to 75% expected this year.

–Dan Durrie, M.D.

 

Outcomes

Tracking the Pros and Cons of Your Services

Don’t get too far ahead in your refractive surgery business before checking on how you’re doing. In our outcome analysis, we found that LASIK was significantly better than photorefractive keratectomy (PRK). On the first post-op day, LASIK patients were nearly four times more likely to see 20/40 than PRK patients.

Despite its increasing popularity, however, we found that fewer than 50% of our LASIK patients achieved 20/20 vision. So we’ve grown without quite achieving excellent vision yet.

Improving outcomes will solidify our position. Tracking this information helps you prepare patients before surgery and, as your practice matures, shows potential patients how you’ve progressed.

–Dan Durrie, M.D.

 

Post-Op Analysis . . . Beforehand?

You may soon be able to find out what your prospective refractive surgery patient’s cornea would look like after refractive surgery before you even put him under the laser.

EyeSys Premier, the corneal topographer maker, and VISX, maker of the STAR S2 laser, have created the VISX Refractive Planner, which incorporates ablation into a pre-op image of a cornea and simulates its post-operative image. The planner would help customize refractive ablation, offering the possibility of optimized outcomes, VISX says. The system is currently in beta evaluation.

 

About the Contributors to this Update:

Daniel S. Durrie, M.D., director of refractive surgery at Hunkeler Eye Center in Kansas City, Mo., has performed refractive surgery exclusively since 1991. He and other refractive surgeons at his practice expect to reach a 7,000-procedure milestone by the end of this year. His comments are adapted from his lecture at the 1999 Contact Lens Association of Ophthalmologists (CLAO) meeting last January in Las Vegas.

Thomas M. Loarie, a long-time expert on refractive surgery, is currently the chairman and chief executive officer of KeraVision, creator of the Intacs (formerly known as the KeraVision Ring) technology out of Fremont, Calif. His comments are also adapted from a 1999 CLAO lecture.

William Fukui is director of marketing and sales at Network Affiliates, a national ophthalmological marketing agency. You can reach him at 1-800-525-3332.