With consumer awareness and demand soaring, and surgical procedures doubling for the last 3 years, refractive surgery is on course to become the most commonly performed surgical procedure in the United States.

In 1994, the refractive surgery market consisted of a small number of Sunbelt surgeons performing radial keratotomy (RK) and generating less than $200 million per year in patient fees. In 1999, the market will generate more than $2.1 billion in patient fees, and its rapid growth and upside potential is attracting national and international attention from surgeons, corporations, investors and institutions.

Newspaper articles, radio ads and, most important, word of mouth has carried the message of freedom from glasses and contact lenses to every corner of the nation. A strong economy and near full employment has provided consumers the means to line up for the promise of better vision. By the end of 1999, more than 1 million Americans will have undergone photorefractive keratectomy (PRK) or laser-assisted in situ keratomileusis (LASIK), creating a large referral base to spread the word.

One of the most important drivers of the consumer market has been the widespread conversion to LASIK, which offers less pain and quicker recovery times than PRK or RK. LASIK now accounts for more than 88% of all refractive procedures. LASIK patients experience an almost immediate improvement in vision and leave talking about their experiences, and spreading the word to family, friends and co-workers.

Growth in consumer demand has been closely followed by ophthalmologists. The doctors crowd training classes, invest in equipment and spend hundreds of dollars per procedure in marketing. More than 7,000 surgeons have been trained and certified by laser manufacturers. More than 3,000 market themselves as refractive surgeons.

Growth has been particularly strong in 1999, as Medicare cuts and managed care controls force surgeons to re-evaluate business plans. Refractive surgery offers an alternative market with high margins, low administrative costs and no government or managed-care controls.

Growth in the number of refractive surgeons has both increased industry capacity and led to additional competition for refractive patients. New surgeons have been able to rapidly grow surgical volumes to a level of 50 or so procedures per month; however, more established surgeons have found volumes leveling off, discovering that even more marketing will be required to raise procedure volumes.

Most surgeons find that climbing to levels of 100 or more procedures per month requires significant investment and may be very difficult in some highly competitive markets. Staying up with growth in the market is difficult because of the increasing number of refractive surgeons and laser centers. But no one expects a drop-off of consumer demand any time soon.

Corporate America is also rushing in to capitalize on the growing market. Market leaders TLC Laser Eye Centers and Laser Vision Centers have been racing to increase capacity, opening new laser centers and expanding their investments. Other privately held laser center companies, Clear Vision and Aris Vision Institute, have been growing even faster, more than doubling the number of laser centers operated in 1999.

Ophthalmic practice management companies such as Omega Health, Vision Twenty-One and NovaMed are also beating a path to the market, in some cases abandoning other industry segments such as managed care and optical shops to focus on the new industry. Omega Health even changed its name to VisionAmerica to emphasize its change in strategic direction.

Laser center management companies have attracted significant investor attention, raising more than $300 million so far this year to acquire new lasers and to expand operations. Stock prices in early 1999 soared. Laser Vision Centers, TLC and LCA Vision had increased 134%, 52% and 385%, respectively, by the end of August. Aggressive growth plans and a desire to quickly capture market position accelerated development plans.

VisionAmerica purchased 12 new lasers, beginning service to 18 new markets in less than 6 months. Laser Vision Centers expanded its fleet of lasers to more than 50 from only 23 last year.

New companies have also been attracted to the market, including intraocular lens manufacturer STAAR Surgical, lithotripter provider Prime Medical Services and optical shop operator Sterling Vision. STAAR announced plans to open 20 laser centers in small to medium markets by year-end 2000. Sterling Vision announced plans to expand its limited operations and acquire six new centers by the end of 1999. Prime Medical Services acquired mega-practice Barnet-Dulaney Laser Center with plans for additional acquisitions, to build the company to a significant market share in the near future.

Procedure fees have remained fairly constant, averaging just above $2,150 per eye, despite widespread predictions of a price decline. Deep discounting of refractive procedures is still rare in the U.S. market and, when present, appears to have only a marginal impact on volume and market share.

One exception has been LasikVision Canada. The laser center operator has been aggressively advertising for U.S. patients to travel to its 11 Canadian centers for treatment. One special promotion offered bilateral LASIK for $995. Although the company’s U.S. patient volume is still small, it has announced plans to open four U.S. centers in 1999.

Larger laser center operators publicly express no concern for the low-price strategies, asserting that few consumers want the lowest-cost eye surgery. Evidence suggests that deep discounters do appeal to some, but that both a low- and high-fee strategy can successfully co-exist in the same market.

All of this market success has increased demand for lasers and led to a doubling of new laser sales this year. Market leader VISX has been flooded with laser orders and is currently quoting lead times of 4 months or more. This year, Summit Technology will sell more of its Apex Plus lasers and LadarVision lasers than it did in 1997 and 1998 combined. New manufacturers are racing to meet regulatory requirements, with approval for the LaserSight and Bausch & Lomb laser expected later this year or in early 2000.

The technology is rapidly evolving in all aspects of the procedure. Corneal topographers are adding new features. Many companies soon will offer planning software designed to simulate ablations and improve up-front planning. Most are working on integration software to assist in the design of custom ablation patterns. Laser manufactures are pursuing integration with corneal topography and other technologies – such as ray tracing, ultrasound and wavefront analysis – to treat patients with irregular corneas. Some predict more improvements, allowing treatment of small optical aberrations and leading to vision beyond the standard 20/20.

Microkeratomes have also evolved with improved ergonomics, easier disassembly and reassembly, and changes to allow for larger flaps. The modifications have reduced complications and made it easier for new surgeons to develop surgical skills. Production capacity has also increased significantly, particularly by the market leader Bausch & Lomb, which can make devices available within a few weeks of an order.

Many have looked at the industry and seen opportunities for new solutions. Several products are under development or waiting regulatory approval. KeraVision’s intrastromal corneal ring, Intacs, received approval in April. The device is an alternative to laser ablation, involving the insertion of two ring segments in the corneal periphery. The segments flatten the corneal surface, correcting low myopia. Only time will tell about the popularity of the procedure; however, it has attracted much interest from refractive surgeons who want to offer their patients the latest technology.

Other devices in final stages of clinical studies include phakic IOLs, lasers for thermokeratoplasty to treat hyperopia, as well as scleral expansion bands, unique ablation patterns, and multifocal IOLs and accommodating IOLs for treating presbyopia.

All of these devices promise to expand treatment options and grow the refractive surgery market. Of particular interest are products and procedures offering a method to treat the 90 million-plus U.S. presbyopes. Meeting the needs of this market will assure long-term growth in the industry.

Demand for refractive surgery is still in the early stages of market development. Less than 1% of the population requiring vision correction has received refractive surgical procedures. A recent survey of refractive surgeons indicates that most expect their individual practice to grow 20% to 50% next year.

Opinions vary on the ultimate penetration level for laser refractive surgery. Many are using the contact lens market penetration of 20% of the vision care population as a model. Contact lens usage reached that level after 20 years of market development.

But unlike a contact lens user, who needs replacement lenses and solutions, a successful refractive surgery patient leaves the market. Nonetheless, with plenty of room for additional market growth, most industry analysts expect to see significant market growth over the next 5 to 10 years.