Chronic Obstructive Pulmonary Disease (COPD) is a leading cause of death in the US. Although the condition is not restricted to the elderly, people over 65 are most at risk for developing the disease. Given that America’s over-65 population is growing at a faster rate than the overall population, the number of patients with COPD is increasing rapidly. In addition to age, factors such as smoking, environmental exposure, and genetics can play a role in the development of COPD, and as a result, this demographic is compounding age-related COPD growth. In fact, the National Heart, Lung, and Blood Institute estimates that more than 12 million are currently diagnosed with the condition in the US, and that another 12 million may have COPD but not realize it . By 2014, the total US prevalence of COPD will reach almost 30 million, according to Decision Resources’ PatientBase.

This has created significant opportunity in the medical device space. In particular, demand for oxygen therapy devices is growing. Oxygen therapy is the leading treatment for patients suffering from conditions resulting from oxygen deficiency, including COPD. Although the US oxygen therapy device market opportunity is appealing, recent reimbursement cuts may restrict its potential.

With symptoms that can range from wheezing, to chest tightness, to shortness of breath, patients suffering from COPD need to manage their condition using devices such as oxygen concentrators, liquid oxygen systems, oxygen conservers, and oxygen regulators. These devices provide symptom relief by either raising the level of oxygen in the ambient air or by providing a direct flow of oxygen that is inhaled through a tube or mask. Over the next several years, increasing demand from the growing patient population will drive growth in two of these segments, which will support overall oxygen therapy market growth.

The biggest segment by far is the oxygen concentrators, which will enjoy moderate growth owing in large part to the popularity of portable oxygen concentrators (POCs) among baby boomers. These devices allow for increased mobility and provide greater convenience, as they are smaller and lighter than other oxygen concentrator options. Although it is a small segment, oxygen regulators will also undergo growth; decreasing prices in this market have altered the way these devices are used; whereas previously they were considered capital equipment, now they are disposable, fueling unit sales.

Revenues for liquid oxygen systems and oxygen conservers will, however, decline over the next five years, with liquid oxygen system revenue falling most precipitously due to steep prices, competition from other segments, and high maintenance costs.

The most significant limiter in the oxygen therapy market, however, is the recent reduction in reimbursement for home oxygen devices enacted by the Centers for Medicare & Medicare Services (CMS). Since home medical equipment presents such a large cost for Medicare, there has been pressure to reduce costs as part of the Deficit Reduction Act (DRA). CMS recently limited monthly payments to home oxygen patients to 36 months, after which time companies can begin billing patients for these devices. Most oxygen therapy machines are used in the home, and individual patients must carry the cost of these systems. Reimbursement cuts to particular device types will further discourage patients from purchasing them, resulting in segment-specific constraints.

Nevertheless, US Representatives Tom Price (R-Ga.) and Heath Shuler (D-NC) recently introduced the H.E. 2373 Home Oxygen Patient Protection Act, presented to the US government in the hopes of abolishing the 36 months reimbursement cap. Although a decision on this act will likely not be made till 2011, the outcome of such a decision is likely to have an effect on patient purchasing behavior in this market.

Despite the potentially unfavorable reimbursement environment, the overall oxygen therapy market will continue to enjoy moderate growth in the coming years, reaching a value of almost $440 million by 2014. Given the revenue potential in this market, oxygen therapy device manufacturers such as CAIRE, AirSep, Philips Respironics, and Invacare will doubtlessly be monitoring changes in reimbursement policy. IQ