The retail pharmacy giant has the potential to be a game-changer in the highly concentrated, $34 billion kidney dialysis industry, using its ubiquitous retail presence to push consumers into home dialysis.
CVS Health's announcement that it will enter the kidney home dialysis market presents the company with as many challenges as opportunities, says industry analyst Jack Curran.
"The dialysis market right now is very concentrated," says Curran, a senior analyst with IBISWorld.
"If any company is going to be able to move into this industry and succeed it is going to have to be a large company with a lot of resources, like CVS," he said. "Right now, with their very heavy M&A activity, in trying to grow their healthcare offerings, CVS is probably going to be very well positioned to succeed."
The biggest challenge for CVS in the kidney dialysis market is its lack in-center dialysis. Fresenius Medical Care and DaVita control about 95% of the in-center market, and Curran estimates that 8% or less of all dialyses occur in the home.
Nearly 700,000 people have end-stage renal disease, and nearly 500,000 of these patients are on active dialysis and more than 120,000 new ESRD cases are diagnosed each year.
Medicare spends nearly $34 billion each year on dialysis patient care.
Bruce Culleton, MD, CMO at CVS Specialty, says the high costs of dialysis are not reflected in the outcomes, noting that mortality rates for Medicare patients treated with in-center hemodialysis are up to 10 times higher than among the general Medicare population.
"While in-center dialysis clinics are currently the most common choice for hemodialysis treatment, published clinical research has shown improved cardiac health, metabolic control, and survival for patients who are treated with longer, more frequent dialysis treatments. This treatment paradigm is best delivered in the convenience of a patient's home," Culleton said.
"CVS Health is uniquely positioned to build a solution that will enable us to identify and intervene earlier with patients to optimize the management of chronic kidney disease, while at the same time making home dialysis therapies a real option for more patients," he said.
Curran says that CVS will be challenged to convince dialysis patients to stay at home.
"It comes down to consumer preference," he says. "People feel more comfortable going into a center where they know they have someone skilled who can handle it. To do home dialysis you have to go through about one month of training. So, it’s a big time investment to do home dialysis."
However, a big player such as CVS with its massive retail presence could change consumer views about home dialysis.
"When you have patients going into CVS clinics and learning about their home dialysis options, if CVS is telling them one of their options is home dialysis, they are likely going to look into it," he said.
In addition, CVS could be poised to take control of the home dialysis market because Fresenius and DaVita are in-clinic centric "so they’re not going to push for home dialysis, even close to as much as a company like CVS would do when they are only offering it," Curran says.
Curran says it will be telling to see who CVS choses to partner with when it comes into the home dialysis market.
"They haven't said what company they’re going to be working with, or who will manufacture their home dialysis device," he says. "The dialysis home equipment industry is also very concentrated. It may depend on the resources of that company and how well-positioned they are to produce a product that is going to be able to compete with Fresenius and Baxter’s devices."
Curran says there are rumors that CVS could work with Baxter, the nation's largest home dialysis equipment manufacturer. "I haven’t seen anything confirmed," he said, "but if that is the case, it's going to be a huge opportunity that could set them apart."
For Curran, who CVS partners with will speak volumes.
"If it's a bigger manufacturer, that is a sign that they are going to do well," he says. "If it's a smaller company that hasn't worked with dialysis equipment that is going to be a challenge. Because of the high concentration in the dialysis equipment manufacturing industry, it's going to be a lot more competitive to get products out."
Even though the dialysis market is highly concentrated, Curran says CVS could still shake things up for established players such as DaVita and Fresenius.
"If CVS's entering this market increases demand for in-home dialysis, then these companies may emphasis their in-home dialysis services," he says. "And meanwhile, they may also push the fact that they have in-center dialysis, as a way of saying that we are able to offer more than CVS, or that they can provide different options."
John Commins is the news editor for HealthLeaders.