The underlying macrotrends, current solutions and investment opportunities
Creative Ventures recently led an investment into VenoStent, an advanced-material technology company working on eliminating the 50%+ failure rate in vascular-access surgery required to initiate hemodialysis. Here we unravel the underlying macrotrends driving the development of solutions and investment opportunities in this sector.
The kidneys are among those typically overlooked organs that are crucial to our survival. While all organs are essential, the kidneys should get a bit more love. They are responsible for our waste filtration, act as powerhouses for hormones, and deposit non-waste materials such as vitamins and amino acids back into the blood flow, among many other functions.
Kidney diseases are a leading but ‘silent’ cause of death
Kidney function declines as we age. Kidney diseases also emerge more in patients with existing chronic conditions like diabetes and high blood pressure. Those who prefer a clear definition of where things stand will appreciate the step-wise classification of Chronic Kidney Disease (CKD) stages below.
Approximately 37 million people – 15% of the US population – are estimated to be suffering from CKD. The rate increases to 38% in the 65+ age group. Kidney diseases are ranked as the eighth leading cause of death in the US. It is sometimes referred to as the “silent killer,” as almost all patients with mild/moderate symptoms are oblivious to their sickness. Awareness increases with severity to about half for those with severe CKD, at which point it is almost always too late. Early detection is paramount for saving lives.
The rise of irreversible End-Stage CKD (ESRD/ESKD)
Low awareness and action-oriented treatment leave most patients irreversibly progress through the CKD “steps.” Given the surge in other chronic conditions, an aging population, and the decreasing mortality rate in End-Stage Renal Disease (ESRD) patients, both the prevalence and incidence of ESRD are projected to rise.
Arriving at the dead end: dialysis or transplant
As patients approach ESRD, they are left with two options – kidney dialysis or kidney transplant.
A transplant using a functional kidney is typically an ideal option; unfortunately, it’s not readily available and there are significant potential complications, including organ rejection. As of 2019, nearly 100,000 patients in the U.S. remain on the waiting list for kidney donation. Kidneys are the most needed organs on the organ-donation list, with the highest gap between ‘needed’ and ‘received’ figures.
As a result, about 70% of ESRD patients rely on dialysis as an alternative. Hemodialysis, in particular, makes up 90% of the dialysis treatment, which is delivered in the course of dreadful four-hour sessions, three times a week, for as long as it takes until transplant becomes an option. The average wait is approximately three to five years. Only one third of the dialysis patients survive that long.
The already limited supply of human kidneys from living and deceased donors is expected to worsen given the apparent decline in living kidney donors and decreasing mortality rates. This has generated a renewed focus on opportunities for developing artificial kidneys as well as improving hemodialysis in the hope that more patients can survive until either a transplant becomes available or artificial kidneys emerge as a clinical reality.
Efforts to develop 3D printed kidney are likely five to ten years from becoming clinically relevant. “The largest hurdle is that there are currently no techniques capable of mimicking the multiscale, hierarchical architecture and complexity of the native tissue/organ which is vital to function” (Wragg et al., 2019).
In the meantime, there is great potential to dramatically improve hemodialysis. From an investment perspective, hemodialysis solutions are of great interest, given the recurring and critical nature of the problem. Creative Ventures recently led an investment into VenoStent, an advanced material tech company, that is working on a solution which could potentially eliminate the 50%+ failure rate in vascular access surgery required to initiate hemodialysis.
Follow the Money
Chronic healthcare management is expensive, and the costs will only continue to grow: as average life spans increase so too will the compounded effects of multiple chronic diseases.
In the US, the cost burden associated with CKD is largely borne by Medicare, which accounts for about 80% of total ESRD expenditures. This is hardly a surprise, given that the Centers for Medicare & Medicaid Services (CMS) deliberately includes patients with ESRD under Medicare, in addition to those in the 65+ age group.
It is a costly, though arguably necessary, move on the part of CMS. ESRD is disproportionately expensive. Under Medicare, average costs per patient were approximately $8K per year for a non-CKD control group, $46K per year for stage 4 CKD patients, and $87K per year for ESRD patients. After accounting for an additional $90K in hemodialysis costs, ESRD patients cost, on average, 22 times more than those without CKD. ESRD patients make up about 1% of Medicare beneficiaries but account for 7.2% of Medicare-paid claims, $35.9 billion in 2019. The majority of this costs ($28 billion in 2019) goes to hemodialysis patients.
The burn is so direct that it fuels logical incentives for CMS to look for cost reduction. Initiatives – like this one launched in 2019 – specifically target ESRD patient groups, proposing that incremental improvement on dialysis may be reimbursed on an add-on basis. Such payment policies will encourage solutions that improve patients’ quality of life while decreasing CMS’ overall costs.
The cost burden on Medicare also leads to an interesting dynamic, one in which innovators benefit if they provide improved cost effectiveness in ESRD patients. According to CMS’ final rules (Medicare Coverage of Innovative Technology or MCIT – Jan 14, 2021), Breakthrough Devices are covered under Medicare for up to four years after the FDA approval date.
Aligning incentives to encourage adoption
In Healthcare “just” improving quality of care is not always sufficient. Innovators need to convince their customers – the hospitals or providers in this case – why it’s beneficial (usually economically) to adopt their solutions. Hospitals are largely compensated by payers or insurance parties, so, without reimbursement codes, providers would have to bear the costs. Additionally, one needs to account for how well the solutions fit into the physicians’ and healthcare providers’ workflows. If they’re disruptive, they may never be put into use. Lastly, from the payers’ perspective, everything needs to add up. They aren’t likely to agree to pay for something extra unless their overall economics improve. This is the harsh reality: improving patients’ lives alone is hardly ever enough.
When it comes to ESRD, the CMS’ MCIT policy is exceptional in aligning incentives among payers, providers, and patients. For the payers – primarily Medicare in this case – solutions can address the inefficiency in the system, improve patients’ quality of life, and cut down on growing costs, are worth investing in. For providers with a reimbursement plan in place, implementing new innovations proven to improve patients’ lives is not only ethical but also generates much needed revenue for the low-margin hospital industry. Finally, his policy provides patients with increased access to life-improving solutions, and that makes it a win-win-win.