Fresenius Medical Care (FMS)
Fresenius Medical Care (FMS – NYSE) is the world’s largest kidney dialysis company, offering both dialysis products and services. It provides dialysis treatment (75 percent of 2006 revenues) at its own dialysis clinics and supplies these clinics with dialysis products (25 percent of revenues). The company also sells dialysis products to other service providers. At year-end 2006, FMS had provided dialysis treatment to approximately 163,500 patients in 2,108 clinics located in over 25 countries.
In a $70 billion global dialysis market, FMS has a leading 30 percent market share in the product market and a 10 percent share in the dialysis service business. In 2006, the company experienced record revenues (26 percent growth) and operating earnings (40 percent growth).
There is a favorable regulatory outlook for the dialysis industry. A possible introduction of bundled reimbursement rates for US dialysis treatments is being explored by the Centers for Medicare and Medicaid services. This policy would result in lower doses of erythropoisis-stimulating agents (ESAs) and higher quality care. Currently, dialysis providers are paid separately for services and drug delivery. Providers are reimbursed based on the amount of high margin ESA administered, which can result in overuse. A bundled rate would incentivize providers to use the lowest dose possible. Additionally, positive reimbursement changes have recently been made in seven European countries.
FMS’ products serve a growing population of people with chronic renal failure. Two million people worldwide suffer from this condition and that number is increasing 5-7 percent per year due to greater life expectancy and the prevalence of diabetes and high blood pressure. The company’s new generation of dialysis machines have eco-efficient features that reduce the water and electricity required for operation by 30 percent. FMS has an eco-ranking system that measures the resource cost per dialysis treatment so as to improve performance.