Demand for skin resurfacing keys today's surgical laser sales

Health Industry Today, Jan, 1996 by Curt Werner

For those companies canny enough to capitalize on the trend, falling reimbursements and the search for private pay patients have proven to be the salvation for manufacturers in the surgical laser segment. Baby Boomers closing in on their fifties have spawned the latest rage--laser skin resurfacing--and fumed it into a mini-bonanza for smart, technologically adept vendors. What's more, physicians in several specialties can perform the procedures, including dermatologists, plastic surgeons, facial plastic surgeons and ophthalmologists, which broadens the universe of purchasers for the machines and moves them from the hospital to the physician's office.

But for vendors that have fallen behind in turning their products into multi-use tools, the past few years have been a trying time.

Like presidential polls, the surgical laser market is subject to fast-changing national mood swings. Just two years ago, lasers that were used to correct severe snoring problems were the hot tickets. But that market has faded.

The key to success in sales of today's sophisticated, expensive lasers is finding a range of uses for them. Said one capital equipment contracting executive for a major group purchasing organization, "When you spend about $100,000 for a laser, you want to make sure it doesn't end up sitting around gathering dust in a corner somewhere."

Credit manufacturers and the medical community for finding scores of applications for lasers. Medical miracles like excising cancerous tissue and cells, coronary angioplasty, and a variety of laparoscopic surgeries are part of the laser equation. But so is removing somewhat more benign unwanted things like warts and wrinkles. In fact, it is precisely that "aesthetics market" that drives the surgical laser segment today.

And what powers that aesthetics market is the public itself. Providers and surgical laser manufacturers have literally teamed up in several cases to promote laser skin resurfacing. They have capitalized on the yen for reversing the aging process by spreading the word about the possibilities of surgical lasers through countless newspaper and consumer magazine articles, network news shows and even infomercials.

Financially speaking, probably the best part of this scenario for physicians and vendors alike is the fact that men and women who go to their doctors for laser skin resurfacing are that most precious of commodities these managed care days: private pay patients. Few insurers will pay for elective skin resurfacing procedures. "Doctors are looking for private pay patients, and aesthetics fits right in," says Karen Amburgey, vice president of marketing for Sharplan Lasers, Inc., a manufacturer that is based in Allendale, N.J., listed on the American Stock Exchange, but owned by an Israeli corporation, Laser Industries, Ltd., Tel Aviv.

For Sharplan and its competitors, like Coherent, Inc., Palo Alto, Calif., Heraeus Surgical, Milpitas, Calif., and the dozens of upstart companies with revenues below the half million dollar mark, the stakes are big and the rewards may be great. According to a June 1995 report published by Frost & Sullivan, Mountain View, Calif., the worldwide surgical laser market topped $203 million in 1994. Factoring in a growth rate of 12.8% in 1995 and 14.1% to 15.4% through 1998, the market will swell to $429 million globally by the year 2000. The U.S. dominates in laser revenues, holding more than 55% of the market, the report said.

Laser's "Swiss Army Knife"

Surgical solid-state lasers and surgical gas lasers will continue to garner the largest share of the dollars by far. Some relatively new laser technology is beginning to have an impact on the market, particularly on the solid-state side. Leading that technology race are holmium:yttrium aluminum garnet (or Ho:YAG) and neodymium:YAG (Nd:YAG) lasers. Ruby lasers and potassium titanyl phosphate (KTP) devices are also in the solid-state market.

The Ho:YAG laser is rising in importance in the orthopedics market. This type, known as the "Swiss Army Knife" of lasers, has been in use for about six years, mostly in arthroscopy and diskectomy (though high powered Ho:YAG devices have been on the scene for less than three years). Reflecting the trend for multi-use applications, Ho:YAG lasers, which cost between $40,000 and $150,000 depending on power capabilities, are being utilized in general surgery, urology, neurosurgery, lithotripsy, angioplasty and dentistry. Because of their ability to be used in blood and saline environments, Ho:YAGs are also being wheeled into the surgical suite for gynecological procedures.

A March 1995 report from ECRI, Plymouth Meeting, Pa., the respected technological assessment company, cautioned hospital laser purchasers about the high price tag, but added, "The ability of a laser to be used in several specialties may help justify its acquisition." ECRI recommended that hospitals that plan to acquire only one laser bring in the C[O.sub.2] laser (for its precise cutting ability and low cost) or the Ho:YAG/Nd:YAG combination laser, which can be used for many types of procedures. Combination lasers, like those produced by Coherent, Inc., sell for approximately $ 150,000. At the same time, ECRI said that the Ho:YAG laser is "poised for rapid and widespread use."