Valeant shakes up GP lens market

Valeant Pharmaceuticals and its subsidiary Bausch + Lomb have come under fire for its recent actions in purchasing competing gas permeable (GP) contact lens manufacturer Paragon Vision Sciences, attempts to purchase independent GP laboratories, price increases, and withdrawal from industry support group Contact Lens Manufacturers Association (CLMA).   

In addition to a U.S. Federal Trade Commission (FTC) probe into the Paragon deal, which gave Valeant a de facto monopoly on ortho-k materials, the company is facing a backlash from eyecare practitioners (ECPs) and independent contact lens laboratories who are unhappy with price hikes and the attempt to control the market (see "Changes happened quickly" box).

“Any time you start limiting choice or consolidating power among a few, history has proven that bad things happen,” says Ryan McKinnis, OD, FAAO, in Cleveland, OH.” We’ve seen it happen on the retail side with Luxottica and now VSP. Optometry has a long history of how vertical integration screws over the OD.”

What began as a business move to expand sales within an underserved market has turned into an emotional play with betrayal and damaged relationships.

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GP labs key to ECP, patient success

The GP contact lens market is a small, closely knit subset of eye care, largely due to the collaboration between ECP and laboratory consultants to help fitters succeed with challenging cases, such as post-surgical patients, irregular corneas, keratoconus, and more.

“The laboratories have been responsible for the designs used for patients who need them desperately,” says Ed Bennett, OD, MSEd, FAAO, executive director of the GP Lens Institute (GPLI) and assistant dean for student services and alumni relations at University of Missouri–St. Louis College of Optometry. “They have their lives changed and their quality of life improved dramatically by these lenses. The labs and their consultants communicate with ECPs every step of the way to make them successful. They’re the ones who provide reasonable fees, warranties, services, and resources to help that ECP become successful with that patient.”

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Mike Johnson, director of consultation services at Art Optical, agrees.

“It’s the relationships and the designs that we have,” he says. “It’s going to be very difficult for Valeant to build that base. If it is going to purchase other labs to do that, it’s purchasing the customer list and using the name of the lab and the people who work there. I don’t see that as being the best way of keeping this industry going. I would say that the approach that Valeant is taking is much too quick to try to acquire that.”

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David Bland, director of specialty lens business at Valeant, agrees that the laboratory relationship is important.

“We dropped the ball with the lab network,” he says, “and we’ll reengage with the laboratories. We’ll get out and talk to labs over the next few weeks. There was some concern that we were going to remove support programs. That is not the case. We will continue to provide the support programs to the lab network that we have provided all these years.”

Next: Valeant, CLMA, and GPLI

Valeant, CLMA, and GPLI

At the core of the GP lens market is the CLMA, founded in 1961. The educational arm of the CLMA is the GPLI, which has driven ECP interest in the flat to declining GP lens market. The CLMA is supported by its members, and the GPLI is supported by button dues. (Unfinished GP lenses are called buttons, and they are similar to spectacle lens blanks. A tax on each button sold is paid by member laboratories to support the GPLI’s educational initiatives.)

For many years, 25 cents was the amount of button dues, with 20 cents going to the CLMA. At the CLMA annual meeting in October 2015, member labs unanimously voted to increase dues by an additional 10 cents for 2016 only.

Most, but not all, GP laboratories are CLMA members. Both Paragon and Bausch + Lomb were members until mid September 2015. Contact lens material manufacturer Contamac rejoined the CLMA in September 2015 after a hiatus.

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According to Bland, the company resigned its CLMA membership because it wanted to support product-specific education about GP contact lenses, not education tied to sales.

“That’s the way the CLMA is structured today,” he says. “It’s tied to how many buttons you sell, and you pay so much for button dues to the CLMA that goes toward education. We felt a better approach was through an educational grant which supports generic education. A lot of the education that we want to do over time is going to be product specific. CLMA can’t train and educate product specifically. Making that decision gave us more flexibility.

“Contamac was another member of the CLMA for many years,” Bland says, “it withdrew its membership, and yet nothing was ever made of that. We’ve withdrawn to take a similar direction, yet we’re being painted as the enemy here. It’s a bit of a double standard.”

However, while Valeant has no plans at this time to rejoin the CLMA, it intends to continue to support the market.

“There’s no question we haven’t done a good job in communicating what we want to do,” says Mark McKenna, Valeant VP and general manager of U.S. Vision Care. “We will show up next year in a very real way and invest in a big way. Folks see us as competition, not partners. If we could go back and do things differently, we would have made sure we had more input from key customers prior to moving forward with some of the changes. As a result, we are in the process of forming an advisory board of key specialty fitters.”

Next: Funding educational programs

Funding educational programs

“When I first heard the news that Valeant dropped out of the CLMA, I assumed the GPLI was dead,” says Dr. Bennett. “Boston (a Valeant material) and Paragon buttons comprise 85 to 90 percent of buttons sold. There’s a button tax on each one that funds the GPLI, so you see your funding going away.”

Valeant plans to offer the CLMA and the GPLI an educational grant to continue to support education of ECPs, students, and optometric educators. In addition, the company is finalizing details of an additional $150,000 grant for which the CLMA and the GPLI could apply.

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“Collectively, those two programs alone will be more than what we have supported education with in previous years,” says Bland. “As we build our new business unit, we will be investing significant millions of dollars in putting the training effort out in the field through various venues to augment what will be going on with these other programs.”

However, the CLMA has opted not to accept funding from Valeant. Instead, it looked to its member laboratories to fill the gap.

“We have 17 labs who have donated $7,500 each to support the GPLI,” says Jan Svochak, CLMA president and vice president of Tru-Form Optics. “It’s just for this first year. When Valeant dropped out, that was a big hit in the short term to our revenue.”

Next: Higher prices, less innovation

Higher prices, less innovation

ECPs worry that with consolidation in the GP lens market, less competition will mean higher prices and less innovation in the marketplace.

“If you have just that one mega laboratory that managed to increase fees, which is a hurdle for ECPs and patients to jump over, you lose that Mom and Pop relationship and one on one with the lab to work with you,” Dr. Bennett says. “It gets more and more standardized. You don’t get as many designs or options. Right now Valeant has a monopoly on myopia control with GP lenses. That’s scary because the button prices were increased, so it costs more and you have a monopoly which shuts out the labs from providing services to those ECPs. You lose that relationship with people you’re working with on fees and services to make that patient successful.”

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Some practitioners think that Valeant decision makers didn’t understand the Bausch + Lomb GP part of its business.

“I’m not sure that Valeant understood the reality of the way that doctors are compensated for scleral lens care,” says Jeff Sonsino, OD, FAAO. “Valeant executives figured that the market could bear a price increase at the level of the buttons. The problem with this strategy is that they didn’t understand that vision insurances are not going to increase reimbursement for scleral lens global fees. The amount that I’m being compensated by vision insurances isn’t going to change. Each lens that I order from the laboratory is warranted for 90 days. The one price that I pay for a scleral lens may in fact be eight lenses that have to be remade. That is all guaranteed under the warranty from the lab. When you look at those numbers, it isn’t such a great multiple from button price to finished lens price. That is one of the things that Valeant didn’t understand.”

Dr. Sonsino is in private practice in Nashville, TN, a member of the GPLI’s advisory board, a member of Bausch + Lomb’s advisory board, and director of clinical studies for SynergEyes.

The perception among laboratories and some ECPs is that Valeant would like to change how the GP lens industry currently functions.

“My impression is that Valeant feels like this industry, of which it owned the greater percentage, is a fractured industry because of the disconnect between who makes the materials and who makes the finished product. I think Valeant thinks it could better streamline it,” says Jason Jedlicka, OD, FAAO, director of the contact lens service at Indiana University College of Optometry and paid consultant to Contamac. “You see Valeant in this business of buying a product and significantly raising its price. This has been their MO. I’m afraid Valeant is going to buy up the labs, increase the prices, then in six or 12 months, I’ll pay 50 percent higher for scleral or GP lenses. People say it’s no big deal-just charge the patient more. But for medical patients, there’s a cap on what practitioners will collect from insurance companies. The practitioner is the one who loses in this, not the patient, not Valeant. There is not a ton of money to be made in specialty lenses. You don't see people who fit a lot of keratoconus rolling up to meetings in Mercedes with Rolexes.”

Fewer players in the market means less innovation, according to Kurtis Brown, marketing manager, global specialty lens business for Menicon Company Ltd. Brown previously was global marketing manager at Bausch + Lomb.

“Valeant and the Boston group aren’t innovators,” he says. “Everything new is coming out of the independent labs. Innovations come from a variety of sources. As one large company starts to control more of industry, there’s less incentive for that.”

Another outcome of only one company controlling the industry? Controlling the message and the conversation, says Brown.

“That company can buy ads, sponsor meetings, send speakers around,” he says. “It can frame the industry and choose the modalities it’s interested in a way that no one else can. That’s where it does start to have an impact on patient care options. Fitters are dependent on industry to learn about what’s new. If you have one large entity that is able to control that conversation, it tends to point people toward its products.”

Next: Regaining industry trust

Regaining industry trust

The GP lens industry is still in a state of flux while Valeant works to integrate Paragon with its Boston products into the newly formed Advanced Vision Products division and looks to purchase independent laboratories.

Valeant, through Bausch + Lomb and the Boston GP lens side of the business and as the largest material manufacturer, has been a key driver of GP lenses over the past 30 years.

“I think a lot people are very angry because they’ve put a lot of loyalty into the Boston products, and they feel betrayed,” Brown says.

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Bland agrees that trust needs to be rebuilt. He says that Valeant plans to do that by engaging key fitters for their input and ideas on the way to move forward.

“Once we demonstrate what this is all about and they see what we’re bringing to the market, I think we will begin to establish more trust. I think also making sure that everyone understands that we are big proponents of training and education, and that we’re going to continue to provide financial support to key organizations, like GPLI, Vision By Design, Global Specialty Lens Symposium. We plan to be major contributors to these organizations to continue to support training and education groups. We intend to package that and make sure that we can reestablish the trust.”

However, Svochak thinks that there is a long way to go in mending laboratory relationships.

“I don’t believe Valeant has any intentions of repairing relationships with labs,” he says. “If Valeant says they’re going to be talking to labs, that’s good. I’ll believe it when I see it. We do not have a direct contact now. They call directly on ECPs. They’re concerned only with what ECPs think.”

Next: What practitioners should know now

What practitioners should know now

Moving forward, ECPs should stay in touch with their laboratories, keep an eye on the lab bills to know if costs are rising, and stay abreast of the changing turn of events.

Dr. Bennett suggests keeping an open mind about trying new materials.

“I would encourage ECPs to talk to representatives from any CLMA member laboratory,” he says. “Be open to the fact that there are a whole menu of materials out there. You might have been tied to a certain material, but there are a range that are quite successful. Keep an open mind if your lab suggests another material.”

Dr. Sonsino is seriously considering moving away from all Bausch + Lomb products.

“I’m willing to give Valeant six months in order to change its strategy significantly because I don’t think the company realized all the repercussions of its actions,” he says.

Trust your laboratory, and trust and your laboratory consultant, says Johnson.

“We specialize in helping the everyday doctor become successful in GP fitting,” he says. “Trust your laboratory. Your lab may make recommendations for alternate materials. The labs know how good those materials are. There’s no reason to panic or think you have to charge your patient base more for a contact lens because someone has dramatically increased prices. If ECPs still want Boston or Paragon materials, they can get them.”

Next: Looking ahead

Looking ahead

ECPs and independent laboratories are concerned that Valeant will manage to purchase several labs and control the entire GP industry.

Bland says that the perception that Valeant wants to own the GP market with materials and manufacturing is not correct.

“Our vision is all tied to specialty lenses and providing access to more innovation for more patients,” he says. “We’re not interested in the material side of things. We’re interested in how we build patient access to these specialty lenses.”

According to Brown, the big concern is that Valeant will succeed in purchasing finishing labs.

“They see themselves as finished lens manufacturers-that’s the business Valeant is in-and become serious competition to laboratories,” he says. “If Valeant gets a big lab, it’s disruptive. I don’t think they’ll put anybody out of business. They’ll make people work harder. They’ve got a lock on ortho-k. It’s going to be expensive and difficult for anyone to come into that segment now. If you’re in ortho-k, it’s a serious problem.”

McKenna would not comment on future acquisitions but says that Valeant’s plan is to grow the business both organically and via acquisition.

“The model that we have in place is fairly disruptive,” he says. We’re trying to change the way that the market operates because we think that the market is underserved. We don’t think that’s in patients’ best interests.”

McKenna says that the Essilor model-with Essilor owning labs while selling to partner labs-is a good model for Valeant to follow moving forward.

Bland agrees, pointing out that the same model exists in the contact lens industry in Europe.

“Bausch + Lomb owns a GP laboratory in England,” he says. “And yet we also work directly with independent laboratories in England. Menicon owns David Thomas in England, and yet it works directly with other independent laboratories in England. Menicon owns NKL in Holland with the same situation.”

Brown suggests that Valeant’s ultimate goal may be increasing sales in China, where high myopia is a public health concern.

“This whole things is probably more about China than the U.S.,” he says. “That’s probably why Valeant misstepped here because they weren’t thinking about it. China is an enormous market. Valeant has the number-one brand of plastic and number-one ortho-k design. The U.S. market might be more of an afterthought than anything else.

McKenna says the company is growing in China and Japan and plans on investing significantly but refused further comment because he oversees the U.S. while Asia has its own area president within the company.

“We’re really trying to raise the tide,” Bland says. “If we do that, everybody will benefit from this, eyecare professionals, patients, ourselves, and laboratories.”

Contamac, Alden Optical, and Paragon Vision Sciences President and CEO Joe Sicari declined requests for comment.

Next: Changes happened quickly

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