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Published 13 September 2012 05:01, Updated 13 September 2012 07:01
The business of baby making has boomed as fertility-challenged parents are willing to spend up big to get a little bundle of joy. However, it’s an area of business that is highly regulated – and highly sensitive.
Fertility company Genea found this out when an advertisement for its service – which included footage of a live birth – fell foul of hopeful parents viewing it online.
The ad ran on the assisted conception forum on the birth and parenting website Essential Baby. For one would-be parent it was just too much. “Having that Genea advertisement on infinite repeat right in front of my eyes every time I visit any thread on the AC boards is seriously making me not want to visit the boards at all,” went one post.
“I know there’s no way it will be pulled because we are, of course, Genea’s perfect target audience. They’ve obviously figured out just how to pull at our heart strings, but for me it’s just too much.”
For Genea chief executive Kylie deBoer this heartfelt criticism of the company’s ad was at once a communications challenge and an opportunity to connect. She hadn’t known the ad was showing there. “I was able to get that ad down immediately, because obviously I knew it was the wrong place, I was able then speak to these people and say, first, ‘thank you’, and secondly, ‘I am so sorry’,” she tells BRW.
A generation after the birth of the first Australian in vitro fertilisation baby, the impact of social media is just one way that the fertility industry is changing. The business of making babies has grown quickly on the back of social trends and medical advances. Now, between 3 per cent and 4 per cent of babies born in Australia come from IVF, says Mark Bowman, Fertility Society of Australia president and medical director of Genea. “It’s about medical evolution and demographic evolution,” he says.
Fertility companies are benefiting from the growing number of women opting to have children later in life when they are less fertile. According to a social trends report from the Australian Bureau of Statistics, the median age at which women had their first baby in 2010 was 28.9 years, up from 27.5 years in 1990.
Advances in the science have also driven more growth. As fertility treatments have become more sophisticated and effective, more people have been attracted to them.
“The treatments have got easier on the patients, as the drug regimes have improved, as the clinicians have done a lot more research and understand the physiology of infertility, and also the safety and efficacy of the treatments, they have improved and the success rates have improved,” says Sue Channon, group chief executive of fertility company Virtus Health .
Helpfully, IVF treatment has also become more socially acceptable. Bowman has been a fertility specialist for 20 years and has seen attitudes change. “I think what happens now is, it’s accepted the success rates are much higher, the commonality of it means that there’s less stigma about it,” he says.
All of this has contributed to a more than tripling of IVF spending between the late 1990s and 2008, according to research outfit IBISWorld. By 2008, expenditure was more than $90 million, IBISWorld says.
When an industry is growing, it attracts outside investors. So in this field private equity players have arrived and are acting as consolidators in the sector. Virtus Health is about 46 per cent owned by Quadrant Private Equity and was created from Quadrant merging some fertility businesses. Quadrant is now reportedly hoping to sell out of the business with the entire company potentially worth about $500 million. Quadrant declined to comment. Channon confirmed there was a process under way, but declined to comment further.
The private equity interest in fertility businesses comes after a strong history of companies buying up small radiology and pathology practices to consolidate them into larger corporations, says Rob Norman, professor for reproductive and periconceptual medicine at the University of Adelaide. But a clinical practice, which has direct contact with patients, is a better business opportunity because it isn’t as dependent on referrals to make money.
“If you buy a clinical company and you add on to that laboratory components, then you have the opportunity of controlling the whole chain of supply from the referral, through the investigation, through the actual treatment,” Norman says. “I think that’s why IVF’s become attractive [as an investment], because it’s a growing business and it has a lot of elements of control in it that you wouldn’t necessarily get in a pathology or radiology laboratory.”
Despite the growth, the fertility industry hasn’t been immune from global events. The financial crisis hit some businesses hard, with potential patients backing away from spending on fertility treatment. That conservatism also hit the national fertility rate. A drop to 1.90 babies per reproductive woman in 2009 from 1.96 in 2008was blamed on the crisis and concerns that people would not be able to meet their debts.
Another big factor was the move to cap out-of-pocket payments for IVF by the federal government under former prime minister Kevin Rudd. This saved the government about $76 million in Medicare payments in the following year, an analysis by University of NSW senior research fellow Georgina Chambers found. The move also had a big impact on consumers after the change to the reimbursements cycle volumes declined by 10 per cent in 2010, Channon says. The market then returned to growth in 2011, she adds.
Sector players are predicting changes to the way fertility services are delivered and say industry growth may slow. Channon does not expect the sector to see the 13 per cent a year growth experienced from 2004 to 2009. She expects it to grow at only 8 per cent a year.
That’s because of a paradox at the heart of the industry – basically, the better IVF clinics become at making babies, the less money they can earn.
Great things are also expected from medical advances. In future, fertility service is likely to become more personalised, says deBoer. Rather than having a protocol that suits lots of people, the company will probably be able to find the right IVF medicine for individuals. Now, patients have different regimes for their hormone stimulation, deBoer says. In the future, she expects the company to be able to run a blood test or a genetic screen to see how a patient responds to oestrogen, for example.
Piecing together information such as that will enable a clinic to build up a “big picture” of an individual, deBoer says. In a business where time is a crucial factor, “that just means you can help people more quickly”, she says.
As consumers take a more holistic approach to health, deBoer also predicts more players in the industry will offer options such as nutrition or acupuncture to complement IVF.
These trends will lead to slower growth: the more effective treatments become, the less patients need to spend to get pregnant. More than 60 per cent of Genea’s patients take a healthy baby home. Most need up to three cycles of IVF treatment. Patients who previously might have had 10 cycles of treatment are now less likely to need so many.
“Our business is driven by the number of couples who come to us to have an IVF cycle, but the quicker we help them, the less custom from that particular couple we have,” deBoer says.
Genea, a company owned by doctors, employees, their trusts and self-managed super funds but not private equity, tries to combat this problem by spending up on research. This year, it is ploughing more than 10 per cent of its revenue into research, deBoer says, while declining to say how much revenue it brings in.
An improved service helps attract customers: “Patients want to go to the clinic that gives them the best chance of having a baby,” deBoer says. “So although we are getting them pregnant quickly, it’s all about our brand and about what we offer.”
Overall, Australia’s profile in terms of pushing the boundaries of IVF has slipped, Norman says. “Australia used to beat the world in IVF in terms of research and innovation and people used to come from all over the world to learn how to do it,” he says.
Research into IVF has decreased at the same time as involvement from universities and public hospitals has waned, although privatisation isn’t necessarily to blame, Norman says.
Still, the nature of IVF company ownership could be a factor in how research is prioritised, with a distinction between those owned outright by doctors and those where private equity is a player.
“If the doctors have a philosophy predisposed to research and innovation, they can choose to spend on this more,” Norman says. “Private equity groups are less likely to do so other than to improve market share.”