Shifting allegiances

Thursday, July 31, 2003

MARIETTA, Ga. - After Coloplast shut down its Amoena manufacturing facility here earlier this year, two top executives left the company and are now launching a new U.S.-based breast care operation called American Breast Care

Jay Markowitz, Amoena’s former vice president of sales, and Lou Malice, formerly president of the breast care division, are currently renovating the 20,000-square-foot building that housed Amoena’s operation when Coloplast bought the company in 1994.

Earlier this year, Coloplast moved its breast form and brassiere manufacturing operations to a company plant in Raubling, Germany. Coloplast also consolidated its product line, jettisoning products familiar to fitters in the United States for similar products made overseas.

Philosophically, Markowitz and Malice think it was a bad move.

“A great deal of our success [at Amoena] over the years was attributed to the fact that we had a base here in the U.S.,” said Markowitz, co-CEO of the new company. “From a product design and development standpoint, it’s important for people to be here in the market who understand the retailers’ needs.”

Amoena is the dominant breast form vendor in the United States. Some say the company is at least twice as large as its nearest rival. Medicare, according Markowitz, pays for roughly 60-65% of the market’s products.

The principal products in the marketplace are two silicone breast prosthesis, L8020 and L8030, and a mastectomy bra, L8000. Over three months in 2001, Medicare allowed reimbursement on L8030 claims for 34,181 beneficiaries. At $240 in reimbursement per breast form, the L8030 Medicare market generates about $33 million per year.

Medicare paid for roughly 200,000 brassieres in 2001. At $30 per bar, the Medicare L8000 market is about $6 million per year.

For many providers, Coloplast’s relocation to Germany has not been an issue. A more significant stumbling block has been the consolidation of the product line.

“Everybody is set in their ways,” said Cheryl Hoyt, owner of a Women’s Health Boutique franchise in Rockville, Md. “You know your old product and how they fit. But for the most part. I would say that it’s not been a problem. It’s just a matter of learning how things fit.”

American Breast Care plans to hire back to work many of the 90 employees that were laid off when Coloplast moved manufacturing abroad.

The new company also expects to win business from retailers who’ve not been happy with the expansion of Coloplast’s relationship with payers. The manufacturer signs supplier contracts with major insurers, such as Kaiser and Aetna, and feeds those referrals to its customers.

“They were happy in 1996 when we [Coloplast] started but as you know healthcare has changed dramatically,” said Markowitz. “By the middle of last year, it was apparent that retailers were not happy with a manufacturer making arrangement with payers.”

Markowitz said American Breast Care has no intention of making arrangements with third party payers.

While the expanding network caused a ruckus among many Amoena providers last year, Hoyt, who services “minimal” revenues from her Coloplast contracts, concedes that the network does have its advantages.

“You don’t have to fight with the insurance company about what you’re being reimbursed and how much,” she said.