How Entrepreneurs Will Move IVF Into The Future


Part 3 of a series on Entrepreneurship in Reproductive Medicine. Part 1 gave an overview of the industry and highlighted the problem of limited access to in vitro fertilization (IVF). Part 2 examined ways in which data analysis can improve access to care and risk allocation. In part 3 we dig into the business case for investment in innovation in reproductive medicine.

Having spent eighteen years in women’s health as an ob/gyn and reproductive endocrinologist, I witnessed up close the human suffering from infertility, the limitations of in vitro fertilization (IVF) and the profound disappointment of prospective parents who could not afford treatment.

These reasons are more than enough to make you want to invest in innovation in assisted reproduction.

And there’s a good business case too.

To start with, the market is already there. Let's review the numbers again. By almost any metric, the United States’ utilization of IVF is substantially lower than that of other developed economies. We perform far fewer cycles per capita than most European countries and Japan; IVF accounts for 1.5% of babies born in the U.S. versus over 4% in Australia. Overall, the slightly more than 200,000 IVF cycles we perform per year underserves the 7 million U.S. women with infertility.

The combination of high start-up costs, the limited number of subspecialty-trained reproductive endocrinologists and skilled embryologists, and the concentration of IVF programs in larger cities has resulted in an equilibrium state where most programs and doctors are busy, everyone is making a good living and new clinics are more often than not extensions of existing programs or the result of a large program absorbing a smaller one -- business development moves that likely improve the quality of care, but do not expand access.

With a typical cost of $12-15,000 a cycle, IVF alone--not counting medications, precycle workups by ob/gyns, or ancillary costs--accounts for $2.4 to 3 billion of revenue. This likely underestimates the size of the industry. There are centers that charge much more than the average, and additional expenses related to egg donation, frozen embryo storage, and genetic testing of embryos can substantially increase the costs of a cycle.

$4 to 5 billion is probably more accurate.

That sum, while substantial, is rather small in comparison to other parts of the healthcare economy. While the costs of care for seven million American women with infertility is $4-5 billion, over $80 billion is spent on cancer treatment for fifteen million affected Americans. (Don’t get me wrong --  I do not begrudge a penny of that spending for either group, nor am I implying any type of comparison between the suffering arising from the two conditions -- I am merely putting aggregate spending for IVF in perspective.)

Is the IVF industry “right sized?” Or is there a case for layering seed and start-up investment on top of the private equity funding that has logically flowed into the consolidation of IVF in the U.S.?

What is the business case for investing in innovation in reproductive medicine? Should we be funding startups, seeding IVF tech companies and trying to disrupt the status quo?

Yes. Unequivocally yes.

Reason 1: Build it, lower the price a bit and patients will come. Lots of them.

As we’ve seen, experience in other countries, plus our own population statistics, implies that there is a very substantial latent demand for accessible, affordable IVF. We do not need to create a market; it is already there.

Reasons 2 and 2a: IVF for elective egg freezing, and IVF for prevention of genetic disease.

New markets are emerging, and we’ll need both expanded capacity and more efficient processes to make sure that the broad expansion of IVF to women and couples that do not have demonstrated infertility does not further limit access to existing patients.

Our Columbia Business School Business of Reproductive Medicine Panel included Susan Hertzberg, CEO of Prelude Fertility, an ambitious company founded by Martin Varsavsky that promotes, facilitates and provides egg freezing, genetic testing and proactive self management of women’s fertility, adding scale to a trend that has been gaining traction since 2012, when the American Society of Reproductive Medicine (ASRM) declared that egg freezing should no longer be considered experimental.

According to the US Centers for Disease Control (CDC), there were over 45,000 egg freezing cycles in the United States in 2015, a very substantial number in the context of the approximately 200,000 yearly cycles performed for infertility patients.

The panel also included Anne Morriss, CEO of Genepeeks, a company that provides greatly expanded preconception screening. IVF with PGD can be a very effective method of preventive medicine, and pays for itself. Compare a single egg retrieval for a young couple that yields sufficient healthy embryos for two, three or four embryo transfers at an aggregate cost less than $50,000 to the $300,000 yearly cost of Kalydeco, one of Vertex Pharmaceutical’s cystic fibrosis drugs.

IVF for disease prevention offers tremendous promise -- as long as we have the IVF infrastructure to support it.

Reason 3: Companies have determined that infertility benefits are an important element in attracting and retaining highly skilled workers, and they are increasingly demanding efficient and cost effective care.

The IVF industry is unique in U.S. healthcare. It is not controlled by a huge hospital system / huge insurance company mega-contracting process where each individual procedure is a tiny part of an all-inclusive healthcare package designed to meet the needs of tens of thousands of people. IVF still follows a retail purchase model, and has been a sellers’ market. The emergence of disciplined large buyers reverses this trend, and hopefully makes IVF affordable for more patients.

So how do these trends translate into entrepreneurship opportunities? How could more cost-conscious IVF be a great business? Let’s list the ways.

Innovation that leverages nursing time with technology, particularly for patient education and communication, standardizes much of the protocol and cycle management decision-making with artificial intelligence, mechanizes many of the repetitive tasks performed in the laboratory, removing the wide variation in operator performance and coupled with an effective process optimization that eliminates a lot of the redundancy grandfathered into IVF cycles (do we really need all of those morning ultrasound scans, and all of those repeated blood tests every cycle?) -- would create a different patient experience, maybe not as hands on, possibly more impersonal, but ideally one that gives patients the same likelihood of successfully conceiving and delivering a healthy child, while giving experienced doctors an opportunity to scale their programs, treating many more patients while staying profitable.

How profitable? If 4.5% of American babies came from IVF, as they do in Australia, we would be doing (using current pregnancy and delivery rates) over 400,000 more cycles, or up to $3 billion of increased revenue even if the revenue per cycle is cut in half. If we increase U.S. per capita utilization to that of Israel, again cutting prices in half, we would create over $6 billion of economic activity.

Yes, margins would be lower, but the same process improvements and efficiencies that make the expansion in capacity possible would counter some of the margin pressure, contributing further to industry growth.

More importantly, this would democratize assisted reproduction, bringing the benefits of best practices infertility care, fertility preservation, and assisted reproduction for the prevention of genetic disease to an enormous population, in a competitive marketplace.

Worthy goals indeed for entrepreneurship in reproductive medicine.

