Baxter Healthcare's Largo plant has started building the Arena, the company's new dialysis machine for use in clinics. The device could provide a much-needed boost in the company's equipment sales.
By KRIS HUNDLEY
Published January 12, 2004
[Times photos: James Borchuck]
Yuk Tsang works on the final assembly line for the Arena.
Project manager Robert West was the engineer who led the design of Baxter’s new hemodialysis machine, the Arena.
LARGO - Robert West, a healthy 53-year-old engineer with Baxter Healthcare Corp., has never been hooked up to a hemodialysis machine. But he knows intimately how the sophisticated device works, cleansing the blood of people with end-stage kidney disease.
West knows that the nurses who supervise dialysis treatments often complain that the bulky devices are too difficult to read and too hard to clean between uses. He knows that patients want the machines to work as quietly as possible, so they can read or sleep while hooked up for four-hour sessions, typically three times a week. And he knows that in Europe, patients have such close relationships with the life-saving devices that they give them names, like an old friend.
All this information was critical to West, a project manager in Baxter's research and development unit in Pinellas County, as he and a team of about 30 spent the past two and a half years designing Baxter's newest generation of a medical mainstay that was originally cobbled together in the 1940s from wood slats, orange juice cans and a washing machine.
The group's creation, dubbed Arena, is now being built at Baxter's Largo factory. About 5 feet tall, with sleekly curved edges and sky-blue trim, it bears more than a passing resemblance to Rosey the Robot from the cartoon Jetsons. But there's a 15-inch touch-screen monitor where the face should be.
Introduced in November, the Arena is still being fine-tuned just a few miles down the road at Morton Plant Hospital in Clearwater, one of 15 test markets worldwide. At the inpatient unit there, medical staffers say Arena has lived up to its billing.
"The machine is more reliable, user-friendly and safe for the patient," said Dr. Larry Dewberry, a kidney specialist on Morton Plant's staff as well as in private practice. "Baxter's competition has had lots of problems with its new models, but Baxter's has had very few bugs. It's a workhorse machine."
Though the company declines to say how much the Arena costs, Dewberry estimates it would sell for $15,000 to $18,000.
Baxter, a global drug and medical device company with $8-billion in sales in 2002, needs a big hit like Arena. In late December, the Deerfield, Ill., company disappointed investors by reducing earnings estimates for the fourth time this year. Baxter said less-profitable health care products are comprising a higher proportion of its international business. Prices are also weak for two of the company's most important products, plasma proteins and blood-clotting drugs for hemophilia.
Those products are part of Baxter's bioscience business, which generated $3.1-billion in sales in 2002. Medication delivery, including intravenous solutions and pumps, has been the company's largest revenue generator, with $3.3-billion in sales. Baxter's renal division, which includes dialysis machines, like the new Arena, and dialysis products, brought in $1.7-billion in 2002.
Jan David Wald, a senior health care analyst with A.G. Edwards in Minneapolis, said Baxter has treated its renal division as a cash cow while developing its bioscience business.
"But their record in biosciences has been spotty, so dialysis may have a more important role in the long run than has been envisioned."
Wald thinks the Arena might offer a much-needed boost to equipment sales. "It's an opportunity to improve growth rates, which have been relatively slow over the last year or so," he said. "It sounds as if their new product is going to be competitive and give them some leverage."
Baxter's Largo plant, and the research and development team nearby in Pinellas Park, have a historical link to their parent company's renal business. The local operation originally was owned by a water pump manufacturer that morphed into a maker of dialysis machines. That business was bought by Johnson & Johnson, which sold it to Baxter in 1984.
Since 1986, the plant has been housed in a low-slung, red-brick complex off Belcher Road. The factory is the only manufacturer of Baxter's dialysis machines, which come in two versions: hemodialysis machines like the Arena, which cleanse and recirculate blood, are most often found in outpatient centers, and peritoneal dialysis machines, which are used at home and pump dialysis solution into the patient's abdominal cavity through a catheter. Of the more than 300,000 Americans with chronic kidney failure, 90 percent receive hemodialysis while 10 percent use peritoneal dialysis. Use of the peritoneal machines is more widespread outside the United States, especially in Canada and Asia.
The Largo plant builds up to 5,000 hemodialysis machines each year; over the past decade, it has produced 40,000 machines for use worldwide. Local workers also build nearly 10,000 peritoneal machines, each about the size of a computer printer. The company declines to say how many of its peritoneal machines are in use globally.
In addition to manufacturing the dialysis hardware, employees in Largo staff a 24-hour call center to advise kidney patients in North America and dialysis service centers worldwide. The total local Baxter workforce, including the research and development office in Pinellas Park and a distribution center in Tampa, numbers more than 850.
Though about 75 percent of the Largo plant's work revolves around Baxter's renal business, the local facility also makes blood-collection machines, including a new model, used by Florida Blood Services among others, that collects much-needed red cells only. Local engineers also build some of the more complex medication delivery pumps used in hospitals; simpler models come off a Baxter assembly line in Singapore.
Mike Perez, an engineer who joined Baxter in 1992, just completed his first year as Largo plant manager. He boasts that the factory is vertically integrated, with 70 percent of product components made in-house.
"We build our own circuit boards and have our own machine shop and painting operation," he said. "I recently had a Baxter executive tell me this is the most sophisticated plant the company has."
Along with its product diversity, the plant's workforce includes employees fluent in 18 languages.
"I use it for competitive advantage," said Perez, a Spanish-speaking native of Cuba. "When we have field service engineers come in from South America, I can line them up with Spanish-speaking technicians. When we had visitors from the Bavarian Red Cross, we had three workers who spoke German. And when we had a Chinese delegation visit, we found someone fluent in Mandarin."
Perez and his colleagues at Baxter are hoping that kind of customer service will help increase sales. Baxter's hemodialysis machines, even the new Arena, are at a disadvantage in the U.S. market because the majority of outpatient dialysis centers are owned by competitors such as Gambro Co. and Fresenius Medical Care who equip the centers with their own machines.
Conversely, Baxter dominates the market for peritoneal machines, both domestically and worldwide. In its 2002 annual report, the company said it is the world's biggest manufacturer of products for peritoneal dialysis and that 70 percent of sales in its renal division come from outside the United States.
Dewberry, the Clearwater kidney doctor, recommends Baxter machines for home dialysis even though his hemodialysis patients are treated at a center equipped with its competitor's machines. "In terms of educating health care professionals and patients, Baxter is superb," he said.
Payment for both kinds of kidney dialysis in the United States comes through Medicare, which reimburses for the treatments regardless of the patient's age. Currently, Medicare spends about $11-billion on dialysis each year. Though the average length of stay on dialysis is five years, Dewberry said he has had one patient on the therapy for 25 years and several for up to a decade.
And the demand for dialysis is only expected to increase, with the number of people with chronic kidney failure projected to double to more than 600,000 by 2012. Most common causes of renal failure are juvenile diabetes, hypertension and aging.
Those numbers mean more challenges for Bob West, who interviewed more than 50 doctors, nurses and patients in five countries before designing the Arena. In his team's quest to make a machine that was easier to use and more patient friendly, he said one unusual request had to be turned down.
"They asked us to build in a name tag holder for each machine, but we couldn't do it because a recessed area like that would be hard to keep clean," West said. "So I guess they'll just have to keep taping name tags to the machines. That's how much patients identify with them."
