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Medical/hospital nonwovens: healthy, but not without minor ailments; cost, infection control and the disposability of its products continue to drive marketing and product development efforts in this billion dollar industry for nonwovens.

MEDICAL/HOSPITAL NONWOVENS Healthy, But Not Without Minor Ailments

For a market so large, so healthy and so influential, the medical nonwovens business has very few forces driving it into the final decade of the 20th century. But those forces each individually have the potential to make or break many companies involved in the segment.

The triple impacts of AIDS, cost containment and disposability remain the three overriding topics on the minds of anyone even remotely involved with the $1.35 billion medical nonwovens segment.

To borrow an old phrase, the U.S. medical nonwovens business remains "healthy," although it certainly is no longer experiencing the rapid growth pattern it enjoyed through much of the mid to late 1980's. Double digit growth figures of the past three or four years have fallen to a more modest projected 7-8% annual expansion; that's not sickly, but it is obviously not as robust as it once was.

The effect of AIDS and other contagious diseases - a frequent subject of debate among participants who differ on just how much of an impact this has had on medical suppliers - is starting to slow, if it hasn't indeed lost most of its punch already. The undisputed need to protect medical workers from blood borne diseases has led to a number of innovative new products and has certainly helped speed up the conversion of many facilities to disposables. The consensus remains, however, that much of this would have happened eventually anyway.

On the other side of the coin, cost containment and continuing pressures to cut or hold prices have reduced margins of fiber and binder suppliers all the way to converters. The pressure to cut costs - and to pass on any inhouse cost saving measures to equally hard-pressed customers - has led more than one major player to reevaluate its participation in the segment.

The concern over disposing of medical disposables has also forced suppliers to defend themselves against marketing attacks by reusable suppliers already armed with the support of environmentalists. The job of keeping hospitals convinced of the benefits of a disposables system falls to suppliers of these products, who are promoting incineration as a means of getting rid of infectious wastes, while reminding administrators of the performance reasons they switched to nonwovens in the first place.

Performance, Not Just Disposability

Hospitals and other medical facilities turned to nonwovens in great numbers over the past two decades perhaps because of the allure of disposability but more so, especially more recently, because of the proven performance characteristics the disposables offer. Repeated tests have proven nonwovens better able to protect workers from infectious liquids. When combined with long-term cost and labor savings of the disposables, nonwovens have been able to significantly penetrate almost every nonwovens fabric market.

Of course, highest penetration has been achieved for face masks, where nonwovens offer close to 100% efficiency in filtering out air-borne bacteria. Other significantly penetrated areas include shoe covers (close to 90% penetrated by nonwovens), X-ray and examination gowns (90% penetrated), shoe covers (85%), patient drapes (83%) and staff surgical gowns (80%).

Segments still offering significant opportunities for nonwoven disposables are central supply room wrap, which remains only about 60% penetrated, isolation gowns (about 55% penetrated), wash cloths (63%), sponges and dressings (20%) and scrub apparel (5%). The areas of floor uniforms and linens and towels remain dominated by woven reusable products. Infant and adult diapers, however, have become primarily disposable products at the vast majority of hospitals.

With penetration at very high levels in many vital segments, and with the outlook somewhat dim for movement into areas such as apparel and uniforms, suppliers of medical fabrics are concentrating on the strengths of their disposable fabrics rather than on their disposability.

"We have long taken the approach of promoting our products as superior fabrics and products for end users," John Metz, vice president-Professional Health Care, at Kimberly-Clark, Roswell, GA, told Nonwovens Industry. "We have the support of medical professionals that our products offer superior protection and we have built on that." There are also economies involved in using disposables over reusables, but that is not the marketing approach K-C has chosen to follow.

"My experience is that when a facility makes a conversion from reusables to disposables, there is a clinician or other professional who is convinced of the need to switch. That, along with the cost comparisons of reusables versus disposables, is the primary driving force behind our growth," said Mr. Metz.

The rest of the nonwovens supply industry is certainly emulating K-C's approach. Such dedication to a combination of performance, ease of use and economics allowed it to become a $1.2 billion converted products business last year, a figure expected to reach the previously mentioned $1.35 billion mark this year on the basis of 7-8% expected growth (see Caffrey box on page 35).

Medical Nonwoven Products: Growth At 7% Forecasted

The total market for nonwoven medical products increased to $1.2 billion in 1988, up 9% over the previous year. Close to two-thirds of these sales were represented by three markets - surgical drapes, surgical gowns and adult diapers. Consumption of nonwoven fabrics increased 6%, to 3.3 billion sq. yards. Three fabrics - splunlaced, spunbonded-spunbonded/ melt blown and wet laid each represented close to 25% of this consumption.

The major participants in these nonwoven markets have remained unchanged for the past several years. DuPont, Kimberly-Clark and Dexter Nonwovens continue to represent more than 50% of total 1988 medical nonwovens production. DuPont and Chicopee are the major suppliers of spunlaced, the most widely used fabrics for surgical drapes and gowns. Kimberly-Clark produces spunbonded and spunbonded/melt blown composites, with the largest consumption of spunbonded in adult diapers and of spunbonded/melt blown in CSR wrap.

Dexter's wet laid nonwovens are used in a variety of applications. Baxter, Surgikos, K-C and Procter & Gamble combined consumed more than two-thirds of this fabric output. Baxter and Surgikos continue to control the bulk of the surgical pack and gown markets. Kimberly-Clark's largest franchise is CSR wrap and P&G's only major business is adult diapers.

Several emerging trends have, to varying degrees, affected the usage of nonwoven products. The problem of providing proper protection for hospital personnel when dealing with infectious diseases has continued as one of the most significant developments in the industry. Use of products such as isolation gowns and face masks in general nursing care areas has increased substantially over the past two years. Surgical personnel are rapidly switching to plastic or fabric reinforced surgical gowns for added protection in the operating room. Plastic pouches have been added to surgical drapes to allow for better collection and control of OR fluids. Most hospitals have already, or are currently, switching to specific standards, such as Universal Precautions, to deal with this problem.

The issue of disposing of medical waste is receiving a great deal of media attention. To date, no significant changes in the usage pattern of medical nonwoven products have been evident due to this trend. However, participants in these markets will need to stay abreast of industry developments and assist their customers in dealing with the problem.

Acceptance of customized procedural kits has continued to grow, with a significant percentage of all disposable pack and gown sales in 1988 passing through this market segment. Hospitals have generally found these kits to be cost effective and their acceptance is expected to continue to increase over the next several years.

The outlook for future nonwoven consumption is good, but growth rates will vary by product. Certain of these disposable nonwoven products, including surgical packs, are rapidly approaching full penetration, having almost totally displaced reusables. Further, surgical procedures are increasing at only about 1% a year.

In total, sales of nonwovens medical products are likely to increase at about 7% a year, to $1.5 billion by 1992. Nonwoven fabric consumption may grow at about 5% a year. Surgical packs and gowns, CSR wrap and adult diapers will remain the largest markets for nonwoven fabrics. However, consumption by nonwoven fabric type may change, as converters/marketers consider various fabric options to meet the changing requirements of the marketplace.

The single largest segment within the medical nonwovens business is surgical drapes/packs, which constituted 28% of 1988 sales with $320 million. Adult diapers, when classified as a medical nonwoven category even though sold primarily to nursing homes, are the second largest segment with $260 million in institutional sales, or 24% of the business. Surgical gowns, with about $150 million in sales last year, account for 13%.

There is then a group of secondary products that contribute to the total, including CSR wrap ($95 million in sales last year), underpads ($85 million to both hospitals and nursing homes), sponges and dressings ($80 million), face masks ($35 million), infant diapers ($30 million), shoe covers ($18 million), isolation gowns ($17 million) and head covering ($16 million).

The gamut of nonwoven technologies is utilized in the manufacture of medical products, with the exact process or processes depending on the exact demand of the end use. According to figures recently published by John R. Starr, Inc., 26% of all medical nonwovens are spunlaced, 24% wet laid and 20% are traditional card and bond nonwovens. Most interestingly, 23% of the estimated 3.3 billion sq. yards of nonwoven medical fabrics consumed last year are either spunbonded or composite spunbonded/melt blown fabrics.

In total there are about 60 companies (not including divisions) that shared 1989 sales. The dominance of a few very large players in this field is evident in the three largest competitors sharing about 60% of 1988 sales, according to a report on The Medical Nonwovens Disposables Market by Theta Corp., Middlefield, CT. More than half of that, about 33% of the total, was held by Baxter (American Pharmaseal-Converters/Baxter Hospital Supply) with slightly over $300 million in annual sales into this market. Two other leaders are Johnson & Johnson (Surgikos, J&J Patient Care, Chicopee), which held about 16%, and K-C, with about 12%.

The next closest competitor is Procter & Gamble, which, although limited to incontinence/diaper products, still managed to hold about a 9% market share.

The next level consists of four companies with a total market share of 13%. These include White Knight/Work Wear (including Struble & Moffitt), Kendall, Medline and Whitestone Products/IPCO. White Knight and Medline compete across all product groups, while Kendall is active in only three of the four major areas and Whitestone's principal area is incontinence.

The next competitive group is made up of six companies each holding between 1.4-1.7% market share; together they account for nearly 10% of the total business in the three major areas of incontinence/diapers, surgical packs/drapes and components and other disposable (CSR/sterilization) wraps.

The final group, again according to the Theta report, involves the largest number (about 45) of companies. Together they share about 6% of sales, each contributing in its own specialized niches.

The AIDS Impact on Nonwovens

There are currently two schools of thought on the impact of the AIDS and infectious disease concern in the U.S. The only consensus is that whatever impetus AIDS gave for hospitals to switch to nonwovens or for companies to develop better barrier fabrics would have happened eventually anyway.

The first school of thought is that the concern over protecting staff from contacting the disease was a boon for the nonwovens suppliers, whose promises of increased barrier protection and safer disposability were right on target. The second is that the concern over AIDS never did make it out of the operating room, where nonwovens were already firmly entrenched, and that cost pressures kept down the widespread use of disposables outside of their normal areas.

The answer probably lies somewhere in the middle. Certainly some hospitals did switch to disposables in a direct attempt to better protect their staff. But many others had already switched or had plans to convert and their conversions were strictly for OR procedures and not for support or floor staff.

"What everyone was looking for was increased utilization of nonwovens outside of the usual uses in the operating room," pointed out Susan Carlson, director of sales and marketing-medical products for Dexter Nonwovens, Windsor Locks, CT. She believes the impact of the AIDS scare on nonwovens growth was minimal.

"As it turned out hospitals feel they can't afford the increased costs or have not yet accepted the increased expenses for nonwovens for increased protection," she added. "It's simply that new customers did not materialize outside of the operating room." Ms. Carlson feels the same optimism surrounding proposed OSHA rulings requiring increased protection for medical workers (see Capital Comments column on page 24) will find even stronger reluctance on the part of hospitals to spend extra to protect employees. "There will be enhanced protection for the staff, we just don't know what that will be at this point. We are poised for change, its just not clear how it will shake out."

Michael Donnelly, business manager-Sontara, at DuPont, Wilmington, DE, feels the nonwovens business did benefit from the increased concern over contagious diseases, but not to the point where it caused the double digit growth of the past few years. "The basic conversion to single use was well along in the U.S. before the concerns over AIDS, although this certainly did accelerate the remaining conversions," he said. He added that if the impact hasn't lessened yet, "it is in the process of slowing down."

The concern in the medical community over infectious diseases has reached all the way down the production chain to suppliers of raw materials such as Microban Products, Winston-Salem, NC, a producer of antimicrobial agents. The company has a patent that covers the addition of antimicrobial agents into binders for nonwovens; the antimicrobial can also be added to polypropylene fiber at the time the fiber is being extruded.

"There is no question that over the last several years the industry and the public in general are becoming more concerned over the spread of infection," he said, adding that the U.S. is following the Japanese lead in this area. "In the past couple of years it has come to the fore, with the concern over infectious diseases pushing the issue."

Mr. Morrison feels a significant pent-up demand remains for infection control medical products, spelling good news for the antimicrobial agents his company produces." "In our opinion, it hasn't yet leveled off. We haven't seen any slowdown yet," he said.

Jim Oelkers, marketing manager at Rohm & Haas, Philadelphia, PA, believes the impact of AIDS has slowed a bit on the supplier side. "We have seen not as much of an effect in 1989, but in 1987 and 1988 we saw a boost in our business that our customers told us was directly related to the AIDS phenomenon." The past year has been a bit of an anomaly for Rohm & Haas since an accident in January at its major monomer plant in Houston that shut production down for 30 days.

Even with the contradictory beliefs, there is no denying the impact the AIDS scare has had on the nonwovens medical business. Products unveiled in the past year or so - from Dexter's "Stasis" infection control fabrics to K-C's "Control" line of medical apparel - were designed for this express purpose. An increased consciousness of the need for patient and staff protection, as exemplified by the OSHA hearings that may require further efforts by employers, can only spell good news for nonwovens producers and suppliers.

Oh, Those Cost Pressures

The increases in sales of medical nonwovens due to the infectious disease concern, whether perceived or actual, surely would have been greater had there not been the constant cost pressures placed on every single step in the supplier chain. It is, as Ms. Carlson, of Dexter, put it, "the biggest concern in the business."

The current push by government, corporations and insurance companies to slow down the escalating costs of medical care has its roots in the early 1980's, when health care in the U.S. became a $1 billion a day business. Today costs for health care represent about 11% of our Gross National Product. And even though supplies account for only about one-fifth of hospital costs, they have borne the inordinate brunt of cost containment measures simply because it is virtually impossible to cut staffing and capital expenses in hospitals.

So the overriding concern to suppliers anywhere on the chain is the continuing margin compression brought about by cost containment procedures. "Whatever internal cost savings you can affect, your customers are looking for you to pass it on to them," said Ms. Carlson.

Mr. Donnelly, of DuPont, labeled the cost pressures "extraordinary," with little relief in sight. "Health care costs in the U.S. are out of control, for a lot of reasons," he said. "The main providers - the corporations and the government - have realized this and are looking to control them. Unfortunately, material is getting all of the scrutiny."

It is going to take a concerted education effort by disposables suppliers to keep their products ahead of the reusable competition. "Cost pressures have become a fact of life," added Jack Kraemer, vice president-marketing, Baxter Operating Room Div., Converters/Custom Sterile Business Unit, McGaw Park, IL, told Nonwovens Industry. "We have to get our customers to look at not just the purchase cost, but at other issues such as aseptic packaging, custom packs, maintaining low infection rates and labor savings in not having to handle reusables. All of these things promote nonwovens beyond their costs and we have to keep telling them that."

Even on the raw material supplier side the price crunch continues to be felt. Howard Katz, marketing manager-nonwovens and textiles, National Starch & Chemical, Bridgewater, NJ, believes "the people we are supplying in the medical area are seeing the cost containment process continue with no end in sight. There is an attitude towards cost containment that isn't going to go away."

As a major long-term supplier to the medical nonwovens business, Hoechst Celanese is obviously concerned over the price pressures. "The entire industry needs to work together to make sure we all have a long-term viable business," said David McKinnon, business director at H-C, Charlotte, NC. H-C is dealing with the dilemma of higher raw material costs for itself and more cost pressures from its customers by entering into technical partnerships with both sides. "We are focusing on ways to make our customers better able to deal with these cost pressures," Mr. McKinnon added. "We are trying to find out how we can get more value into the product from our end that will allow them to do their end more cost effectively."

The cost pressures have trickled down to suppliers because of the maturity of the market and because the nature of customers is to ask suppliers to help them maintain costs. Only in this instance the raw material suppliers are caught in the same squeeze.

"There are a lot of people out there very educated about their products," said Mr. Oelkers, of Rohm & Haas. "With this maturity comes price sensitivity. Their businesses are mature and they are telling us they can't absorb even modest increases, which is something we then have to deal with."

That Disposability Issue

There is serious discussion among suppliers as to whether the disposability of nonwoven medical fabrics is pro or a con, an asset or a liability to their marketing efforts. Feelings are mixed, but most point out that nonwovens are certainly safer and more convenient than their woven counterparts.

It is an issue each supplier, no matter where on the chain, must address. Disposability remains a two-sided issue for nonwovens suppliers, most of whom have long promoted the disposability of their products but who now must deal with the issue of disposing of the disposables at a time of increased environmental awareness.

"We have to help address this issue with our customers, because hospitals are facing a significant issue in disposing of waste," pointed out Mr. Metz, of K-C. "We are working hard to understand it all. We have to look at the total supply chain system, from delivery to recycling or disposing. We have to look at the potential impact on better protection for workers and patients and include that in the equation as well." He emphasized that all factors - including worker and patient protection, cost, convenience and disposability - must be factored into the equation before making a judgement.

Mr. Kraemer, of Baxter, echoed the belief that the total picture must be considered before a decision on reusables and disposables can be made. His emphasis is on education of his customers; he views the disposability issue as a drawback for the nonwovens suppliers currently, more so because of lack of education than for performance.

"Much of the problem is an educational need," he said. "Look at the issue of syringes washing up on shore and the initial costs of disposables. These are real concerns. But we have to trade that off and realize why people went to disposables in the first place." The marketing emphasis at Baxter is to educate its customers on why they were attracted to disposables in the first place, namely for performance and costs in the long term. "This is understandably a very emotional issue in the market."

Disposability, he added, "is the number one information issue facing the medical nonwovens business today. I can compete with my competition one-on-one with no problem. But this is a new issue and our marketplace isn't very well informed. When you are uninformed you can make some bad, reactionary decisions."

"We have no choice but to address the issue for the short term first," added Robert Bayer, president of American Threshold, Asheville, NC, a medical products converter that moved into new 75,000 sq. foot manufacturing facilities earlier this year. "This can't go on forever, but we still have to deal with it right now. All of our suppliers are certainly working on their own solutions."

Ms. Carlson, of Dexter, pointed out that the disposability issue is forcing suppliers and customers to remember why they turned to nonwovens in the first place. "We will have to go back to basics and ask `why did we go to nonwovens?' It was not to try to promote a new product, it was because there was a need for better protection from cross contamination and better patient care. Nonwovens still have that today.

"We have a challenge ahead if hospitals are not going to allow increases in costs," she continued. "Hospitals know from experience that they have done very well with nonwovens and there are a lot of reasons to continue using nonwovens."

One of the potential solutions to many environmental concerns, in medical as well as other unrelated areas, is the use of cotton nonwovens, something Ed Hart, product manager for the Natural Fibers Group of Veratec, Walpole, MA, is promoting. "Cotton has the perfect story for disposability," Mr. Hart told Nonwovens Industry." As a supplier of fiber we are looking for what the customer needs and right now they are looking at value added functions of cotton in the medical area." One of those value added areas happens to be disposability.

Nevertheless, there are woven competitors taking advantage of, as Dennis Durkin, marketing manager, Scott Nonwovens, Philadelphia, PA, said, "current political winds" in competing against nonwovens. Scott's new spunlaced line in Landisville, NJ will certainly be targeting the medical segment. "In most cases where disposability and environmental problems are brought up concerning medical nonwovens, it is usually from the people using it as an excuse to return to the wovens they used a while back," Mr. Durkin said.

Concerns and Answers

The nonwovens suppliers have worked too hard for them to lose the footholds they have established against their reusable competitors because of the disposability and cost issues. But these are very real concerns that dominate their marketing planning sessions.

While most feel there is very, very little chance of hospitals returning to reusables - existing facilities and staffing being two of the more imposing reasons - there is always the concern that penetration, already high, will level off completely. That, coupled with even a small number of usage reversals, would make the medical nonwovens market a bit less attractive.

Despite the reusable challenges, Mr. Metz, of K-C, does not foresee any chance of a reversion to reusables from disposables. In fact, "as long as reusables are still in use, there will be growth opportunities for nonwovens as users replace conventional woven textiles in medical applications to obtain better protection."

He did admit there are some hospitals that have thought about going back to reusables, especially with increased marketing pushes by the woven manufacturers. Despite the obvious drawbacks of such a move, there is too much at stake to allow them to ignore the simple fact that nonwovens perform better.

"There is a strong feeling among most professionals that you just do a better job in terms of good clinical technique with single use nonwovens than with reusables," he said. "In addition, most hospitals are no longer set up to use reusables. They want to manage their resources and give good health care and that seems to keep coming back to nonwoven disposables."
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Title Annotation:includes related articles
Author:Jacobsen, Michael; Caffrey, Richard
Publication:Nonwovens Industry
Date:Nov 1, 1989
Previous Article:Making 'big' work 'small': the smaller converters and private label producers can take a page from the Kimberly-Clark and Proctor & Gamble books on...
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