AMO
AMO is Bullish on Optometry.Here's Why it Matters
AMO sees the O.D. as the primary decision maker for all eyecare needs -- even surgery.

Nearly two years after Advanced Medical Optics (AMO) spun out of Allergan, many in the eyecare industry still express confusion over AMO's exact identity, says James V. Mazzo, president and CEO of AMO.

"Our sales reps are sometimes asked by customers to provide pharmaceutical samples," says Mr. Mazzo. "Well, we tell them to call our former Allergan colleagues because we're now two totally separate companies. We have entirely separate shareholders, boards of directors, management teams, sales forces and visions for the future." (For the record: Allergan is the pharmaceutical company. AMO is the ophthalmic medical device company. See the sidebar, "The AMO Spin.")

Mr. Mazzo, a 23-year veteran of the eyecare industry, argues that all players in the industry -- especially optometrists -- need to gain a thorough understanding of the manufacturers that serve them. "Optometrists are becoming more and more involved in industry activities and issues," he says. "It is important they understand how the companies they deal with can impact their practices."

The eyecare connection

What should optometrists understand about AMO? First, it depends on its contact lens care business for about 50% of its $600 million annual revenue. "Technology is our lifeblood," says Mr. Mazzo. "If we don't continually introduce the most technologically advanced products, then we will lose and the industry will lose."

Second, AMO is a strong supporter of optometry, says Mr. Mazzo. "Optometry is a large and well-established market with an excellent opportunity to continue to grow," he says. "Other professions will typically lean toward the elderly or the young. But people of all ages are served by optometrists every day."

AMO uses this view of optometry to shape its strategy. The company developed a "vision care life cycle," which illustrates the typical patient's eyecare needs throughout his lifetime. Mr. Mazzo identified the opportunities for optometrists along the cycle.

For example, most new fits of contact lenses are among 14- to 24-year olds, the second-fastest growing demographic, and the majority of all contact lens wearers are under the age of 35. "A contact lens patient is more profitable to a practice than a non-contact lens patient," says David Noon, AMO vice president for North America.

In addition, 40- to 55-year olds are experiencing changes in their refractive needs. They are the most affluent group and they're willing to spend money for new innovations to address presbyopia, for example.

"It's AMO's mission to help optometrists maximize their opportunities to serve patients and grow their practices," says Mr. Mazzo.

Most contact lens wearers use the lens care products that their doctors recommend.

The decision maker

When it's time to make a choice regarding the patient's ocular health, AMO recognizes the optometrist as a critical link "in the chain of decision making," says Mr. Mazzo.

"The optometrist rightfully dictates the best products for his patients," he explains. "And they're effective -- 75% of contact lens wearers will use the contact lens care product recommended by their doctor."

Therefore, AMO focuses its sales, educational and marketing efforts on the practitioner rather than on the consumer. This approach has rewarded the company. "On a worldwide basis, our Complete Moisture Plus brand (a multi-purpose contact lens care solution) grew by 17% last year while the overall segment grew about 5%," says Mr. Mazzo. "And some claim this is a no-growth segment."

Mr. Noon says that increased sampling among O.D.s has helped gain recommendations for Complete. "Before the spin, optometrists didn't receive samples consistently," he says. "That has changed. We're working closely with eyecare practitioners to not only provide them with samples, but also to survey their patients about their contact lens care preferences." According to AMO's patient surveys, eight out of 10 patients said that Complete Moisture Plus made their lenses feel comfortable. "Consequently, requests for our samples have continued to rise," says Mr. Noon.

	"No one should be shy about charging a premium price for a premium product or service." -- James V. Mazzo

The O.D. and surgery

The optometrist's role as decision-maker even extends into surgery, says Mr. Mazzo. "The number-one reason that the optometrist must be knowledgeable about surgery is because the patient is more knowledgeable," Mr. Mazzo says. "Ten years ago, a patient wouldn't have asked, 'Can you tell me about this new cataract procedure called bi-manual phaco?' But the Internet has changed that. So if you're the practitioner, you want to be educated."

In addition, optometrists are now often involved in screening their patients for refractive or cataract surgery. They're involved in preoperative and postoperative care.

Also, because of comanagement, the optometrist "needs to understand the product lines in order to have a reciprocal relationship with the ophthalmologist," Mr. Mazzo explains.

According to Mr. Noon, AMO is unique in its role of providing optometrists with an education in refractive and cataract surgery. "Optometrists are the refractive specialists and we're a leader in advances that improve vision," he says. "So we want to make sure that the optometrist appreciates all of the alternatives. The better the education, the better decision the optometrist can make for the patient."

Pay for performance

With this central role in the ocular health of patients, optometrists need to recognize their own value, says Mr. Mazzo. "They graduated optometry school. They take classes to receive CE credits. They train their staffs and maintain offices. They should command a premium in their practices. No one should be shy about charging a premium price for a premium product or service. We don't. We recognize the value of the science inside our bottle."

Mr. Noon says that optometrists need to avoid a "vendor mentality" and instead maintain a medical provider mentality. "Successful optometrists leverage their power and value," he says. "They make strong recommendations for products and approaches that improve vision care. This is something we emphasize in our educational efforts. We don't want to see optometrists give up this power."

The AMO Spin

Several years ago, Allergan found that its two primary businesses ­ pharmaceuticals and medical devices ­ were in conflict. They operated differently, had different product development and regulatory processes and delivered different margins. The fast-growing pharmaceutical business was receiving an increasing share of resources, sales and marketing attention and management focus, often at the expense of the medical device business. "We were separate businesses with few synergies to leverage," says James V. Mazzo, president and CEO of Advanced Medical Optics (AMO). "Wall Street viewed the businesses differently. Even our sales organizations were separate, with medical device specialists and pharma specialists calling on the same practitioners."       James V. Mazzo   A resourceful solution "Outside the U.S, Allergan was a leading medical device company with a growing pharmaceutical base," says Mr. Mazzo. "In the U.S., however, we were primarily a pharmaceutical company, with a small medical device business that was not receiving ample resources. It was evident in our U.S. market positions." As then-president of Allergan's Europe, Africa and Middle East region, Mr. Mazzo was part of the senior management team that developed the solution. The company would spin off the contact lens care and ophthalmic surgical businesses into a separate entity, leaving Allergan to focus on pharmaceuticals. The transaction, executed in July, 2002, created AMO, a company headquartered in Santa Ana, Calif., and listed on the New York Stock Exchange under the symbol AVO. "We're a worldwide company," says Mr. Mazzo. "We have manufacturing facilities on three continents and a direct sales organization in more than 20 countries, with a presence in more than 60." A new approach to optometry Under Allergan, there was a limited, primarily part-time sales force that called on U.S. O.D.s. Outside the United States, the company had a dedicated sales force. Since the spin, AMO has increased its U.S. sales force, with full-time employees covering a much broader geography. David Noon, AMO vice president for North America, says that the sales force is critical to the company's education efforts. "We're certainly there to sell our products, but it must be in the context of what benefits the doctor's practice." "Look at the millions of contact lens dropouts, for example," adds Mr. Mazzo. "The number-one reason for dropouts is comfort. If our contact lens care product makes lenses as comfortable at the end of the day as they are at the beginning, then the patient wins. With fewer dropouts, the practitioner wins. And with the patient using our product, we win." AMO also broadened its educational efforts to include industry meetings as well as a presence at all of the schools of optometry. Mr. Noon notes that before the spin, "these efforts were minimal."