Top Companies Report

Still on Target: Our annual in-depth profiles of the top 10 players in the orthopedic device market.

The orthopedic industry historically has been a safe business during economic downturns. Despite positive demographics, orthopedic industry executives and analysts—justifiably—have concerns about price pressure resulting from a weak hospital sector, the impact of probable healthcare reform currently being debated in Washington, D.C., and pending legislation on Capitol Hill (similar versions already are in effect in some states such as Massachusetts) regulating company interactions with physicians and researchers. And, oh yeah, they have to find time to be innovative, too.

A recent survey by the American Hospital Association reported that nearly all of the 1,078 hospitals taking part in the study said their capital situation had not improved since December or was still getting worse. Hospital administrators are looking for cost savings under every rock. This could—and often does—include insisting that surgeons use lower-cost implants. Results of a survey of hospital purchasing managers conducted by Wachovia at the end of the first quarter suggested that price pressure on orthopedics was likely to increase. Those surveyed expected the average joint implant cost to decline by 4.5 percent within the next 12 months, with spine implant costs down 4.7 percent, according to the survey. Michael Matson, a medical device industry analyst with Wachovia Capital Markets, told Reuters news service that he did not expect prices to match the forecasts of the hospital purchasing managers, but said their responses were a sign of “intensified pressure” on orthopedic firms.

Overall, however, fiscal 2008 was positive for the companies on this year’s list. Revenues continued to rise, though the economic turmoil that came to a head in the fourth quarter limited gains made earlier in the year. The good news is that most industry watchers still predict overall market growth for orthopedic manufacturers. Solid demographics—and a host of other positive factors—are still on the sector’s side. This year’s annual Top Companies report illustrates that even though challenges may have increased (and 2009 could prove to be a harder balancing act than last year), the orthopedic industry’s heavyweights are equal to the task.

Top 10 Orthopedic Device Manufacturers

1.	Stryker Corp.	$6.7B
2.	DePuy (J&J)	$5B
3.	Zimmer Holdings	$4.1B
4.	Smith & Nephew	$3.8B
5.	Synthes	$3.2B
6.	Medtronic Sofamor Danek	$3B
7.	Biomet	$2.4B
8.	DJO Incorporated	$980M
9.	Orthofix	$519M
10.	Wright Medical	$465M