Michael Barbella, Managing Editor05.19.14
The painkillers didn’t help much. Yet Irene Passani refused to skip them, hoping—praying, really—they would somehow work their magic. She longed for a normal life, a return to an ordinary existence filled with restful sleep and mundane tasks such as dog-walking, driving, and kickboxing.
Passani often dreamed of the day she’d be pain-free. She pictured herself running up stairs to catch a train, or riding her bike around the neighborhood on bright sunny mornings. And each time, she’d be jolted back to reality by the excruciating pain in her right knee.
“The pain was so debilitating it would wake me up five or six times a night even though I was taking a painkiller,” the 52-year-old said. “Since my knee didn’t have any cartilage, it was bone-on-bone. After 17 years, my leg was so bowed it was truly uncomfortable physically and emotionally to walk around.
Going up and down stairs was almost ridiculous because I had to do a little jump in order to come down and I had to walk up very slowly. Also, it was difficult for me to get into the car quickly because my leg was so stiff I had to guide it in. I thought to myself, ‘there’s got to be a solution where someone can help me and fix this leg.’ ”
Passani’s solution turned out to be an iUni G2 unicompartmental partial knee replacement from ConforMIS Inc., a Bedford, Mass.-based developer of patient-specific osteoarthritis treatments and joint replacements. The company uses digital imaging and 3-D models to precisely match implants to the shape and curvature of individual joints.
Cleared by the U.S. Food and Drug Administration (FDA) in January 2011 and released commercially in October 2012, ConforMIS’ iTotal Patient-Specific Tricompartmental Knee Replacement System was designed as an alternative to traditional “off-the-shelf” knees, which come in a limited range of shapes and sizes.
The iTotal G2 was developed in conjunction with the company’s patented iFit technology for designing patient-specific implants and jigs. Each iTotal G2 is made to fit an individual patient based on his or her computed tomography (CT) scan. Since each implant is made to fit just one patient, surgeons avoid the sizing and fit trade-offs associated with standard knee replacement procedures. The implant shape and geometry closely matches the patient’s natural joint anatomy and curvature, providing the potential for more natural knee motion. In addition, the iTotal’s pre-navigated disposable instruments help place the implants accurately and reproducibly.
“We know that about one in five patients are fairly unhappy with their knee replacement, even when the X-rays look perfect and the surgeon feels that it came out very well,” said Baltimore, Md., orthopedic surgeon Barry J. Waldman, M.D. “One of the reasons that happens is probably because off-the-shelf implants don’t fit perfectly. They either overhang, meaning they rub on the soft tissues, or they’re too small and the bone sticks out. The closer we can get to getting those parts to fit their knee, we think the happier the patient is going to be and the more natural [the replacement] is going to feel.”
The desire for naturalization in artificial joints has spawned a plethora of custom solutions in recent years from emerging companies like ConforMIS and major manufacturers including Biomet Inc., DePuy Synthes, Smith & Nephew plc, Stryker Corp., and Zimmer Holdings Inc. Though these firms speciously tout their designs as “custom,” the implants they sell actually are not made-to-order—they’re the same off-the-shelf replacements (available in six to 10 standard sizes) that have been used in countless other procedures over the last several decades. The customization lies in the instruments.
Zimmer’s patient-specific instrument system, for example, features tailor-made jigs built to fit the articular surface of a patient’s distal femur and proximal tibia. Designed into the jigs are guides for drill bits that facilitate pin placement and cutting blocks during surgery according to pre-operatively planned bone resections. The system’s tibial guide also contains provisions to help the surgeon set the tibial implant’s internal/external rotation.
Smith & Nephew contends the “customized” cutting blocks in its Visionaire Patient Matched Instrumentation Kit eliminate up to 22 surgical steps from a knee replacement procedure. Made from medical grade nylon, the Visionaire cutting blocks are aligned to the knee’s mechanical axis for improved positioning and, ideally, implant longevity. Smartly, the blocks are compatible with standard instruments in case bone resection modifications are needed during the procedure (i.e., additional distal resection to accommodate for a flexion contracture).
DePuy Synthes claims the stainless steel guides within its RenShape plastic cutting block set are designed to minimize particle generation during bone cutting, while ConforMIS brands its iJig instruments as “a next-generation approach to the challenges associated with traditional orthopedic surgery.” Designed to work with the firm’s patient-specific implants, iJigs replace multiple trays of instrumentation with a small set of disposable cutting and placement guides.
iJig pre-navigated instruments are designed using the same imaging data as ConforMIS implants. Surface contour data from the patient’s joint ensures that each iJig is precisely sized and shaped to match the targeted anatomy in only one location and with one orientation. Cut angles and drill holes are placed by the surgeon by maneuvering each iJig until it finds its anatomic markets and settles into position.
“A lot of orthopedic companies have patient-specific instrumentation. This type of instrumentation is becoming a lot more common now because it reduces the time it takes to complete a surgery and it’s a more precise fit for the patient. But many of the implants used are still off-the-shelf implants,” said Brian McLaughlin, ALM business unit manager for DiSanto Technology Inc., a Shelton, Conn.-based designer and manufacturer of orthopedic implants and instruments.“
ConforMIS is a company focused on custom implants and instruments derived from the CT scan of a patient’s joint. The fact that ConforMIS closed perhaps the single largest round of funding in the history of orthopedics really says something about the technology, though. They are not in the limelight as much as the big guys are, but people in the industry still know who ConforMIS is. They are here and they’re not going anywhere and that in itself says something as well.
“As far as the DePuys, the Strykers, the Biomets of the world, they really have standard implant solutions on the market that cover a range of sizes based on experience and history. They’ve become very adept at educating people about their solutions,” he continued. “We all have easier access to information now and people have become much smarter about their own healthcare. When a doctor says ‘we may have to go in and do a total knee,’ many patients will go and research knee replacement procedures. People are more informed than ever now, and they’re looking more at patient-specific solutions because the information is readily available to them.”
Knowledge, though, can be a dangerous double-edged sword, particularly in healthcare. Products and procedures with professedly impressive benefits can have monumental challenges as well. Case in point: Patient-specific implants generally are lauded for their ability to improve implant alignment, increase patient throughput, minimize tissue loss, lower overall healthcare costs, shorten recovery times and decrease infection risk. Yet clinical data on the technology is mixed.
One study conducted within the Department of Orthopaedic Surgery at the University of Mississippi Medical Center in Jackson recorded 161 intraoperative changes in 66 knee arthroplasties (2.4 changes/knee) performed with patient-specific instrumentation. The predetermined implant size was changed intraoperatively in 77 percent of femurs and 53 percent of tibias. In addition, researchers identified a subset of 95 intraoperative changes that could be radiographically evaluated to determine whether their changes helped or hindered surgeons’ ability to align the implant. Eighty-two of the 95 changes (86 percent) made by the surgeon improved the recommended alignment or size of patient-specific instrumentation. The study found that guides fit improperly on eight femurs (12 percent and three tibias (5 percent). The instruments did not improve tourniquet time or blood loss.
“We caution surgeons against blind acceptance of patient-specific instrumentation technology without supportive data,” the researchers warned.
Besides a mixed bag of data, the technology’s other sticking points include limited contingencies (no room for error), long turnaround times (four to six weeks) and potential radiology training to certify employees on the creation and submission of 3-D scans to manufacturers. Software updates also can be tricky, as companies must convert CT data for manufacturers with FDA-regulated software.
Accordingly, any changes to patient-specific system software must be submitted to the FDA for review and, quite possibly, a new 510(k) process.
Going to Extremes
Indeed, the “Big Five” orthopedic implant manufacturers have become quite skilled at educating patients about their respective technology. But there still is room for improvement.
Consider, for example, the lack of marketing/enlightenment of patient-specific instruments for shoulder replacements, a sector that has experienced staggering double-digit growth in the last few years. Analysts expect the global market for total shoulder replacements to reach $959 million by 2019, due primarily to significant increases in shoulder arthritis and fractures.
Biomet, DJO Global and Zimmer each offer patient-specific shoulder systems but the technology largely is overshadowed by their knee replacements.
The two anatomy sets are designed similarly, using CT data to create preoperative case plans for surgeons to template and prepare for procedures. Zimmer’s Patient Specific Instruments shoulder system uses 3-D visualization software and complements the company’s Trabecular Metal reverse shoulder system. Biomet’s Signature glenoid system, on the other hand, features a patent-pending dual trajectory and is used in conjunction with its Comprehensive shoulder system; DJO’s Match Point system, meanwhile, employs Materialise’s SurgiCase Connect software and is designed specifically for the company’s reverse shoulder prosthesis and Turon modular total shoulder system.
“There are over 100,000 [total] shoulders done on an annual basis now,” McLaughlin noted. “A number of companies are making a lot of noise in total shoulders. It’s a great opportunity.”
The entire extremity market, in fact, has become a golden opportunity for companies, particularly those that have relied on large-joint implants for growth. Zimmer posted a 9 percent rise in first-quarter (2014) extremities sales, more than double the increase in knee proceeds. Stryker followed suit—its Q1 trauma and extremities sales rose 8.4 percent while hips and knees lagged behind at 3.1 percent and 1.1 percent, respectively.
Wright Medical Group Inc., which divested its hip and knee implants business last year to MicroPort Medical B.V. for $290 million, experienced phenomenal growth in the first three months of the year: Its global foot/ankle sales ballooned 31 percent to $46 million, and upper extremities proceeds swelled 6.9 percent to $6.47 million, according to the company’s latest earnings report. Wright’s products were especially popular overseas: International foot/ankle sales skyrocketed 76 percent to $12.8 million, while its upper extremities offerings mushroomed 45 percent to $2.8 million.
“The small-joint market is what is growing right now. We have seen very good growth with our customers in the extremities business,” said Wally Gacek, senior director of business development at Tegra Medical, a Franklin, Mass.-based precision machining service provider and contract manufacturer. “It appears there is a lot more activity in small joints. A customer of ours that was focused on the hip has been branching out to other areas of the body, moving away from the hip area, because there are more opportunities. The large joints are not seeing the growth they’d become accustomed to in the past. So companies are leveraging some of the lessons they learned there or their infrastructure to expand into the smaller-joint markets.”
That likely was the impetus behind Zimmer’s $13.4 billion bid for Biomet. Market analysts claim the deal, expected to close in the first quarter of 2015, will give the new, combined company one-quarter of the fast-growing extremities market and more than a third of the shoulder market. Mike Matson of Needham & Co. called the move a “home run,” noting it will allow Zimmer to move up the food chain of orthopedic device manufacturers.
“With this deal, Zimmer’s worldwide share in extremities increases from 11 percent to 20 percent...,” Matson wrote in a note to clients. “Zimmer’s overall orthopedic market share increases from 10 percent to 17 percent, pushing it past Stryker into the No. 2 position behind Johnson & Johnson.”
Many industry observers were not surprised by the Zimmer-Biomet merger, given the recent history of market consolidation.
“We’ve seen fewer players, as the medical device companies buy up each other’s ‘lines’ for growth in a particular market, or to exit a particular market,” said Tanya DiSalvo, president and owner of Criterion Tool & Die Inc., a Brook Park, Ohio-based precision machine shop specializing in CNC milling, turning and Swiss turning technologies. “From the manufacturing end, we were never in knees and hips but now the companies that were extensively in those areas are looking to lower extremities and small-bone fixation or trauma-type applications.”
Rise of the Generic Implant
Ours is a brand name-loving society.
Nothing, for example, came between us and our “Calvins” in the early 1980s (thanks partly to its vivacious teenaged spokesmodel); no other shoe has inspired us quite like Nike (“Just Do It”); and few fast-food chicken dinners have been as “finger lickin’ good” as KFC.
In healthcare, our brand loyalty clearly is evident in the popularity (and skyrocketing sales) of pharmaceuticals like Lipitor, Vicodin and Zithromax, as well as joint replacements from orthopedic device behemoths Biomet, Johnson & Johnson, Stryker and Zimmer. Generic alternatives—regardless of their proven efficacy—just haven’t garnered the same respect.
“When someone hears generic, they often think cheap. They think inconsistency and poor quality,” Orland Park, Ill., orthopedic surgeon Blair Rhode, M.D., wrote in an article for PHA Pulse, the official publication of Physician Hospitals of America. “Generic is actually about efficiencies and process.”
Maybe so, but America’s medical institutions generally have been unwilling to gamble their reputations and patients’ lives on products that lack manufacturers’ support. Moreover, the orthopedic industry has ensured they’ll never succumb to the temptation: Generic or foreign-made joint implants largely have been shut out of the United States by trade policy, patents and an expensive U.S. Food and Drug Administration approval process that deters startups from entering the market. “Companies defend this turf ferociously,” Peter M. Cram, M.D., a University of Iowa medical school physician who studies healthcare costs, told the New York Times last summer.
Lately, however, those companies have encountered some resistance. Efforts to control healthcare spending (the Affordable Care Act) and the shrinking number of private practice physicians is creating both a need and desire for lower-cost alternatives to pricey implants. Companies such as Rhode Orthopedic Group (founded by Rhode in 2010), Emerge Medical Inc., run by a former Synthes sales consultant, and The Orthopaedic Implant Company, led by a former Smith & Nephew rep, are selling “generic” screws, plates, drill bits and other devices in part through a no-frills sales approach.
Only one of the major implant manufacturers—Wright Medical—has joined the generics movement. In 2010, the Arlington, Tenn.-based company launched White Box Orthopedics, a business that offers cheaper versions of its replacement hips and knees through a more bare-bones sales approach.
Rhode’s Orland Park, Ill., company uses the same approach to sell a 5.5 millimeter knotless anchor for $80, a 7.5 millimeter by 70 millimeter cannula for $180 and a rope suture wire for $23. The firm also offers a German 30-degree angled suture passer for $700, an insertion tool for its 2.9 millimeter anchor for $560 and a $170 tissue elevator based on a Cobb elevator design.
Neither Emerge nor The Orthopaedic Implant Company (OIC) publicly disclose prices for their products. Four-year-old OIC—which launched a portfolio of proximal humerus, distal radius and clavicle plates/instrument sets last fall—has vowed to save $1 billion in healthcare costs by next year through the sale of quality discount implants priced up to 60 percent less than average market premiums. “Innovation has a price and a premium,” the company claims on its website. “We support that idea because it drives better products, but it is important to drive the human race forward as well. People should no longer pay an arm and a leg for the very implants that go into them. OIC innovation embraces both the delivery of high-quality products with life-changing costs so everybody feels better.
We call it ‘human pricing.’ ”
Such humanistic markdowns potentially can generate significant savings for hospitals. Reno, Nev.-based Renown Regional Medical Center, for one, realized an additional $49,125 annually by using OIC’s 7.3-millimeter cannulated sacroiliac and femoral neck screws in trauma procedures. Two independent studies found the generic cannulated screws performed as well as conventional versions in femoral neck fracture and posterior pelvic ring injury treatment.
Emerge Medical is a proponent of “human pricing” as well, selling cannulated screws, guidewires and drill bits at 40-50 percent below market premiums. The Denver, Colo.-based firm sustains the price cut by focusing mostly on core devices used for multiple procedures (avoiding complex hip/knee replacements) and bypassing the sales rep.
Several years ago, such an idiosyncratic growth strategy would have seemed radical and overreaching. But the orthopedic device market is a significantly different beast these days, permanently scarred by stubbornly high unemployment and U.S. healthcare reform. Hospitals and group purchasing organizations now dictate buying decisions, particularly for general hardware items, forcing surgeons—long a conduit for high product prices—to align themselves more closely with budget-conscious hospital administrators.
As a result, device companies that offer lower-cost alternatives are gaining traction in the market. Emerge, for instance, sells its products through distribution partnerships with Cardinal Health and Premiere Inc., a Charlotte, N.C.-based group purchasing organization with 2,500 member hospitals.
“Based upon our market and customer research, we believe that U.S. healthcare providers are ready to support a simpler, more transparent, fair-priced orthopedic business model,” Cardinal Health spokeswoman Lisa Ashby said when the deal was announced in 2012.
Rhode agrees, though he warns that healthcare providers must do more than merely support lower-priced implants. They must be willing to manage the surgical procedure.
“This starts with being willing to take the representatives out of the operating room and becoming an ‘owner’ versus a ‘renter,’ ” Rhode explains in his PHA Pulse article. “The hospital and surgery center have been more than willing to allow the sales rep to show up with the implants and instruments for the case. This saves on implant inventory and instrument costs, but it comes at a price. We have shown that this results in a 75-90 percent increase in implant prices. This is why hospitals and surgery centers have to become owners of the process and implants.”
Rhode recommends replacing the traditional sales rep with an operating room device technician (ORDT), an on-site specialist qualified to teach and manage all stable implant orthopedic procedures. Besides training surgical teams on implant systems, ORDTs work directly with device manufacturers to resolve product availability/repair issues and handle complaints. OrthoDirectUSA LLC, a Fort Wayne, Ind., consulting group that developed an ORDT curriculum and training program, claims the sales rep swap potentially could transform the orthopedic supply chain.
Skeptics, however, are hesitant to ditch the full-court sales press, fearing inadequate product knowledge from ORDTs and quality issues among new, unproven companies, especially those making subtle changes to well-known implants. Some surgeons also are wary of using discounted products for complex joint replacement procedures.
Ultimately, though, they may not have a choice. Rhode contends a soon-to-be bankrupt Medicare system will force a change in delivery incentives, such as team-based care (partnerships with primary care physicians, specialists, non-physicians and hospitals). Quality outcomes and efficiencies increasingly will be rewarded, and performance will take center stage.
“As reimbursements decline, ambulatory surgical centers (ASCs) and acute-care facilities will have real difficulty trying to survive paying the current markup for stable technology implants. These products are quality, time-tested technologies that have exhausted their patient value,” Rhode argues.
“As soon as surgeons understand they can have the same quality they are accustomed to, the transition to generics will accelerate. Then, hospitals and ASCs can once again become owners of the implants, the instruments and the process that allows these savings.”
Passani often dreamed of the day she’d be pain-free. She pictured herself running up stairs to catch a train, or riding her bike around the neighborhood on bright sunny mornings. And each time, she’d be jolted back to reality by the excruciating pain in her right knee.
“The pain was so debilitating it would wake me up five or six times a night even though I was taking a painkiller,” the 52-year-old said. “Since my knee didn’t have any cartilage, it was bone-on-bone. After 17 years, my leg was so bowed it was truly uncomfortable physically and emotionally to walk around.
Going up and down stairs was almost ridiculous because I had to do a little jump in order to come down and I had to walk up very slowly. Also, it was difficult for me to get into the car quickly because my leg was so stiff I had to guide it in. I thought to myself, ‘there’s got to be a solution where someone can help me and fix this leg.’ ”
Passani’s solution turned out to be an iUni G2 unicompartmental partial knee replacement from ConforMIS Inc., a Bedford, Mass.-based developer of patient-specific osteoarthritis treatments and joint replacements. The company uses digital imaging and 3-D models to precisely match implants to the shape and curvature of individual joints.
Cleared by the U.S. Food and Drug Administration (FDA) in January 2011 and released commercially in October 2012, ConforMIS’ iTotal Patient-Specific Tricompartmental Knee Replacement System was designed as an alternative to traditional “off-the-shelf” knees, which come in a limited range of shapes and sizes.
The iTotal G2 was developed in conjunction with the company’s patented iFit technology for designing patient-specific implants and jigs. Each iTotal G2 is made to fit an individual patient based on his or her computed tomography (CT) scan. Since each implant is made to fit just one patient, surgeons avoid the sizing and fit trade-offs associated with standard knee replacement procedures. The implant shape and geometry closely matches the patient’s natural joint anatomy and curvature, providing the potential for more natural knee motion. In addition, the iTotal’s pre-navigated disposable instruments help place the implants accurately and reproducibly.
“We know that about one in five patients are fairly unhappy with their knee replacement, even when the X-rays look perfect and the surgeon feels that it came out very well,” said Baltimore, Md., orthopedic surgeon Barry J. Waldman, M.D. “One of the reasons that happens is probably because off-the-shelf implants don’t fit perfectly. They either overhang, meaning they rub on the soft tissues, or they’re too small and the bone sticks out. The closer we can get to getting those parts to fit their knee, we think the happier the patient is going to be and the more natural [the replacement] is going to feel.”
The desire for naturalization in artificial joints has spawned a plethora of custom solutions in recent years from emerging companies like ConforMIS and major manufacturers including Biomet Inc., DePuy Synthes, Smith & Nephew plc, Stryker Corp., and Zimmer Holdings Inc. Though these firms speciously tout their designs as “custom,” the implants they sell actually are not made-to-order—they’re the same off-the-shelf replacements (available in six to 10 standard sizes) that have been used in countless other procedures over the last several decades. The customization lies in the instruments.
Zimmer’s patient-specific instrument system, for example, features tailor-made jigs built to fit the articular surface of a patient’s distal femur and proximal tibia. Designed into the jigs are guides for drill bits that facilitate pin placement and cutting blocks during surgery according to pre-operatively planned bone resections. The system’s tibial guide also contains provisions to help the surgeon set the tibial implant’s internal/external rotation.
Smith & Nephew contends the “customized” cutting blocks in its Visionaire Patient Matched Instrumentation Kit eliminate up to 22 surgical steps from a knee replacement procedure. Made from medical grade nylon, the Visionaire cutting blocks are aligned to the knee’s mechanical axis for improved positioning and, ideally, implant longevity. Smartly, the blocks are compatible with standard instruments in case bone resection modifications are needed during the procedure (i.e., additional distal resection to accommodate for a flexion contracture).
DePuy Synthes claims the stainless steel guides within its RenShape plastic cutting block set are designed to minimize particle generation during bone cutting, while ConforMIS brands its iJig instruments as “a next-generation approach to the challenges associated with traditional orthopedic surgery.” Designed to work with the firm’s patient-specific implants, iJigs replace multiple trays of instrumentation with a small set of disposable cutting and placement guides.
iJig pre-navigated instruments are designed using the same imaging data as ConforMIS implants. Surface contour data from the patient’s joint ensures that each iJig is precisely sized and shaped to match the targeted anatomy in only one location and with one orientation. Cut angles and drill holes are placed by the surgeon by maneuvering each iJig until it finds its anatomic markets and settles into position.
“A lot of orthopedic companies have patient-specific instrumentation. This type of instrumentation is becoming a lot more common now because it reduces the time it takes to complete a surgery and it’s a more precise fit for the patient. But many of the implants used are still off-the-shelf implants,” said Brian McLaughlin, ALM business unit manager for DiSanto Technology Inc., a Shelton, Conn.-based designer and manufacturer of orthopedic implants and instruments.“
ConforMIS is a company focused on custom implants and instruments derived from the CT scan of a patient’s joint. The fact that ConforMIS closed perhaps the single largest round of funding in the history of orthopedics really says something about the technology, though. They are not in the limelight as much as the big guys are, but people in the industry still know who ConforMIS is. They are here and they’re not going anywhere and that in itself says something as well.
“As far as the DePuys, the Strykers, the Biomets of the world, they really have standard implant solutions on the market that cover a range of sizes based on experience and history. They’ve become very adept at educating people about their solutions,” he continued. “We all have easier access to information now and people have become much smarter about their own healthcare. When a doctor says ‘we may have to go in and do a total knee,’ many patients will go and research knee replacement procedures. People are more informed than ever now, and they’re looking more at patient-specific solutions because the information is readily available to them.”
Knowledge, though, can be a dangerous double-edged sword, particularly in healthcare. Products and procedures with professedly impressive benefits can have monumental challenges as well. Case in point: Patient-specific implants generally are lauded for their ability to improve implant alignment, increase patient throughput, minimize tissue loss, lower overall healthcare costs, shorten recovery times and decrease infection risk. Yet clinical data on the technology is mixed.
One study conducted within the Department of Orthopaedic Surgery at the University of Mississippi Medical Center in Jackson recorded 161 intraoperative changes in 66 knee arthroplasties (2.4 changes/knee) performed with patient-specific instrumentation. The predetermined implant size was changed intraoperatively in 77 percent of femurs and 53 percent of tibias. In addition, researchers identified a subset of 95 intraoperative changes that could be radiographically evaluated to determine whether their changes helped or hindered surgeons’ ability to align the implant. Eighty-two of the 95 changes (86 percent) made by the surgeon improved the recommended alignment or size of patient-specific instrumentation. The study found that guides fit improperly on eight femurs (12 percent and three tibias (5 percent). The instruments did not improve tourniquet time or blood loss.
“We caution surgeons against blind acceptance of patient-specific instrumentation technology without supportive data,” the researchers warned.
Besides a mixed bag of data, the technology’s other sticking points include limited contingencies (no room for error), long turnaround times (four to six weeks) and potential radiology training to certify employees on the creation and submission of 3-D scans to manufacturers. Software updates also can be tricky, as companies must convert CT data for manufacturers with FDA-regulated software.
Accordingly, any changes to patient-specific system software must be submitted to the FDA for review and, quite possibly, a new 510(k) process.
Going to Extremes
Indeed, the “Big Five” orthopedic implant manufacturers have become quite skilled at educating patients about their respective technology. But there still is room for improvement.
Consider, for example, the lack of marketing/enlightenment of patient-specific instruments for shoulder replacements, a sector that has experienced staggering double-digit growth in the last few years. Analysts expect the global market for total shoulder replacements to reach $959 million by 2019, due primarily to significant increases in shoulder arthritis and fractures.
Biomet, DJO Global and Zimmer each offer patient-specific shoulder systems but the technology largely is overshadowed by their knee replacements.
The two anatomy sets are designed similarly, using CT data to create preoperative case plans for surgeons to template and prepare for procedures. Zimmer’s Patient Specific Instruments shoulder system uses 3-D visualization software and complements the company’s Trabecular Metal reverse shoulder system. Biomet’s Signature glenoid system, on the other hand, features a patent-pending dual trajectory and is used in conjunction with its Comprehensive shoulder system; DJO’s Match Point system, meanwhile, employs Materialise’s SurgiCase Connect software and is designed specifically for the company’s reverse shoulder prosthesis and Turon modular total shoulder system.
“There are over 100,000 [total] shoulders done on an annual basis now,” McLaughlin noted. “A number of companies are making a lot of noise in total shoulders. It’s a great opportunity.”
The entire extremity market, in fact, has become a golden opportunity for companies, particularly those that have relied on large-joint implants for growth. Zimmer posted a 9 percent rise in first-quarter (2014) extremities sales, more than double the increase in knee proceeds. Stryker followed suit—its Q1 trauma and extremities sales rose 8.4 percent while hips and knees lagged behind at 3.1 percent and 1.1 percent, respectively.
Wright Medical Group Inc., which divested its hip and knee implants business last year to MicroPort Medical B.V. for $290 million, experienced phenomenal growth in the first three months of the year: Its global foot/ankle sales ballooned 31 percent to $46 million, and upper extremities proceeds swelled 6.9 percent to $6.47 million, according to the company’s latest earnings report. Wright’s products were especially popular overseas: International foot/ankle sales skyrocketed 76 percent to $12.8 million, while its upper extremities offerings mushroomed 45 percent to $2.8 million.
“The small-joint market is what is growing right now. We have seen very good growth with our customers in the extremities business,” said Wally Gacek, senior director of business development at Tegra Medical, a Franklin, Mass.-based precision machining service provider and contract manufacturer. “It appears there is a lot more activity in small joints. A customer of ours that was focused on the hip has been branching out to other areas of the body, moving away from the hip area, because there are more opportunities. The large joints are not seeing the growth they’d become accustomed to in the past. So companies are leveraging some of the lessons they learned there or their infrastructure to expand into the smaller-joint markets.”
That likely was the impetus behind Zimmer’s $13.4 billion bid for Biomet. Market analysts claim the deal, expected to close in the first quarter of 2015, will give the new, combined company one-quarter of the fast-growing extremities market and more than a third of the shoulder market. Mike Matson of Needham & Co. called the move a “home run,” noting it will allow Zimmer to move up the food chain of orthopedic device manufacturers.
“With this deal, Zimmer’s worldwide share in extremities increases from 11 percent to 20 percent...,” Matson wrote in a note to clients. “Zimmer’s overall orthopedic market share increases from 10 percent to 17 percent, pushing it past Stryker into the No. 2 position behind Johnson & Johnson.”
Many industry observers were not surprised by the Zimmer-Biomet merger, given the recent history of market consolidation.
“We’ve seen fewer players, as the medical device companies buy up each other’s ‘lines’ for growth in a particular market, or to exit a particular market,” said Tanya DiSalvo, president and owner of Criterion Tool & Die Inc., a Brook Park, Ohio-based precision machine shop specializing in CNC milling, turning and Swiss turning technologies. “From the manufacturing end, we were never in knees and hips but now the companies that were extensively in those areas are looking to lower extremities and small-bone fixation or trauma-type applications.”
Rise of the Generic Implant
Ours is a brand name-loving society.
Nothing, for example, came between us and our “Calvins” in the early 1980s (thanks partly to its vivacious teenaged spokesmodel); no other shoe has inspired us quite like Nike (“Just Do It”); and few fast-food chicken dinners have been as “finger lickin’ good” as KFC.
In healthcare, our brand loyalty clearly is evident in the popularity (and skyrocketing sales) of pharmaceuticals like Lipitor, Vicodin and Zithromax, as well as joint replacements from orthopedic device behemoths Biomet, Johnson & Johnson, Stryker and Zimmer. Generic alternatives—regardless of their proven efficacy—just haven’t garnered the same respect.
“When someone hears generic, they often think cheap. They think inconsistency and poor quality,” Orland Park, Ill., orthopedic surgeon Blair Rhode, M.D., wrote in an article for PHA Pulse, the official publication of Physician Hospitals of America. “Generic is actually about efficiencies and process.”
Maybe so, but America’s medical institutions generally have been unwilling to gamble their reputations and patients’ lives on products that lack manufacturers’ support. Moreover, the orthopedic industry has ensured they’ll never succumb to the temptation: Generic or foreign-made joint implants largely have been shut out of the United States by trade policy, patents and an expensive U.S. Food and Drug Administration approval process that deters startups from entering the market. “Companies defend this turf ferociously,” Peter M. Cram, M.D., a University of Iowa medical school physician who studies healthcare costs, told the New York Times last summer.
Lately, however, those companies have encountered some resistance. Efforts to control healthcare spending (the Affordable Care Act) and the shrinking number of private practice physicians is creating both a need and desire for lower-cost alternatives to pricey implants. Companies such as Rhode Orthopedic Group (founded by Rhode in 2010), Emerge Medical Inc., run by a former Synthes sales consultant, and The Orthopaedic Implant Company, led by a former Smith & Nephew rep, are selling “generic” screws, plates, drill bits and other devices in part through a no-frills sales approach.
Only one of the major implant manufacturers—Wright Medical—has joined the generics movement. In 2010, the Arlington, Tenn.-based company launched White Box Orthopedics, a business that offers cheaper versions of its replacement hips and knees through a more bare-bones sales approach.
Rhode’s Orland Park, Ill., company uses the same approach to sell a 5.5 millimeter knotless anchor for $80, a 7.5 millimeter by 70 millimeter cannula for $180 and a rope suture wire for $23. The firm also offers a German 30-degree angled suture passer for $700, an insertion tool for its 2.9 millimeter anchor for $560 and a $170 tissue elevator based on a Cobb elevator design.
Neither Emerge nor The Orthopaedic Implant Company (OIC) publicly disclose prices for their products. Four-year-old OIC—which launched a portfolio of proximal humerus, distal radius and clavicle plates/instrument sets last fall—has vowed to save $1 billion in healthcare costs by next year through the sale of quality discount implants priced up to 60 percent less than average market premiums. “Innovation has a price and a premium,” the company claims on its website. “We support that idea because it drives better products, but it is important to drive the human race forward as well. People should no longer pay an arm and a leg for the very implants that go into them. OIC innovation embraces both the delivery of high-quality products with life-changing costs so everybody feels better.
We call it ‘human pricing.’ ”
Such humanistic markdowns potentially can generate significant savings for hospitals. Reno, Nev.-based Renown Regional Medical Center, for one, realized an additional $49,125 annually by using OIC’s 7.3-millimeter cannulated sacroiliac and femoral neck screws in trauma procedures. Two independent studies found the generic cannulated screws performed as well as conventional versions in femoral neck fracture and posterior pelvic ring injury treatment.
Emerge Medical is a proponent of “human pricing” as well, selling cannulated screws, guidewires and drill bits at 40-50 percent below market premiums. The Denver, Colo.-based firm sustains the price cut by focusing mostly on core devices used for multiple procedures (avoiding complex hip/knee replacements) and bypassing the sales rep.
Several years ago, such an idiosyncratic growth strategy would have seemed radical and overreaching. But the orthopedic device market is a significantly different beast these days, permanently scarred by stubbornly high unemployment and U.S. healthcare reform. Hospitals and group purchasing organizations now dictate buying decisions, particularly for general hardware items, forcing surgeons—long a conduit for high product prices—to align themselves more closely with budget-conscious hospital administrators.
As a result, device companies that offer lower-cost alternatives are gaining traction in the market. Emerge, for instance, sells its products through distribution partnerships with Cardinal Health and Premiere Inc., a Charlotte, N.C.-based group purchasing organization with 2,500 member hospitals.
“Based upon our market and customer research, we believe that U.S. healthcare providers are ready to support a simpler, more transparent, fair-priced orthopedic business model,” Cardinal Health spokeswoman Lisa Ashby said when the deal was announced in 2012.
Rhode agrees, though he warns that healthcare providers must do more than merely support lower-priced implants. They must be willing to manage the surgical procedure.
“This starts with being willing to take the representatives out of the operating room and becoming an ‘owner’ versus a ‘renter,’ ” Rhode explains in his PHA Pulse article. “The hospital and surgery center have been more than willing to allow the sales rep to show up with the implants and instruments for the case. This saves on implant inventory and instrument costs, but it comes at a price. We have shown that this results in a 75-90 percent increase in implant prices. This is why hospitals and surgery centers have to become owners of the process and implants.”
Rhode recommends replacing the traditional sales rep with an operating room device technician (ORDT), an on-site specialist qualified to teach and manage all stable implant orthopedic procedures. Besides training surgical teams on implant systems, ORDTs work directly with device manufacturers to resolve product availability/repair issues and handle complaints. OrthoDirectUSA LLC, a Fort Wayne, Ind., consulting group that developed an ORDT curriculum and training program, claims the sales rep swap potentially could transform the orthopedic supply chain.
Skeptics, however, are hesitant to ditch the full-court sales press, fearing inadequate product knowledge from ORDTs and quality issues among new, unproven companies, especially those making subtle changes to well-known implants. Some surgeons also are wary of using discounted products for complex joint replacement procedures.
Ultimately, though, they may not have a choice. Rhode contends a soon-to-be bankrupt Medicare system will force a change in delivery incentives, such as team-based care (partnerships with primary care physicians, specialists, non-physicians and hospitals). Quality outcomes and efficiencies increasingly will be rewarded, and performance will take center stage.
“As reimbursements decline, ambulatory surgical centers (ASCs) and acute-care facilities will have real difficulty trying to survive paying the current markup for stable technology implants. These products are quality, time-tested technologies that have exhausted their patient value,” Rhode argues.
“As soon as surgeons understand they can have the same quality they are accustomed to, the transition to generics will accelerate. Then, hospitals and ASCs can once again become owners of the implants, the instruments and the process that allows these savings.”