Growth is also fueled by numerous mergers and acquisitions within the industry. Leaders in the orthopedic space continue to diversify through acquisition so they can capitalize on growth opportunities. With solid business models and proven track records, they can offer a broader line of products, including legacy devices, which generate more sales growth.
For example, Phillips Precision Medicraft, an Elmwood Park, N.J.-based contract manufacturer of advanced orthopedic implants, instruments, and sterilization delivery systems, enjoyed double-digit growth in 2016—in part driven by an increase in legacy products and product transfer activity across its business portfolio. “The growth in legacy products is a result of products surviving the rationalization process after mergers,” said Jack Neenan, vice president of business development for the company. “These products then generally receive increased exposure in the field, with more salespeople marketing the products."
In general, surgical instrumentation and delivery systems trends support orthopedic industry trends. Hip and knee products are becoming more of a commodity and therefore face greater pricing pressures; extremities and niche products tend to provide more profitable opportunities. Innovation continues to enhance minimally-invasive procedures. The tight tolerances and complex assemblies required for these types of surgical equipment often create unique design and manufacturability challenges for contract manufacturers.
“More complex procedures, value-driven healthcare and miniaturization and robotics-assisted surgery are all driving innovation,” said Alan Connor, CEO for Cadence Inc., a Staunton, Va.-based contract manufacturer for medical device and diagnostics companies.
This innovation also includes an increased interest in single-use instrumentation. Although reusable instruments are high quality and well-suited for the job, they can be difficult to calibrate and clean, which adds time and money to surgery overheads and creates slight but real infection risks. With an emphasis today on cost reduction and improved patient outcomes, as well as the ever-present goal to improve operating room (OR) efficiencies and reduce reprocessing needs, more surgeons are moving toward single-use, disposable instrumentation.
“There is a definite shift toward using disposable sterile-packed instruments and complete procedural kits in the OR,” said James B. Schultz, executive vice president for ECA Medical Instruments Inc., a Thousand Oaks, Calif.-based provider of single-procedure (disposable) torque-limiting instruments, fixed drivers, ratchets, and sterile-packed procedural kits for securing orthopedic and spine implants.
What OEMs Want
Many new product development efforts by orthopedic OEMs target “reducing the total cost of instrumentation or delivery, improving the overall performance of the instrumentation, and/or enabling minimally invasive or computer/robotic-assisted surgery,” said Jodie Gilmore, CEO of Onyx Medical LLC, a Memphis, Tenn.-based manufacturer specializing in bone-cutting, bone-piercing and bone-fixation products and is also a subsidiary of Elos Medtech.
Saving money across the board is a constant pressure on orthopedic contract manufacturers (CMs). Their designers and engineers are always trying to think of new ways to reduce costs in design, development, production, packaging, approval, and even just getting the product out the door. This mindset requires an innovative thinking approach—not just with technology, but also with operational improvements that will appeal to their customers.
“OEMs continue to ask for highly complex parts at low prices with fast deliveries,” said Ken Gredick, engineering manager for Triangle Manufacturing Co. Inc., an Upper Saddle River, N.J.-based provider of highly complex, tight-tolerance surgical implants, medical instruments, and powered hand tools. “Most of them have metrics that account for many other aspects—such as quality, capability, and quality management systems—but still require the lower pricing and fast deliveries that will win the work.”
To optimize design and production, OEMs partner up with suppliers to create custom solutions with low price points and quick turnarounds that are also compliant with regulations. Everything is on the table for consideration—even changes to tried-and-true legacy products if they improve performance, streamline manufacturing, and reduce costs.
“More existing legacy instrumentation is being reevaluated in the areas of inspection methods, frequencies, and devices used to inspect these product types,” said John Phillips, president of the implants and instrumentation division of Phillips Precision Medicraft. “We’re also seeing increased growth in single-use instrumentation and robotic-assisted surgical procedures.”
Single-use instrumentation is getting more attention as a way to save money and reduce potentially costly risks of infection. It is often less expensive and safer to perform medical procedures with single-use tools and instruments. This eliminates the possibility of spreading bacterial infections and superbugs from equipment that has not been completely sanitized. Single-use disposable instruments also eliminate the need for cleaning and decontamination (which also lead to shorter lifespans for expensive reusable equipment).
Therefore, a strong business case can be made for reducing cost and risk by investing in single-use equipment, compared to buying and maintaining reusable sets of instruments.
“OEMs want to cut that upfront and lifecycle cost of instrumentation support, and also move toward lower cost of sales per transaction by reducing rep. presence in higher-volume, lower-complexity procedures,” said Schultz.
A wide range of single-use and sterile-packed kits are entering the market in 2017. Major OEMs are introducing simplified, ready-for-surgery kits for hand and wrist fracture repair, as well as foot and ankle fracture, bunion, and hammertoe repair. Other instrument sets will be introduced for clavicle, lower extremities, shoulder, elbow and general reconnaissance surgery. “Simplified cases and trays, and disposable sterile-packed, ready for surgery instrument sets tailored to OEM specifications, will be the future,” Schultz added. “These sets are always surgery ready, reduce inventory hassles, and provide significant sustained benefits to both the hospital/outpatient center and the surgeon.”
Beyond improving device effectiveness, stripping out non-value added features and cost drivers, and limiting the cost of ownership/cost of inventory, OEMs also want to create more revenue through differentiation and competitive advantages as a result of enhanced performance of their products. “This allows them to potentially enter new markets and expand their global reach, while still maintaining competitiveness, despite cost pressures and preserving gross margins,” said Gilmore.
They also expect their contract manufacturers to help them out in a big way to get there.
OEMs increasingly look for design and manufacturing guidance from their supply chain partners. Variation and complexity can be extreme in the instrumentation and delivery systems market, with the continual pressure to deliver designs or products faster, with fewer resources and greater requirements.
“Medical device manufacturers [MDMs] are often constrained with resource allocation, which keeps them from going on the offensive to proactively develop solutions,” said Sean Miller, director of operations, case and tray division, for Pierceton, Ind.-based Paragon Medical Inc., a manufacturer of cases and trays, reusable and single-use surgical instruments, and implantable components. “Product development teams therefore seek and rely upon knowledge, resources, support, and sometimes even direction from contract manufacturers. Smaller firms have done this for a long time out of necessity, but we are starting to see larger firms reach out for design-for-manufacturability [DFM] help.”
In fact, they often seek complete solutions from their CMs that go well beyond traditional DFM involvement, including complete, packaged, sterile devices and program management, design, and supply chain services. They also prefer to work with CMs with demonstrated experience in their fields of interest, such as sports medicine. “We continue to expand our solutions into new market segments by building a core team of seasoned experts,” said Connor. “Many on our team have spent part of their careers actually working for medical device OEMs in these market segments.” This in-depth market knowledge is one reason OEMs have asked Cadence to help them evaluate potential acquisition targets.
The field of orthopedics tends to stay traditional, with surgeries performed the same way they have been done for decades. This is starting to shift as more surgeons become interested in minimally invasive procedures, image-guided navigation, and computer- or robot-assisted surgical technologies. There is also an increased focus on “smart” instruments that merge robust electronic capabilities with traditional metal and plastic device components. The ongoing trend toward implementation of computer-aided and robotic-assisted surgery will reduce the need for traditional instrumentation and require new supporting tools and technologies.
Advances in engineered polymers and metal alloys, or combinations of these materials, provide engineers with more design options, as well as challenges. “Consistency of material from heat lot to heat lot, for example, is always a potential problem,” said Gredick. “Variations in hardness or sulfur content can also lead to tool-wear inconsistencies.” Because of their unique properties, polyether ether ketone (PEEK) and nitinol are more common in complex devices, but present machining challenges. Materials selected for instruments, cases, and trays must also be able to withstand the advanced sterilization and cleaning practices used in healthcare settings.
The future disrupter in manufacturing technology will be 3D printing. Although it is making significant strides in other industries, it has yet to replace conventional manufacturing in orthopedics. This may soon change as 3D printing rapidly evolves with larger machines, more materials, and faster throughput. Some orthopedic CMs use 3D printing in limited, but effective ways. For example, Cadence relies on plastic and metal 3D printing for prototypes, tooling, and fixtures. Metal, however, can be a bit more problematic. “Metal 3D printing is currently too expensive for production at higher volumes, where customization is not required,” said Connor. “The material properties are also often inadequate for the applications that we see.”
“Additive manufacturing is completely redefining what’s possible in the medical device sector,” added John Phillips. “It is becoming more accepted by the FDA and OEMs for the manufacture of medical devices, and will no doubt continue [to] evolve and gain traction—from small components that are difficult to manufacture conventionally to lattice structures that promote bone growth to the implant. We are actively working with OEM clients to produce such products.”
Another limiting factor will be having enough design engineers who are skilled in the use of 3D printing. Forward-thinking companies in other industries have built 3D manufacturing design centers that are stocked with the latest AM technologies. There, they teach engineers to design products specifically for 3D manufacturing techniques, so they can better understand the design flexibility that the process offers—and devise innovative products that cannot be made any other way. “As design engineers become more proficient in their designs, the capabilities and uses of 3D printing will advance more rapidly,” said Gredick. “For example, a traditionally designed fixture may take 20 hours to print. An experienced 3D printing design engineer, however, can redesign the fixture, and keep the same design intent, in half the time.”
Delivery systems have experienced more regulatory change in the past two years than the previous few decades combined. The U.S. Food and Drug Administration (FDA) released its latest reprocessing guidance document in March 2015. Some firms have not changed their approach to the product at all, continuing to view a sterilization tray as an accessory; others are splitting the system out on its own development pathway and submitting it as a Class II device to the FDA.
“We believe how the FDA responds to the various submissions will set a much narrower and defined path in the future,” said Miller. “But this will take time and be more complicated because sterilization trays go to two different branches of the FDA, depending on if they are submitted as standalone devices or as accessories to a broader system.”
In addition, the FDA has announced one of its regulatory science priorities is the reduction of healthcare-associated infections. The agency is especially concerned about cleaning, re-sterilization, handling, and re-calibration of instruments. This is in response to the serious health risks posed by superbugs and other bacteria associated with reprocessing/cleaning and re-sterilization of duodenoscopes and other devices. The FDA has called for following Instructions for Use and cleaning instructions for reusable torque limiters, cannulated instruments, and related devices. These are especially hard to clean as bacteria can survive cleanings as well as flash and steam sterilization protocols.
“As a result, the FDA favors sterile-packed, single-use (disposable) instrument alternatives, as they eliminate this risk and are also in pristine condition and calibration,” said Schultz. “Reprocessing of instruments is also a time-consuming and costly hassle for both hospitals and ambulatory surgical centers.”
Unique device identification (UDI) continues to be a major regulatory focus. The FDA’s UDI labeling requirements impact both surgical instrumentation and delivery systems. For implants and instrumentation, UDI labeling can be a complex process, especially regarding smaller parts and the need to meet legibility requirements. Phillips Precision Medicraft has developed an in-house digital contact graphics process for applying UDI codes to case/tray products.
“DCG is highly scratch-resistant and delivers a high contrast appearance, making it a cost-effective process for satisfying UDI legibility requirements,” said Mike Phillips, president of delivery systems for Phillips Precision Medicraft. “The fact that codes can be applied anywhere, even on rounded corners, gives our design engineers more flexibility to explore a wider range of creative possibilities.”
Innovation Isn’t Just Technical
To reduce costs, MDMs might first think that a new design or technology innovation is the answer: “How can I reduce my costs by using new or improved technology, advanced materials, or better engineering and design?”
As important as technology is, innovation can go beyond technical solutions to discovering new ways to expand service models and add value to the customer experience. “Sometimes that means pushing deeper to expand our design service to include design control and regulatory ownership,” said Miller. “For some clients, we have added on services on the back end of our process to reduce handling, inventory, logistics, and risk.”
During the early feasibility and development stage, Onyx Medical provides customers with a tool that allows them to make better decisions about what they need, what they want, and how that will ultimately impact the resulting cost to market. The goal, said Gilmore, is when the various stakeholders get into a room to work on the early phase design and development requirements, the tool makes it easy for them to understand what features of their product are driving expense so they can make optimal cost/benefit decisions.
“For example, it might be nice to have specialized coatings, color coding, and abundant laser marking, but if they do not translate into improved performance for the end user, or generate enough added value for the OEM that is selling the device, those features may not be worth the added cost,” said Gilmore.
Often a team is working to customize a solution, which typically adds time and cost—but is customization always necessary? Although some OEMs are starting to standardize their products to reduce development and manufacturing costs, many OEMs remain wary. “It is anti-cultural to conform and follow a standard, but this is what will help a lot of OEMs save time and money, without sacrificing performance,” said Miller. “Standardization allows rapid customization if it is adequately preplanned into the design. Deciding to standardize may be the greatest engineering feat of all—overcoming the false fear of being one-dimensional and undifferentiated.”
The improved results cannot be argued, Miller added. “Development and production lead times are cut by more than half, design control and testing become part of the process, risk is reduced, volume can be leveraged, common branding is maintained, and training is already complete.”
Invest in Your Supply Chain
The orthopedics field continues to expand its focus on how to add value through the entire healthcare experience. In the past, new products were largely surgeon-driven and sharply focused on a specific procedure, or a task within the procedure. Now, however, with the rapid evolution of minimally invasive surgery and management of healthcare economics, “OEMs must pay more attention to how their devices fit into the overall episode of care, from before the procedure takes place to long after the patient leaves the hospital,” said Connor.
Working with a trusted contract manufacturer early in the design phase of a project is critical for robust process development and a smooth launch. “Also, when OEMs find an experienced supplier, they should trust their experience and guidance, and work toward building the kind of relationship that allows them to become a natural extension of the business,” said John Phillips. “Partnerships like this are long-lasting, mutually beneficial, and provide each with a competitive edge.”
It is recommended to involve all primary stakeholders in the design process and receive expert feedback from a variety of sources, including marketing, development, manufacturing, and regulatory. “It helps to define critical ‘must-have’ criteria and separate these from the ‘nice-to-have’ criteria for a project,” advised Gilmore. “We always start each project discussion with the same basic questions for our customers: ‘What problem are you trying to solve?’ ‘What are you trying to achieve?’ And finally, a blue-sky question such as, ‘In a perfect world, what is your best case/ideal outcome?’”
OEMs can go one step further in deepening these relationships by implementing risk-based methodologies for supporting process improvement changes (including allocating resources) at key suppliers. Often, with a new product development project, schedule (not cost) is the primary driver. “As a result, manufacturing processes are not as robust or cost effective as they could be,” said Connor. “The no-change restrictions that most OEMs place on their suppliers, in addition to the risk-adverse approach that most take toward any process change, effectively prevents suppliers from delivering on cost reduction opportunities.”
Regulatory agencies are also focusing more on the quality management systems of sub-tier, second-tier, and even third-tier suppliers. If OEMs or CMs have some highly valued suppliers that do, however, have some deficiencies in their quality management systems, “these suppliers are at risk of being eliminated from the manufacturer’s approved supplier list (ASL),” said Gredick. “The challenge then becomes bringing those suppliers up to compliance so they can remain on the ASL and continue to do good work for their CMs.”
After finding trustworthy partners that can deliver expert service at an acceptable cost, Miller advises getting out of the way and giving them the freedom to do what they do best. This aspect of freedom, however, can intimidate many designers and engineers because it is viewed as a risk. To mitigate this perceived risk, the client adds on project management, weekly calls, side testing, and additional quality requirements. “These, however, erase all the added value of working with trusted partners,” said Miller. “I am not suggesting having zero oversight, but if you can get to the point of relying on an external team’s strength, it gives you the freedom to concentrate on your own strengths and tasks at hand, which can accelerate the project, instead of delaying it.”
Mark Crawford is a full-time freelance business and marketing/communications writer based in Madison, Wis. His clients range from startups to global manufacturing leaders. He also writes a variety of feature articles for regional and national publications and is the author of five books. Contact him at firstname.lastname@example.org.