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Industry Insiders Grapple With How to Handle Future of Orthopedics

Hurricane Sandy kept more than a few participants from attending Cleveland Clinic’s Medical Innovation Summit 2012 as planned, but the conference went ahead as scheduled with some adjustments. For the panel on whether orthopedics is a bull or bear market, David Cutler, Ph.D., and James Capretta joined the conference via video, lending a high-tech visual to a discussion that was very technology-focused.

According to recent government numbers, the United States is projected to be spending 20 percent of its gross domestic product (GDP) on healthcare by 2021. Is this sustainable?

“We’re seeing that whole system is globalized,” said Kelly Barnes, leader of the U.S. health industries practice at PricewaterhouseCoopers. “We’re largely publicly funded. We need innovation to occur to get the best care to patients. The United States will always spend a little more in healthcare, because Americans want a premium—but 20 percent GDP isn’t sustainable.”

“Innovation has to be part of the answer,” said Cutler, who is the Otto Eckstein professor of applied economics at Harvard University. “Firstly, therapeutic innovation. New orthopedic implants, surgical techniques, etc. Secondly, the structure of the healthcare system and the way it innovates needs to change. In 1950, a doctor would not recognize anything—not one thing—a doctor does today. But the 1950s doctor would recognize the system in which 2012 doctor operates—the way she gets paid, and so on. That is not true of any industry now, and can’t be true of healthcare. We need a system that’s striving to give us the best at lowest cost.”

Most speakers during the summit’s first day projected one half of the economist’s perspective. Product innovation is not—or should not be—the main focus of the future of orthopedics. Rather, the focus should be on systems and procedure innovation, agreed Stryker CEO Kevin Lobo and Richard Parker, M.D., Cleveland Clinic’s chair of orthopedic surgery.

“The potential market here [in the United States] is large,” said Capretta, a fellow at the Ethics and Pubic Policy Center. “Demand is high. But the policy climate is making innovation more difficult.”

Cutler said that high-value firms across industries all do three key things:

  1. They invest in information technology;
  2. They have very effective payment systems; and
  3. They empower employees and customers to help them improve.
Customers—in the case of the orthopedic device industry, patients—are more willing to help in the medtech industry than in any other industry, because of the fact that their lives are at stake. “They want to be intimately involved with their care,” Cutler said. “These groups are increasingly sophisticated and helpful in running clinical trials.”

There was clear disagreement between the medtech CEOs and physicians, and economic experts about the way in which the orthopedic industry should move forward to be successful. Orthopedic industry insiders envision a future of making existing technologies and devices more accessible, and perfecting design, manufacturing, and delivery systems. Economists such as Cutler see more product innovation as the answer, although innovation may not be able to remain in the United States under current policy pressures.

Nonetheless, there is agreement that orthopedics is a bull market. Traditionally a slower growing market, it isn’t as hot as some other sectors such as cardiac or neuro—but there is no question that the market is growing as populations age, sports get more aggressive, and more people occupy the extremes of obesity and extremely active lifestyles.

“The key is we all have to be thinking of the patient first, and if we all remember that, that will drive us to where we need to be,” said Brian Donley, M.D., president of Lutheran Hospital in Cleveland, Ohio.

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