Business as Usual?

If one thing’s clear when it comes to doing business in the orthopedic sector, it’s that market conditions very seldom remain static. Companies must continually adjust to meet evolving market demands—whether they are regulatory, legislative, technological or financial.

Having the right product or service isn’t always enough. And having a robust bottom line—while it sure helps—isn’t always enough, either. What about best practices? Risk management? The FDA may have cleared a product, but will Medicare reimburse for it?

In early July, Biomet entered discussions to resolve a US Department of Justice probe regarding consulting and professional service agreements with surgeons using or considering the use of the company’s implants for the period January 2002 through March 2005. Biomet received subpoenas in March 2005 relating to the agreements, including contracts for surgeons to teach other doctors how to use its devices. Johnson & Johnson, Smith & Nephew, Stryker and Zimmer also received subpoenas.

Resolution of these purported anti-kickback violations remains uncertain at the moment but could, among other things, require monetary payments, cause orthopedic companies to significantly change some business practices, and include the very real potential of increased government oversight.

Unrelated to the probe mentioned above, Medtronic Sofamor Danek paid $40 million last July to resolve civil allegations that it paid kickbacks to physicians in exchange for use of its spinal products. The company also entered a five-year corporate integrity agreement with the US Department of Health and Human Services’ Office of the Inspector General.

In response, companies have embraced codes of conduct such as the AdvaMed code and a new code unveiled by the Medical Device Manufacturers Association (MDMA). Jason Hannon, senior vice president and general counsel for spine company NuVasive, detailed the MDMA code during the association’s recent annual meeting and said his company has developed policies based on it, citing the code as dynamic, less static and more about real-world best practices.

No matter what code a company adopts, (with a nod to Star Trek fans) resistance is futile, and compliance is not a matter of if so much as when. In this issue, ODT regulatory columnist Mark Langdon examines this topic in greater detail, including the role played by corporate integrity agreements and how companies can best prepare and protect themselves (see page 16).

Also in this issue is ODT’s second annual report of the top 10 orthopedic companies. We rank firms by 2006 revenue and examine how they have handled new product launches, acquisitions and divestitures, lawsuits, FDA approvals and reimbursement coverage decisions, to become the industry’s biggest players. Upon examination, it’s pretty clear that business for even the largest orthopedic firms is anything but usual.

Christopher Delporte
Group Editor