Orthopedics’ Future Hinges on Technological Improvements

Orthopedic companies should focus on value rather than product innovation in order to survive and thrive in the healthcare industry’s “new normal,” medical professionals contend.

The Cleveland Clinic.

The advice came from a panel of experts who attended Cleveland Clinic’s Medical Innovation Summit 2012. With attendance down due to Superstorm Sandy, the summit’s opening panel, “21st Century Orthopedics: Hands-On Perspectives from Clinical Leaders” extended to an hour, and a much-anticipated panel on the state of healthcare innovation was nixed. The opening panel nimbly addressed some innovation topics as well, adapting superbly under the extraordinary circumstances.

The panel’s central message was that product innovation will not be the main focus of the future in orthopedics, a sentiment Stryker Corp. CEO Kevin Lobo echoed. Rather, said Joseph Iannotti, M.D., Ph.D., the practice of medicine must change. He said caregivers must change the way they care for patients and how they get paid. Caregivers also must prove their methods and products are effective.

Medical device designers and manufacturers, meanwhile, must focus on value.

Value is derived from a simple equation—the resulting ratio of quality divided by cost, explained Iannotti. The questions manufacturers must ask are, “What value does the new technology bring? Is it better? How? When is it appropriate to use? Will it improve efficacy?”

For Richard Parker, M.D., chairman of the department of orthopedic surgery at Cleveland Clinic, the future of innovation lies in regenerative medicine. Looking back over the past two decades, Parker noted how far technology has come. “There have been huge imaging improvements in MRI and 3D-CT [magnetic resonance imaging and 3D computed tomography] reconstruction,” he said. “We used to have to inject dye, but now nothing invasive is needed for imaging. Ultrasound [for orthopedic applications], too, has improved, and has been popular in Europe for years and is growing in popularity in the United States. Non-operative colleagues are perfecting indications for ultrasound imaging.”

The importance of imaging in orthopedics is great. In minimally invasive surgery, a preferable choice over major surgery, no surgeon can go in blind. “You still have to be able to see clearly,” said Parker. “There can be no blind cuts, even small incisions, without sight. There will be complications if you do that.”

Thus, over the next 20 years, innovation in orthopedics should happen in intra-operative imaging, and also smart implants that react cohesively with biological environments, interval procedures proprietary to or instead of arthroplasty, regenerative medicine, resurfacing (of bone), and alternative visualization in arthroscopy, among other fields.

With regards to regenerative medicine, (a heavy focus at the summit), Parker said, “We have younger candidates becoming candidates for arthroplasty. We need to figure out better ways to prevent that. Arthroplasties are great but can result in significant bone loss, deformity, and so on.” The field needs better regenerative biologic innovations—something other than total joint replacements, he added.
But total knee replacements or arthroplasty (TKAs) are one of the “highest value surgical procedures in terms of return on investment,” Iannotti noted.

Hip and knee implant procedures certainly are rising. A 2008 study predicted a Medicare bill of $50 billion for these procedures alone by 2030 if the trend continues. According to the study, the U.S. market for implants doubled between 2002 and 2005 to $5 billion. Zimmer Holdings Inc., one of the largest orthopedic implant manufacturers, doubled its net sales of implants between 2003 and 2007.

With an increase in TKAs, however, comes an increase in surgical complications. “In-vivo tissue healing is a huge market going forward,” said Iannotti. “There is variation on how people heal and how they injure. Non-invasive methodologies are a big opportunity. They may provide substantial outcome improvement.”

Parker also highlighted electronic medical records (EMRs) as an important item to watch, saying they are “not our burden, but a tool.” EMRs save time and space in obvious ways—they consolidate former paper records into an accessible computer database. However, there are concerns over information security and electronic failures that make many hospitals and health care professionals loath to embrace them. “The new era of healthcare will require measurement and proof of outcome, lower cost technology, better health records, and integration,” said Parker.

Also in the realm of health IT (information technology) are smart implants—those with wireless connectivity (and therefore vulnerable to malicious cyber attacks) that can adapt and react to different biologic environments. Will smart implants be a standard of care in the coming years, or will regulatory and other obstacles render them useless, moderator David Cassak (of Elsevier Business Intelligence) asked the panel.

While Parker mentioned there is difficulty in bringing them to market in an ethical, evidence-based manner, Iannotti offered some advice to manufacturers: “Smart people will have to innovate, and be critical about what they have to prove before putting it on market.”

The State of Stryker: New CEO Focuses on Efficacy

Stryker CEO Kevin Lobo. Photo courtesy of Stryker Corp.

It’s common knowledge that aging populations worldwide are fueling growth in various medical device sectors. Orthopedic devices, in particular, enjoy growth when patients get older, and now as baby boomers reach their 60s, procedures such as total knee arthroplasty and other total joint replacement procedures are much more in demand. A rise in obesity as well as (conversely) people seeking a more active lifestyle also have contributed to a rise in the need for orthopedic devices, procedures and surgeries in recent years.

Stryker Corp.’s core business always has been orthopedics, reiterated the company’s new CEO and President Kevin Lobo at Cleveland Clinic’s Medical Innovation Summit, but it is now moving away from a “product” focus to a “systems” focus. The future of orthopedics, as had been the theme of the conference’s opening day, is not in innovation, but in value propositions, according to Lobo and others. Key questions that medical technology professionals must ask include—how much value does this device or technology have for the consumer, and how much return on investment will the designer, manufacturer, surgeon, etc., see from the technology?

“We have a master brand,” said Lobo, “and frankly our customers appreciate it more than we do. We [now] have a brand plan, and will be more assertive in branding ourselves.” The company has launched a direct-to-consumer advertising effort with its Triathlon Custom Fit Knee System. Television and print advertisements have been touting the seven-year-old device unofficially re-named for consumers as the “Get-Around Knee” to better communicate its intended use. “Patients are taking charge of their healthcare,” Lobo continued. “They are better educated and more Internet savvy now.”

Stryker’s marketing strategy for the knee includes tracking online ad clicks, and the company has tracked a significant percentage of those clicks all the way to surgical provider websites.

Branding, systems, efficacy—these strategies are just different ways of saying that Stryker has a robust business, and will continue to keep fostering it, according to Lobo. On a “freshness index,” an informal way of gauging companies’ products, the Triathlon knee replacement would score a “big fat duck’s egg,” said Lobo, because it is seven years old. However, it is a proven knee, and with a new marketing focus, it is doing well in the marketplace.

Lobo’s advice for smaller companies is to focus on new procedural approaches and accumulating lots of clinical evidence for their product. In fact, companies that fit that description have been purchased by Stryker over the past several years.

Lobo predicted more orthopedic company consolidations in the years to come. During slow market growth, he said, there tend to be more acquisitions—growth is in a slow period now, so if it sustains, there will be more mergers forthcoming.

Does this mean more acquisitions in Stryker’s future? Lobo hinted that Stryker may soon be following in Medtronic Inc.’s footsteps. Medtronic recently made two major purchases in China, the first of which was orthopedic firm China Kanghui Holdings Inc.

“Stryker has high growth in premium markets in India and China,” Lobo said. “It’s a smart move to get into value markets. Our best markets are in the United States, but you’ll hear about Stryker making moves like that [of Medtronic] in the future.”

Lobo joined Stryker last April, and has been CEO and president for less than a month. His most recent position was group president of Stryker Orthopedics. He has had a 25-year career in business, including executive positions in general management and finance. His medical industry experience includes time as chief financial officer (CFO) of Johnson & Johnsons’s (JNJ’s) McNeil Consumer Healthcare, CFO of Ortho Women’s Health and Urology, and general manager of McNeil Canada. In 2005, he was named president of JNJ’s medical products business in Canada, and in 2006 he became president of Ethicon Endo-Surgery Inc.

Stryker is based in Kalamazoo, Mich. While its main business is orthopedics—the company was founded by an orthopedist, Homer Stryker, M.D.—it also provides medical products in the neurovascular and surgical spaces. Many of its recent acquisitions have been of medical/surgical device companies, including neurotechnology company Surpass Medical Ltd.

Industry Insiders Grapple With How to Handle Future of Orthopedics
David Cutler, Ph.D., and James Capretta joined the Cleveland Clinic’s Medical Innovation Summit via videoconference (thanks to Superstorm Sandy) to debate whether the orthopedic sector is experiencing a bull or bear market.

According to recent government numbers, the United States is projected to spend 20 percent of its gross domestic product (GDP) on healthcare by 2021. Cutler, Capretta and other industry experts discussed whether such growth would be sustainable for the nation.

“We’re seeing that whole system is globalized,” said Kelly Barnes, leader of the U.S. health industries practice at PricewaterhouseCoopers LLP. “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 the 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:

• They invest in information technology;
• They have very effective payment systems; and
• They successfully empower both employees and customers to help them improve.

Customers—which, in the case of the orthopedic device industry, are patients—are more willing to help in the medtech industry than in any other industry, because 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 acutely active lifestyles.

K2M Highlights Global Expansion at NASS
During this year’s North American Spine Society (NASS) annual meeting (held Oct. 23-27) in Dallas, Texas, executives at K2M Inc. were focused on the global release of the company’s Rail 4D system.
Rail 4D is stabilization technology featured in the K2M’s Mesa Rail Deformity and Mesa Rail Small Stature spinal systems, which are used to help complex spinal curves. The Rail 4D product first debuted this summer during the International Meeting on Advanced Spine Techniques in Istanbul, Turkey. The news from NASS in Dallas was that the company now has continued to expand its global sales of Rail 4D, most recently in Denmark, Germany and Holland. The technology already has been introduced in the United Kingdom, Switzerland, Spain, Sweden, Ireland, and the United States.

“The European expansion of Rail 4D Technology signals the rapid uptake of this technology,” said Eric Major, K2M’s president and CEO. “Establishing a strong European presence with this technology is critical to our commitment to offering the best solutions for physicians and patients around the world.”

The Leesburg, Va.-based company claims to be the largest privately held spinal device firm that develops devices for the treatment of complex spinal pathologies and minimally invasive procedures. K2M’s product development pipeline includes spinal stabilization systems, minimally invasive systems, and biologics.

Inspired by structural I-beam geometry, the Rail 4D is an alternative to traditional round spinal rods offered with other products. According to the company, the Rail provides enhanced structural rigidity, while maintaining a lower-profile than set screw-based systems. Compared to a standard 5.5 millimeter cobalt chrome rod, the company’s cobalt chrome Rail of the same size is 210 percent stronger in flexion-extension and 46 percent stronger in lateral bending, according to company data. This technology is exclusive to K2M, as it has been designed to complement the company’s existing Mesa Locking and Cricket Reduction technologies.

“Rail provides the surgeon the ability—in conjunction with state-of-the-art screw technology—to optimally correct the scoliotic spine in the coronal and, more importantly, the sagittal plane. This presents significant short and long term advantages to the scoliotic patient,” said Stewart Tucker, MBBS, FRCS (Eng), FRCS (Orth), of the United Kingdom’s Royal National Orthopaedic Hospital.

According to the company, the design offers fixation options for surgeons by helping to apply forces during axial correction of difficult spinal curvatures and has the potential to reduce intraoperative rod “flattening” dreaded by surgeons. The Rail may decrease the need for over-bending the construct and give surgeons more predictability and direct control over sagittal balance, officials noted.

Lane Major, senior vice president of global marketing for K2M, told Orthopedic Design & Technology that 2012, despite market conditions, pricing and reimbursement pressures, has been another growth year for the company and that additional expansion is expected for 2013.

When asked if market conditions make the task of innovating more difficult, Major told ODT it isn’t easy but that’s the “name of the game” lately in medical devices and in the spine market, in particular.

Other goals, according to Major, in 2013 include expansion of the company’s biologic product line as well as the evaluation of new product categories.