05.29.08
Implant Manufacturing: Hot Market, Sizzling Demand
The implant market has OEMs and their suppliers scrambling to meet ever-growing demand.
Mark Crawford
Healthcare spending in the United States is expected to hit $4 trillion by 2017, nearly doubling the 2007 amount. The baby boomers undoubtedly will lead the spending frenzy, as they will expect medical technology to keep them active so they don’t miss a day of golf, tennis or even daily activities such as running up and down stairs.
With all those dollars to be spent, the value of the worldwide orthopedic implant market is expected to climb to nearly $7 billion in 2009, a steady climb from the $4.5 billion value the market had in 2002, according to recent research by Frost & Sullivan. Orthopedic implants that are—and will continue to be—in high demand include hip, knee and spine replacement devices, among others.
“Orthopedics continues to be a rapid-growth industry,” said Bob Durgin, corporate vice president for global quality and clinical and regulatory affairs for Biomet, a medical device firm headquartered in Warsaw, IN. “Most of our products assist an aging demographic that wants to maintain an active lifestyle. Knee replacement devices are in high demand and growing at a rate exceeding 10% a year.” Spinal devices, another hot segment of the market, have an even more impressive annual growth rate at 20%, fueled by cutting-edge research in bone growth factors, herniated disk technologies and fusion biologics.
Complexity with miniaturization is a significant driver within the medical marketplace. This tiny example of a micromachined part is shown sitting atop Roosevelt's ear on a dime. Photo courtesy of JM Medical. |
Many orthopedic implant manufacturers are focusing their research-and-development efforts on designing implants that reduce the effect of invasiveness. Leading the way are US manufacturers, which long have been internationally recognized for innovation—especially in designing products that rely on advanced materials, nanocomponents and micromechanical engineering.
“We continue to see significant growth in minimally invasive orthopedic implant systems and non-fixation orthopedic systems,” indicated Chris Rawlins, sales manager for Mentor, OH-based Miltronics & Skye Trust Technologies, which machines and assembles complex orthopedic implants and instruments for major orthopedic OEMs. “Each has [its] share of manufacturing challenges with extremely complex geometries, tight tolerances and almost-perfect fits between parts. The impact these technologies have on the overall orthopedic market is huge.”
Keeping with this trend, companies have introduced uni-compartmental knees and partial hip implants that need smaller incisions than before. Because minimally invasive surgeries reduce patient trauma and shorten hospital stays, an increasing number of patients are willing to get implanted. Thus, these relatively new techniques are driving strong growth in the US orthopedic implants market—and suppliers of the materials used to make these products are benefiting from this momentum.
Advances in Technology and Materials
One of the biggest trends in orthopedic implants are designs incorporating advanced materials. For example, Nitinol is a flexible alloy that has great potential in orthopedic implant design. “You know those eyeglasses that than can be twisted, and when they’re released they go back to the original shape?” asked Stuart Bestrom, marketing manager for West Chester, PA-based JM Medical, a producer of advanced materials and components for the industry. “That’s the most basic application. Now Nitinol is being used in a variety of medical applications. For example, spinal rods and arthroscopic surgery are usually performed with Nitinol, since it can bend 90 degrees and help maneuver in tight spots. We also have the capacity to polish Nitinol wire using a proprietary process that is the first to use no harmful chemicals and is environmentally friendly.”
Besides newer advances in alloys, ceramic innovations also are in demand. C5 Medical Werks, a Grand Junction, CO-based manufacturer of ceramic components for a variety of orthopedic implants, is developing customer-specific ceramic materials to assist orthopedic companies differentiate themselves from their competitors. “We are able to design stronger, higher-purity materials with greater flexural strength that are proprietary to individual companies,” reported Andrew Nield, director of sales and marketing for C5 Medical Werks. The materials benefit customers, while C5 also gets to differentiate itself from European and Japanese ceramic manufacturers.
Nield indicated that a key growth area in his market segment is the development of ceramic-on-ceramic bearing surfaces for spinal total disc replacement. “There is a huge amount of R&D effort going into this area,” he said. “The big push is to reduce the number of particles generated by the bearing surfaces and reduce the size of the particles generated. These are both advantages of ceramic-on-ceramic versus metal-on-metal or plastic-on-plastic. Our ceramic-on-ceramic components may help reduce the risk of osteolysis [bone degeneration] through reduced particle generation. Ceramic also has many advantages in a [magnetic resonance imaging] application, based on its radiolucent properties.”
Complementing material advancements are new generations of high-tech machining and design equipment used to meet the production demands of OEMs. “Advanced CAD software and shop-floor software are helping tremendously for programming and product order and data control management,” said Duane Audette, a senior estimator with Elk River, MN-based Metal Craft, a manufacturer of complex orthopedic instruments and implants for medical device OEMs. “Multi-axis machines are becoming required for manufacturing complex geometries. Sophisticated deburring equipment is also needed to accurately deburr complex close-tolerance parts.”
This type of equipment has become essential for OEMs intent on developing smaller, less invasive devices for more intricate surgical procedures. “A few examples of machined devices include cochlear implants and bone growth stimulation, both of which use very small machined metal parts,” said Bestrom. “Our advance micromachining allows us to make smaller devices with tolerances as low as 0.0001 inch. These smaller parts can then be used in parts of the body that traditionally are avoided, which is expanding the range of the kinds of implants that are being developed.”
Rawlins indicated that the development of new, innovative alternatives to traditional fixation systems is driving a significant shift in the overall design of the devices and the materials traditionally used to produce them. “We’re seeing spinal devices with more than twice as many intricate features in a device half the size of a traditional device,” he said. “In some cases, these are very tricky to machine and assemble.”
Rising Production Costs
Even though demand is high, profit margins are tighter because all of the advances in equipment, materials and other aspects of product development don’t come cheap. The steady rise in raw material costs during the last few years has been one area of concern. For example, titanium prices particularly have been expensive. Moreover, titanium production is being constrained by the extremely strong demand for raw materials needed to produce titanium mill products. The medical device industry must compete with other industries—such as aerospace, industrial and recreation—for available titanium, which drives up demand and price.
As a result, some innovators are turning to other types of metal. “The rise in metal prices has increased interest in metal alloys that offer low-cost alternatives to precious metals, such as platinum,” said Bestrom. “For example, our Biomed Series allows the use of palladium, iridium or other precious metals, which provide the same mechanical properties as platinum but with lower costs.”
Rawlins noted that shifts in material selection also have occurred for implants used in the spine and small-bone segments. “We’ve experienced a number of opportunities to machine PEEK and cobalt-chrome implants, which are designed as an alternative to traditional titanium and 316 stainless steel devices,” he said.
It’s not just materials that are jacking up production costs. “We are also seeing a large increase in regulations and documentation, which has resulted in increased administrative costs,” said Trisha Mowry, vice president of customer logistics for Metal Craft.
Orthopedic implant manufacturers have been busy complying with the new FDA Amendments Act of September 2007. “If properly implemented, the framework for performance goals and related interactive review processes established by the act should streamline the review process, reducing the time to market for new technologies that will benefit patients,” said Biomet’s Durgin. “In the meantime, the Global Harmonization Task Force, a partnership between regulatory agencies in the US, Canada, Australia, Japan and the EU, is striving for more uniformity in regulatory standards between these countries. Right now, it is very difficult to launch a new device uniformly across the globe because the regulatory requirements are so diverse.”
To remain compliant with regulatory requirements, OEMs are requesting more validation (which involves destructive testing) and failure modes and effects analysis (known in short as “FMEA”) data, and these additional steps in testing a design or process add to the overall cost of the final product.
“More emphasis is being placed on the quality and manufacturability of the designs and the planning and review prior to the actual manufacture,” said Mowry. “This has been value-added for both us and our customers, but it does take more time, which can be critical in a product launch.”
Proven consistent quality on the manufacturing floor—whether completed in-house or outsourced to a solutions provider—is as important an expenditure as any other.
“Price is still an important factor, but they also want to be assured that the supply will meet demand and that quality is reproducible over very large quantities, such as hundreds of parts per month,” commented Bestrom. “ISO certification and other advanced quality control measures must be proven. We already have the capacity and [quality controls] and have recently expanded our ability to use our multiple manufacturing sites for various steps in the process, so that we can do the complete product in-house for faster deliveries and better process control.”
Strategies for Keeping Costs Down
As strong as the demand is for new orthopedic implants, and as much as costs are increasing for materials and production, OEMs are reluctant to increase their prices for products—in fact, there’s an overall decline in prices for many of these devices in all regions of the world, as a result of cost-cutting measures designed to accommodate deficits in healthcare budgets that otherwise would hamper market growth.
High demand for implants will lead to increasing use of high-speed machining to get products to market quicker. Photo courtesy of Miltronics & Skye Trust Technologies. |
Some major US orthopedic OEMs have manufacturing facilities in Europe and/or Asia to help keep production costs down. Usually, the devices produced at these facilities are shipped back to the United States for sale and distribution. “However, with the falling dollar, we’re experiencing an influx of OEM inquiries to make products that had been previously produced overseas,” said Rawlins. “We anticipate the falling dollar to continue to open doors for us domestically.”
Audette agreed. “The falling dollar is stimulating foreign companies to outsource to the United States,” he said. “We are also seeing more [US-based] companies staying home to get their products because of long lead times, and the extended vacations, that take place overseas, which disrupts their business plans.”
Some companies prefer to manufacture in-house, or at least manufacture where they can closely monitor the manufacturing process. “If it is more than a four-hour flight to see your product being manufactured, that is a problem,” commented Nield. “How can you monitor that on a regular basis? It is also important to have manufacturing performed in a geographic area that follows the same stringent requirements as the FDA.”
Others are reluctant to outsource overseas because they worry about losing control of quality. Not only is there the cost and hassle of dealing with defective equipment and returns, but there also is a fear of painful, costly lawsuits should an outsourced implantable device fail and lead to patient injury or death.
Given the tough competition in various segments of the orthopedic market, OEMs are finding it difficult to maintain the double-digit growth percentages they have enjoyed over the past several years and, as a result, all of these issues are being weighed more carefully when developing strategies to remain profitable. Since most OEMs today are focused on streamlining costs any way they can do so without impacting quality, many device firms have found the solution is to work with long-term strategic manufacturing partners with capabilities beyond just machining metals and plastics.
“Over the last few years, orthopedic OEMs have really focused on cutting costs to provide greater returns to their shareholders,” said Rawlins. “In an effort to maintain a competitive edge, we've had to streamline costs and innovate alongside our customers.”
Once a job shop, Miltronics & Skye now is a strategic manufacturing partner that also provides engineering support, prototyping, assembly, packaging and various finishing operations. “As a strategic partner, we offer one-on-one engineering support for product development, quick turnaround prototyping and inventory management services,” said Rawlins.
Future Outlook
Regardless of strategy in getting products to market, the orthopedic implant market will continue to flourish—and service providers, already benefiting from the industry’s success to date, have been reinvesting profits to gear up for increased demand ahead. Metal Craft is more than doubling its manufacturing floor capacity to bring more of its design and manufacturing processes in-house for greater control and higher productivity (its workforce has already grown 17 % in the last six months). C5 Medical Werks has just installed a ceramic injection molding line based on customer demand for small intricate shapes in ceramic material. And Bestrom reported that JM Medical’s precious metals division is up 17% in revenue and 31% in profit. “We expect Nitinol revenues to continue to achieve double-digit growth over the next few years,” he said.
The prosperity only should grow greater for OEMs and their suppliers, if some eagerly awaited advances are any indication of how the implant market will evolve.
Smart implants—which can identify how a patient’s condition is changing and communicate those changes in a quantifiable way to the physician or hospital—will be one trend to watch. “Smart implants will improve health, save lives, reduce hospital time and reduce overall health costs,” said Nield, who additionally noted that ceramic compounds have advantages for smart implants because of their electrical insulating properties, low thermal expansion, biocompatibility and radio frequency translucency.
In terms of material advancements, look for biomaterials to become an even bigger market in years to come.
Finally, research is targeting advanced material coatings that fight infection in the body. Scientists at Columbia University’s Department of Surgery have developed a silver-based antimicrobial coating for implanted medical devices that greatly reduces the risk of post-operative infection. Studies have shown that devices coated with this material have reduced infection rates at the implant site by up to 80% and reduced bloodstream infection by up to 60%. (To learn more about the antimicrobial properties of silver, turn to page 61.)
The bottom line, as anyone working in the industry probably knows, is that product innovation will remain vital to the success of any orthopedic OEM. “The impact these innovative technologies have on the orthopedic market is huge and just as significant for the contract manufacturer producing the products,” concluded Rawlins. “To stay competitive as a manufacturing partner, we are continuing to innovate alongside our customers, such as investing in the most recent machining technologies. This is vital to maintaining a competitive edge in the industry.”