Calvin Lin, president at United Orthopedic Corporation USA, recently spoke with ODT to provide insights on his company’s strategy. Combining disposable options with fewer overall trays resulted in decreased cleaning costs associated with reusable surgical instruments. Further, the company maintains a vertical integration focus in its design and manufacturing processes, enabling it to control all aspects of the development procedure.
Sean Fenske: Can you share a bit of background on United Orthopedic Corporation?
Calvin Lin: United Orthopedic Corporation was founded in Taiwan in 1993 with the purpose of helping orthopedic surgeons provide better and more affordable care to their patients. We specialize in knee and hip replacements and were the first Asian company to receive FDA clearance for these types of replacements. The company has been publicly traded since 2004 on the Taiwan Stock Exchange.
We started distributing internationally in 2001. Currently, we are selling in 38 countries, with sales and marketing subsidiaries in the U.S., France, Switzerland, and Japan.
Our product portfolio includes orthopedic replacements for both revision hip and knee and primary hip and knee.
Fenske: What differentiates you from the big players in this sector?
Lin: In order to compete with some of the larger players in our industry, we must add real value for our customers. Value is a combination of quality and cost. While we strive to provide the best possible products to our customers, we also work very hard to streamline the manufacturing process. This allows us to further help our customers by reducing total episode of care costs.
Unlike our competitors, we decided to own the entire design and manufacturing process by applying a unique, vertically integrated manufacturing model. We source top-quality, medical-grade raw materials from the U.S. and Europe like the competitors do, and we create our products in house, starting with forging and casting, going all the way to packaging.
Our vertical integration allows us to provide top-notch quality products. The fact that we have never had any major recall for the past 24 years justifies this integration model. Also, because we own our factories, we are able to react faster to address market needs—no matter if there’s demand for a new product proven to improve outcomes, or an instrument customization which can facilitate surgical procedures.
Our vertical integration also gives us a competitive advantage against second-tier competitors. Not only can we offer a greater supply, but, because of our competitive cost structure, we are in a better position to assist our customers in reducing their costs.
Fenske: Where are your products available in the U.S.?
Lin: Our products are being distributed throughout the entire U.S., from the West to East Coast.
Fenske: Why the focus on knee and hip? Do you expect to expand into other implant sectors?
Lin: The global orthopedic market is around $48 billion, where the knee and hip space represent $15.5 billion with a combined growth rate around three to five percent a year. It’s a very big market, and there is plenty of room to grow.
Our primary goal now is to fill the product gap in our knee and hip offerings. For example, we anticipate to launch an oncology system (USTAR II) next year, which will address the need to correct for severe bone loss after revision or tumor removal surgery.
Other than our work with large joints, in 2017 we acquired A-Spine Asia, a leading Taiwanese spine products company. This acquisition helps us increase our footprint in the Chinese orthopedic market.
Fenske: Your offering reduces the number of trays involved for a procedure. How is this accomplished?
Lin: It started by solving a need. Reprocessing instrument trays has always been a major cost for hospitals. Traditionally, it takes anywhere from six to nine trays to do a total knee replacement. All the preparation, sterilization, and storage—it all costs time and money. Our thinking was, “How do we help our customer partners reduce some of their burden in delivering healthcare?” Our engineering team spent almost two years redesigning our U2 Knee System’s instruments, including the patented U2 Knee AiO (All-in-One) Block. These redesigned instruments were made available in early 2017. We successfully reduced the number of trays from four to 1.5 for every total knee replacement performed now with our U2 Knee System.
Fenske: You offer a disposable solution for knee implants, replacing the more traditional reusable products. Can you share some insights on this technology?
Lin: A disposable instrument is not a new concept. What we did differently from other companies is that we incorporated disposability when we redesigned our U2 Knee System’s instruments. By making the trials disposable, it only takes 1.5 trays to perform a total knee replacement with our U2 Knee System. Not only does that save time and money by eliminating the need to reprocess trays, but it can potentially reduce the risk of infection.
The U2 Knee MDT (Modular Disposable Trial) was designed with medical-grade composite material to reproduce the same user experience as traditional metal products. For example, we added a metal plate in the back of the femur trial to mimic what surgeons will feel when using a traditional all-metal femur trial.
Fenske: What is the overall response to your product offering? Why have surgeons preferred your selection over those from other firms in the industry?
Lin: Throughout our nearly 25-year history, we have been fortunate to have many surgeons use our products for approximately 10 to more than 15 years. The reasons why they choose our products can be subjective. For example, our U2 Knee System can reduce bone cutting by up to 30 percent, which makes it a better solution for surgeons who want to preserve as much bone as possible. Also, our UTF Stem reduced has 28 sizes—the most number of sizes for a hip stem product on the market—and helps provide patients with a better fit for their implants.
We receive positive feedback from our surgeons on our implant design showing that it is very forgiving (meaning, the impact of errors is minimized), and the results are reproducible, along with the overall ease of use of our instruments.
Fenske: Where do you see the opportunity for expansion? Will that be spine with the recent acquisition?
Lin: Our primary goal is to be the go-to solution when it comes to knee and hip replacements. We expect to complete our product offering in the next 24 to 36 months. Of course, we are always evaluating new opportunities, such as in the spine and extremities spaces. The acquisition of A-Spine Asia provides us with a good way to test the market.
Fenske: Where are orthopedic implants headed? What changes do you expect for your business in the next five to 10 years?
Lin: It’s hard to say exactly what’s on the horizon for orthopedic implants. Today, we see many companies invest in robotic-assisted surgery, with the hope the outcome will justify the capital investment. United Orthopedic Corporation, as a smaller orthopedic company specializing in knees and hips, has to provide value to our customers. We watch very closely all the technologies that can potentially improve clinical outcomes, such as custom-made implants that use 3D-printing technology. We have been using 3D printing for rapid prototyping for years. However, we don’t think it’s cost-effective and time-effective for mass production yet. But, we do believe at some point it may entirely change how we make implants.
Fenske: Before we close, do you have any additional comments or thoughts you would like to share?
Lin: Bundled payments are definitely going to be changing the healthcare paradigm in the orthopedic space. Bundled payments incentivize the streamlining of surgical procedures, such as knee and hip replacements, and encourage efficiencies in healthcare management and administration. At the end, though, the goal of bundled payments is to reduce unnecessary costs in the U.S. healthcare system. We, as a company, are aligning ourselves strategically around this reality, and we have done a great deal of research into bundled payments to capitalize on the opportunity it represents for surgeons and patients.