KEY EXECUTIVES:
William Weldon, Chairman and CEO, Johnson & Johnson
Gary Fischetti, Company Group Chairman, DePuy Familyof Companies
Andrew Ekdahl, President, DePuy Orthopaedics
Gordon Van Ummersen, Worldwide President, Trauma &Extremities, DePuy Orthopaedics
Mark Hanes, Worldwide Director of Research, DePuyOrthopaedics
Namal Nawana, Worldwide President, DePuy Spine
Patrick Brady, Worldwide Vice President of Manufacturing, DePuy Family of Companies
NO. OF EMPLOYEES: 6,400
GLOBAL HEADQUARTERS: Warsaw, Ind. & Raynham, Mass.
Despite Johnson & Johnson’s volume and breadth of product offerings, the 2010 fiscal year was a mixed bag for the healthcare giant. Sluggish sales and a number of high-profile recalls made it a tough 12 months. Though J&J as a whole reported a slight overall sales drop, the firm’s Medical Device and Diagnostics segment—the largest of its three business sectors—continued to deliver gains—despite headline-making recalls for its orthopedic subsidiary.
“Although 2010 was a challenging year, the business continued to deliver earnings growth, while investing in the future and emerging a stronger organization,” Bill Weldon, chairman and CEO, wrote to shareholders. “While we will continue to see near-term pressures on the business for 2011, we remain committed to investing in innovative products, a robust pipeline and talented people who will sustain our growth and increase our market leadership in one of the most important and rewarding industries in the world.”
For fiscal 2010, medical device and diagnostics sales were $24.6 billion, an increase of 4.4 percent compared with the prior year. Domestic sales increased 3.6 percent and international sales rose 5 percent. DePuy’s orthopedic joint reconstruction and sports medicine businesses grew 4 percent to $5.6 billion, up 4 percent.
As noted above, the recall of DePuy’s ASR hip system came during a time when the company had more than its share of recalls across all of its product categories. A cover story in Businesweek magazine in April of this year asked if “the family company,” as the firm touts itself, could still be trusted after 15 months of 50-plus product recalls (including contact lenses; popular over-the-counter drug brands such as Tylenol, Motrin, Benadryl and Rolaids; surgical sutures due to compromised sterile packaging; cracks in prefilled syringes; and more). The recalls even drew scrutiny from Capitol Hill, where two hearings were held, calling J&J executives and members of the U.S. Food and Drug Administration (FDA) to testify about manufacturing and quality issues. Following a hearing in October, Weldon told lawmakers that the company plans to invest $100 million across the company to improve facilities, equipment and operations around the world.
In August 2010, DePuy Orthopaedics voluntarily recalled the ASR XL Acetabular System and DePuy ASR Hip Resurfacing System. Data from the National Joint Registry of England and Wales showed a five-year revision rate of approximately 12 percent for the ASR Hip Resurfacing System and approximately 13 percent for the ASR XL Acetabular System. Later studies from the United Kingdom showed even higher rates of revision. As of the beginning of this year, J&J faced more than 600 lawsuits in state and federal courts by patients who had the hip implants.
The ASR resurfacing System was introduced in 2003 and is only approved for use outside the United States. The ASR acetabular device was launched in 2004 and has been available worldwide. DePuy officials claim the decision had been made in 2009 to discontinue the ASR System as a result of declining demand and the intention to focus on the development of next generation hip replacement and resurfacing technologies.
There has been ongoing controversy about metal-on-metal orthopedic implants. Earlier this year, the FDA launched a webpage detailing some of the issues surrounding metal-on-metal implants, and agency officials said they are taking a close look at all-metal hips, which have faced sales pressure amid concerns about metal particles wearing off and causing medical problems. As a consequence of the sliding action of joint replacement devices, wear particles form in the joint space. Implant, design and materials selection can limit the concentration and size of the particles that develop during the expected life cycle of the implant, but essentially it is unavoidable.
It is the presence of the wear particles, at certain concentrations and specific size ranges, that largely contributes to osteolysis (bone cell death) through various cell responses in the body. The formation of wear debris has created considerable concern about the long-term longevity of implants. People react to metal particles differently, and it’s not currently possible to predict who will have a reaction, what it will entail or when it could happen, according to the FDA. The problem with more frequent revisionary surgery is that every surgery has risks, and every additional surgery involving the hip joint exponentially increases the chances of serious complications like blood clots, bone loss, nerve damage or infection.
In part due to the fallout from the recall, David Floyd, president of DePuy Orthopaedics, announced his resignation in March this year, a post he held since 2007. In June, he was replaced by Andrew Ekdahl. Ekdahl’s career with DePuy and Johnson & Johnson spans more than 20 years, where he has worked in orthopedics, trauma, sports medicine, neurosciences and spine. Prior to his appointment as president of DePuy Orthopaedics, he was franchise vice president, DePuy Europe, Middle East and Africa.
The fiscal year wasn’t all bad news on the product front, of course. A number of new devices were launched.
The company rolled out new high-mobility cup for reverse shoulder replacement, a new hemiarthroplasty system for shoulder resurfacing and new anatomic locked plating systems (ALPS) for the elbow and the proximal tibia.
“Complex challenges with shoulder repair and replacement, as well as the effective treatment of intra-articular fractures, are growing areas of clinical need and interest in the orthopedic community,” said Gordon Van Ummersen, president, Trauma & Extremities, DePuy Orthopaedics. “DePuy is effectively responding with meaningful innovation and solutions that help improve patient care and provide surgeons with more clinical options.”
The new Delta XTEND high-mobility humeral cup with Premieron x-linked polyethylene is a total, semi-constrained shoulder arthroplasty that reverses the normal relationship between the scapular and humeral components. Laboratory testing has shown the new polyethylene developed for this cup reduces wear debris by 85 percent compared with conventionally manufactured and sterilized polyethylene components, according to the company. In addition, the cup has a shallower depth than other cups offered with the system, which may further reduce the risk of scapular neck erosion while maximizing range of motion for certain patients.
DePuy expanded its line of bone-preserving anatomic prostheses for shoulder resurfacing with the introduction of Global CAP CTA, the company’s first resurfacing prosthesis indicated for cuff tear arthropathy. In addition to the features and design benefits offered with Global CAP for osteoarthritis or rheumatoid arthritis, Global CAP CTA has an increased area of superolateral articulation and implant geometry designed to compensate for superior humeral head migration to help restore joint stability and range of motion, officials noted. The benefit of shoulder resurfacing is that it allows patients to retain more of their natural bone by replacing only the diseased surface of the joint, instead of the entire joint.
DePuy also added to its extensive trauma platform with the launch of two new systems to the ALPS product line. The elbow plating system is designed to allow surgeons to address fractures around the elbow, many of which are caused by direct or indirect blows during a fall or motor vehicle accident. The proximal tibia system addresses a variety of common proximal tibia (shin bone) fractures, many of which are caused by a fall from considerable height, sports-related trauma or motor vehicle accident.
The ALPS line also includes large- and small-fragment, distal fibula and hand fracture systems. Together, the six systems offer anatomically contoured titanium plating technology using low-profile, high-strength plates to mimic the patient’s natural anatomy and provide locking, non-locking and multidirectional screw fixation options.
DePuy Spine launched its Expendium vertebral body detotation set to help surgeons correct spinal alignment and decrease rib rotation in patients with scoliosis, an abnormal curvature of the spine that affects about 6 million people in the United States. The new instrumentation added to the Expendium spine product line and features a “deraotation quick stick,” an extension to pedicle screws that attaches quickly and securely to facilitate 3-D spine correction. The instruments in the set allow surgeons to link and manipulate multiple vertebral bodies at once for efficient en-bloc or segmental derotation maneuvers.
“Rib prominence is often the main concern for scoliosis patients and their parents so derotation is a very important part of the surgery,” said Randal R. Betz, M.D., one of the design surgeons who helped develop Expendium and past president of the Scoliosis Research Society. “However, derotation can be challenging and complex. This new instrumentation is designed to streamline the process and to help produce an excellent clinical and cosmetic result.”
DePuy Mitek Inc., DePuy’s sports medicine arm, introduced the Bristow-Latarjet instability shoulder system, the first instrument set specifically designed to be used in both open and arthroscopic Latarjet or Bristow procedures, according to the company. Bristow and Latarjet procedures are used to treat recurrent shoulder instability caused by bone loss or soft-tissue damage. The new system was developed with Laurent Lafosse, M.D., an orthopedic surgeon specializing in arthroscopic shoulder reconstruction who pioneered the arthroscopic Latarjet procedure in 2003. The Bristow and Latarjet procedures involve transferring the coracoid graft and the conjoint tendon to the bone-deficient glenoid to create a stable bone-block and prevent further joint dislocation. DePuy Mitek’s instrument set features a drill guide to help create the optimal location for drill holes into the coracoid graft and a positioning cannula that holds the graft for more precise positioning of the bone block. It also offers a screw and top hat implant system for more controlled fixation and compression of the coracoid on the glenoid.
The arthroscopic procedure also can help speed recovery for a quick return to high-intensity activities; patients can begin a full range of movements immediately after surgery and return to low-risk sports at three weeks and high-risk sports at six weeks.
The new fiscal year started with management shuffling and some significant consolidation of big-name orthopedic brands. In addition to a new president at DePuy Orthopaedics, DePuy Spine also got a new chief. Namal Nawana was named worldwide president of DePuy Spine. He has been with Johnson & Johnson and DePuy for more than 13 years, serving roles in engineering, marketing, sales and general management in Europe, Canada, Australia and the Asia-Pacific. Nawana succeeded Gary Fischetti, who was promoted to company group chairman for the DePuy Family of Companies in January.
This year also brought the largest buyout in Johnson & Johnson’s 125-year history and certainly a blockbuster in the orthopedic sector with the $21.3 billion purchase of Synthes Inc. The move positions DePuy to become the leader in the $6 billion market for trauma devices.
“Very infrequently do you ever see an opportunity for a company like Synthes to come into play with J&J,” Weldon said on conference call with analysts after the deal was announced. “We just thought this was an extraordinary opportunity and the time was right.”
Synthes already has about 40 percent of the market for sales of screws, plates, bone grafts and other products to treat skeletal injuries.