In recent years, spine and orthopedic devicemakers have merged and acquired smaller companies.
Spine surgeons discuss the effects these business moves and their outlook for the market.
Note: Responses were lightly edited for clarity.
Question: How are you thinking about the continued consolidation of spine and orthopedic device companies?
Rachel Bratescu, MD. Weill Cornell (New York City): In recent years, the spine industry has been undergoing a consolidation process. Last year there were a number of acquisitions, and these occurrences seem to be growing at a rapid pace. Mergers like this are advantageous for shareholders, but the question is whether consolidation strategies translate into improved product development and therefore better tools for surgeons. Ultimately, what matters most on the clinical side is how this affects patient outcomes. Out of many competing interests at play I think the primary factors driving this trend include intense competition in the spine market and the pressure for innovative research and development.
The historical trend with other industries is that when there is less competition, there tends to be less innovation. I am hopeful that with further consolidation patterns device companies continue pouring similar, if not higher, amounts of capital into device improvements.
Michael Gallizzi, MD. The Steadman Clinic (Vail, Colo.): Larger companies in the medical device industry are increasingly relying on acquisitions to stay competitive in a rapidly evolving landscape. By purchasing smaller, innovative companies that have already navigated regulatory processes and developed cutting-edge technologies, larger companies can quickly expand their product portfolios and stay ahead of the curve.
This strategy allows larger companies to accelerate their innovation pipeline, enhance their R&D capabilities, expand their market share and stay competitive in a rapidly changing industry.
Developing a new medical device from concept to launch can be a lengthy and complex process, involving biomechanical testing, ex vivo and in vivo testing, clinical trials, regulatory submissions, packaging, and marketing. By acquiring companies that have already completed these steps, larger companies can shortcut this process and bring new products to market more quickly.
The "lead, follow, or buy" approach is a common trend in the medical device industry, where companies must constantly innovate to stay ahead. This strategy enables larger companies to leverage the expertise and innovations of smaller companies while expanding their own capabilities and market reach.
Lali Sekhon, MD, PhD. Spine Surgeon at Reno (Nev.) Orthopedic Center: Acquisitions have been the standard corporate business model in spine/orthopedics for close to 20 years. The days of internal organic development are mostly over for the big five to six companies who, in spine, have about 7% market share based on revenue. Many have reduced their internal engineering staff numbers which makes getting custom instruments challenging and product development an afterthought. It's a corporate decision to derisk. It means they are buying proven revenue generating products and not taking the risks of development, approval etc. [It] makes corporate sense but makes it exceedingly hard for surgeon innovators where they basically need to bring products to market themselves.
The surgeons are the future of innovation so there needs to be a clearer pathway for this and acquisitions in the short term make sense but in the long term may stifle innovation as the development road becomes too long. I know this, because I have lived it with two medical device startups.
Vijay Yanamadala, MD. Hartford (Conn.) HealthCare: Consolidation will likely provide further efficiencies as individual companies are able to offer a broader range of devices and technologies to surgeons. It means that surgeons can also consolidate who they work with as well, allowing for more consistent experiences in the operating room. This will also help hospital staff who will have to work with fewer companies in contracting and processing equipment. Overall, I see many positive results from this without any significant negatives.