In the wake of healthcare reform and a poor economy, orthopedic and spine device companies face several challenges over the next year. Here, industry experts discuss the most apparent challenges the industry stands to overcome in the future.
1. Consolidation within the medical device industry. The number of smaller orthopedic and spine device companies merging or being acquired by larger device companies has been growing over the past few years. For example, in 2010 Stryker acquired Gaymar Industries, Boston Scientific's neurovascular business and Porex Surgical. This consolidation could be occurring because it's difficult for small companies to obtain enough capital to initiate and maintain operations in today's market. As regulations for the FDA 510(k) clearance process change and healthcare reform seeks to lower the cost of healthcare, the capital it takes to bring a device to the market could continue to raise.
2. Changes in the FDA 510(k) clearance process. Healthcare reform includes significant changes to the FDA's 510(k) clearance process for medical devices, which could make it more challenging for companies to bring approved products to the market. The new regulations demand that companies seeking approval for products which are similar to ones already on the market clinically prove comparative effectiveness.
One advantage from the increased number of trials required for FDA approval could be that there will be more reviewers, according to an Oct. 5, 2010 AdvaMed report. These new trials will be specifically important for spine device companies as they seek stronger data to support fusion devices and begin developing new minimally invasive systems. "Now, the insurance companies want to see if the minimally invasive surgeries have clear advantages," says Deanna Vankessel, a senior analyst with Millennium Research Group. Surgeons and insurance providers who want clearer information on the benefits of certain devices and procedures over others are driving the boost in number of clinical trails for spine, she says. The device companies and interested surgeons are now providing comparative effectiveness data hoping to gain an advantage by showing the device has a clear benefit.
The trials can cost between $10,000-$1 million, and companies must go through several years of work to finish them, which means there could be less innovation. While the new regulations impact all companies, the larger companies may also see it as a strategic advantage because there may be less competition.
3. Reimbursement for orthopedic and spine procedures. While the reimbursement for orthopedic and spine procedures has been decreasing over the past several years, some insurance companies are starting to refuse coverage of some spinal fusions. Most notably, the Blue Cross Blue Shield of North Carolina announced that it will require stricter criteria for coverage of spinal fusions, a procedure that has been performed by spine surgeons for decades. With low or no reimbursement for a procedure, facilities either have trouble recovering the cost of those surgeries or else the procedure is not performed. "Reimbursement is a really big issue for spine because of the cost of the procedure," says Ms. Vankessel. "The insurance companies are beginning to require specific patient populations and diagnoses for these procedures. This is something that's not widespread, but it is a growing concern."
Clinical data will be important for increasing reimbursement in the future, says Melissa Hussey, a senior analyst with Millennium Research Group. In Oct. 2010, the American Academy of Orthopaedic Surgeons launched a trial version of a joint registry using 15 hospitals to measure the effectiveness of implants. The pilot program is expected to be expanded in the summer of 2011 with the goal of eventually tracking data from 90 percent of hospitals in the US, she says. Overseas, if device companies show good data, they may receive a premium for their devices. "It will be interesting to see if manufacturers receive a premium in the US for good data," she says. "It's a trend we'll be watching."
4. Lowering the cost of healthcare. Right now, the orthopedic and spine device market leans toward innovations that show improved patient outcomes but are more expensive for the healthcare providers. In some cases, device companies are not successful with their products if they don't provide an advantage over the leading products in the market. For example, many of the companies working on biologic solutions for use in spine surgery are very similar to what is already available, says Ms. Vankessel. "In order to gain any significant market share, these companies need to show clinical data comparing their biologic to the gold standard, autograft, or Medtronic's INFUSE and prove it works just as well and has a better price tag," she says.
However, in the future companies could begin looking at how they can provide technology with the same good outcomes for less money than competing products.
5. Connecting with orthopedic surgeons. Increased scrutiny on the relationship between orthopedic surgeons and device companies over the past several years has led to stricter regulations on how surgeons can interact with device companies. There are two kinds of controls in place: the national AdvaMed, which is an industry-led organization that puts controls on the relationship, and individual state regulations. In the past, orthopedic device companies have been able to spend a large amount of money on events to introduce surgeons to their products, which is no longer allowed in many cases.
Additionally, surgeons often collaborate with orthopedic and spine device companies to develop implants and instrumentation systems, either through innovation or trialing the product. These types of relationships are also under scrutiny to ensure surgeons don't choose to use an inferior device or system due to stake in the company. This can hinder a device company's ability to understand the best way to craft the product for their customers: orthopedic surgeons.
6. Device marketing and communication with customers. Orthopedic and spine device companies are facing new challenges in connecting with potential customers and marketing new devices. In the past, companies would attend trade shows and meet with several potential customers, such as physicians, who are attendees. However, attendance to some of these events could be dwindling, as hospitals and physicians are more hesitant to meet the costs.
Instead, device companies are seeking alternative routes to introducing their products. These methods include direct representation at the hospital, direct mail, an increased web presence and direct e-mails to hospitals and physicians. They are also publishing news releases on new products and company news online.
Read more about Millennium Research Group.
1. Consolidation within the medical device industry. The number of smaller orthopedic and spine device companies merging or being acquired by larger device companies has been growing over the past few years. For example, in 2010 Stryker acquired Gaymar Industries, Boston Scientific's neurovascular business and Porex Surgical. This consolidation could be occurring because it's difficult for small companies to obtain enough capital to initiate and maintain operations in today's market. As regulations for the FDA 510(k) clearance process change and healthcare reform seeks to lower the cost of healthcare, the capital it takes to bring a device to the market could continue to raise.
2. Changes in the FDA 510(k) clearance process. Healthcare reform includes significant changes to the FDA's 510(k) clearance process for medical devices, which could make it more challenging for companies to bring approved products to the market. The new regulations demand that companies seeking approval for products which are similar to ones already on the market clinically prove comparative effectiveness.
One advantage from the increased number of trials required for FDA approval could be that there will be more reviewers, according to an Oct. 5, 2010 AdvaMed report. These new trials will be specifically important for spine device companies as they seek stronger data to support fusion devices and begin developing new minimally invasive systems. "Now, the insurance companies want to see if the minimally invasive surgeries have clear advantages," says Deanna Vankessel, a senior analyst with Millennium Research Group. Surgeons and insurance providers who want clearer information on the benefits of certain devices and procedures over others are driving the boost in number of clinical trails for spine, she says. The device companies and interested surgeons are now providing comparative effectiveness data hoping to gain an advantage by showing the device has a clear benefit.
The trials can cost between $10,000-$1 million, and companies must go through several years of work to finish them, which means there could be less innovation. While the new regulations impact all companies, the larger companies may also see it as a strategic advantage because there may be less competition.
3. Reimbursement for orthopedic and spine procedures. While the reimbursement for orthopedic and spine procedures has been decreasing over the past several years, some insurance companies are starting to refuse coverage of some spinal fusions. Most notably, the Blue Cross Blue Shield of North Carolina announced that it will require stricter criteria for coverage of spinal fusions, a procedure that has been performed by spine surgeons for decades. With low or no reimbursement for a procedure, facilities either have trouble recovering the cost of those surgeries or else the procedure is not performed. "Reimbursement is a really big issue for spine because of the cost of the procedure," says Ms. Vankessel. "The insurance companies are beginning to require specific patient populations and diagnoses for these procedures. This is something that's not widespread, but it is a growing concern."
Clinical data will be important for increasing reimbursement in the future, says Melissa Hussey, a senior analyst with Millennium Research Group. In Oct. 2010, the American Academy of Orthopaedic Surgeons launched a trial version of a joint registry using 15 hospitals to measure the effectiveness of implants. The pilot program is expected to be expanded in the summer of 2011 with the goal of eventually tracking data from 90 percent of hospitals in the US, she says. Overseas, if device companies show good data, they may receive a premium for their devices. "It will be interesting to see if manufacturers receive a premium in the US for good data," she says. "It's a trend we'll be watching."
4. Lowering the cost of healthcare. Right now, the orthopedic and spine device market leans toward innovations that show improved patient outcomes but are more expensive for the healthcare providers. In some cases, device companies are not successful with their products if they don't provide an advantage over the leading products in the market. For example, many of the companies working on biologic solutions for use in spine surgery are very similar to what is already available, says Ms. Vankessel. "In order to gain any significant market share, these companies need to show clinical data comparing their biologic to the gold standard, autograft, or Medtronic's INFUSE and prove it works just as well and has a better price tag," she says.
However, in the future companies could begin looking at how they can provide technology with the same good outcomes for less money than competing products.
5. Connecting with orthopedic surgeons. Increased scrutiny on the relationship between orthopedic surgeons and device companies over the past several years has led to stricter regulations on how surgeons can interact with device companies. There are two kinds of controls in place: the national AdvaMed, which is an industry-led organization that puts controls on the relationship, and individual state regulations. In the past, orthopedic device companies have been able to spend a large amount of money on events to introduce surgeons to their products, which is no longer allowed in many cases.
Additionally, surgeons often collaborate with orthopedic and spine device companies to develop implants and instrumentation systems, either through innovation or trialing the product. These types of relationships are also under scrutiny to ensure surgeons don't choose to use an inferior device or system due to stake in the company. This can hinder a device company's ability to understand the best way to craft the product for their customers: orthopedic surgeons.
6. Device marketing and communication with customers. Orthopedic and spine device companies are facing new challenges in connecting with potential customers and marketing new devices. In the past, companies would attend trade shows and meet with several potential customers, such as physicians, who are attendees. However, attendance to some of these events could be dwindling, as hospitals and physicians are more hesitant to meet the costs.
Instead, device companies are seeking alternative routes to introducing their products. These methods include direct representation at the hospital, direct mail, an increased web presence and direct e-mails to hospitals and physicians. They are also publishing news releases on new products and company news online.
Read more about Millennium Research Group.