Other Articles

The Match Process…Part II: Interviews
By Elizabeth Hofheinz
This week we are checking in with medical students Matt Popa and Scott Tucker, who are moving through the residency match process. Learn their thoughts on scheduling interviews, the interviewers, and how they handled unusual questions.

How a Recession Might Affect Orthopedics
By Robin Young
With Citibank and Merrill Lynch waking up from their sub-prime party and realizing with growing horror that they wrecked the house and with stocks signaling a recession, it’s time to consider how past and imminent recessions might affect orthopedic product manufacturers, surgeons and hospitals. Here’s our analysis.

FDA Homes in on Postmarket Off-Label Marketing in Spine
By Walter Eisner
Staff shifting at the FDA from premarket to postmarket offices has raised the agency’s expertise level to monitor off-label marketing of spine devices. What’s it mean for you?

Nucleus Replacement: Perspectives Regarding the Gap in the Continuum of Spine Care and Degenerative Disc Disease
By Matt Menze
Confucius said, “Do not use a cannon to kill a mosquito.” In spine, the admonition could become, “Do not use fusion to treat an early stage degenerated disc.” Nucleus replacement may become an alternative for early stage degenerative disc disease.

So You Want to Write or Edit a Textbook…
By Elizabeth Hofheinz
While not financially lucrative, writing or editing an orthopedic textbook brings other rewards. The chance to contribute to the field and establish oneself as an expert are just two of the benefits of participating in this interesting process.

Biggest Order Ever for a Stem Cell Product
By Robin Young
To load $224.7 million of stem cell products, more than one semi-tractor trailer will have to back up to the loading dock on Aliceanna Street in Baltimore, Maryland. Last week the Department of Defense issued a landmark purchase order for stem cell products. The business of stem cells is gaining momentum. The implications are huge. Read on.

Fallout From Arkansas
By Walter Eisner
Dr. Chan’s guilty plea in Arkansas adds fuel to the fire of the remaining civil cases. Blackstone Medical is clearly in the plaintiff lawyer’s crosshairs. Read about the fallout from Arkansas.

Nailing the Rotator Cuff Market
By Dev Joshi
Rotator cuff sprains and ruptures count as two of the top five reported shoulder diagnoses in the PearlDiver database. Out of 3.7 million patients in the PearlDiver extremities database, 1.6 million are there due to shoulder pain complaints. What’s it all mean? Read on.

Recruiting Residents: Formal Strategies and Gut Instincts
How to home in on the residents who will be most successful in your program? Read what the experts have to say. Sharing their wisdom and experience are Dr. Robert Pedowitz, Professor and Chair of the Department of Orthopedics and Sports Medicine at the University of South Florida, and Dr. Ken Yamaguchi, the Sam and Marilyn Fox Distinguished Professor of Orthopaedic Surgery at Washington University School of Medicine.

Stem Cells Beat HA for Knee Pain Relief—Updated Chondrogen™ Results
New one-year data shows that a single, direct injection of Mesenchemal Stem Cells (MSC) beats multiple injections of hyaluronic acid (HA). Beyond pain relieve, the study also delivered evidence that stem cells reduce subchrondral sclerosis and osteophyte formation in OA patients. The evidence FOR stem cells keeps piling up.

Mike Mahoney: A Steady Hand for DePuy
New DePuy Group Chairman Mike Mahoney has one goal: make DePuy the clear leader in orthopedics. How? OTW talked with Mahoney and DePuy Spine’s Gary Fischetti. Here’s what they had to say.

How to Get the Surgeon’s Attention
Understanding relationship dynamics and having the chutzpah to put your best creative foot forward can garner you real success as a sales rep. Find out how to bring inventiveness to the sales process so as to attract and retain the surgeon’s attention.

Death Spiral
Since January, ReGen Biologic's stock has fallen from $0.95 per share to $0.04 per share. The number of shares outstanding is up 45% in 9 months. In one case, the company paid a $24,000 vendor bill with 68,572 shares of stock. Still, a couple of particularly savvy orthopedics investors have bought roughly 7% of the stock. Can ReGen survive?

Diving in to the Future
Since 1996 total knee procedures have risen 77% to 455,000 annually. A study presented at AAOS estimates that by 2030 that number grows to 3.48 million knee replacements a year! If infection rates continue to rise at current rates, however, that future will not be nearly as rosy for either patients or industry. Read on.

Selling Yourself: Career Advancement for Sales Reps
Are you considering becoming a distributor or do you plan to advance within a company? Either way, you need to be ready. You will want to know how to make product line choices, hire a sales force, and lead others, among other things.

Mission Unaccomplished: Are the Wheels Coming Off at the FDA?
The FDA is no longer able to fulfill its mission and its wheels are coming off. So says the FDA’s own Science Board in a scathing report. We looked under the hood of the report and here’s what we found.

“Back” to the Future Part II: Technology and the Vertebral Compression Fracture Market
In Part I, our inquiring analyst, Matt Menze, highlighted opportunities for spinal implant manufacturers in the vertebral compression fracture (VCF) market. Now he tackles the thorny issue of new and emerging VCF technologies. What’s on the horizon? Read on.

Direct-to-consumer advertising by the orthopedic industry has been increasing since it began in 2003 with Stryker Corporation’s Jack Nicklaus Trident® ceramic-on-ceramic Hip television commercial. At an average cost of $381,000 to create a commercial (according to the American Association of Advertising Agencies), plus airtime costs that range from $5.00 per 1,000 viewers to the average prime-time spot that costs over $300,000 per 30 seconds, the orthopedic manufacturers have followed the pharmaceutical industry’s lead. They are using television and print advertising to create brand and product awareness among potential customers. Advertisements such as Smith & Nephew’s “What Moves You?” commercial have been dubbed the beginning of the education process for the consumer. But with the level of investment required, is the manufacturer really benefiting?

Frankly, the rise of direct-to-consumer advertising strikes us as a natural progression to the market segmentation we are now seeing. Large joint implants are moving away from one-size-fits-all and being increasingly tailored to the patient’s specific needs. Manufacturers realize it is more important than ever to understand the various segments of the large joint market.

Certainly, we think, the best way to understand the large joint market segmentation is with diagnoses. In Table 1 is a list of the top five knee diagnoses across all ages and genders, according to the Agency for Healthcare Research and Quality.

Table 1: Top Five Knee Diagnoses (All Ages Included)

Source: Agency for Healthcare Research and Quality

For surgeons and manufacturers of large joint implants, this list shouldn’t hold much surprise. Just as if it were a list of the top music hits of all time you would expect to find a Beatles song or two, in this list you would expect osteoarthrosis to be prevalent in any diagnosis leading to a knee implant. It is interesting, though, that 90% of these patients within the top five were diagnosed with an osteoarthrosis-related condition. Also, it is noteworthy that the number of patients dropped significantly from the first to the second diagnosis, and then again to the third diagnosis.

But what is most important in this table is what isn’t shown. This list includes ALL patients, and nearly 62% of the patients in this list are 65 or older.

In the past, manufacturers sold the same basic design to all market segments. Even now it is challenging to spot the differences between knee implants. Should the industry remain in this situation, knee implants are clearly at risk of becoming a commodity. Therefore, large joint implants are increasingly being designed with more specific end-users in mind. With a more refined design focus, manufacturers are discovering that the markets can open up in some intriguing ways, as we demonstrate with the PearlDiver-generated list in Table 2.

Table 2: Top Five Knee Diagnoses (Excluding MedPAR Data)

Source: PearlDiver Patient Records Database

To uncover heretofore hidden market segments, we took the deep dive into PearlDiver’s database of 104 million patient records. We excluded from this analysis all Medicaid and Medicare (MedPAR) data—essentially eliminating the majority of patients aged 65 and older.

While this is a first step, it is an important one. Again, if we were talking in terms of music, we could equate this data to the top five hits of the ’70s and ’80s. There is still a large amount of unknown information, but we can see more clearly what is happening when we impose constraints to view specific groups of patients from the beginning of the process.

Looking at our PearlDiver data in Table 2, we can immediately see that the top five diagnoses have changed dramatically from Table 1. Osteoarthrosis-related conditions amount to only 17.5% of the top five diagnoses in Table 2 and, in fact, only two diagnoses remain from the “all ages” group in Table 1 to the group excluding MedPAR data in Table 2.

Addressing the needs and issues of patients with differentiated products has many positive outcomes—for manufacturers as well as patients. If manufacturers do not have the ability to demonstrate that their products are different based on function, they are then faced with the alternative of differentiating through other means such as service, brand image, or price.

But how does direct marketing fit into all of this, and is it really benefiting manufacturers? To be sure, direct marketing helps to target specific groups of consumers and can be beneficial, but it can also have a downside.

In our view, product differentiation benefits both large joint implant manufacturers and patients. As of year-end 2006, the average selling price of a metal-on-metal hip implant was $7,155. This is clearly a premium price, which reflects the long-term wear capabilities of metal-on-metal. However, depending on their insurance plan, patients may or may not be allowed access to the best possible implant if differentiation boils down to price. Furthermore, should differentiation by price become the norm, innovation could well suffer as manufacturers seek the cheapest way to bring a product to market.

But, if large joint implants are differentiated in ways that matter to patients and their lifestyles, then demand, we believe, will evolve in ways that support innovation and further research and development.

Direct marketing can also have strong implications over the near term. The immediate impact of Mary Lou Retton speaking about her recent hip replacement is, we suspect, to drive patients who identify with Ms. Retton to begin the process of researching hip implants and their respective features and benefits. Thus, direct-to-consumer advertising can well be an important initiator of patient education.

Of course, in most cases patients will research implants recommended by their trusted orthopedic specialist. But even in these cases, the direct-to-consumer activity serves to both reinforce recommendations and the eventual patient decision. After all, who wants to have an implant from a company they have never heard of before?

There are also other reasons for defining the market in terms of its segments discussed above. By marketing to potential customers under the age of 65, a manufacturer has the potential to sell the consumer its primary orthopedic device plus also any revisions that follow. By covering the entire continuum of patient care, a manufacturer has the opportunity to serve that patient throughout the disease process.

Once the primary orthopedic device is implanted, should any revisions be required, the operation in theory will be easier on both the patient and the doctor if a product manufactured and designed with the same specifications as the original is used. In other words, replacing a knee implant from company A with a revision from company A should in theory take less of a toll than replacing that same implant with a revision from company B.

Unfortunately, there is also a darker side effect to targeting consumers in specific groups, especially under the age of 65. Along with lifestyle differences and life expectancy, there is another element that differs greatly between consumers under 65 and consumers older than 65: insurance.

Private insurance companies typically cover patients under the age of 65, and the associated reimbursement rate is typically superior to Medicare reimbursement rates. Advertising to prospective patients under the age of 65 and encouraging them to check with their doctor may be viewed as providing incentives to have surgeries.

Looking ahead, both patients and manufacturers can benefit from direct marketing and market segmentation. In many respects getting the consumer more involved with the product selection process results in better overall outcomes for all concerned. And while there is always the risk of unintended consequences, with direct-to-consumer advertising the potential for better patient education and enduring support for innovation would be a welcome by-product.