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In July, The Wall Street Journal published an article titled “Low-Cost Orthopedic Device Firms Aim To Shake-Up Market.” The following thread arises from an ORTHOWORLD Linkedin group discussion in which the question was posed,
What are the group's thoughts/opinions on small firms offering discounted orthopaedic products?
Anonymous #1 at a manufacturing company • China and India are already producing low cost orthopaedic products to compete against the current market. It is only a matter of time...
John Sommer, Operations at OrthoDirectUSA • Low cost orthopedic products are already MANUFACTURED in the U.S. Unfortunately, the wasteful supply chain with consigned instruments, consigned implants and sales rep commissions has driven prices to unsustainable levels. There is a new business model. Check it out at www.orthodirectusa.com.
Anonymous #2 from the financial sector • I would think a low-cost orthopedic implant might mean more surgeries for the patients because of the lack of R&D on these implants. But on the other side of that coin, even the implants with all the expensive R&D fail. I guess you let the patient decide what implant they can afford and what surgeon to put it in and let the chips fall where they may...
John Sommer • Almost 75% of orthopedic patents have expired. Much of the "innovation" is tweaks to current technology and is covered under predicate 510(k) approvals. We would consider most of orthopedic technology to be "stable technology." There is no reason for these stable technologies to demand premium pricing in the marketplace. Reimbursements are shrinking. Medicare is broke. The current supply chain must change to respond to this crisis.
Mark Piazza, President at Mark T. Piazza, LLC • If a small orthopaedic company (which is what I believe is meant by "small firm") is able to produce an implant at less cost than one of the "larger" orthopaedic companies, and if that implant is well researched, manufactured and approved, it should be acceptable in the market. If the smaller firm has lower overhead than the big companies, that is a competitive edge for that firm. Of course, if that small firm implant does not perform as expected or promised, then consequences will follow.
Anonymous #3, a consultant • All markets mature and develop and eventually become commodity markets in which price of course plays a significant role. The orthopedic companies have brought it upon themselves since the industry has no cohesion - there is no way the oil industry would give away pumping stations to sell their gasoline!!! Also the larger orthopedic companies are only concerned about share price and have failed to invest in true innovation, and true innovation is one of the best answers to the "commodity" challenge. Don't just tweak products - take them to a new level. I do not believe that an implant of high quality can be manufactured more cheaply by a small company with minimal volumes (have tried that myself several times), but certainly with a leaner structure and lower profit margin expectations those small companies can be price agressive.