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Thoughts on Low-Cost Orthopaedic Device Companies

Itai Nemovicher, President at The Orthopaedic Implant Company • It is not that we can produce or manufacture implants at a lower cost than our competitors - we simply have eliminated the high overhead associated with a direct sales force, streamlined our supply chain, and reduced our margins to what we feel is more appropriate. Regardless whether a device is considered a "stable technology," there is still the R&D needed to ensure that the implants are high quality. Coupled with the U.S. regulatory landscape, I don't see implants prices in the U.S. ever reaching those of China and India.

Abhishek Agrawal, Manager - International Marketing at Matrix Meditec Pvt Ltd • I represent one "SMALL" Indian orthopedic company. I agree with most of the opinions that major driver for producing low cost implants is relatively lesser overhead cost-biggest benefit of cheap labour (skilled & unskilled). We have also managed our borrowing sources in such a way that our overall interest rates would not cost more than 10-14% pa. I believe these parameters certainly give us an EDGE over other USA/European manufacturers. But at the same time, one should note that we use European raw materials and Korean/European machines to produce these implants. This will increase our capital investment and to some extent working capital owing to high cost of European raw material (cost of material + freight + import duty). We are already doing OEM for many European/Latin American companies and they are quite happy about the QUALITY of products. Low cost SKILLED labour is another advantage which helps us to produce/modify complex implants. The biggest constraint for small companies like us is less allocation of funds towards R&D, and because of which we remain manufacturer of OEM/standards/obsolete products only and are not able to come out with advanced products and technology. All in all, I firmly believe a proper amalgamation of technology & management from developed countries plus skilled labour with cheaper rate of developing countries can enable companies to churn out low cost ADVANCED products.

Nuno Reis, Product Specialist for Zimmer products at Werfen Group - Cormédica • In Europe, the problem is not only Asian countries producing implants of low price and questionable quality, there are also some European companies which simply copy parts of other large companies do through strong investment in R & D.

This is the result of downward pressure on prices, and that I believe could worsen with the economic crisis of the peripheral countries of Europe. The need to bring down the deficit in the health sector will certainly constrain the quality and longevity of implants and certainly lead to more revisions.

I believe it is the wrong way and that large companies will find strategies to stay on the market with the desired quality.

Asian countries may try to use European machines, American or Korean to produce those implants, but this does not solve easily the question of quality. Remember the thousands of hours spent in studying the biomechanics of a joint...and many others in a biomechanical study of an implant that can take about a year and a half to two years to get to the market. These implants cost one-third, do not go through this process, so have low production costs. What we can expect!!!!


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