Corporate consolidation, new young companies bursting on the scene, novel and controversial distribution models, a fall from grace, a deferred prosecution agreement gone bad, new science and money all affected one way or the other how the orthopedic community changed this year.
How did we know which news events resonated with readers? Because they voted each time he or she clicked their computer mouse for a story. Readers did that almost 7 million times in 2012 and certain stories grabbed the lion’s share of those clicks.
So, while the national media focused on large issues like Obamacare, procedure volumes and payer pushback during the Great Recession and an impending fiscal cliff, orthopedic industry readers stuck to things closer to their practices, patients and industry.
Here are the top ten news events and trends that had the most affect on the orthopedic industry in 2012.
10. Young, Dynamic Orthopedic Companies Continue to Emerge and Earn Market Share.
Innovation, hard work and good old fashion customer service can still vault a young emerging growth company into the orthopedic big leagues. Two cases in point in 2012—K2M, Inc. and Globus Medical, Inc.
The tenth most popular story in Orthopedics This Week in 2012 was the account of a group of experienced surgeons starting their own device manufacturing business for all the right reasons. It was Kostuik Plus Two Majors – K2M.
John Kostuik, M.D. was not ready to hang it up at age 69 and decided to start a company. So in 2004 Dr. Kostuik hooked up with the Major brothers, Eric and Lane, and K2M was born.
“I insisted that our company’s product development be surgeon focused, ” remembers Dr. Kostuik.
By 2010, K2M was among the more successful private spine companies in the industry with sales well over $100 million.
9. Trading Product Lines With the Big Boys. JNJ and Biomet Cut a Deal
When Johnson & Johnson asked regulators for approval to acquire Synthes, Inc., the regulators told them they would have to divest themselves of their current trauma business. So J&J put the DePuy trauma business up for sale.
Biomet, Inc. surprised some with a $280 million bid. It was a surprise because of the company’s high level of debt when it was taken private by Wall Street. The company has struggled to make a profit. Company leaders said they had more than $380 million in cash and cash equivalents on hand, more than enough to cover the $280 million cash offer.
J&J accepted the bid and Biomet acquired the trauma business.
8. Medicare Raised Ortho Reimbursement 4.4% for 2013
In August the Centers for Medicare and Medicaid Services (CMS) said it was going to raise reimbursement rates for in-patient orthopedic related procedures by 4.4% to approximately 3, 400 acute-care hospitals for 2013.
That was generous given that overall payments only went up 2.8%, the trust fund will be insolvent in about 12 years and rates only went up 1.8% last year.
7. Synthes Sued Some of Its Former Sales Reps and Stryker
After J&J and Synthes announced their agreement to merge, three Synthes USA spine sales representatives in San Francisco resigned from the company and promptly went to work for Stryker Corporation.
So began the game of musical chairs because there was significant product and territory overlap between DePuy Spine and Synthes Spine.
How would Synthes protect itself? In December 2011 Synthes sued the three former reps for disloyalty and stealing company secrets. The company also sued Stryker for aiding and abetting the former sales reps.
6. New Technology Is Alive and Well in Spine
Whoever says innovation in spine is dead, is dead wrong.
A record number of companies submitted their new technologies for an Orthopedics This Week Spine Technology Award in 2012.
A distinguished panel of spine surgeons reviewed each submission carefully.
Both Medtronic, Inc. the largest firm in spine, and Mighty Oak Medical, Inc., possibly the smallest firm in spine, were winners. For the first time ever, one company won three awards. And it was Biomet. It is very difficult to win even one award. Three is off the charts. Biologics ruled as two-thirds of the biologics submissions won.
The winners of the 2012 Orthopedics This Week Best Technology Award for Spine were:
- NuVasive, Inc.’s Bendini system
- Biomet Spine’s DeRoduction System
- Mighty Oak Medical, Inc.’s Firefly Technology
- Biomet Spine’s Indux Cortical Strip
- Medtronic, Inc. Spine’s MAST MIDLF Procedure
- ISTO Technologies, Inc.’s NuQu
- Society for Minimally Invasive Spine Surgery’s SMISS Core Curriculum
- TransCorp Spines’ SpinePort MIS Access System
- Biomet Spine’s Translation Screw
- Safewire, LLC’s Y-Wire
5. Deferred Prosecution Agreements Affecting Company Performance
This was very much in view at Wright Medical Technologies, Inc. this past year—both on the downside and the upside. When the DPA (deferred prosecution agreement) came back to bite this Memphis based manufacturer the news was lawsuits and fired senior executives and what certainly appeared to be a botched execution of a Deferred Prosecution Agreement between the company and the Justice Department.
In those dark days, the headlines talked about a senior Wright executive warning members of the company’s Board of Directors’ Corporate Governance Committee that the company’s compliance program had “serious continuing problems and deficiencies.”
But that was then and Wright ended this year on a 180 degree turn-around. Before the year ended, all issues were resolved regarding the DPA and Wright Medical is quite obviously on a rebound.
4. Stryker’s MacMillan Gone?!
Stephen MacMillan, the Dean of orthopedic CEOs suddenly announced his resignation as Chairman, President and CEO of Stryker Corporation in the middle of the American Academy of Orthopaedic Surgeons’ annual meeting in February.
The official reason given at the time was that he was resigning for “family reasons.”
It turns out MacMillan was going through a contentious divorce. While separated, he asked for permission from his board of directors to date a fellow Stryker employee.
After internal investigations and numerous board meetings, MacMillan’s board decided they had lost confidence in him. So he resigned. Rumors soon surfaced that he might head back to help Johnson & Johnson with the DePuy Synthes merger. The rumors have not panned out.
3. How JNJ Bought Synthes and How It Almost Didn’t Happen
The creation of the world’s orthopedic Superpower in June with the merger of DePuy and Synthes, was not without internal drama. We got the scoop from insiders on how this deal almost didn’t happen.
Price and compensation packages for senior executives almost sank the deal.
Synthes notified J&J during negotiations that it had received an all-cash offer (non-binding) from another party that was higher than J%J’s bid. If J&J wanted Synthes, the price would have to move up.
J&J’s raised its offer to $18.5 billion.
But, wait, there was more. One more issue popped up. And it was the toughest one of all—management compensation as a condition of closing.
That issue was finally settled and the new Superpower was born for $21.3 billion.
2. Physician-Owned Distribution Companies – The Great Debate
No issue about surgeons and industry generates more passionate debate than that of physician-owned distributors (PODs). Some analysts and company executives think close to 15% of the spine market is now controlled by PODs.
Many physicians have jumped onto the bandwagon and defend their decisions to do so fiercely. At the same time, many suppliers and distributors are equally adamant that PODs are out of bounds and should be modified or even stopped immediately.
OTW hosted two lively debates between John Steinmann, M.D., one of the founders of the POD movement and senior executives from Biomet and NuVasive.
The debate continues while the Office of Inspector General (OIG) concludes an investigation to see if the rules to keep PODs legal need more work. One debate is being decided in marketplace. PODs are growing as supply chains in orthopedics are disrupted by pricing pressures.
1. Top Orthopedic Surgeons and Hospitals
An impressive number of orthopedic surgeons and hospitals have created a culture and practice of excellence. These are individuals who believe in continuous improvement and are fully in agreement with improving patient outcomes and making the practice of orthopedic medicine more cost effective.
This raising of the standard of care among all players in this industry was by far the most impactful and, in terms of the data we saw at OTW, the most popular orthopedic news in 2012. As a group, practitioners, executives and administrators understand this in their bones—no pun intended. Who are the surgeons, clinicians, investigators, administrators and hospitals who are considered to be at the forefront of orthopedics excellence and improvement?
When we asked that question, you answered. On the basis of our reader’s advice and counsel, we found out who were the top spine surgeons, followed by the best shoulder surgeons, best knee surgeons, the best hospitals for fusion surgery and the top foot and ankle surgeons.
Thank You
We thank our readers for their visits to OTW, our advertisers for supporting the work and most importantly, we’re grateful to be associated with the best and brightest minds in science and medicine whose single goal is to improve lives and keep us moving.
