'Generic' medical devices could cut into name-brand profits

July 27, 2012 By David Sell

Generic competition - a billion-dollar problem for brand-name drug companies since the 1980s - is making inroads in the orthopedic medical devices industry. Last week Cardinal Health Inc., one of the three biggest device wholesalers, said it was increasing its offering of lower-cost products for broken bones.

This nascent trend, borne of increasing pressure to control , represents a direct threat to brand-name device makers such as West Chester, Pa.-based Synthes, which was bought in June by Johnson & Johnson for $19.7 billion.

Cardinal Health, 21st on the Fortune 500 list, is based in Dublin, Ohio. In announcing its so-called "Orthopedic Solutions" option for hospitals and surgery centers, Cardinal said it could supply some products at 30 to 50 percent savings.

"Based upon our market and customer research, we believe that U.S. health care providers are ready to support a simpler, more transparent, fair priced orthopedic business model," Cardinal Health executive Lisa Ashby said in a statement.

Cardinal Health entered a partnership with Emerge Medical, a Denver-based company that makes surgical screws, drill bits and guide wires. Emerge CEO John Marotta is a former Synthes sale representative. Synthes was sufficiently annoyed with his efforts that it sued him in 2011. He has countersued, and a trial is pending.

"Together we will provide a low-cost trauma solution that will drive simplicity and transparency to this pressured health care environment," Marotta said of the Cardinal Health partnership.

The U.S. Food and Drug Administration does not use the term "generic" devices, as it does with drugs, but there is an approval process. Like drugs, medical devices have patents, and the disputes employ numerous lawyers.

Johnson & Johnson CEO Alex Gorsky said last week that medical devices are a $40 billion market worldwide. But Johnson & Johnson, like other device makers is being pressed to lower prices or at least slow the rate of growth.

Trade publication Orthopedic Network News reported that list prices for hip and knee implants increased 4.2 percent between 2011 and 2012 - the lowest increase in the 19 years it has surveyed device manufacturers and the fourth straight decline in the growth rate.

Laura Ruth, director of the practice for research and consulting firm Fuld & Co., said the generic device market is still "fragmented," but pointed to a January report by the Government Accountability Office as an example of greater scrutiny of the cost and acquisition process of hospitals, whose bill are often transferred to taxpayers. Hospitals often buy through group purchasing organizations, which have been criticized for being too cozy with manufacturers and too secretive with hospitals.

The title of the GAO report was: "Lack of Price Transparency May Hamper Hospitals' Ability to Be Prudent Purchasers of Implantable ."

Because of those forces, Ruth said, "there should be a greater opportunity for lower-cost devices."

Explore further: Unprecedented international effort to improve safety of orthopedic devices

Related Stories

Unprecedented international effort to improve safety of orthopedic devices

December 21, 2011
Responding to a need for better post-market surveillance of orthopedic devices, the U.S. Food and Drug Administration (FDA) established the International Consortium of Orthopaedic Registries (ICOR) in October 2010.

Recommended for you

Opioids overused in migraine treatment, regardless of race, study finds

August 17, 2017
African-Americans are more likely to experience debilitating migraine headaches than whites, but a new study probing the issue found no evidence of racial disparities in treatment practices.

Finding better ways to reduce serious drug side effects

August 14, 2017
Many of the medicines we depend on to treat disease—and even to save our lives—pose potentially serious risks along with their benefits. Data from the U.S. Centers for Disease Control and Prevention indicate that about ...

Ultrasound-triggered liposomes for on-demand, local anesthesia

August 10, 2017
Researchers at Boston Children's Hospital have found a new way to non-invasively relieve pain at local sites in the body; such systems could one day improve pain management by replacing addictive opioids and short-lasting ...

Independent pharmacies and online coupons help patients save money on drugs

August 8, 2017
Uninsured patients or those with limited prescription drug coverage can save significant money by buying their drugs at independent pharmacies instead of big box, grocery or chain drug stores and by using discount coupons, ...

New study generates more accurate estimates of state opioid and heroin fatalities

August 7, 2017
Although opioid and heroin deaths have been rising dramatically in the U.S., the magnitude of the epidemic varies from state to state, as does the relative proportion of opioid vs heroin poisonings. Further complicating the ...

Mind-body therapies immediately reduce unmanageable pain in hospital patients

July 25, 2017
Mindfulness training and hypnotic suggestion significantly reduced acute pain experienced by hospital patients, according to a new study published in the Journal of General Internal Medicine.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.