Changing Orthopaedic Markets

‘Improving value requires either improving one or more outcomes without raising costs or lowering costs without compromising outcomes, or both.’  1

Now, more than ever, health care organisations around the world are focused on ensuring that any products, or services, that they procure will help them to deliver the best outcomes that they can for the patients that they treat whilst also meeting their budgetary goals.

Within the orthopaedic specialty there are increasing pressures. The acknowledged success of established surgical interventions such as total joint replacements has created growing demand from prospective patients. This demand is further compounded by demographic changes. As a result there are more prospective patients looking for treatments that will enhance their mobility and reduce their pain. This burgeoning demand places more pressure on available healthcare resources.

The long-term success rates of many of these orthopaedic interventions are published in peer reviewed publications. These studies are, by definition, time dependent and as the procedure becomes accepted over time so the device technology that is central to the success of the procedures matures and ultimately commoditises.

As the orthopaedic market has matured over the last thirty years it has become increasingly challenging for companies to develop truly sustainable technology based product differentiation. As a consequence the traditional commercial model has been predominantly based on developing comprehensive platform technologies augmented by largely iterative developments and enhancements. Premium positioning in the market has been mainly determined by the breadth and completeness of the product portfolio, the effectiveness of its educational programmes and marketing campaigns and ultimately the size, reach and effectiveness of the sales channel it has deployed.

Maturing or commoditising technology presents an opportunity to develop functionally equivalent products that are efficacious and more cost effective. The established commercial model is now being challenged, especially in the USA, by a number of new entrant companies that are offering mature technology products at lower prices.  These new entrant ‘generic’ companies are not burdening themselves with many of the costs associated with the traditional commercial model, especially a costly sales channel.

1- Michael E Porter & Thomas H Lee – The Strategy That Will Fix Health Care – Harvard Business Review – October 2013