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OMTEC 2015 Highlights: The Paradigm Shift in R&D Spend

Orthopaedic professionals in attendance at OMTEC® 2015 received less of a warning and more of a mandate from surgeon and hospital executive, Wael Barsoum, M.D.: device companies that want to get paid must spend resources to produce transformational devices, or to produce today’s clinically-proven devices at a lower cost. Hospitals will no longer purchase devices with incremental changes at a slight surcharge, due to the reimbursement pressures they face from public and private payors.
 
“This is a paradigm shift in how we think about spending our R&D dollars,” said Barsoum, President of Cleveland Clinic Florida and Vice Chairman of the hospital system’s Orthopaedic Department. “It requires a completely different thought process than how we’ve done it in the last 30 years.”
 
Barsoum’s comments offered context to the perspective provided by device company executives in Wednesday’s OMTEC keynote. That panel included:
 
  • Moderator Doug Kohrs, Managing Director of startup Responsive Orthopedics and Past President and CEO of Tornier
  • B. Sonny Bal, M.D., J.D., Chairman, President and CEO of Amedica and a joint replacement surgeon at the University of Missouri
  • Ken Gall, Ph.D., Founder and Chief Technology Officer of MedShape and Chair of the Mechanical Engineering and Materials Science Department at Duke University
  • Rod Mayer, President of Nextremity Solutions


The panelists agreed that one of today’s major obstacles to commercialization is getting products through value analysis committees—a challenge that will remain for the foreseeable future. 

Dr. Gall, who has pushed new biomaterials like NiTiNOL and additively-manufactured devices through regulatory bodies, said FDA has a bad rap for its slow and convoluted processes, but the value analysis committees have been five times worse than FDA. 
 
Mayer, too, noted that Nextremity has experienced value analysis committee decision-making terms from 30-60 days up to 18 months. Kohrs shed light on the Mayo Clinic’s process, adding that the hospital system’s new product committee has 14 people: one orthopaedic surgeon, one cardiologist and 12 accountants.
 
As a joint replacement surgeon at the University of Missouri’s orthopaedic hospital, Dr. Bal said that he and his colleagues face procedure-specific price parameters. If he wants to use a knee system that costs more than the set price, he must justify his decision to a committee. He described the uphill climb that is getting new materials and differentiated products through the committees.
 
What, then, will hospitals pay for? And what is needed to get through committees?
 
Barsoum, who sits on the new products committee at the Cleveland Clinic, said that if the device is not cheaper or if it’s new, companies must present one or more of the following: existing human data, level 1 studies, reproducible published studies in peer-reviewed literature and cost-benefit studies.
 
Herein lies the gap: development of differentiated products takes time and money. Collection of data takes time and money. 
 
“A lot of devices don’t have clinical data,” Bal said. “You introduce a new knee system, and by the time you get clinical data that compares it to its predicate, it’s been a decade. Most of us are dead by that time. 
 
“What the industry needs—and this is a challenge—is good, validated, short-term proxies for how something will perform over the long run. It’s very important so that we can go to value analysis committees and say, ‘Some clinical data is impossible to obtain because of ethical reasons; some are decades out, but here’s the valid testing we’ve done that shows an advantage.’ ”
 
Business changes, whether they center upon manufacturing, marketing or organization, take time and money, too. The price squeeze has driven consolidation at the device company and supplier level in order to increase breadth of product and capacity and achieve operational synergies. The price squeeze is expected to continue to drive device company and supplier consolidation, just as it has at the hospital level.
 
Amidst these market changes, all five keynote participants maintained that orthopaedic innovation is not dead. However, innovation will need to focus on differentiated products, efficient processes and surgeon education. The ability to navigate these pathways will stand as the greatest challenge throughout the next five years.
 
The challenges and opportunities discussed by these executives was recapped in an article in the latest issue of ORTHOKNOW®, Success in Orthopaedics Lies in Products that Improve Quality, Decrease Costs

Stay tuned for more OMTEC highlights here and at BONEZONE® and ORTHOPRENEUR®.
 
 
 

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