Citation From: ORTHOKNOW® - July 2004

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EXECUTIVE INTERVIEW: Dane A. Miller, Ph.D., Biomet, Inc.

OrthoKnow (OK): The Biomet story is an inspiration to many: the little guy taking on the giants and prospering against the odds. What basic advice would you give a start-up in the orthopaedic market today?

Dane Miller (DM): “A couple of things. First, many people say that companies fail because of a lack of capital, but rather, they fail because of improper utilization of capital. After all, you can start a business with $10 if you’re delivering newspapers.” The company’s “plans and objectives must carefully account for the way funds will be spent and the investments made.”

Secondly, “take small steps, don’t cut corners and learn by experience. If you take big steps, you’re more likely to fail.” If you do things, you will make mistakes, “but the key is to learn from your mistakes. When things go wrong, you must step back and look honestly at what happened” and determine what to do to fix the issue. “If companies lose that ability (to allow mistakes), politics creep in and people begin pointing fingers and looking for people to blame, rather than diagnosing what went wrong and then trying to fix it.”

OK: How does a company prevent that from happening?

DM: “A lot of hard work is necessary to prevent that from happening. I believe in ‘organizational entropy’ (if left alone, the organization creeps toward disorder). You must stay on top of things. I tell people that I report to more people than anyone else in the company (because I am responsible for all in the company). A big part of my job is ‘environmental engineering’—ensuring that we have an environment that allows mistakes and encourages employees to ‘step out of the box’ and not fear reprisal.”

OK: What, do you predict, will be the financial impact of the introduction of increasingly expensive technology into the orthopaedic market, and how do you see global healthcare systems absorbing the impact?

DM: “First, (you) must carefully separate the cost of new technology from the (cost of) increased utilization of new technology.” Most of the focus in orthopaedics is on the cost of the implant. But, for example, there are “low revision rates in total joint replacement,” which is favorable, but the cost of a revision is high. So, the additional “cost of new technology to reduce revision rates (further) is (a) good investment, as it leads to a total reduction in cost to the (healthcare) system. We are interested in the cost associated with the patient as they go in the front door and out the back door (of the hospital). So, an additional $100 cost to the implant might save the $500 to the system.”

OK: Does everyone understand that distinction?

DM: “The understanding of this issue is improving but is still not very good. Here at Biomet, we have very sophisticated cost accounting systems that allow us to know precisely the cost of each machine (and our operations), but the sophistication of cost accounting systems in a hospital is poor. If you ask a hospital administrator how much it costs to do a total joint in his hospital, he will tell you $8,256, but if you ask him to explain how he got that number, he will admit that he called the O.R. supervisor and that is what she told him.” (They use) a cost build up (wherein they add up the equipment costs).”

“There’s a real good argument that the only way to control costs is through technology. You can shave the doctors’ income, you can shave payments to the hospital, but that won’t get the job done.”

OK: What about the industry is fundamentally different now from what it was in 1977? What key things have not changed?

DM: “When we started Biomet, (it seemed clear that) there was room in the market for a firm like Biomet. The orthopaedic industry (in the late seventies) was a two-tier market; there were four firms that were all owned by pharmaceutical companies (Zimmer was owned by Bristol Myers, Howmedica was owned by Pfizer, DePuy was owned by Boehringer Manheim, Richards Medical—now Smith & Nephew—was owned by Rorer Group). There was room for an aggressive company not affected by the pharmaceutical market. The difference now is that there are many ‘pure-play’ orthopaedic companies.”

“Many of the predicted changes (for the orthopaedic market) haven’t happened.” For example, it was predicted that orthopaedic implants would simply be shipped to a hospital in the same manner as other surgical supplies, such as gloves, without a sales rep to assist. “But orthopaedics is still driven by the surgeon,” (and a) “big part (of the success of the implant) is installation. The reps are required for proper training of the surgeon and the O.R. staff.” (The specifics of each product’s instrumentation system are) “not taught in any medical school, residency or fellowship program. It could be said that the raw material that arrives in the Biomet box is incidental to the overall service provided by the representative.”

OK: What potential developments/trends/changes in the musculoskeletal industry excite you most?

DM: “There is great opportunity for less invasive surgery and new biomaterials.”

OK: Can you provide some specific examples?

DM: “Years and years ago, I felt strongly that unicompartmental knee replacement was a procedure of the future. We (Biomet) are a major player in the Scandinavian market, and we are now seeing unicompartmental knees done there on an outpatient basis. (This demonstrates) that there is a place for early intervention. (Originally,) in patients with medial compartmental arthritis, (unis were implanted) to buy the patients five to ten years of life (before a total knee), but many uni patients are getting at least ten to 15 years of life from their implant. It’s a real treat seeing patients happier, and wishing that they had (the surgery) earlier.”

OK: Alternatively, what developments/trends/changes in the musculoskeletal industry are of most concern to you?

DM: “The failure of our consumer, be it the payer or the patient, to realize the value of what we do (is a concern). The average American has some idea, but many don’t realize the social value (of orthopaedic treatment). We need to work together to elevate the knowledge (of the general public) on this issue.”

“Also, the litigation environment is of great concern. I researched these numbers for a presentation I gave recently. In 2003, we spent $50 billion in litigation costs (malpractice claims, medical products liability). At the same time, another $50 billion was spent on ‘defensive medicine,’ such as extra tests and the like. That totals $100 billion spent in the U.S., which is nearly $400 per person, which is more than is spent on all healthcare (not just orthopaedic) in 90 percent of the world! It’s simply too much.”

OK: What potential political or government actions (regulatory, reimbursement, etc.) are most critical to the future of the U.S. musculoskeletal industry over the next five to ten years?

DM: “I co-authored an FDA whitepaper which represents the FDA’s internal opinion that while there is still a rapid expansion of research into new technology, there is (in the U.S.) a slowdown of translation of those technologies into treatments, because of the large regulatory burden. In most other countries, it is the responsibility of the manufacturer to demonstrate the safety of the product or treatment. In the U.S., the manufacturer must demonstrate (not only) the safety, (but also) the efficacy of the device. Other countries believe that the market forces will drive out ineffective products.”

OK: How do you think the public perceives the orthopaedic/musculoskeletal industry today? Are you concerned about the medical device industry being portrayed unfairly in the press?

DM: “There is a far better understanding than there was ten to 20 years ago, but unless they (the general public) have had specific experience with some (musculoskeletal) condition, they have limited knowledge of orthopaedics. Unfortunately, the only source (for orthopaedic information) for many is the media. I have never turned on my T.V. and heard a story (about a failed implant) that also provides the total number of implants used or the number of successful implants. Never is the denominator mentioned. For example, with the Centerpulse issue, it would have been nice to know that, for the 15,000 or so implants affected, that 200,000 or 500,000 successful implants were put in.”

“The breast implant scandal is another example. This was really a scandal of the legal profession. There is no such thing as ‘cluster disease’ (which was described by the attorneys as the resultant disease)—it was something that the lawyers just made up.”

(This has) “a secondary (negative) effect on engineers, as they are portrayed as if they deliberately designed a poor implant or were negligent.” It all adds inefficiency and cost to the system.

OK: With the issuance of the AdvaMed guidelines, industry has adjusted its policies regarding the financial relationship between industry and surgeons. Much discussion has surrounded the issue of surgeons being “compensated” to use a company’s products. Do you think we as an industry have a problem? Are fundamental changes needed?

DM: “I don’t think we have a problem. We support clinical studies of our products. Our industry is different because we are interested in how well our patients are doing five to ten years out. In our reimbursement-strapped environment, doctors won’t collect this (long term follow-up data) simply out of the goodness of their hearts—they have to be compensated for their time spent in patient follow-up and review.”

“The orthopaedic surgeon is paid to provide clinical follow-up data, not paid to use a company’s product.”

OK: Take us ten years down the road. What will orthopaedic technology be like?

DM: “Well first, I’ll describe what I think a total knee will look like in 2024. (The surgeon) will open a box containing some chemicals and a couple of membranes. The surgeon will shape the surfaces of the bone ends using precision-controlled minimally invasive instrumentation, and the two membranes will be placed in the knee: one on the patella and one on the tibia. The membranes will be composed of a self-curing, high wear-performance polymer. Then, the surgeon will use a sheet from a roll of memory metal and insert it into the joint, and it will be reconfigured with wire. All of this will be done via small arthroscopic portals that will then be closed with a single stitch or glue. The patient will wake up from anesthesia, will smile, shake the surgeon’s hand and happily go home (immediately) after the procedure.”

“Minimally invasive unicompartmental knees are an example of an interim step (to the futuristic knee). Sure, the patients don’t wake up and go right home, but it’s a brief hospital stay. We are moving in that direction. (Thus far), the limiting factors to minimally invasive surgery are not the tools, but the size of the implants. Modular implants can be placed using smaller incisions and we’ll use computer-driven instrument sets.”

OK: Are there ways you think industry can work together to ensure an appropriate piece of the future healthcare pie?

DM: “We must work together with other members of the industry, through the Orthopedic Surgical Manufacturers Association, AdvaMed, the American Academy of Orthopaedic Surgeons and OREF (Orthopaedic Research and Education Foundation) to advance the general public’s understanding of the value of orthopaedics.”

OK: What are your plans for the future?

DM: “Well, I’m 58. My father retired at age 63 as a high school principal, and then worked as a college math professor until he was 80. So I figure I’ve got another 22 years.”

OK: Doing the same things or something else?

DM: “I’ve got the best job in Indiana; why would I want to change!”
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