The demand for implants for baby boomers' aging knees and hips appears to be a bigger driver in the orthopedic implant markets than a recent spate of negative news, according to Raj Denhoy Bear Stearns & Co. (New York) med-tech analyst. Denhoy last month issued positive reports on large-cap orthopedic players Stryker (Kalamazoo, Michigan), Smith & Nephew (S&N; London) and Zimmer Holdings (Warsaw, Indiana). And he predicted that the market for orthopedic implants will continue to grow indefinitely at an average of 8% to 10% per year.
"It's a sustainable growth pattern," Denhoy told Biomedical Business & Technology. "Unless something happens to change things, we're not expecting any paradigm shifts in the near term. "Obviously there are some macro concerns out there on cost containment ... but for the most part we don't expect these to have any large impacts on growth for this sector."
Denhoy's rosy outlook follows a string of bad news for implant makers:
- In September, five medical device implant manufacturers settled with the U.S. Department of Justice to resolve fraud allegations, with four of those companies agreeing to pay about $311 million and consenting to federal monitoring and other reforms.
The agreements settled a government probe into improper consulting contracts with surgeons. Translation: company payments to the surgeons for using its products. The companies involved included Biomet (Warsaw, Indiana); DePuy Orthopaedics (Raynham Massachusetts), a unit of Johnson & Johnson (New Brunswick, New Jersey); S&N and Zimmer. Stryker paid no civil settlement, but it is part of the pact and has agreed to the reforms, including 18 months of federal monitoring.
- In mid-October, the U.S. Securities and Exchange Commission initiated an investigation into potential violations of the Foreign Corrupt Practices Act regarding the sale of devices in a number of foreign countries. Letters announcing the investigation were sent to several companies, including Stryker, S&N and Zimmer.
- Later in October, Sen. Chuck Grassley (R-Iowa) and Sen. Arlen Specter (R-Pennsylvania) introduced the Transparency in Medical Device Pricing Act of 2007, legislation intended to prevent the taxpayers from being overcharged for implants paid for through Medicare, Medicaid and the Children's Health Insurance Program.
If it becomes law, the legislation would require manufacturers to submit to the Secretary of Health and Human Services on a quarterly basis data concerning average and median sales prices for all implantable medical devices used in inpatient and outpatient procedures.
Denhoy said demographics and advances in new technology are such strong market drivers that implant performance won't stumble. Of the three major players, Stryker seems best-positioned to deliver consistent earnings growth, he said.
S&N has been upgraded from "peer perform" to "outperform" by Bear Stearns. "We're going to see earnings growth accelerating to 21% in 2008. This is going to be a very attractive story," Denhoy said.
Zimmer's 2008 earnings, however, are at risk, he said. Among other reasons, the high costs of compliance with the DoJ settlement ($169.5 million) could drive 2008 earnings lower than anticipated.
Bear Stearns' predictions are focused only on the hip and knee implants market, which make up about 44% of the worldwide $23 billion orthopedics market. Denhoy said his company focuses on these segments because they are considered "bellwethers" for the entire industry.
Use of new polymer may lead to longer-lasting artificial joints
The continued growth in orthopedics is being driven by new technologies in the sector, so that we no longer have images of hip replacement patients hunched over in pain, the implant not working anywhere like "original" equipment. Now, Active Implants (AIC; Memphis, Tennessee), says it is developing a new material that will provide longer-lasting implants, more resistant to deterioration and better able to fight off infection.
Researchers in the Campbell Clinic Department of Orthopedic Surgery at the University of Tennessee Health Science Center (Memphis) presented a paper, sponsored by AIC, on use of a medial grade form of polyurethane polymer, used in other medical applications, at the recent combined meeting of the world's Orthopaedic Research Societies in Honolulu. Their report touts the use of this polymer material for applications in joint reconstruction, with data indicating that it can reduce by seven times the harmful chemicals formed as a result of the presence of wear particle debris in the body.
One avenue of research on this problem has been related to the reaction of implant materials to otherwise innocuous infectious agents.
Richard Treharne, PhD, vice president of orthopedic research for AIC, said that researchers have long known that one of the first places that infections migrate to in the body is the joints. And he said that previous research at the Campbell Clinic found that even minute infections that do not cause any clinical symptoms — such as, for instance, those that enter the body during tooth brushing — can become attached to the wear particles of the traditional plastic material used in joint replacement, a type of polyethylene called UHMWPE, a plastic that articulates or rubs against an artificial hip implant.
Infectious agents such as these, once attached to wear particles, can create chemicals that destroy the bone around the hip joint by a process called "osteolysis" and can lead to implant loosening, which often leads to pain and an implant failure requiring major revision surgery.
"It's a theory — not everyone believes it," Treharne told BB&T. But he thinks it's more than speculation. "I started thinking about why could a replacement in one patient be fine 30 years later, and another replacement in a patient with similar demographics have bone loss and deterioration after just a few years. Our bodies handle these sub-clinical infections, but they end up going through the heart and to the joints — that's why one becomes so sore when they have the flu or flu-like symptoms. These bugs migrate to the joints of people who have hip replacements. If these endotoxins attach to those, they create compounds called cytokines which are known to cause osteolysis." He said that this debris is well-known to cause loosening of the hip implants.
Treharne said that the name of the company reflects its true mission. "Active Implants — we try to find something that will work in younger, more active patients. One of the main reasons surgeries are postponed or canceled is because there is a pretty high chance that they will get a revision — depending on who you ask or which part of the body" the implant is made.----
Silver a secret weapon against MRSA, other infections
Methicillin-resistant Staphylococcus aureus (MRSA), or the "superbug," as it has been dubbed, has become uber-resistant to antibiotics and is transmitted mostly in hospital settings. MRSA along with other infections garnered from hospital settings are the fourth-leading cause of death in the U.S., cost an average of $57,000 per patient for diagnosis and treatment and can cost hospitals between $28 billion and $30 billion annually in extended care and treatment, according to the Centers for Disease Control and Prevention.
But the seeds to preventing the spread of these diseases in clinical settings, lies with a treatment from the past — silver. Historically silver has been used as a bacteria killer for as far back as ancient Rome. It was used to preserve foods and heal wounds. In the 1800s it was used to treat skin ulcers. However, the use of antimicrobial silver was supplanted by antibiotics — which gave way to recent strains of bacteria that were resistant to current treatments.
"Silver has been shown to be resistant to just about everything," David Rardin, VP of marketing and development of Acrymed (Portland, Oregon), told BB&T.
The problem with most devices, particularly catheters and endo-trachial tubes or anything that would stay in the body for a period of time is that bacteria colonies form on the device.
Ionic silver has become a favored substance for surface modification for several reasons: It has broad spectrum antimicrobial action; it's well-tolerated by tissue; it is compatible with most materials used in making medical devices; it can be compounded into the submatrix or applied on the surface; and resistance to it is largely non-existent.
Acrymed's Silvagard are nanoparticles that form chemically in a solution, are uniform in size (10 nm) and do not agglomerate to form large particles, but stay in suspension pending application to materials.
After the Silvagard solution is prepared the device is then dipped in the solution. The adhesion to the device is such that that this sliver treatment can't be removed by ultrasonic cleaning, the company said. Silvergard also adheres to elastic devices when they are stretched or flexed. "Our technology inhibits the formations of these bacteria or these colonies on the device," Rardin said.
In July, the FDA issued a proposed guidance document on antimicrobial device submissions stating that when companies claim their product reduces or prevents device-related infections, the claim should be supported by such clinical data.
Some of the latest companies to throw their hats in the ring against MRSA and other hospital infections include:
Pure Bioscience (San Diego) and its silver dihydrogen citrate, which is an electrolytically generated source of stabilized ionic silver. The bacteria views the molecule as a food source and once the organism consumes it, SDC destroys the bacteria by disabling proteins and halting its metabolic and reproductive functions.
C.R. Bard (Murray Hill, New Jersey), which recently received FDA clearance for the Agento endotracheal tube, which is coated with a thin layer of silver.----
CMS staffer sees agency payments shifting to outcomes
Don Thompson, acting deputy director of the hospital and ambulatory policy group at the Centers for Medicare & Medicaid Services, says that "The cornerstone of where CMS is heading is transparent, value-driven healthcare," That was his main message at last month's reimbursement conference of the Medical Device Manufacturers Associaiton (MDMA). But he also acknowledged that the agency is not there yet.
He said it is waiting for Congress to pass legislation that more decisively remodels the Medicare payment paradigm. In the meantime, the agency is still "working under the old indemnity insurance model."
His office is responsible for $200 billion in spending each year and spends, he said, "about $1.6 billion a day" on Medicare. Medicare, with expenditures of about $454 billion in FY08, currently covers about 43 million Americans. But that number will jump to roughly 77 million by 2031, Thompson said, adding that the hospital trust fund for Part A will dry up in about 12 years.
While CMS has rolled out several changes in payment protocols, Thompson said the agency wants a more fundamental alteration. "We want to change from paying for just reporting, to paying for outcomes," requiring new legislation.
As for the 2008 edition of the hospital in-patient prospective payment system (HIPPS), Thompson said that the agency published the final rule for 2008 in August, and "the average payment increased about 4.3%," over 2007, an overall increase of $4.6 billion.
Among the key changes is a transition to the Medicare severity diagnosis-related groups (MS-DRGs), adopted by the agency because the Medicare Payment Advisory Commission (MedPAC) said that the old DRG system led to cherry-picking of less-severe patients. "You had growth of the specialty hospitals," thanks to the previous system, a trend that drew considerable congressional scrutiny, Thompson said.
Thompson said that a report compiled by RTI (Research Triangle Park, North Carolina) indicates that some in industry think the existing system led to lowball cost estimates for some items because "the cost-to-charge ratio for certain hospital cost centers largely reflect greater mark-up rates on lower cost items," such as supplies. RTI recommended expanding from 13 to 19 departments for cost-based weights in the short term.
However, "this [report] wasn't ready to go" when the rule was published, Thompson said, and "the comments were mixed" on whether to try to adopt them immediately once RTI published the report.
"Several hospital associations recommended addressing long-term cost report issues raised by RTI" before getting into the expansion of cost departments, and CMS expanded to 15 departments for 2008. "This will be an issue for the next in-patient proposed rule, which will come out in late winter or early spring next year, but also the outpatient rule," Thompson said.
As for hospital-acquired conditions, which for CMS are quickly becoming no-pay situations, the agency selected situations such as objects left in the patient during surgery, catheter-associated urinary tract infections and several others. Overall, these were "extremely well received" by hospitals, Thompson said, noting that Minnesota is looking at 28 such events to deny reimbursement. Rather than not reimbursing at all for such situations, CMS will cut reimbursement by 50% in 2008.----
FDA revamps advisory panel selection and voting procedures
FDA reported last month that it has taken a couple of steps to boost the transparency of the functions of its advisory committees. In a statement, Randall Lutter, PhD, deputy commissioner for public policy, said that the FDA's use of advisory committees is one of the agency's strong points, allowing it to "routinely enlist the nation's leading experts to give us public advice on complex medical and scientific issues." The announced revisions "further enhance the transparency and reliability of our advisory committee processes," Lutter added.
One of the guidances deals with the voting procedures used during advisory committee hearings. While the proposed guidance notes that not all meetings require votes such as those during which clinical trial requirements are discussed there has nonetheless "been much discussion inside and outside FDA regarding sequential voting versus simultaneous voting."
One concern regarding the process of each member announcing his or her vote in turn is the possibility that "some sequential voters may be influenced, perhaps even subconsciously, by the votes that precede theirs, especially if those votes are identical or signal a clear trend." The document also notes that this risk may be heightened in settings "where votes are often conducted in full view of a passionate public and participatory audience."
FDA recommends that "voting should be done simultaneously...to avoid any potential order bias" induced by sequential voting. The panel chair and the designated federal officer have a choice of simultaneous voting methods, including "a simultaneous show of hands, a simultaneous show of 'yes' or 'no' cards," or a ballot process. In the case of the last scenario, the ballots would be read aloud and attributed to the voter.
The agency also recommends that the focus of each specific vote be thoroughly discussed prior to the vote, but that "the question of the vote should not be the subject of further discussion or clarification while the voting is underway."----
FDA says it will publish conflict-of-interest waivers
FDA also reported last month that it had penned a draft guidance to deal with conflict-of-interest information disclosures and waivers. According to the document, the agency's review of such conflicts as well as comments submitted for the January 2002 draft guidance, "FDA is revising this draft guidance to broaden its applicability, to bring as much transparency as possible to FDA's waiver process, and to increase the consistency and clarity of the process."
The guidance states that prior to each advisory committee meeting, FDA will attempt to obtain the relevant information from each panelist, and any panelist who fails to file the required materials will not participate. FDA will disclose any disqualifying information unless it is "protected from disclosure by statute or regulation."
Any waiver information that is not protected will be published at the FDA web site 15 days prior to the meeting unless the agency receives the data when 30 days or less remain before the meeting date. In that case, FDA will publish the information "as soon as practicable and no later than the day of the meeting."
The announcement says that the declared time frames are "consistent with the requirements" of law, and that the agency intends "to make the disclosure statements and waiver documents public at corresponding advisory committee meetings."