Misconceptions Regarding Orthopedics Companies
BY DAVID KRESSEL, MARCH 6, 2006
The HealthpointCapital blog is read by thousands of people of varied backgrounds: physicians, patients, caregivers, device company employees, consultants and investors. Based on some of the feedback on the blog we see, we felt it was worth clearing up some confusion.
Misconception: Medical device companies give away instruments to "trick" physicians into buying their implants.
Truth: Device companies do provide use of their instruments through consignment to hospitals, but this is not to trick physicians. Instruments are designed to work with a specific implant and only with that implant. It used to be that hospitals had to buy instrument sets upfront and in full. This meant that innovation was more slow to diffuse through the industry, and made hospitals less able to deal with price increases because they were already invested in a specific system. Today, every orthopedic company consigns its instruments, so the net effect is that physicians are free to use the best implants for their patient without forcing the physician or hospital to commit to a system upfront. Of course, nothing is free, and surgeons end up paying for the instruments through the purchase of implants, but this arrangement benefits patients, payors and hospitals as much as it does the device companies.
Misconception: Device companies provide surgeons with training on their instruments and implants, so of course surgeons are going to be beholden to the companies.
Truth: Free surgeon training ends up being very similar to free instrument sets. Critics assume it's an unethical inducement to use a company's products, but the truth is that patients should be happy that physicians have the chance to train with new products and devices, frequently under the tutelage of world-reknowned surgeons. Without the support of industry, surgeons would not be able to learn new procedures in risk-free settings such as cadaver labs.
Misconception: Orthopedics companies raise prices significantly every year.
Truth: Take a look at this blog entry for the full story, but what most people see is list price, and most hospitals pay less than list, sometimes as little as 50% of list price. The key statistic is average selling price (ASP). It is usually hard to find out what hospitals are actually paying as purchasing managers are secretive and consider their purchase agreements as competitive weapons and highly confidential. Prices do generally rise, but it is hard for folks outside of hospitals or companies to get the data to show what part of the overall rise in prices is from price increases vs. changes in product mix.
We hope this is helpful to our readers, and when other misconceptions arise based on our reader comments we will try to shed light on them.
