Threatens the innovation that improves patient care
Improvements in orthopaedic patient care are typically connected to improvements in orthopaedic technology. However, the supply of new implants and procedures is not guaranteed.
The successful commercialization of truly novel orthopaedic technology currently faces stiff headwinds, including regulatory risk, payer risk, and market risk. This may reduce interest in financing novel technologies within the venture community and among major device manufacturers.
The crisis in commercializing new technology threatens the innovation that improves patient care, and it also endangers the very basis of evidence-based medicine itself. Payers increasingly demand the highest level of evidence to support positive coverage policy for any surgery or treatment. Much of the highest-level evidence in orthopaedic surgery derives from industry-sponsored, pivotal, randomized, controlled trials and postapproval studies, which include some of the largest and most rigorous trials to date.
Registries, publicly funded trials, meta-analyses, evidentiary reviews, and professional society coverage recommendations can help. At the same time, the demand for long-term results that support coverage is a tall order for new products. As a result, there are fewer industry-sponsored trials, which could create an information vacuum that worsens the payer dialogue. If this scenario were to occur, patient care could suffer. The best medicine from five years ago may not be the best we can do today.
The relationship among patients, surgeons, device manufacturers, and payers is not zero-sum. Surgeons can advocate for better patient care through more cost-effective, evidence-based medicine and improved surgical technology simultaneously. Still, if new ideas don’t see the light of day, progress will slow. Surgeons should actively lobby payers to cover new technologies that are supported by the highest-quality evidence.
Surgeons should also consider educating patients on the evidence as part of shared decision-making. The surgical marketplace should reward innovators who take the high road and commercialize new technology supported by rigorous evidence. In this way, surgeons can advocate both for individual patients and for economically efficient payer coverage in musculoskeletal care.
Triathlon of technology commercialization
In the past, orthopaedic innovators had several routes to successful commercialization. For some, gaining regulatory approval for a new device was enough to spur acquisition by a larger vendor. For a few others with novel technologies, coding changes and reimbursement drives were required, but the momentum of regulatory approval carried these processes forward. For others, limited sales growth after approval was enough to demonstrate market interest to an acquirer. A tiny minority of innovating companies matured into major vendors.
Successful commercialization of orthopaedic technology is like a triathlon with three grueling events (Fig. 1). Increasingly, innovators with truly novel technology must gain arduous regulatory approval, ensure widespread payer coverage, and achieve substantial market success before a return on capital can be realized.
Further, potential investors with venture capital perceive that each of these events has gotten tougher. Stringent regulatory requirements ensure safety and efficacy but increase the cost and duration of clinical trials. Payer pushback requiring high levels of evidence ensures cost-effectiveness but increases the uncertainty around and timeliness of coverage decisions.
To set the bar for market success at a level that requires substantial market penetration is high for even the best entrepreneurs. In essence, the three events require three different skill sets tantamount to three different organizations.
These trends are clearest for technologies that are the most novel. In orthopaedic surgery, these tend to be class III devices. They traditionally include first-in-class devices and materials, hard-on-hard novel arthroplasty bearings, mobile bearings, total ankle arthroplasty, spinal motion preservation, viscosupplementation, and recombinant osteobiologics.
These devices are subject to premarket approval (PMA) by the U.S. Food and Drug Administration (FDA), the most rigorous regulatory process requiring clinical trials. But similar trends apply also to class II devices, which are cleared by FDA through the 510(k) pathway. Although most orthopaedic technologies traditionally have been devices, musculoskeletal drugs and biologics are subject to similar market forces.
Courtesy of S. Raymond Golish, MD, PhD, MBA
Out of the Valley of Death
AdvaMed is a trade organization representing manufacturers of medical devices and diagnostics. In 2016, AdvaMed commissioned a major report on entrepreneurship in the medical technology sector titled “A Future at Risk: Economic Performance, Entrepreneurship, and Venture Capital in the U.S. Medical Technology Sector.”
In 2017, AdvaMed commissioned a follow-up report titled “Out of the Valley of Death: How Can Entrepreneurs, Corporations, and Investors Reinvigorate Early-Stage Medtech Innovation?” The reports were the result of market research and multistakeholder roundtables with members of the entrepreneurial, venture capital, and large-cap device communities. Both these reports paint a dire picture of the current innovation landscape.
Difficulty with all three events of the triathlon of innovation was described in both reports. With respect to regulatory affairs, roundtable participants congratulated the FDA on improving timeliness and accountability but noted that the PMA process requires 54 months on average. The participants concluded that “financially constrained firms are less likely to enter new device markets as pioneers.”
With respect to coding and reimbursement, participants observed that “only the most robustly funded startups could reasonably include [establishment of new codes] as a part of their strategic model,” with one report urging entrepreneurs to “consider projects that don’t have the reimbursement challenges. This advice comes at the cost of discouraging some breakthrough innovation in health care, but that is what the system is already doing.”
On the topic of sales growth, the report noted that major acquiring companies have become risk averse, and that “many large companies have decided to acquire startups after or near successful product commercialization. And with only a few major players in each category, the number of potential buyers is limited.”
Even worse, this environment is creating decreased returns for early-stage venture investment. In the future, the triathlon of innovation might not even be attempted.
However, both reports contained affirmative messages for surgeon action. Traditionally, surgeons have been inventors, and one investor commented that “there’s no lack of great ideas … I see 20 different companies a week. It’s not an innovation problem.”
Also, it was noted that “large caps are starting to wake up to the fact that the acquisitions that drive their future blockbuster products are drying up.” One investor commented that “being reimbursable is a ticket to the dance,” and that surgeon advocacy is key.
The link between ethical surgery and value-based care was heavily emphasized: “Discussions about quality measurement in value-based payment models increasingly focus on incorporating metrics such as patient experience, quality of life, improvements in functional status, and evidence-based behavioral interventions.” In these areas, the AAOS fellowship are leaders and hopefully will be for decades to come.
The relationship among patients, surgeons, device vendors, and payers is not zero-sum. Surgeons simultaneously can sustain their practices by advocating for patients, embracing new technology, and offering payers more cost-effective, evidence-based medicine. Surgeons should actively educate patients and lobby payers to cover new technologies, which are supported by the highest-quality evidence, rewarding innovators who take the high road.
Orthopaedic surgeons must do this, because the crisis in commercializing new technologies threatens innovation for improving patient care. Because industry-sponsored trials often provide the highest-level evidence in orthopaedic surgery, the crisis also threatens evidence-based medicine itself.
- Gardner M, Hathaway I. A future at risk: economic performance, entrepreneurship, and venture capital in the U.S. medical technology sector. Accessed Jan. 28, 2018. www.advamed.org/sites/default/files/resource/a_future_at_risk_advamed_october_2016.pdf
- Whitaker S, Snyder G. Out of the Valley of Death: how can entrepreneurs, corporations, and investors reinvigorate early-stage medtech innovation? Accessed Jan. 28, 2018. www.advamed.org/sites/default/files/resource/medtech_innovation_report_2017.pdf
Raymond Golish, MD, PhD, MBA, is chair of the AAOS Biomedical Engineering Committee. He can be reached at firstname.lastname@example.org.
William M. Mihalko, MD, PhD, is the chair of the AAOS Orthopaedic Device Forum. He can be reached at email@example.com.
Tracy Watson, MD, is chair of the AAOS Biological Implants Committee. He can be reached at firstname.lastname@example.org.