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Medhealth Review

Moving from Devices to Digital: The New Currency in Orthopedics

The global orthopedic device market was valued at close to $50 billion USD in 2022 with the United States accounting for approximately 50% of the global market. While the value of this market has historically been in the devices themselves, with the growing prevalence of enabling technologies in orthopedics, data and digital are emerging as the new currency in the space. 

Orthopedics is best known for its early innovations in technologies like the total knee replacement, anterior cruciate ligament (ACL) knee reconstruction, and spinal fusion. All these technologies are very mechanical in nature with devices incorporating various metals and medical grade plastics like polyethylene.

Increasingly though, technological enablers like surgical planning software, navigation systems, and surgical robotics are playing a more prominent role in the use and application of the orthopedic implant. Orthopedic device companies are now as likely to have openings for electrical and software engineers as they are for mechanical engineers. 

While new orthopedic and spinal device companies continue to emerge with newer versions of pedicle screws, interbody cages, and other mechanical, implantable devices, a growing number of entrepreneurial companies have formed around novel, digital enablers.

Companies, like Intellijoint, THINK Surgical, and OrthAlign are positioning themselves as product (device company) agnostic, allowing their technologies to be used with implantable devices from a cross section of established orthopedic companies. This agnostic approach helps smaller entrants gain a foothold in this highly competitive market while not directly competing with the major players. 

Evidence of the importance of digital technologies for the major orthopedic players, was highlighted recently when Stryker’s Chair and CEO Kevin Lobo voiced the importance of AI-enabled innovations during his interview on Fox Business on February 8th.

In fact, over the past few years, CEO’s at large and mid-sized orthopedic and spine companies have announced developments or acquisitions of digital enabling technologies to augment their existing hardware portfolios. Examples include SeaSpine’s 2021 acquisition of 7D Surgical and its machine-vision, image-guided surgery platform; Stryker’s 2021 acquisition of OrthoSensor and its sensor-enabled knee spacer; Medtronic’s 2018 acquisition of Mazor Robotics and its robotic guidance system for spine surgery, and Globus’s 2018 acquisition of surgical planning software platform, Surgimap. Each acquisition was rationalized as a “value-add” for the hospital and surgeon customer and to help differentiate themselves from the competition. This differentiation is even more significant today as many of the orthopedic products on the market become commoditized and subject to continued downward pricing pressure.

Companies large and small are betting big that digital and enabling technologies in the orthopedic space will drive future differentiation and revenue growth. What remains to be seen is how orthopedic companies will capitalize on these investments and truly turn digital into the new currency. Orthopedic companies are beginning to design and deploy Software as a Service (SaaS) software licensing and subscription models.

These models have proven to be extremely successful in the Business to Business and Business to Consumer spaces but are still in their infancy in the orthopedic device space. But without a mechanism for insurance reimbursement, hospitals may voice reluctance to pay for these technologies as they may be deemed costly “add-ons” to established surgical procedures. This has orthopedic companies moving to bundle their enabling technologies with their existing implantable hardware to lock out the competition in the meantime.

There is one untapped area for revenue generation the move to digital hasn’t yet captured…data. Digitally-enabled devices have the capability to capture a huge amount of surgical and clinical data. While data scientists know how to sort through and collate the data, the challenge device companies face is what to do with this plethora of information. How do companies monetize this information? Certainly, the data could help refine product development efforts internally, but is there an external market for this information?

This data could help drive clinical decision-making and improvements in evidence-based medicine, but this would likely be challenging to monetize. Insurance companies may find value in the data, but concerns would likely emerge as to patient privacy and potentially lead to restrictions on less beneficial or more costly procedures. Finally, hospitals could conceivably use this data to compare procedures (and surgeons) operating in their hospitals. But with hospital margins currently strained, they may be unwilling or unable to purchase this data. 

Devices and digital will continue to blur the lines on which brings more value to orthopedics in the coming decades. The data generated through these enabling technologies has the potential to change how medicine is practiced. The outstanding question remains how to capture value from this data and truly turn it into the new currency in orthopedics.

By Anthony Troncale, General Manager at joimax® Inc.

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