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Four lessons about the orthopedics industry from the CEO of group purchasing organization Amerinet

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Few sectors have been impacted by healthcare reform more than the orthopedics industry. And the looming merger of Zimmer ($ZMH) and Biomet threatens to bring even more change and further consolidation. To get another perspective,FierceMedicalDevices spoke with Todd Ebert, the CEO of group purchasing organization Amerinet.

Amerinet offers its 75,000+ member healthcare providers–including about 29,000 clinics and 3,300 acute care hospitals–a contract portfolio that it says can result in savings of up to 16% on medical and surgical products and services such as orthopedics.

Every organization, every hospital that we know has to reduce costs. One of the biggest areas where they have to reduce costs is in the device side, either cardiology or orthopedics.”

It negotiates with the top industry players on behalf of providers to help them secure low prices on medical devices. Given his direct contact with the orthopedics industry, Ebert offered valuable lessons about the rapidly changing market. Here are four takeaways.

Prices will stay low

Between 2007 and 2011, the inflation-adjusted prices of artificial hips fell 23% and those of artificial knees by 17%, according to an AdvaMed study. Expect more of the same going forward.

“Every organization, every hospital that we know has to reduce costs. One of the biggest areas where they have to reduce costs is in the device side, either cardiology or orthopedics,” Ebert said.

“The Affordable Care Act is a catalyst for change because they’re not getting paid anymore,” he added, referring to the tightening of Medicare reimbursement, which is now declining on a per-person basis.

Furthermore, product differentiation in the orthopedics industry is low, which means they are being priced like commodities, Ebert said: “There’s not a lot of room for price increases unless there’s something unique from the technology standpoint, but when you talk to the clinicians that know these things, they’re saying that there’s not a whole lot of difference between these things.”

The Zimmer-Biomet merger won’t change the trend

Some fear the impending acquisition of Biomet by Zimmer for $13.4 billion will increase prices due to the reduction in competition, but Ebert said the industry will remain competitive, although he predicted more consolidation in the future.

“There are still four strong players out there, and so there is still competition,” he said, referring to Zimmer-Biomet, Johnson & Johnson’s ($JNJ) DePuy, Stryker ($SYK) and Smith & Nephew ($SNN). “If there were two providers, yes, we’d be concerned.”

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Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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