OrthoEx: The Exoskeleton That Gives Orthopedic Startups a Boost

by Elizabeth Hofheinz, M.P.H., M.Ed.

In the world of robotics, exoskeletons are devices that serve to augment an existing technology. In the world of orthopedic companies, OrthoEx, a specialized third-party logistics company that enhances the capabilities of startups, is the exoskeleton.

The brainchild of Tony Passalacqua, a former operations manager at FedEx, UPS, and Stryker, OrthoEx exists to propel orthopedic startups forward. Passalacqua, President and CEO of OrthoEx, says, “While at FedEx and UPS I learned the art of standardization. When I moved to Stryker, I then applied the same principles to inventory and loaner management and over time as my understanding of the relationship between the manufacturer and distributor grew. That is when my ideas about refining supply chain logistics in medical devices began to germinate.”

The genesis

When Passalacqua met Josh Sandberg, Co-Founder of Ortho Spine Partners, nearly four years ago, a “click” was heard around the Board room table…OrthoEx was born. Initially in a 1,500 square foot office, the company has flourished and now occupies 12,000 square feet.

Sandberg says, “It was obvious that Tony possessed a deep-seated knowledge of not only the medical device world, but the transportation arena as well. And he came with a superb idea that was begging to see the light.”

Now an OrthoEx board member, Sandberg states, “We knew that OrthoEx could make a measurable difference in the lives of orthopedic startups.”

Small companies donning exoskeletons

“There are a multitude of small companies that for various reasons cannot grow into massive enterprises,” says Passalacqua, who has 27 years of experience in sales operations, supply chain optimization, operational restructuring, and strategic planning. “However, if you can take advantage of economies of scale by stacking 3, 4, 5, or 6 companies in a particular market, then you are able to pass that savings or value on to the customer. That way, they can compete in the larger market with less overhead and infrastructure.”

“It is difficult to achieve and maintain standardization in a constantly changing industry that is highly customized. However, through technology and streamlined processes we can standardize and optimize inventory and instruments. OrthoEx eliminates so many steps for companies that they are able to use their remaining resources to grow their top line as a startup.”

“At present, we are focused on smaller startups because they do not have vast quantities of cash and capital on hand. OrthoEx allows these enterprises to function like a large company. They can use their capital for marketing, sales or equipment versus sinking money into building a costly network.”

Warehousing

One of OrthoEx’s most appreciated offerings, warehousing allows smaller companies to have an outsourced, environmentally controlled storage facility along with a customized logistics plan.

“While many people develop a plan, things go wrong when not everyone follows it,” says Passalacqua. “OrthoEx has a warehousing system that is distinct in the way we process instruments and implants. So the ‘secret sauce’ is not a technique or a technology…it’s that people actually adhere to the procedure that was developed.”

“What you find in a faulty operation is that people have deviated from or circumvented the system. In medical devices, the manufacturer gives their product to the salesperson to sell. When the reps increasingly find that they need a logistics system to support them, a system is built backwards, meaning that there is a constant vacuum. For example, people with intellectual property (IP) approach surgeons and convince them to use their product…then they figure out the operations piece.”

Distribution

There are few more ideal stewards of device transportation than Tony Passalacqua, who was once a Senior Manager for the fourth largest FedEx ground facility in the U.S. He says, “OrthoEx saves companies money because we have a deep understanding of the transportation network…and because we offer a volume discount on freight.”

Intimately familiar with transportation zones and travel times, the OrthoEx virtuosos save customers money by looking at service, cost and transportation time within Fedex. “For example,” notes Passalacqua, “someone might ship a package overnight from San Diego to Los Angeles and pay the premium price. We would have known how to send it at a lower service level and have it arrive at the exact same time.”

Inventory management

Given OrthoEx’s exlusive relationship with their asset management software, companies don’t waste resources on unnecessary expenditures. The software, Surgio Health, is a field-designed tracking system that includes notification when cases are scheduled, surgeon preferences and more.

Passalacqua, who routinely led Stryker in cost control and inventory management initiatives, says, “A lot of companies lose inventory when they begin operations; they spend substantial amounts of capital on additional instruments and implants and underutilize what they already have. With OrthoEx, we optimize set utilization, track expiring implants, and foster accurate demand planning.”

On-site cycle counting

OrthoEx’s on-site cycle counting services mean that companies can capture hard-to-obtain data. And their experienced inventory experts deep dive into the information in order to provide startups with actionable information.

Tony Passalacqua: “One thing that distinguishes OrthoEx is that it is manufacturer-agnostic. Similar third party logistics organizations are attached to some of the largest orthopedic companies, which may not be an ideal situation because having a very close relationship with a manufacturer can be fraught with complications.”

Like tumblers in a safe

Asked about the company’s X factor Passalacqua states, “You can standardize processes in order to optimize quality or to minimize expense. For sales reps, it is difficult to sufficiently trust the operations people until they have proven themselves with zero errors. As for the hospitals and patients, they are depending on—assuming, really—that the supply chain and logistics are working as they should. You could say that seamless supply chain management is like the tumblers in a lock…everything has to line up every single time.”

And that is what OrthoEx does…they take all of the small piece of the puzzle and ensure that everything clicks into place.

So what does Passalacqua say about maintaining quality every single time? “In order to reproduce the same level of quality each time, you must be able to ensure that your procedures are designed to eliminate human error and provide the outcome that reps and hospitals need. We at OrthoEx have carefully crafted reproducible procedures so as to ensure that high quality is maintained—no matter what obstacles might be thrown in the mix.”

Josh Sandberg: “Without OrthoEx, companies must locate an operations person who understands the industry and is available. Then they have to build all of the quality systems and processes from scratch. By leveraging the OrthoEx team’s knowledge, talent and facilities, you can greatly reduce the investment required to kickstart operations and ensure that all key stakeholders from distributors to surgeons are properly supported.”

OrthoEx, specially designed so that small startups don’t have to invest in operations, allows for startups to compete with the big players on a substantial scale all with having an intimate knowledge of how the business and relationships within orthopedics work. “All someone has to do,” says Passalacqua, “is take their IP and ‘turn on’ OrthoEx to manage their pipeline. We bring the ‘easy.’”