A Minneapolis medical device maker that was supposed to challenge the existing business model for costly orthopedic implants for the lower body is instead being closed by Medtronic, which acquired the business in 2016 but could never make it work.
Responsive Orthopedics, founded as a startup by entrepreneurs including Minneapolis med-tech veteran Doug Kohrs, designed a line of prosthetic knee and hip implants that were specifically engineered to have lower prices than the high-end implants that have long dominated the market. The cheaper devices were designed for “bundled payments,” in which hospitals receive flat payments for joint implants regardless of the cost of the implant or the amount of follow-up care needed in the first 30 days.
Medtronic, which was an early investor in Responsive before acquiring the company outright, said federal guidelines for orthopedic joint replacements have changed. Those changes have caused implant pricing to become highly competitive, making it difficult for Medtronic to offer a “disruptive solution,” said a company statement.
“In February 2019, Medtronic announced that it was withdrawing from the orthopedic implant market. This decision was made in response to shifting market dynamics and to focus the business for future growth,” the statement said. “The Responsive Orthopedic knee system remains a high-quality, effective implant that has performed well for the patients who received it. Medtronic is focused on superior product quality, and our orthopedic implants are no exception.”
Although Responsive Orthopedics designed both hip- and knee-replacement systems, Medtronic only sold the knee systems. The hip implant is not cleared by the Food and Drug Administration.
Kohrs, who has since gone on to run a new company called Responsive Arthroscopy, said the decision to stop selling the products was unfortunate.
“It’s disappointing, but it is what it is,” Kohrs said Thursday morning. “The people that used the products loved them. The people who developed the products loved them. [The decision to end sales of the devices] was 100 percent a financial business decision that had a whole bunch of factors and layers in it, but it was nothing to do with the products and the value.”
Unlike with prescription drugs, there is essentially no such thing as a generic medical implant in the United States, despite strong cost pressure that has been brought to bear by Medicare.
Although hospitals may be interested in buying cheaper implants, Kohrs has said the major medical device companies have long preferred to innovate new features and designs to keep prices higher, and private-equity groups are hesitant to fund something that is deliberately designed to be less expensive.
But hip and knee implants are among the oldest and most widely used medical device implants. The constant innovation has maintained premium prices over the years, but some resulted in only somewhat dubious gains in performance. In some cases, newer orthopedic devices have performed worse than older technology, like certain “metal-on-metal” hip implants.
It’s not clear what will happen to the intellectual property developed by Responsive Orthopedics. Medtronic still owns it, and Kohrs declined to comment on the matter.