Royal Oak Medical Devices says it can save its hospital customers more than $100,000 a year on their orthopedic implant spends, using its so-called ‘repless’ generic sales model.
The repless sales model eliminates the traditional medical device sales rep’s role in the operating room. Although companies such as Smith & Nephew (FTSE:SN, NYSE:SNN) and Wright Medical (NSDQ:WMGI) are piloting their own versions, others including Stryker (NYSE:SYK) are skeptical that repless sales can gain a foothold in high-skill orthopedics procedures.
Michigan-based Royal Oak, a subsidiary of Royal Oak Industries, said a surgeon in Illinois saved about $88,000 over 6 months using its repless offering – claiming its prices are 40% to 70% lower than the lowest-price premium-brand implants.
Apart from the cost savings, the company said, "removing an unnecessary person from the operating room can reduce the chances of infection as well as removing other liability issues for the hospital."
Earlier this year Smith & Nephew CEO Olivier Bohoun touted his company’s Syncera pilot as "disruptive of the commercial model," noting that the British orthopedic maker is seeing profit margins "equivalent with the classic old-style [hip and knee] business."
Syncera is in its pilot phase in limited hospitals in the U.S., with Bohuon saying that hospitals performing 700 procedures a year with the Syncera system will save an average of about $4 million in cash over 3 years.
Wright Medical launched a pilot program in 2013 called WrightDirect that eschewed a traditional sales model for a more collaborative, "turn-key" approach with C-level executives at a select number of U.S hospitals. WrightDirect was sold along with the company’s hip and knee business last year to China’s Microport.
But Stryker CEO Kevin Lobo is skeptical of so-called "repless" generic sales models for orthopedic procedures.
"I look at a generic model very skeptically, regardless of which company is offering it,"Lobo said in January. "Until these procedures are de-skilled it’s very hard to imagine [not having] the sales force and the services that we provide in the hospitals. If you don’t have that, the operating rooms just don’t flow effectively and efficiently. I don’t know when they launched their initially but we are not seeing it in any meaningful way in the market."