University of Kentucky
Robots may not have emotions, but that’s certainly not the case when it comes to the investors, doctors, and other associated people who are involved in the surgical robotics market. From promises that robots open up new avenues in surgery that are better and more comfortable for patients to accusations that robots are dangerous and unnecessary, it often feels like the middle ground is perilously thin these days. While the utilization rates don’t point to robots disappearing anytime soon, investors in Intuitive Surgical (NSDQ:ISRG) and Mako Surgical (NSDQ:Mako) are likely looking at plenty of volatility and debate for years to come.
Cost drives the discussion
It’s impossible to talk about any surgical robotic system without acknowledging the costs. An Intuitive Surgical da Vinci system now costs north of $1.5 million, with per-procedure selling prices running north of $2,000. What’s more, it’s not as though hospitals can go with knock-off tools, as the electronics of the system won’t allow unrecognized tools/accessories to be used. Mako’s Rio likewise comes at a premium, with an average system cost of more than $800,000, and per-procedure costs running north of $4,000.
The expense of these systems, the da Vinci in particular, has made them a target. A recent paper in the Journal of the American Medical Assn. highlighted that the "all in" costs (that is, including depreciation on the robot) of performing a hysterectomy with the da Vinci robot were nearly one-third higher than a regular laparoscopic hysterectomy, with no appreciable differences in complication rates or outcomes. Likewise, the da Vinci has previously come under scrutiny and scorn for the higher costs associated with robot-assisted prostatectomies.
But results matter
The counterpoint to the cost argument is that these robots offer something special to the doctor and/or patient that justifies the cost. It is here where the debate heats up, as even the biggest robot supporters don’t deny the higher costs.
In the case of da Vinci-assisted prostatectomies, repeated studies have shown that patients undergoing robot-assisted surgeries experience less blood loss, less pain, and shorter recovery times. Likewise, while the outcomes have looked similar in terms of complications and successful procedures, there seems to be an apples-to-oranges issue of comparison, as the robot results are often being stacked up against the results of surgeons very experienced in laparoscopic procedures.
This also appears to be a relevant factor with Mako and the Rio system. Partial knee replacements can indeed be done without robots, and high-volume surgeons can often do them quite well. When the surgery is done by less experienced surgeons, however, the success rate declines, sometimes quite significantly. Newer tools and cutting guides from ortho companies like Stryker (NYSE:SYK) and Zimmer (NYSE:ZMH) certainly can help make the procedure easier (and likely to represent a threat to Mako penetration/utilization), but they don’t invalidate the use of the robot.
There’s also a question of whether the da Vinci robot can allow surgeries to be done laparoscopically that otherwise could not/ would not be done that way. Intuitive Surgical has claimed that its target market, at least for hysterectomies, is in the hundreds of thousands of procedures that currently cannot be done via traditional laparoscopic methods (or are strongly contraindicated against). If that’s true, and there is considerable debate about it, that argues that the true comparable to robot-assisted hysterectomy is open surgery – and even the fiercest robot critics typically acknowledge that the outcome, complication, patient experience, and cost data favor the robots (on balance) against open procedures.
Plenty of surgeons disagree with what I’ve just written. They argue that a competent laparoscopic surgeon can do anything the robot can do, and do it faster and more cheaply. Accordingly, they argue that robots are just expensive toys that hospitals buy to please gadget-loving surgeons and/or attract credulous patients. My rebuttal is largely this – I’ve rarely met a surgeon who didn’t have exceptional confidence in his or her abilities (it’s sort of a requirement for the job), and even fewer willing to acknowledge that their results were below average. In the cold light of day then, I think the numbers still support the argument that da Vinci and Rio allow ordinary surgeons to consistently generate results on par with those of much better, more experienced surgeons.
The debates will never end
Ultimately, there is no reason to believe that the debates about the utility of robots and their proper role in care will ever end. At a bare minimum, a journal paper or investment article taking either a pro or con position is a guaranteed way to generate some attention for the author. What’s more, the notion of proving anything in medicine isn’t quite as cut-and-dried as people like to pretend.
The Palmaz-Schatz balloon-expandable stent was launched by Cordis (now part of Johnson & Johnson (NYSE:JNJ)) in 1994, but doctors are still arguing about the utility of stents – not so much whether stents have a place in the treatment of heart disease now, but rather which patients should get them and in what circumstances. Likewise, there has been ample debate about the who should get ICDs, hip/knee implants, and so on. Even the intra-aortic balloon pump, a device in use since the ’60s, has come in for reevaluation after the surprising results of the Shock II study.
The bottom line
Certainly there is ample uncertainty today about the future of surgical robotics. Patients increasingly want minimally invasive approaches that minimize pain and recovery times, and hospitals are happy to charge their insurers a premium to give them those surgeries.
What is unclear, though, is the long-term cost-benefit to the healthcare system. Given the difficulty of conducting truly randomized studies (or the ethical issues of doing a study comparing robots to surgeons with below-average results in minimally invasive surgeries), it will likely take a very long time to resolve the issue. In the meantime, while Mako appears to be having a hard time completely selling the ortho community on the Rio system, Intuitive continues to roll ahead with impressive robot placement and procedure growth numbers, as well as a deep pipeline of tools/instruments to further expand the utility of the system into new surgeries.
Stephen Simpson CFA is a former sell-side and buy-side analyst who focuses most of his professional attention on financial and investment writing. In addition to a decade of work as an analyst, Mr. Simpson has worked as a wet-bench biomedical researcher and a consultant in the med-tech industry, as well as writing on a freelance basis for over 10 years. He can be reached via email at tuonela.fool@gmail.com.
