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This report originally appeared in the April 2009 issue of DOTmed Business News

Just about everywhere you look arthroscopic procedures are on rise, attributed to their mounting scope and usage in the diagnosis and treatment of ankles, elbow, wrists, hips and knees. Shoulder procedures are also expected to increase with the introduction of advanced knotless fixation systems by some of the OEMs.

When you are dealing with the business of arthroscopy equipment, you need to look into more than just the arthroscopes themselves, as a typical arthroscopy system can include camera, camera cables, light source, sheath, color monitors, printers, fiber optic cable and accessories. Accompanying instruments include shavers, cannulas, blades, burrs and forceps. All of these components make up what the Arthroscopy Association of North America now calls a billion dollar industry.




Advancements in endoscopes, fluid management systems, cameras, powered instruments, displays, and hand tools are encouraging surgeons to prefer the use of arthroscopic devices to open procedures. Some believe the arthroscopy market is driven by increased utilization in sports-related injuries, as a majority of orthopedic surgeons find arthroscopic surgeries to be less risky.

In a recent marketing report created by Global Industry Analysts, Inc., they cite arthroscopic visualization instruments as representing the largest as well as the fastest growing segment of the field in both the U.S. and abroad. In fact, it is expected to reach more than $515 million in the U.S alone by next year.

The Players

While OEMs such as Stryker, CONMED Corp, Storz and Olympus continue to see sales rise yearly, companies such as Advanced Endoscopy Devices, Inc. have graduated from service and refurbish sales to manufacturing their own new arthroscopic equipment and are seeing success.

"It's pretty competitive out there. One of the things that's really helped us is because we don't have that many layers, like Storz or Stryker, we don't have to do the big markups so our prices are typically 60 percent below what the other manufacturers sell them for," says the company President John Dawoodjee. "For independent distributors and people from other countries wanting to buy product, our price advantage is so much greater and we have seen an increase in sales."

Then there's the refurbished market, which has also been thriving according to the companies who sell, service and deal in this equipment.

"Our company sells refurbished arthroscopes from all the manufacturers and we've seen sales increase steadily over the years," says Cornel Cacuci, Office Manager for Apex Endoscopy Inc. in Lawrenceville, Ga. "We're refurbishing about 40 a month and we haven't seen any change with the downward trend in the economy. The refurbished market is still strong here."

Arthroscopes have evolved to bring brighter, sharper images to the physician and there seems to be a "latest and greatest" piece of new equipment coming to market every other month. Of course, as more applications evolve for using this equipment and the OEMs continue to roll out advancements on a regular basis to fill the need, some of the older equipment may not hold its value.

"One of the biggest challenges is trying to gauge the future value of equipment that is on the secondary market. As the OEM's continue to bring new products to market and with high frequency, equipment that was once in high demand can lose a large portion of its value due to newer generations continually showing up on the secondary market," says Philip Mothena, President of Simple Solutions, Inc., a pre-owned dealer based in Virginia. "Another hurdle recently has been facilities being very reluctant to spend the capital on upgrading their existing equipment, or expanding their current arthroscopy set-ups."

Refurb process

Over at Knoxville, Ten.-based Townsend Surgical, owner Scott Townsend deals in refurbishing all types of arthoscopic equipment, from scopes to shavers to cameras. The amount of work needed on each varies from piece to piece.

"An all OEM scope that passes the function tests perfectly and survives the autoclave with no moisture intrusion will be re-sold without doing anything but the testing," says Townsend. "Conversely, a camera may be entirely rebuilt including the prism and the cord."

Danny Tipei, Owner of Skokie, IL-based Inex Surgical, Inc., believes that reverse engineering the new equipment is the best way to know how to refurbish the equipment to peak specifications.

Arthroscopic instruments that come in get inspected, taken apart, cleaned, have bearings and seals replaced, and put through a performance test. Then they measure the motor coils, test the sensors, the shavers, repair the consoles, and look at the power supply.

"The only blue prints we have are the ones we made on our own, and we understand how the different components and parts work," Tipei says. "Everything that has to do with arthroscopy from small shavers to video cameras to scopes we repair, refurbish and service here."




By The Numbers

When you look at a new arthroscopic system from an OEM such as Stryker or Olympus, you are dealing with prices in the tens of thousands of dollars. A camera can run upwards to $50,000 by itself, scopes average around $7,000, while sheaths average a little under $1,000. When you start comparing those prices to those of a refurbished system, you understand why business has been booming for most.

"They can save a lot of money on a refurbished unit and we can duplicate the functionality and can save a surgeon more than 70% on a lot of this," says Tipei. "One Stryker shaver can be $7,000 but we can refurbish it and bring it back to life and sell it for under $1,000."

Same holds true for the camera systems which can run from $20,000-$50,000. A refurbished camera can go on the market for anywhere from $1,000-$10,000.


Fixer Uppers

The popularity of arthroscopic procedures comes from a surgeon's ability to examine joints through small incisions and it is that sensitive, micro-technology that often leads to equipment damage.

Tipei offers up a laundry list of things that can go wrong with these delicate instruments as the miniature cameras, lenses, light source and the fiber optics inside the scope are all vulnerable. Things are dropped, bent, sliced by other instruments or they get dirty or simply are overused and are susceptible to normal wear and tear,

"With scopes going down very frequently-due to, for example, a doctor who doesn't maneuver a shaver or laser very well and cuts the tips off scopes or a facility where they don't have enough scopes in inventory and resort to overusing the scopes that they have, it's important to have everyone prepared," he says. "My technicians know how to search blind and repair to the component level."

Michael Lay, Principal of Chesterfield, Mo.-based Life Systems, Inc., also understands the importance of having experienced service people when fixing arthroscopic equipment to make his company stand out.

"For flexible scopes we have a senior technician with previous OEM experience. We have a head technician in rigid that was also previously with a major OEM. Our camera lead technician has 15 years camera repair experience with three major repair companies," Lay says. "This is delicate equipment and you need the best people if you are going to provide the best service."

Todd Abrams, President of Rigid Repair Center in Wellington, Fla., repairs on average, 350-400 scopes a month.

"What we do is a-z repairs on 99.9 % of the rigid endoscopes that are out there," he says. "We do a three-level system here. Level 1 would include a basic cleaning, opening up of the scope, evaluating what's wrong with it, replacing one rod lens, cleaning the scope and putting it back. Level 2 would be replacing the objective lens system, the working end glass piece, which is the expensive part. Level 3 is a complete rebuild. We will replace the inner and outer tubing, fiber-optic bundle, and any and all parts necessary to bring it back to original specifications. If it's run over by a bus we can fix it."

Perhaps that's why service companies have seen their business continue to grow over the years, even in today's economic climate.

"We are doing more than usual. I am seeing the future for repairs, at least in terms of the next year or two as the economy picks back up," says Abrams. "The hospitals are not getting the budgets they used to get so they can't buy those new toys with the bells and whistles and need to fix their old toys, which is our niche market. Business has been very good, especially since October."

But when so much business exists, that opens up the door for more businesses to try and take a stab at the market. Abrams says there are at least 275 arthoscopic rigid repair shops that he knows of, but many are operating out of their garage with little experience, no insurance and not much to stand behind their business except for slightly lower prices.

"There are way too many people doing repairs and sales these days. I have been doing repair business for over 15 years now and have seen the cost of the repair go up and the price I can charge my customers go down," says Adam Rudinger, President of Lex-Tech, Inc., which deals in refurbished arthroscopes. "This is due to a glut of repair companies that have popped up over the past few years. The new guy tries to undercut the existing guy and then a price war ensues."

This could affect the industry in the years to come.


International Market

Economic growth, corresponding increase in living standard, and aging population would continue to create a greater demand for arthroscopic procedures throughout the world.

Global Industry Analysts, Inc. reports that the United States, Europe, and Japan account for more than 85% of the global market for arthroscopy. Meanwhile Asia-Pacific and Latin America, each at about 10%, constitute the two fastest growing markets during the last decade.

Those numbers have opened up the eyes of Advanced Endoscopy Devices, Inc. as they look to sell their new equipment overseas.

"The international markets such as Asia and South America are very much in demand for arthro equipment right now," says Dawoodjee. "Our international market is only 20% right now but we are hoping to increase that number, because more and more countries are demanding that they get new products and we can supply them with what they need."

Obviously, the pre-owned equipment is attractive for foreign markets since they don't often have the same budgets as U.S. hospitals.

Cacuci has seen his company increase refurbished equipment to places like China and South America, because they are interested in getting the most for their money.

What lies ahead

In the next few years, the most obvious advancement that is starting to already come into play from the OEMS, concerns clearer imaging with HD video systems and wireless technologies being introduced.

Scopes, cameras, fluid management systems and power instruments are all being seamlessly integrated into customizable OR systems, alongside high-definition monitors and wireless camera heads, which offer greater data capturing flexibility and enhanced image viewing. This helps to maximize space, reduce procedure and turnover time and enhance surgeon control.

"It's a strong industry and you have to keep things state of the art and have the ability to offer things that other people can't," Dawoodjee says. "I think a way the business will change is more and more hospitals will not want to do business with people coming to them, realizing the savings of purchasing on-line."

When you have a billion dollar industry where the momentum doesn't seem to be waning, there seems to be plenty of business out there for everyone right now.

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DOTmed Registered Arthroscopy Equipment Sales & Service Companies
Names in boldface are Premium Listings.

Domestic
John Woods, Advanced Endoscopy Devices, Inc., CA
David Bello, Endoscopy Replacement Parts, Inc., FL
Todd Abrams, Rigid Repair Center, FL
Cornel Cacuci, Apex Endoscopy, Inc., GA
Danny Tipei, Inex Surgical, Inc., IL
DOTmed Certified
Sam Kanaan, Laproman, MI
DOTmed 100
Asif Bhinder, tekyard, MN
Marcus Rosenberg, Endoscopy Development Company, LLC, MO
Michael Lay, Life Systems, Inc., MO
DOTmed Certified
Jason Eden, Bio Basics, MO
DOTmed Certified
Edward Soto, SterilMed's Scope Exchange, NC
Adam Rudinger, Lex-Tech, Inc., NY
Roger Kotona, Zoi Surgical, Inc., OH
Scott Townsend, Townsend Surgical, TN
DOTmed Certified/100
Stephen Rousset, Medical Equipment Solutions, TX
Philip Mothena, Simple Solutions, Inc., VA
Robert Overmars, BPI Medical, Inc., WA

International
Kashif Saleem, Ansari Medical, Pakistan

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