IMS study – Ortho implant manufacturers operate at low margins of ~30-40%

A new study undertaken by IMS Health has revealed that the margins in orthopedic implant manufacturers are low given high cost involved in managing the supply chain. According to the study findings, orthopedic Implants operate differently from other medical devices and each surgery requires additional costs for instrumentation, inventory and equipment support, specific to that implant and investments are required for doctor training for these sophisticated implants

The study findings showcased that in case of orthopedic implants, the following additional costs are involved in managing the supply chain:

–        Equipment support for surgeons-  Specific instrument sets are provided as case support for every case to surgeon. This also covers logistical cost of cleaning, storage, sterilization and transportation of instruments for covering hospitals upto 250 Km range

–        High inventory costs due to large no. of SKUs to be made available at each location. Patient specific details are not predictable and companies need to manage all sizes and types across all locations. Generally, this stock builds up inventory and consignment costs

–      Surgeons training is critical piece as each implant needs to be used as per specifications and design. This is a significant cost component that is ignored completely. This is required for patient safety and success of surgery.

Specialized Sales force required to support every case with instruments


All the above components are critical investments to ensure desirable patient outcomes and hence need to be considered when evaluating margins. Typical markup across the value chain is 130-140% i.e. if the landed cost is 100, then MRP is ~230-240.  This markup of 130-140% is split across manufacturer, distributor and hospital. Manufacturers and distributors have a share of ~25-30% each and hospitals have a share of ~40-50%. The study stated that given that there are multiple costs involved in managing the value chain of a medical device, these markups seem reasonable. Since the orthopedic implant manufacturers are already operating at low net margins, further price reduction would make it difficult for these companies to operate. Additionally, this would have huge impact on the launch of and access to next generation/ innovative implants in India.

Additional points to be considered:

Orthopedic implants contribution to overall procedure cost is less than 40% in majority of the cases; study identifies that access to orthopedic surgeries is currently constrained by infrastructure and manpower constraints.

Medical technologies are only one part of the treatment picture and reducing the price of these implants alone will have minimal impact on increasing access. The study found that for the orthopedic segment, device costs contribute to less than 25-35% of the overall procedure cost, while remaining 65-75% includes procedure charges, doctor fees, cost of drugs and consumables etc. While the cost of device can be regulated, procedure package cost is an unguarded area, and benefit of price cap may not reach the patients as hospital might increase other costs of the procedure to compensate for the loss in margins from implants.

Another important aspect peculiar to orthopedic implants is the need to recognize the importance of categorization as different implants affect degree of flexibility, stability, range of motion, wear resistance and ultimately survivorship. There could be 9-10 categories of knee implants that can be used depending on the different patients’ needs. Therefore, before getting into markups and prices, it is important to understand the categorization of each of these devices.

Actions are required across multiple dimension of awareness, availability and affordability to increase access to medical devices in India; real barrier to access is not the cost of medical devices but infrastructure and manpower constraints.


The study findings reinforce the fact that given the nuances involved in the orthopedics industry, it is important to understand what drives cost of treatment and what are the components of the supply chain. These elements need to be carefully considered for defining guiding principles which impact treatment cost, accessibility and quality of outcomes in order to establish a robust unbiased view of pricing trends for implantable medical devices. All stakeholders need to understand the real issues that impact access to quality healthcare and improves health outcomes in India.  Therefore, improving access to devices such as orthopedic implants would require a comprehensive approach and not just regulatory price or margin control.

Leave a Reply

Your email address will not be published. Required fields are marked *

1 × 3 =