Stryker Corp. is a multibillion-dollar company. Its subsidiary, Stryker Orthopaedics, controls nearly one-quarter of the U.S. hip and knee implant market. A massive hip implant recall and lawsuits have plagued the company.
Through acquisitions – beginning with the Osteonics Corporation of New Jersey and culminating with the giant Howmedica – Stryker grew into a major player in orthopaedics and is now the second-largest seller of orthopaedic devices. A subsidiary of the parent company, Stryker Orthopaedics was created in 1998, and by 2011 it was listed as one of the top 15 most profitable orthopaedic and spine device companies in the world. Its hip, knee, shoulder and bone products continue to multiply, and are used by millions.
Stryker Orthopaedics was forced to recall the Rejuvenate and the ABG II modular-neck hip stems in July 2012 after reports of pain, infection and complex revision surgeries. In 2013, it recalled a third, similar model of implants, its Accolade modular system. Accolade’s design similarities extend to the complications, and Stryker faces mounting lawsuits over the implants. Nearly 1,700 are already filed.
History of Stryker
Dr. Homer Stryker began selling inventions in 1941 and incorporated the Orthopaedic Frame Company in Kalamazoo, Mich., in 1946. His first significant invention was a mobile hospital bed later known as Circ-O-Lectric. One of his next major inventions was an oscillating saw used to cut cast material.
|Fast facts about Stryker|
|Established: 1941||Headquarters: Kalamazoo, Mich.|
|Founder: Homer Stryker||Size: More than 20,000 employees worldwide|
|2012 Revenue: $8.7 billion|
In 1964, the company changed its name to the Stryker Corporation. Dr. Stryker retired, leaving his son, Lee Stryker, as general manager of the company. Ten years later, in 1979, Stryker joined the orthopaedic implant market by purchasing the Osteonics Corporation of New Jersey. The next year, Stryker Corp. divided into three segments: surgical, medical and osteonics.
The osteonics division had its own sales force, specializing in orthopaedic implants. Another of this division’s early products was the first high-performance cordless power tool for orthopaedics. Stryker received approval from the U.S. Food and Drug Administration (FDA) in 1991 to market the first implants that didn’t require bone cement.
Today, three grandchildren of Homer Stryker are among the world’s billionaires: Ronda Stryker ($2.8 billion), Pat Stryker ($1.6 billion) and Jon Stryker ($1.3 billion).
Establishing Stryker Orthopaedics
Stryker in 1998 bought Howmedica, an orthopaedic division of Pfizer, for $1.65 billion. With that, Stryker Orthopaedics was established, and the acquisition immediately made Stryker a significant competitor in the joint implant market. The same year, IndustryWeek listed Stryker’s osteonics plant in New Jersey as one of the 10 best U.S. manufacturers.
Stryker entered the global orthopaedic market in 2001 with the Stryker Knee 1.0. Continuing its international expansion, the CentPillar hip stem was manufactured for the Japanese market in 2003. The company’s expansion efforts were rewarded: Medical Product Outsourcing listed Stryker as one of the top 10 global medical device companies in 2003.
|Stryker stayed on the list with a string of new acquisitions. Among them:|
|Spine Core, Inc. (2004)|
|Ascent Healthcare Solutions, Inc. (2009)|
|OtisMed Corp. (2009)|
Stryker Orthopaedics grew to the point that it held nearly 25 percent of the U.S. artificial hip and knee markets and 16 percent of the worldwide orthopaedic market by 2010. Its major products were hip stems and unicondylar systems.
Today, Stryker, DePuy and Biomet dominate a device industry worth about $6.7 billion annually, accounting for some 70 percent of sales of hip and knee implants to U.S. hospitals.
|Stryker Orthopaedics manufactures a variety of products, including:|
|Knee replacement systems||Shoulder and elbow systems|
|Hip replacement systems||Bone substitutes|
Defective Hip Implants
One of Stryker’s innovative hip implant designs – stems with modular necks – allows surgeons to select neck and stem components to customize the devices for individual patients. The Rejuvenate (introduced in 2008) and the ABG II (2009) were supposed to offer increased stability and flexibility, and were implanted in 20,000 U.S. patients.
But the implants proved to be harmful to patients, as the metal necks and metal stems rubbed against each other, releasing metal ions into surrounding tissues, bones and the bloodstream. The innovative design came to a screeching halt with a July 2012 recall, which warned of “fretting and corrosion.”
Claimants with defective hip implants have filed lawsuits against Stryker. As of February 2013, there are at least 50 lawsuits pending in New Jersey state courts. The number of Stryker hip lawsuits is expected to grow substantially.
Defective Knee Implants
In 2007, the FDA warned Stryker about procedural problems at two of its joint manufacturing facilities in Ireland and New Jersey. The warning letters let Stryker know that two knee components, the Duracon and Scorpio, and other components were not conforming to manufacturing standards.
And in January 2012, Stryker recalled 26,000 of its EIUS Unicompartmental Knee Systems over high revision rates. Lawsuits over the EIUS have followed. Some of Stryker’s other knee products — the Total Knee, Scorpio CR and PS components — have been partially or totally recalled.
In addition to recalling certain knee products, Stryker had to submit to federal supervision for 18 months because of allegations that it was paying surgeons to use its devices.
Only a few months later, in May of 2012, Stryker responded to scrutiny concerning another of its knee devices. The U.S. Department of Justice (DOJ) originally subpoenaed Stryker in 2012 for sales and marketing practices associated with the OtisKnee device. Following negotiations with the DOJ, Stryker reached a settlement of $33 million. While the devices are not associated with the complications the ABG and Rejuvenate are known for, Stryker’s policies regarding knee implants leave room for improvement.
The Future of Stryker
Stryker is likely to face more lawsuits related to its hip implants, which could cost the company hundreds of millions of dollars to resolve.
Lawsuits from faulty implants are not the only legal troubles Stryker faces. In October 2013, the U.S. Securities and Exchange Commission fined the company $13.2 million, alleging the joint manufacturer masked over $2 million in bribes as consulting services, charitable donations, commissions and travel expenses. Stryker Corp. neither denies nor admits the charges.
Internal documents showed that among the bribes was a six-night New York hotel stay and Broadway tickets given to a hospital director and his wife by Stryker’s Polish unit. According to the documents, the visit was to “strengthen [the doctor’s] conviction that Stryker products are the best solution for her hospital.”
Stryker plans to continue its focus on sales outside the United States. In January 2013, Stryker purchased Trauson, China’s leading manufacturer of products used in trauma surgery. The acquisition gives Stryker access to a rapidly growing Chinese market.
Stryker Orthopaedics CEO Kevin Lobo, who took over in late 2012, said the company plans to shift its focus from products to systems, like examining the value of a product for patients, surgeons and manufacturing companies. He plans to put time into branding and other marketing strategies.
The demand for orthopaedic products is growing steadily, especially as the obesity rates rise and as there are more people seeking an active lifestyle in spite of injuries. Stryker executives have said the company plans to stay afloat in the competitive orthopaedic industry by creating implants with greater longevity, continued investment in research and enhanced customization.