Shawn Lunney is vice president of sales and marketing for GMD in Gig Harbor, Wash., which develops generic medical devices.
Q: What products does GMD have on the market?
Shawn Lunney: We offer one product so far, a female incontinence sling for urologic and urogynecologic procedures. This product can be traced back to the frustrations of one of our cofounders, Raymond Rackley, MD, a urologist at the Cleveland Clinic. Dr. Rackley was bothered about the costs of buying brand-name female incontinence slings. The implanted component of the sling system is a small piece of mesh that is very inexpensive. It costs only about $30 to make, but some brand-name companies have been charging as much as $1,400 for it.
Our product, which went on the market more than two years ago, costs almost $500, compared with the $900-$1,000 that surgery centers usually pay for the brand-name product. That kind of savings can make all the difference between a money-losing and a money-making procedure in the ambulatory surgery center. This means that by going with the generic version, an ASC can increase its volume as well as save money.
Q: How popular has your generic version been?
SL: This product is now sold to more than 400 facilities across the country, of which about half are ASCs. Sales have been growing every quarter since we entered the market and we see a lot more room to grow. By our calculations, about 1,500 ASCs are involved in urologic procedures. Sales are better in states where there are more surgery centers, probably because when physicians own their facility, they have an economic incentive to keep costs in line by opting for a generic version. For example, we have nine ASC customers in Texas, where there are a lot of ASCs, and none yet in New York, where the number of ASCs is severely limited by CON laws.
Q: Are there many companies selling generic devices?
SL: Not many companies are out there selling generic devices yet. We're about the only one in urology or urogynecology. Generic device companies have to pick their products carefully. These products do best when they don't involve a life or death issue. Some examples are meshes for abdominal areas and orthopedic screws or rods. You wouldn't have a generic pacemaker or heart valve or even a generic hip. People would be very concerned about a cheaper hip.
Q: How do you compare with generic drugmakers?
SL: Generic drugs have been around for 30 years and are now widely accepted, but generic medical devices are still not used much. This is in part because the physician's relationship with the device is different than with drugs. A physician prescribes a generic drug for his patients, but he personally uses the generic device. He has a hands-on relationship with it. He has more at stake.
However, generic drugs and devices are very similar in how they are designated. When the patent on a device has expired, companies like ours have the opportunity to make an equivalent. In many cases the brand-name maker will attempt to extend the patent by making some minor changes in the device, creating a new patent and reapplying for FDA approval. But that doesn't stop a generic maker from producing an equivalent of the original design.
The makers of brand-name drugs also make generics, but that is not often the case with devices. Our company only makes generic devices. GMD is in the iteration business and has no interest to be in the creation business. With no patents to protect, we can make a close copy of the original device and then sell it for much less. We have secured venture capital and have a network of sales representatives.
Q: Do you have plans to introduce other generic devices?
SL: We want to expand to more products, but we have to make sure the product we choose will have good chances of success. For example, GMD was approached to make an ophthalmology product, but we concluded that the potential savings and sales volume would not be big enough. We also looked into other products and found they could not easily be copied. We are still evaluating orthopedics, where already a few companies are making generic products, such as orthopedic screws.
Q: What are the prospects for generic devices in the future?
SL: The prospects are very promising. For as long as anyone can remember, healthcare has been about buying the newer, better and more expensive product in most cases. We cannot afford as a nation to do that for much longer. In the past, people could easily ignore the escalating costs of a procedure, but with the growth of high deductibles for private insurance and pressures for more limits on government spending, that attitude is changing. The writing is on the wall. Physicians who choose devices will have to think more about cost.
Learn more about GMD.
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