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Iowa Orthop J. 2010; 30: 35–38.
PMCID: PMC2958268


John J Callaghan, MD*,** and Steve S Liu, MD


Although the deferred and non-prosecution agreements entered into by five of the leading orthopaedic implant companies have caused our profession to re-examine the surgeon-industry partnerships that have helped advance the field, the legal and ethical considerations in that relationship have not changed. Moving forward, the surgeon must recognize that a truly valuable exchange must be demonstrated and delivered in that relationship for compensation to be warranted. This paper summarizes the value proposition in the orthopaedic surgeon-industry partnership.

The Deferred Prosecution Agreements entered into by four orthopaedic manufacturing companies and the Non-Prosecution Agreement entered into by an additional orthopaedic company, through the U.S. Attorney's office in New Jersey, has brought into question, “What is the True Value of the Orthopaedic Surgeon's relationship with Industry?” In this regard there are two definitions of value which warrant exploration: “Value” defined as a fair or proper equivalent exchange of commodities and “Value” defined as social principles, goals or standards held or accepted by an individual class or society. It is these two definitions which will be addressed in the context of the relationship of the orthopaedic surgeon with industry.1-3 The discussion will further focus only on the value of the orthopaedic surgeon-industry partnership in regard to product development. The discussion will try to apply context to the requirement for compensation and what constitutes appropriate compensation in this age of increasing accountability for increasingly limited resources of society where healthcare has become a major expenditure of these resources.

The second definition of value which relates to social principles, goals and standards is very germane to this discussion. Medicine in general, and surgery specifically, is considered one of the learned professions. With professionalism comes both privilege and responsibility. The public cedes the learned professions certain privileges because these professional occupations require specialized knowledge, training and experience which provide important and valuable services to the public.2,3

The public is paramount in the value proposition of the surgeon designer-industry relationship. The public in terms of the patient will be discussed later. However, there is another aspect of the public in regard to the value proposition. Industry has a responsibility to its public, the shareholders, to optimize its returns and optimize the use of its resources.4 The surgeon designer must understand that he or she has a responsibility to his or her public, his or her professional field. This includes full disclosure of all potential conflicts of interest which in this day and age includes a complete understanding of the effects these conflicts can have on decision making in the practice of medicine and in the interpretation and reporting of scientific results.5-7

Self regulation is one of those privileges which we as a profession should cherish, respect and promote every day of our professional lives. Self regulation has given our profession relatively exclusive authority to set the standards for the degree of expertise needed for licensure and certification as well as recertifica-tion. As surgeons, it has granted us the right to make judgments about the need for surgery and the need to perform operative procedures on our patients which can have unintended consequences including severe complications, even death. In addition to enforcing levels of technical competence, self regulation as well as professionalism require us to enforce certain levels of ethical performance. We are expected to have a dominant commitment to serving others, rather than to personal gain. Privileges ceded to the medical profession require a perception by the public that physicians are truly dedicated to the welfare of their patients over their own self-interest. The basis for “Medicine's Contract with Society” as articulated by Linda Emanuel is that our ethical responsibility as medical professionals “is primarily about the expert protection of vulnerable people and vulnerable values, in this case patients and the values of health care, respectively.”2,3

It is for these reasons that the orthopaedic surgeon who chooses to partner with industry must understand that because of his or her statute as a medical professional he or she cannot engage in the type of partnerships with industry that other leaders in their fields are able to engage. Eldrick Tont (Tiger) Woods can partner with industry by endorsing products of which he has no involvement in design. Michael William (Coach K) Kryzewski can partner with industry by endorsing a device he has had or procedure he has undergone. The differences between the perceptions and realities of these industry partnerships and between those of a medical professional, including an orthopaedic surgeon and industry, lies in this understanding of the privileges and responsibilities awarded by society to our medical and orthopaedic profession. This differentiation most recently arose in the case of Robert Koffler Jarvik, MD, developer of the Jarvik-7 artificial heart, when he endorsed Lipitor for Pfizer even though he had never completed an internship or residency and had never been licensed to practice medicine. Pfizer eventually withdrew the advertisements after public and congressional outcry questioning the propriety of a medical professional partnering and profiting with industry through endorsements.8-10

It is within this professional and ethical environment that an orthopaedic surgeon who enters into a product development partnership with industry today must function. The principle beneficiary of the partnership between the orthopaedic surgeon and industry should and must be the patient.2,3 The value of the orthopaedic surgeon in the partnerships with industry during the infancy of the orthopaedic surgery discipline was easily defined. Homer Stryker of Kalamazoo, Michigan founded his own company, John Charnley developed his own hip and brought it to Thackery for commercialization and the Association for the Study of Internal Fixation, (AO/ASIF) (Martin Allgower, Maurice Muller, Robert Schneider and Hans Walleneggor) developed a series of implants which they licensed for manufacture to the Straumann Institute, (Waldenburg, Switzerland) and which were widely distributed under the Synthes trademark. These implants were small in scope and were used by relatively few surgeons. Regulation of the commercial manufacture and distribution of orthopaedic implants in the 1950's and 1960's were rudimentary. No one would question the value of these partnerships in elevating the quality of care for patients afflicted with musculoskeletal conditions and disorders.11

The maturation of the field of orthopaedic surgery over the last half century has presented both opportunities and more recently threats to the orthopaedic surgeon-industry partnership especially in relationship to orthopaedic implant design and distribution including surgeon education.6,11-13 The vast scope of this endeavor in the competitive capitalistic environment present today in the United States as well as throughout the world (estimates are for a ten billion dollar market for the orthopaedic implants in the United States and a twenty-five billion dollar market worldwide, annually) has created hundreds if not thousands of orthopaedic related companies around the world. Growth in the development and need for orthopaedic surgical procedures requiring implants and specialized techniques to care for the ever increasing numbers of patients who are afflicted with musculoskeletal conditions and diseases, has provided opportunities as well as abuses in the surgeon-industry partnership.4,11 The magnitude of the potential revenues, the large number of orthopaedic surgeons and the potential for large volumes of procedures to be performed allowed for industry to influence the orthopaedic surgeon's use of implants, including, in some cases, payment for nonexistent or over-valued services which would be considered a violation of anti-kick-back statutes under the False Claims Act.

The actions of the Attorney General's Office in New Jersey as well as some congressional legislators has called the question “Is there any real value in the surgeon/industry design partnership and if so what constitutes that value and what is it worth?”

It can definitely be argued that the orthopaedic surgeon-industry design development partnership is very different than the physician drug company partnership. Although the professional and ethical considerations are no different, the surgeon actually helps in the development of the device whereas the physician usually is not involved in the development of the drug. In addition the surgeon is intimately involved in providing the instruments and techniques to implant the devices as well as teaching these techniques to other orthopaedic surgeons. This process has an obvious benefit to the patient.

It has been argued “Is there really any value in designing another widget?” As one who has studied hip and knee replacement for over a quarter of a century, a clinic hardly ever goes by where a patient doesn't ask “Is there anything on the near horizon that might be developed or is in development that will be better?” I respond truthfully that “when I reflect on my career in five year segments there never has been an interval that I had not changed a device or technique because, after careful consideration, I had decided that a technique or device could provide a more durable outcome.” Hence with newer technologies and better understanding of the procedures and long term results, and a more demanding population (obesity and increased activity level in the joint replacement population), most would agree we still have room for improvement.

If one agrees that new widgets or orthopaedic devices are warranted in orthopaedic surgery, “What contribution of an orthopaedic surgeon in the design and distribution process justifies royalty or consultant fee payments?” The criterion for royalty justification has come under question most recently with the Department of Justice Investigation. All would agree that intellectual property must be transferred between the orthopaedic surgeon and the company in a design project to warrant royalty payment. However, many in the public eye only consider ownership of patents as true intellectual property. In law however, patents, copyrights, trademarks, know how and trade secrets are all considered intellectual property. Only patents (considered true inventions), copyrights, and trademarks are granted exclusive rights protected by law.

Know how is the ability to execute specific tasks or to produce specific products. Know how involves reducing an invention to practice and is essential to the commercial success of many patented inventions. As an orthopaedic implant designer it comes from unique knowledge and insight gained from experience (in many cases twenty or more years) in surgery and from years of analyzing data on what works and what does not. Only surgeons who meet strict criteria to include having critically analyzed their results and demonstrated their ability to understand what works and what doesn't work warrants involvement in a design. I can't imagine this can be thoroughly accomplished without extensive publication on the topic. Surgeon volume as a single contribution is a potentially dangerous criteria for design team involvement.

Intellectual property is often times transferred or sold by its inventor through the process of licensing. In the typical license agreement the inventor charges a royalty to the purchaser licensee for the right to utilize the inventor's intellectual property which often times includes related unprotected know how as well as protected patents. The inventor many times transfers the right for the licensee to pursue patents based on the inventers know how. Most licensees recognize that know how plays at least, if not more, of an important role as conception in the successful commercialization of an invention, and thus include value, and compensate know how contribution in their development programs and licensing agreements. The monitors of the companies involved in the Department of Justice investigation have agreed with this interpretation as well as a fair value amount in terms of percent of product sales (royalty burden) that is appropriate for an orthopaedic implant.

The other important feature of the value proposition in the orthopaedic surgeon industry royalty and consulting partnership is the appropriate documentations of time and effort as well as documentation of personal contribution to that time and effort. The attorney mindset of billing for time spent on a project (which is now required in the surgeon-industry partnership) compared to the medical professional mindset of billing for a completed task, clinic visit or operation, no matter what the time required can be culturally difficult for a medical professional. Many physicians are suspect of the potential for over-billing whether it is related to time or to the potential to justify the time based on over documentation. Unfortunately the old adage that “if it isn't documented it was not done” is becoming an important standard for the orthopaedic surgeon who consults with industry. This however should be easier for the surgeon to accept as the same practice is being applied to him or her in the clinical setting especially in cases where the government is subsidizing the care through Medicare. Just as in the clinical setting, fair market value for consulting time is being dictated by outside sources. Most recently the monitors, in the case of the Deferred and Non- Prosecution agreements of the Justice Department have dictated what fair market value for consulting time related to design projects should be.


The Orthopaedic Surgeon and Industry value proposition in regard to design partnerships must follow many of the principles utilized for decades by our legal colleagues. Value can only be assigned when based on time, effort and personal contributions to the project. Fortunately it has now become accepted that know how is as important as patents in regards to intellectual property transfer. It is only with this surgeon know how, with or without patented technology, that engineers of an implant company can produce instruments and products that address clinical problems and can provide predictable outcomes for patients. Especially in the present environment, it is important for implant designers to craft and communicate the message to colleagues, patients and the public, that the value of know how is paramount in developing a device that will provide better, more durable, results for our patients afflicted with musculoskeletal conditions.

The orthopaedic surgeon, as a medical professional, entering into such partnerships must understand that because of the privilege and ethical responsibilities that are attached to that profession, more stringent public oversight and transparency may and probably will be a requirement in that partnership, especially since a large portion of the healthcare dollar expenditure comes from government.2,3,14,15 We as a profession should help craft the value discussion and this discussion should provide important information in this regard. In addition, the sensitive issue of compensation has been valued both for hourly compensation and royalty burden payable for a design, and has been defined by one government organization, the Department of Justice.

In addition, transparency in this proposition must be expected in our professional practice to include disclosure to our patients, colleagues, academic institutions and the public. Not only must the surgeon understand and disclose all potential conflicts of interest, but he or she must understand all of the potential ramifications of these conflicts in relationship to the presentation and publication of results related to the devices they design and the techniques they establish.2,3,5-7,14,16-18 If these principles are followed the orthopaedic surgeon, industry design partnerships should and must continue in this country to keep the United States the world leader in the business of providing the best orthopaedic implant design helping to provide optimal care for patients throughout the world who have been afflicted with musculoskeletal conditions and diseases, while providing an opportunity to contribute to the economic welfare of our and other countries.


Consultant and Royalties for DePuy (JJC)


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Articles from The Iowa Orthopaedic Journal are provided here courtesy of The University of Iowa