It seems like it wasn’t just President Barack Obama who took inspiration from Doris Kearns Goodwin’s book about Abraham Lincoln entitled, “A Team of Rivals,” and brought on archrival Hillary Clinton as secretary of state after the 2008 elections
Current trends in the orthopedics industry seem to indicate that executives are adopting a similar approach. Zimmer, for example, hopes to have a green light from the Federal Trade Commission on its plan to acquire close competitor Biomet  in a deal worth $13.35 billion.
And then just this week after rumors surfaced, Stryker CEO Kevin Lobo acknowledged  that the Kalamazoo, Michigan, company had conducted a preliminary evaluation of London-based Smith & Nephew for a potential acquisition. The pause button has been hit on this deal per U.K. regulatory rules, but were this to occur sometime in the future, it would be another $10 billion-plus M&A in the orthopedics market.
Why are large ortho companies tripping over each other trying to acquire a competitor?
The simple fact is that there isn’t a whole lot of product differentiation in the ortho space. Orthopedic surgeons like Howard Luks have said that innovation in the ortho space has been historically incremental , and it’s rare that he sees a new product and gets excited.
Add to that the pressure that hospitals are putting on device firms, including orthopedics, to reduce prices on products they sell currently.
So, what do you do when your products are not that different from and/or better than your competition and everyone is trying to chase the same customers and undercut each other on price, or worse steal each other's customers ?
You go out and buy the competition.
“With implant pricing remaining under pressure and hospitals continuing to consolidate, medtech companies are looking to gain scale and reduce costs,” wrote Glenn Novarro, an analyst with RBC Capital Markets, in a research note following the surprising announcement from Zimmer about buying Biomet in late April.
Another analyst commented on what the Zimmer-Biomet marriage means for the combined company should the deal be consummated by regulators.
“The transaction now catapults [Zimmer] more firmly into the #1 share position in the [worldwide] hips/knee market (#2 behind JNJ in overall ortho),” wrote Richard Newitter, an analyst with healthcare investment bank Leerink Partners.
A similar narrative has followed since the rumors about Stryker wanting to acquire Smith & Nephew became public.
“The potential acquisition of SNN would vault SYK into the clear #1 or #2 market share position in several important key orthopedic markets such as reconstruction, trauma, and sports medicine,” Novarro wrote Thursday.
To repeat a well-worn cliche, it appears that in the orthopedics world, especially given the fundamental shift in the healthcare marketplace, size does matter.
And if you can’t get there yourself and can’t beat your competitors, join them.