Trouble Flares in the Bunion Market as Treace Sues Stryker
Treace is accusing Stryker of patent infringement and unfair competition.
October 16, 2024
Treace Medical Concepts, a company fighting for share in the bunion market, is suing Stryker and its subsidiary Wright Medical Technology.
The Ponte Vedra, FL-based company claims Stryker infringed on nine patents related to Treace’s Lapiplasty 3D Bunion Correction technologies. The company also claims “unfair competition” in the suit that was filed in the U.S. District Court for the District of New Jersey. Treace seeks injunctive relief and damages.
“Treace Medical was the first company to develop, patent, and introduce an instrumented 3D bunion correction system, which created an entirely new segment of the U.S. bunion market and successfully built its market presence from zero to becoming a standard of care in bunion surgery over the past 10 years,” said John T. Treace, CEO and founder of Treace. “...Companies such as Stryker, unfortunately, have rushed to capitalize on Treace’s pioneering research and development by launching products that, as detailed in our complaint, infringe on Treace’s intellectual property. Moreover, we believe Stryker has also commercialized those infringing products in ways that violate competition laws.”
Treace said the suit not only “sends a message” to competitors in the marketplace but also reassures shareholders that the company is committed to protecting its investments.
As of press time Wednesday, Stryker had not responded to MD+DI's request for comment on this lawsuit. This story will be updated accordingly if the company responds.
As Ryan Zimmerman, a medtech analyst at BTIG, noted in a report this morning, patent infringement lawsuits are nothing new in medtech. However, the analyst says pursuing a legal case alleging unfair competition may prove challenging.
“We think [Treace] has a much more likely shot regarding patent infringement given the close nature of the bunion systems,” Zimmerman wrote in his report, adding the caveat that this is just his cursory view after reading the complaint, and that he does not have extensive knowledge of patent law.
The analyst also noted that winning injunctions against competitors has been challenging in medtech patent disputes historically.
“We expect this case to take time to play out and will not, at least in the near-term, impact either [Stryker] or [Treace] in terms of quarterly results,” Zimmerman wrote.
Below are the analyst’s key takeaways from the complaint:
The products in question include Stryker's Ortholoc 2 LapiFuse Triplanar Correction System. Treace alleges that Stryker infringed on five of the nine patents through methods used in performing TMT bunion correction surgery and another four of nine patents that cover specific instrumented bunion correction apparatuses and systems.
Treace introduced its Lapiplasty System in 2015. The company alleges that Stryker (then Wright Medical) began developing a knockoff system in 2017 after a medical director at Wright attended one of Treace's Lapiplasty cadaveric labs. The complaint alleges that Wright launched the LapiFuse system in February 2020 with full knowledge of Treace's patents.
Treace could materially ramp production based on an excerpt from the complaint: "If Treace Medical fully utilized its existing capacity, it could substantially and quickly increase its production and distribution of the Lapiplasty System without incurring significant additional fixed costs or direct employee headcount, doubling its production and distribution within approximately six months." The complaint goes on to say that Treace’s supply chain could double its production and packaging of the Lapiplasty System while its sales representatives in almost every United States metro area could oversee and service a doubling or more of Lapiplasty procedures with minimal, if any, increase in the number of sales representatives.
On Stryker's clinical studies related to LapiFuse: Of the two studies that the Stryker defendants cite as supporting its LapiFuse claims, neither discusses procedures performed with the LapiFuse System. One study predates the development of the LapiFuse System by years and, as a biomechanical cadaver study using pins for fixation, did not test anything resembling the LapiFuse System fixation under relevant conditions. The other study discusses Lapidus and osteotomy procedures generally that shorten the first ray, not the LapiFuse System, Treace claims.
On LapiFuse clinical outcomes, "Surgeons forced to use the LapiFuse System report the occurrence of 'rebound' or 'bounceback' in the transverse plane compared to their experiences with the Lapiplasty System and procedure."
Alleging unfair competition by using its size and scale to bundle contracts: In short, Treace alleges that Stryker has engaged in anti-competitive practices by not carving out individual products in unrelated businesses by bundling multiple service line products together in order to win IDN contracts. This practice, Treace alleges, can be the subject of scrutiny from past antitrust lawsuits and competition authorities (such as the FTC).
The “carrot” of Stryker’s bundled service line agreements with healthcare systems is a substantial rebate of 3%–5% on all purchases (often in the range of hundreds of thousands to over a million dollars) that Stryker pays to the IDN if the IDN achieves the required percentage of purchases within the covered product service line(s). The “stick” is monitoring and enforcement of individual healthcare facilities’ compliance with the bundled service line agreement.
Market size estimates highlight a $500 million market today. By 2024, the total market for Instrumented TMT bunion systems and components was estimated to be almost $500 million, with predictions of growth to over $650 million by 2030.
Treace alleges that Stryker uses its size to impact pricing in the TMT space. For example, according to the complaint, Stryker is selling the Stryker TMT Bunion Systems below cost after allocating its rebate on the trauma bundle to sales of the Stryker TMT Bunion Systems. This is confirmed by surgeons who have not been permitted to purchase Instrumented TMT Bunion Systems from Treace Medical, the complaint alleges. Also, according to Treace's complaint, IDN purchasing departments have rejected offers by Treace Medical to sell the Lapiplasty System at substantial discounts because Stryker has forced its bunion systems into the trauma bundle and tied them to the associated rebate program.
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