Stan Mendenhall, Orthopedic Network News – July 2010

Suggestions regarding what can be done to dramatically decrease the cost of Orthopedic Implants.

I was at a conference in Chicago a couple of months ago attending by a lot of “money” people –investment bankers, venture capitalists, companies looking for investors, and folks wanting to invest for their clients. Inevitably, the issue of reimbursement, average selling prices for devices, and how to get paid arose. More than one of the speakers reported on the fact that the largest component of a medical device is not research and development not manufacturing costs, but “SG&A” (selling, general, and administrative expenses). Although this category contains elements such as royalty payments, insurance, an general administration, the largest element is the payment to the sales group, i.e., the sales reps and the organization that they report through. In this newsletter, we report that the average SG&A for seven orthopedic companies was 43.3% in 2009.

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