Industry Executives Track Opportunities, Cost Pressures in Global Medical Market
Titanium industry executives, offering presentations at the annual TITANIUM conferences during the last two years, have underlined the importance of the medical sector as a global, high-growth market. They’ve pointed out that while some business sectors have suffered significant deterioration and employment cutbacks in the wake of the 2008/2009 financial crisis, the medical industry continues to expand. However, while titanium’s near-term opportunities in the medical field are lucrative, several speakers have offered words of caution regarding downward cost pressures and challenges to the global supply chain for medical devices.
Some industry sources said they don’t foresee any major material advances on the horizon, in terms of new titanium alloys that target medical applications. Instead, the expectation is for steady, incremental improvements in metal grades that offer enhanced strength, wear resistance, and properties that encourage bone to fuse to titanium—a process called osseointegration.
Members of the Baby-Boomer generation continue to age gracefully (and somewhat defiantly) while pursuing active, healthy lifestyles, which include an emphasis of a host of recreational pursuits such as golf, tennis, running, cycling, softball and swimming. As a result, the conventional wisdom is that there will be a steady, growing demand for medical implants and devices to repair and replace broken bones and worn-out joints. In addition, controlling healthcare costs remains a major economic and political issue in the United States and the hope among industry leaders is that titanium maintains its edge as a cost-effective material of choice for medical applications.
One example of the importance of the medical market for titanium is illustrated by the Remmele Medical unit of the Engineered Products and Service Segment business of RTI International Metals Inc., Pittsburgh. Remmele, based in Minneapolis, had revenues of $55.5 million in 2012. By contrast, revenues for aerospace that year by RTI’s Engineered Products and Service Segment totaled nearly $214 million. Products for the Remmele group include minimally invasive surgical tools (jaws, blades, and grips), spinal and dental implants, urology sling components, and drug infusion components. Production capabilities for the Remmele unit feature automated machining cells, 3-, 4- and 5-axis milling, laser machining, and various secondary operations.
Many titanium industry executives look to ongoing improvements in additive/3-D manufacturing technology and titanium alloys as areas that will yield significant advances in medical part production (see related story in this edition). Ric Snyder, product manager, Fort Wayne Metals, Fort Wayne, IN, said his company is one year into the roll out of 4TiTUDE™, which he said combines the strength of an alloyed titanium grade with the beneficial attributes of commercially pure Grade 4 Titanium. Snyder said the material is being evaluated for medical applications such as dental implants and orthopedic bone screws.
According to company literature, 4TiTUDE provides a balance between the beneficial properties of commercially pure Titanium and the strength of alloyed titanium such as TiZr or Ti 6Al-4V. “With a minimum tensile strength of 1,172 Mpa (170 ksi) in diameters up to 4 mm and 1,103 Mpa (160 ksi) in diameters from 4-6 mm, 4TiTUDE is just as strong as cold-worked alloyed titanium,” the company wrote. “This is a significant increase from cold-worked commercially pure Grade 4 titanium, which typically exhibits tensile strengths in the range of 950 Mpa (138 ksi). This means that 4TiTIUDE allows you to design smaller implants from unalloyed titanium, without sacrificing strength.”
Fort Wayne, on its website, states that, apart from a significant increase in strength, 4TiTUDE is “equivalent” to commercially pure Grade 4 titanium as it “meets all requirements of ASTM F67, which means that it won’t release toxic aluminum or vanadium ions. Since 4TiTUDE is commercially pure, it doesn’t only promote osseointegration, we also expect it to be compatible with osseointegrative coatings such as hydroxyapatite or calcium phosphate.”
The vast majority of Fort Wayne’s business is dedicated to the medical market, Snyder said. In addition to titanium, the company offers other materials such as stainless steel, cobalt/chrome and Nitinol. Products include helical hollow strand (HHS) tubing, wire, strands and cables, straight linear torque (SLT) wire, composites, and centerless ground bar.
Andy McElwee, vice president, sales and operations, VSMPO-Tirus, US in Leetsdale, PA, said orthopedic applications, especially hip and knee replacements, continue to drive medical market applications for titanium. Trauma applications, such as bone plates and screws, and spinal components represent the two other major sales areas for the medical market. Industry sources estimate the current United States orthopedic market is valued at $15 billion.
McElwee attributed this demand for orthopedic applications to Baby Boomer lifestyles. “As the Baby Boomer generation keeps getting older, there will be more demand for implants,” McElwee observed. “Baby Boomers are staying more active, playing sports and getting hurt more often. They’re wearing out their hips and knees.”
The technology for hip and knee implants, as well as the medical techniques to operate and replace these parts, also has gotten significantly better during the last 10 years—in part, due to the Baby Boomer attitudes as the “impatient” generation. “Boomers say they want to have their knee or hip fixed right away, and they want to be playing golf or tennis in six weeks,” he said with a chuckle. In addition, he said new generations of titanium materials and product designs have improved for medical applications, which translate into longer-lasting joint replacements and reduced pain and rehab time.
In terms of business trends, McElwee noted the ongoing consolidation among hospitals, treatment clinics and medical centers, as well as consolidation among the original equipment manufacturers that produce titanium implants. He said executives in the titanium industry would be wise to follow these developments and anticipate how it will affect business in the medium and long term. Some industry executives and observers anticipate there will be downward pressure on titanium pricing and profits due to this consolidation. (See the related market analysis article in this edition on speculation concerning Stryker Corp. and Smith & Nephew Plc.)
Another key business trend worth tracking is the global growth and demand for titanium medical products and implants. “Right now, a large majority of the medical business for titanium implants is in North America, Western Europe and Japan,” McElwee said. “But now we’re starting to see demand coming from places like China, India and South America. These are regions with a growing middle class. At the moment, these markets are in their infancy, but they represent growth markets for titanium medical applications.” Considering the emerging trends of global growth and downward pressure on titanium prices and profit margins, the titanium industry will need to closely monitor its supply chain metrics and logistics.
Like McElwee, a marketing executive with Vulcanium Metals International LLC, has observed the downward pressure to control prices in the medical market. He said this pressure comes from the hospital/medical center level, a highly leveraged group looking to keep costs low.
This Vulcanium executive said current market dynamics require metal distributors and service centers to provide a diverse portfolio of product choices. As such, in addition to titanium bar, plate and sheet, Vulcanium also offers specialty stainless steels grades and cobalt/chrome/molybdenum alloys. “Our strategy is to work with our customer base in a business development role, to provide the materials they need, whether it’s titanium or other metal alloys,” he said. Vulcanium is part of the high-performance metals group of O’Neal Steel Inc., Birmingham, AL.
The conversation with the Vulcanium executive also proved to be instructive regarding American business history, as he pointed out that nearby Warsaw, IN, is the global hub for the orthopedic device and implant business, with roots that date back to the 1890s.
The OrthoWorxIndiana website (http://orthoworxindiana.com) touted Warsaw’s orthopedic/medical device cluster of original equipment manufacturers and tier-two vendors (a total of over 40 companies and 13,000 employees) as “one of the most concentrated centers of economic activity anywhere in the United States.” The “who’s who” list of heavyweight companies includes Medtronic, Zimmer, DePuy (J&J), Symmetry and Biomet. Overall, the Warsaw cluster represents nearly one-third of the estimated $38-billion global orthopedic sales market, according to OrthoWorxIndiana.