The Bone Graft and Bone Substitute Market-Aint Nothing Like the Real Thing?

When it comes to bone, some still believe there “Ain’t nothing like the real thing….” BUT we’re getting there! The use of autograft in spine fusion has declined, and a $1.5 billion bone graft substitute market has emerged. Today we’ll review the state of the bone graft and bone substitute market and use the PearlDiver Patient Records Database to analyze pseudoarthrosis, or non-union diagnoses in lumbar fusion. After all, in the end it is successful outcomes that matter! Last, we break down the segments of this market and look at the increasing use of growth factors across the spectrum of fusion.

Autogenous Bone Graft and the Bone Graft Substitute Market

Autogenous bone graft is often referred to as the “gold standard” in fusion. The advantages to using autograft include that it is osteoinductive, osteoconductive, and osteogenic. Other advantages of using autograft include less risk of rejection and surgeon familiarity. However, the use of autograft continues to decline in spine fusion surgery because of complications, longer operating times, and operative blood loss due to the surgery on the pelvis to obtain the graft have led to a desire to develop bone graft substitutes. The primary problem associated with harvesting bone from the patient’s iliac crest is graft site morbidity. This view is echoed in an article entitled “Bone Graft Donor Site Pain” by Dr. David Polly, Jr. and Timothy Kuklo (http://www.spineuniverse.com/displayarticle.php/article909.html), which compares the relative morbidity of anterior versus posterior iliac crest harvest. Their data  showed that 83% of patients had pain at 6 weeks, 56% at 3 months, 43% at 6 months, and 32% at 24 months. In conclusion, the doctors stated that “Harvesting bone graft is painful, regardless of approach. The posterior approach is more painful, regardless of the volume of bone harvested from the posterior crest.”

Even with the caveats of the surgery to obtain the graft, autograft achieves fusion rates of about 85%. Achieving consistent, successful outcomes is a primary goal of surgeons, and this has traditionally made autograft an attractive option.

Fusion Rates: Always Room for Improvement

To achieve fusion, three processes are necessary. The first is osteoconduction. This refers to the scaffolding on which new bone grows. The second is osteogenicity, or the transmittal of osteoblasts, which are live bone cells. The third is osteoinduction, the process by which proteins induce the bone to grow. In spine surgery, osteoinductive materials make the most sense, due to the fact that fusion is an attempt at getting bone to grow where it normally does not. The bone graft and bone substitute market is centered on finding materials that aid in these processes to achieve the best possible fusion rates.

We ran an analysis of our own on the PearlDiver Patient Records Database. We analyzed 5,101 patients who had posterior lumbar fusion (ICD-9 procedure code 81.08) in 2005. Based on our analysis, 16.2% of the patients were diagnosed with pseudoarthrosis after 6 months, with this diagnosis rising to 20% of the patients 12 months following the surgery.

Fusion rates can also be impacted by smoking, the number of vertebrae being fused, type of bone graft, comorbidities, and implants. Chart 1 below is an analysis of 300 females who had posterior lumbar fusion in 2005 and were also diagnosed with osteoporosis. This chart illustrates how comorbidities can impact the incidence of pseudoarthrosis. The percentage of patients diagnosed with pseudoarthrosis following fusion surgery is displayed according to number of months post-

surgery. The chart compares females who had posterior lumbar fusion and were diagnosed with osteoporosis to the overall average pseudoarthrosis diagnosis rate for females. Females with osteoporosis exhibit an above-average rate of non-union. Chart 2 is an analysis of 212 males who had posterior lumbar fusion in 2005 and illustrates the percentage of males diagnosed with pseudoarthrosis on a monthly basis following posterior lumbar fusion. Tobacco users display higher instances of pseudoarthrosis than non-tobacco users.

Chart 1: Pseudoarthrosis Diagnoses in Females
Source: PearlDiver Patient Records Database

Chart 2: Pseudoarthrosis Diagnoses in Males

Source: PearlDiver Patient Records Database

Drivers of Growth in the Market

The bone graft and bone substitute market has seen tremendous growth since the late ‘90s, and its value has increased threefold. Revenues in this market were estimated at $400 million in 2000 and grew to an estimated $1.5 billion in 2007. The caveats of using autograft bone―the desire to increase fusion rates, growth in spine fusion procedure volumes, an increased number of bone products, and the advent of growth factors―have all been primary drivers of the growth in this market. The market can be segmented into machined bone, bone allograft, demineralized bone matrix (DBM), bone graft substitutes, platelet helpers, and growth factors.

The growth in spine fusion is one of the primary drivers of this market. Spine fusion has grown from 218,000 cases in 1999 to an estimated 560,000 cases in 2008, an increase of 156%. This has been coupled with a decrease in the use of autograft bone, creating opportunity. In 1999, the use

of allograft and autograft was split nearly equally in spine fusions. According to Orthopedic Network News (Volume 16, Number 4, October 2005), the most pronounced decline in use of autograft was in lumbar fusions, where usage fell from 87% in 2001 to 31% in 2005. Also, harvesting bone from the iliac crest is considered a second procedure and can increase operating room time and costs. There is an economic incentive to reduce the need for the second surgery, which should benefit the patient and hospital. Other factors contributing to the decline include the increased use of machined bone, growth factors, and demineralized bone products.

Segments in the Bone and Bone Substitute Market

The decline in the use of autograft has been met with a rather stagnant market in allograft. Revenues from allograft bone were estimated at $130 million in 2006, falling to $126  million in 2007. The leading processor of allograft bone is the Musculoskeletal Transplant Foundation. Allograft bone, or cadaver bone, is primarily osteoconductive. Advantages to the use of allograft include less pain and complications than autograft due to the fact that an additional surgery doesn’t have to be performed on the patient. Problems with allograft bone include the patient’s rejection of the allograft and inflammation. Other caveats associated with allograft include variability in how effective donor bone is at promoting growth. The use of spine fusion cages and PEEK/titanium spacers has also contributed to less use of allograft.

DBM products have also raised interest in the spine community. Osteotech, Inc is a leading processor of DBM products, and Synthes is a leading distributor of these products. Osteotech’s flagship product is Grafton® and Synthes’ is DBX®. DBX is processed by the Musculoskeletal Transplant Foundation. Although both DBM and rhBMP (recombinant bone morphogenetic protein) are considered to have osteoinductive properties, the two materials differ greatly. DBM products are often positioned as autograft enhancements or extenders. Wall Street estimates that this market produces annual revenues of about $250 million.

Revenues in the osteoconductive bone graft substitutes segment are estimated at $100 million. These grafts do not provide inherent bone growth. They primarily serve as scaffolding on which newly forming bone can grow. Vitoss®, which is composed of Beta-tricalcium phosphate, is a leading synthetic bone graft substitute produced by Orthovita, Inc. We believe that Orthovita may have reached nearly $35 million in sales from Vitoss in 2007. Other bone graft substitutes include calcium sulfate, hydroxyapatite and biphasic calcium phosphate (MasterGraft®, offered by Medtronic Sofamor Danek).

Revenues in the machined bone market are estimated at almost $300 million. Medtronic Sofamor Danek, Synthes, and the Musculoskeletal Transplant Foundation are leaders in this market. However, the percentage of interbody fusion devices made of bone has been on the decline, while the use of PEEK and titanium spacers has risen.

Platelet-rich plasma is probably not the way forward in spine surgery. It is uncertain whether these aid in increasing fusion rates. The theory is that these products could be used as an adjunct to autogenous bone graft or as an extender. DePuy is a leader in this market with its SYMPHONY™ platelet concentrate system.

The growth factor market is perhaps the most exciting. The first commercially available recombinant bone morphogenetic protein (rhBMP) was INFUSE® Bone Graft sold by Medtronic Sofamor Danek. This product was approved in 2002 for use with the LT-CAGE® in single-level anterior lumbar interbody fusion. The other product currently on the market is by Stryker and is OP-1™ putty. Indeed, rhBMP products are positioned as autograft replacements. Sales have seen solid growth with respect to INFUSE, and more stable growth with respect to OP-1. According to Wall Street estimates, INFUSE sales were $666 million in Medtronic’s fiscal year 2006, and they are expected to have risen 15% to $769 million in 2007. OP-1 sales are forecast at a little over $50 million for 2007. We estimate revenues for this segment to be over $800 million in 2008.

Chart 3 below illustrates the increased use of growth factors in spine fusion. This is an analysis of how often the procedure, “Insertion of recombinant bone morphogenetic protein” (ICD-9 procedure code 84.52), which was coded with inpatient spine fusion procedures (ICD-9 procedure codes 81.01-81.08), was performed in 2003 – 2005. While BMPs are approved for anterior lumbar fusion, increasingly their use can be seen across the board in spine fusion from 2003 to 2005.

Chart 3: BMP Usage in Spine Fusion by Approach

Source: *HCUPnet, Healthcare Cost and Utilization Project. Agency for Healthcare Research and Quality, Rockville, MD. http://hcupnet.ahrq.gov/

Future Displacement in a Dynamic Spine Market?

We estimate overall spine fusion procedure growth to be 2%–5% through 2009. This forecast may indeed prove aggressive given several potentially disruptive technologies on the horizon. These include motion preservation technologies such as artificial discs, nucleus replacement technologies, interspinous spacers, and dynamic stabilization systems. These technologies could impact the growth in fusion procedure volumes, thus undermining a primary driver of revenue growth in the bone and bone substitute market with respect to spine. For example, a high percentage of sales for products such as DBM is attributable to the use of DBMs in spine fusion.

With respect to spine, the future of this market remains uncertain. Several forces will continue to impact this market. The first is motion preservation technologies and the potential impact they have on fusion procedure volumes. A second is the proliferation of osteoinductive growth factors. The growth in the use of BMPs could continue to impact current market segment leaders. The focus on developing technologies to treat spine disorders earlier in the continuum of care could also decrease the need for fusion. In the long term, advancements in the field of gene therapy could also play a role.