A New Spin On Surgery Giving It a New Spin

A throwaway society is accustomed to disposable plates, cups, bags and even clothing. But ECA Medical Instruments goes one better – with disposable surgical tools. The Thousand Oaks company makes wrenches and screw drivers that limit the torque to a specific tightness when for screws on medical devices. Traditionally, surgeons have used stainless steel tools that are sterilized before each operation, but ECA’s products are used once and thrown away. The company’s biggest product line is for instruments that install pacemakers and defibrillators, which have screw-in connections for wires. But at a trade show earlier this month, the company unveiled a new line of kits for orthopaedic procedures such as spine, hip, knee and hand surgeries. Chief Executive John Nino said the American Academy of Orthopaedic Surgeons convention in New Orleans showcased the company’s new spinal, trauma and small-bone operation kits. “ECA’s products are the wave of the future,” he said. “A few years ago when I talked about disposables, people in the orthopaedic industry looked at me like I was from another planet. But we have stayed patient with it and now people are starting to embrace it.” ECA was founded in 1979 and purchased by American Capital Ltd., a Bethesda, Md. private equity firm in 2005 for $50 million. In conjunction with the ownership change, American Capital installed Nino, a former consultant with the firm, as ECA’s chief executive. At first, Nino worked to dominate the pacemaker instrument market. Now, he’s looking to grow the company by expanding the disposable concept to other types of surgery. A study released last month by Freedonia Group Inc., a Cleveland research firm, found that the U.S. market for disposable medical supplies is expected to grow 4.1 percent annually to reach $49.3 billion by 2018. Drug delivery systems, such as IV equipment, will be the fastest-growing part of the market, followed by supplies that prevent infection or contain costs. This segment includes orthopaedic surgical kits and specialty surgical instruments, such as ECA’s products. With sales taking off, the company has hired 25 people to bring its total payroll to 60. The company designs, manufactures and sells its products from two buildings, one across the street from Amgen Inc. in Thousand Oaks and one farther west in the Newbury Park neighborhood. Precision torque When a surgeon puts a screw into a bone, the torque or “tightness” must be exactly right. Too tight and it will crack the bone; too loose and it will come out. Solving this problem is ECA’s business. The company’s wrenches or screw drivers come in a kit along with the implant, be it a pacemaker or a metal plate to hold wrist bones in place. The torque-limiting tools have a ratchet inside the handle similar to socket wrenches used in auto repair. If the surgeon applies too much pressure to a screw, the tool clicks and will not turn further. “The doctor can both feel and hear the torque is maxed at the proper point,” said James Schultz, executive vice president at ECA. With disposables, hospitals save the costs of cleaning, sterilizing and recalibrating the instrument for repeated use. ECA estimates that on average, its system saves $400 per procedure in tooling costs. “At $400 per procedure, it could save the health care industry $1 billion a year,” said Schultz. “All these medical companies are being squeezed, so it’s compelling for them to look at our products.” ECA’s kits range in price from about $100 to $250. Each kit comes with instruments for a specific implantable device. ECA’s customers are the makers of pacemakers, plates, rods and other implants. The kits are sold along with the device to hospitals or medical supply distributors. Confidentiality agreements prohibit ECA from naming its customers, but Schultz said most of the major implant manufacturers are on its client list. Nino said the main pushback to acceptance of disposables is the tradition of fine steel instruments and the significant investment in permanent, reusable surgical instruments and the equipment to sterilize them. Usually the implant companies provide the tools as loaners, while the hospitals pay for cleaning and calibration, a bill that adds up to hundreds of dollars a year. ECA salespeople make headway by pointing out that disposables are most cost effective and require no sterilization. He said as hospitals have worked to control costs, the disposable option makes more sense. “It’s amazing how the change to managed health care has been a lynchpin for us,” he said. “When they see how we can improve both product development and cost reduction, it points them right to us.” Expansion plan Joe Hage, chief executive of Medical Marcom, a medical device marketing consultancy in Seattle, noted an advantage of ECA’s strategy is that they can focus on a few device manufacturers rather than trying to contact a multitude of surgeons. “From my vantage point, ECA has already won by selling the device to the implant manufacturer,” he said. “It sounds like a brilliant distribution plan to me.” American Capital has a portfolio of nearly 100 companies in the chemical, manufacturing and biotech industries. Its best-known companies include Rug Doctor, Aamco Transmissions Inc., Riddell Sports Group Inc. and Electrolux LLC. In the Valley region, it owns Cinelease, a motion picture equipment rental company near Glendale. American Capital did not respond to calls and emails seeking comment, but Schultz said the investment fund plans on owning ECA long term and growing the business, both through organic growth and possible acquisitions. Also, ECA’s major customers are large multinational corporations and they like dealing with large companies that have similar resources. Although ECA is small, the connection to American Capital gives it access to big capital should the need arise. As for the possibility that those large customers could make their own torque instruments and put ECA out of business, Schultz sees it as a non-starter. “Their core competence is making the implants and we are complementary equipment,” he said. “We are so specialized and we have patents on every one of our instruments, so the price of entry to create these tools really would be prohibitive.”