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The Market and The Trends

The global market for hip and knee replacements was valued at $18.79 billion in 2023 and is expected to grow to $24.72 billion by 2029. This represents a compound annual growth rate (CAGR) of 4.0% from 2023 to 2029

Regression analysis projected an annual growth rate of 5.2% for Total Hip Arthroplasty (THA) and 4.44% for Total Knee Arthroplasty (TKA). Based on these yearly projected increases, an estimated increase of 28.84% and 24.28% is expected for each 5-year period after 2020 for THA and TKA, respectively.

The Knee Replacement Market size was valued at USD 10.77 billion in 2022, and is projected to reach USD 15.32 billion by 2030, with a growing healthy Compound Annual Growth Rate (CAGR) of 4.5% over the Forecast Period 2023-2030. Geographically, in 2023 sales in the US accounted for slightly over 60% of global joint replacement revenues.

About 790,000 total knee replacements and 544,000 hip replacements are done every year in the U.S. This number continues to grow as our population ages

In the US, several additional trends have been evident, including:

Regulatory: Over the past several years, the FDA has severely tightened requirements for 510k clearances. As a result, the percentage of positive 510k clearances has decreased, the number of requests for additional information during the 510k process has increased, and the total 510k review times have lengthened. For orthopedic companies, timelines have been extended and the cost to innovate has increased.

Comparative Effectiveness: The Health Care Reform Law has mandated comparative effectiveness, which compares the benefits and costs of different treatment methods. Comparative effectiveness uses data to evaluate the relative effectiveness of two or more treatment methods (one device versus another) in realistic healthcare settings and measures differences in patient outcomes and/or differences in cost. Comparative effectiveness will increase the scrutiny on existing and potential future treatments and products and make data collection a must.

Cost Removal Programs. In an effort to further reduce implant costs, hospitals are implementing bundled payments for in-patient procedures. These bundled payments are delivered across an episode of care (a total hip or knee) versus having a hospital pay for services separately. Based on early experiments in orthopedic procedures, bundled payments have yielded device savings to hospitals.

In addition, several orthopedic companies have offered generic hips to hospitals and have penetrated a very small segment of the market. These generic hips sell for 40-50% less than the standard products based on an alternative distribution model, which in many cases has resulted in the elimination of the high paid, commissioned sales rep entirely or replacement by a lower paid individual (former nurse, operating room tech).

Commoditization. Diminishing R&D productivity, greater regulatory hurdles and changes in selling/marketing relationships have opened the door for greater competition, including lower cost providers. This has created a buyer’s market, as price has become an increasing lever in purchases. Without disruptive technologies to reverse pricing trends, the price outlook remains concerning.

At approximately 7$, R&D remains one of the smallest expenses for the major and mid-major publicly-traded orthopedic companies. Innovation has been underwhelming in the last five years with little in the way of new, disruptive technologies. With decelerating revenue, R&D has been an area of underdevelopment in Orthopedics.

Summary of the Hip and Knee Markets