J&J Depuy does a pair of deals, one to treat disc degeneration and another for bundled payments

Herniated disc--Courtesy of Mayo Clinic

Johnson & Johnson's ($JNJ) orthopedic arm, Depuy Synthes, has detailed a pair of deals aimed at preparing for its future of that segment. One, with Israeli med tech Rainbow Medical, is slated to develop a treatment for degenerative disc disease (DDD) that could delay or even reverse the degenerative process. The news comes shortly after J&J disclosed a massive medical device business restructuring in January that would slash 3,000 jobs and save the company $1 billion.

The other is with consultancy Value Stream Partners to enable the design, development and implementation of bundled payment programs for hip and knee replacements to address a rapidly approaching deadline for the Centers for Medicare & Medicaid Services (CMS).

Rainbow Medical and Depuy Synthes company Medos have partnered to develop a minimally invasive implant to treat DDD. Johnson & Johnson Innovation, a J&J venture capital outlet, also participated in the deal. Current approaches typically include only pain management or invasive surgery; but there are no interventions to curb disease progression. The condition is associated with aging and is a major cause of chronic acute back pain. DDD involves the degeneration of the intervertebral disc nucleus, which consists of a gelatin-like substance.

Yossi Gross, Rainbow Medical co-founder

"Our product has the potential to provide the answer to a debilitating condition that hampers the daily functioning of millions around the world," said Yossi Gross, who is a co-founder of Rainbow Medical and the developer of this new method, in a statement. "Moreover, our revolutionary approach will attempt not only to alleviate the pain but also to stop the degenerative progression, radically transforming the way the disease is treated." Gross is a serial medical device entrepreneur who has helped to launch dozens of startups.

The Herzliya, Israel-based company and Medos will conduct research and development both in Israel and the U.S. J&J had already disclosed the deal in minimal detail in early January.

Rainbow is an R&D and investment company with a diverse medical device company portfolio including startups working to develop products for several chronic indications including cardiovascular disease, diabetes, hypertension, sight restoration for the blind, uterine fibroids and chronic neuropathic pain.

"Rainbow Medical is at the vanguard of the medical device industry in Israel," said Rainbow COO Yaron Tal in a statement. "In addition to DePuy Synthes, we have partnered over the years with Medtronic, Abbott, Sony, LivaNova and other innovative companies which have also invested in our group and our portfolio companies."

On the bundled payments front, Depuy Synthes has made an exclusive strategic alliance with Value Stream Partners for bundled payment programs for hip and knee replacements. The idea is to offer a more than 20 customized programs to help hospitals to achieve clinical outcomes, increased patient satisfaction and lower overall costs.

The obvious expectation is that these could help reduce the performance-based financial pressures on hospitals, thereby limiting their need to squeeze Depuy Synthes further on its pricing of orthopedic devices.

Starting on April 1, CMS will require acute care hospitals to participate in its Comprehensive Care for Joint Replacement (CJR) Model that compensates hospitals for an entire episode of care from the time of a hip or knee replacement through 90 days after discharge. Prior to this payment typically has been just for the surgery itself, with the follow-up care reimbursed separately. Hospitals can receive additional payments based on high quality of care and spending performance--or need to repay a portion to CMS if the care is substandard.

"There are great clinical and economic incentives for hospitals, physicians, and post-acute care providers to put in place the processes, procedures and alignment strategies necessary to better coordinate care," said Depuy Synthes President Juan-José Gonzalez. "VSP has a solid track record in designing, implementing and administering bundled payment programs with the necessary collaborative, alignment and balanced incentive strategies to be successful."

In 2014, there were more than 400,000 Medicare beneficiaries who received hip or knee replacement, according to the Department of Health and Human Services.

- here is the Rainbow announcement
- and the VSP statement