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Kellogg on Biotech

The Charité: Lessons in the Launch of a New Medical Device

David Arida KSM '07, Aayush Kabra KSM '06, Christina Lowe KSM '06, Anna McVittie Szafranski KSM '06, David Milestone '06

In October 2004, Johnson & Johnson subsidiary DePuy Spine received U.S. approval for the first artificial disc to treat severe cases of chronic lower back pain. Called the Charité, it ostensibly offered a superior alternative to standard of care spinal fusion which had penetrated only a small proportion of the total market. Promising greater range of motion and quicker recovery from surgery, Charité generated significant media, physician and patient attention pre-launch leading to forecasts of sales of $100M in 2005 and $1B by 2010. Many thought the Charité had the “potential to revolutionize spine surgery.” DePuy planned an aggressive launch program to meet this expected high demand including training 2,500 spinal surgeons at special three-day training sessions to learn the complicated procedure. However, while initial anecdotal patient stories generated significant excitement in the market, lack of long-term clinical data and safety concerns meant that most insurers refused to cover the $11,500 device. DePuy responded by citing new peer-reviewed publications, durability tests, as well as successful long-term use in Europe. However, as surgeon support waned owing to rare complications, this failed to have any impact with sales reaching only a third of the initial target in 2005. In early 2006, DePuy was faced with still new obstacles in Medicare’s denial of national coverage (leaving the decision to local carriers) and the near-term entry of three competitors.

©2007 Kellogg School of Management, Northwestern University