Zimmer Inc. Earns Profit despite Costs of Zimmer Hip Lawsuits

Warsaw, INWhile there may still be Americans walking around (if they can even walk) with a problematic Zimmer hip, the company that makes the allegedly defective product appeared to have a banner year in 2011, according to a recent Associated Press (AP) report.

The Warsaw, Indiana medical device manufacturer reported January 26 that its profit in the fourth quarter (Q4) of 2011 quadrupled to $156.6 million, which translates to 87 cents per share. Excluding one-time costs, the company reported a profit of $1.36 per share, which amounted to two cents more per share than the most optimistic expectations of analysts.

The bullish profit margin was realized in spite of costs associated with defending itself against many a Zimmer hip lawsuit on the part of disgruntled patients experiencing problems with their Zimmer Durom Cup hip replacement system.

The world's largest manufacturer of hip replacement components suspended sales of the Durom Acetabular Component after Durom Cups appeared to be failing prematurely. The suspension, in 2008, came after a review of 3,000 cases.

However, rather than recall the Zimmer hip replacement system (the Durom Cup), Zimmer simply suspended sales until instructions to surgeons for optimum installation of the device could be updated.

Some surgeons have commented that surgical technique is not the issue, but rather the problem rests with the way in which the Durom Cup was designed. Many patients with Zimmer defective hip replacements have sued the company.

It was for this reason that Zimmer set aside $108 million in the final three months of 2011 in order to cover the costs of litigation pursuant to allegedly failing Durom Cups. That amount is in addition to $270 million the company had already set aside to deal with potential lawsuits.

Even with the $108 million charge, Zimmer Inc. still managed to make a profit in Q4.

Artificial hips are expected to last, under normal use, upwards of 15 years—and often longer. However, some Zimmer hip replacement products, akin to other new-age hip products manufactured by other companies, have been failing far sooner than expected.

In many cases some patients have had to undergo revision surgery within a few years of their initial procedure to replace a problematic Durom Cup. A second operation would require additional healing, inconvenience and time off from work to facilitate.

What's more, it was recently revealed that a second hip replacement installed as the result of revision surgery has a greater risk for dislocation.

Medical device manufacturers, including Zimmer hip, are able to capitalize on a regulatory feature maintained by the US Food and Drug Administration (FDA) that excuses manufacturers from the need to implement rigorous pre-market testing of new devices if they are substantially similar to that which is already on the market.

Traditional hip replacement parts reflecting earlier generations—technology that would have required more rigorous pre-market testing—have proven, in the long run, much more reliable than newer, so-called better devices that boast the latest technology but were allowed to skirt past the needed pre-market evaluation.

Thus, while Zimmer rakes in the profits, patients with allegedly defected Zimmer Durom Cup hip replacement continue to suffer.