Dive Brief:

• Intuitive Surgical has lengthened the lifespan of certain core instruments used with its da Vinci systems, as the robotic surgery pioneer looks to boost customer loyalty before competition arrives in the sector.
• The Extended Use Program, which launched Oct. 1, reduces the price per use on some high-volume instruments for the da Vinci X and Xi robotic surgery systems. The company expects most U.S. customers to realize annual cost savings of 9% to 15% on those instruments.
• Baird Equity Research, in a note to clients Tuesday, said the program is expected to expand market penetration for da Vinci in areas including hernia repair and gallbladder removal by narrowing the per-procedure cost gap with techniques such as traditional laparoscopy. In a Baird survey of surgeons who perform those procedures, one-third of respondents think cost savings from the program may allow them to use da Vinci more often in the future.

Dive Insight:

The coronavirus pandemic has pushed back the timelines on efforts by medtech heavyweights Medtronic and Johnson & Johnson to bring competing robotic systems to market, and Intuitive is taking advantage of the extra breathing room.

With the new program, Intuitive believes it can increase market penetration faster, CFO Marshall Mohr said at an investor conference last month. "We have the opportunity to expand then, without their competition. We also think that the total opportunity for robotic surgery is huge. So this is the time to really continue to drive investment," Mohr said.

Recent validation testing verified the reliability of a set of instruments beyond the current 10-use limit without any loss of precision or dexterity. Now, some instruments will be usable for 12 to 18 lives, depending on the specific instrument, Mohr said.

Intuitive also plans price reductions on some other da Vinci X and Xi instruments that are commonly used in surgeries for which reimbursement rates are lower.

The initiative comes as hospitals are struggling with lost revenue from the deferral of many patients' elective procedures during the pandemic, when healthcare providers dedicated more resources to fighting the virus. While elective procedure volumes are expected to have rebounded in the third quarter, there are signs that momentum may be leveling off, as well as caution about the potential impact of an uptick in coronavirus cases heading into flu season.

Intuitive itself saw a sharp downturn in procedures performed with the da Vinci robot at the start of the pandemic, reporting in July that volumes fell 19% worldwide in the second quarter from a year ago. The company is scheduled to release third-quarter results on Thursday.

With hospital budgets strained, a program that gives da Vinci users more for their money seems well timed. The Baird analysts called the move a "wise investment," noting the two key specialties the program targets — hernia repair and gallbladder removal — represent about 40% of all new procedures the company hopes to capture over the long term.

The Baird survey of 53 general surgeons found 32% think savings from the program may help them do more gallbladder surgeries and 38% think they will do more hernia repairs as a result. However, the survey also found that two-thirds of respondents still believe the direct costs of da Vinci surgery are higher than other techniques on average.