$2B a year in sales depends on benevolence of tissue donor families, companies admit
By Luis Fábregas and Andrew Conte
Published: Saturday, Dec. 14, 2013, 9:30 p.m.
Companies worldwide cash in on a $2 billion-a-year trade in human skin, bones and other tissues obtained for free from deceased donors and later sold, and resold, at a premium.
Compared with vital organs such as hearts, kidneys and livers, these body parts can be major moneymakers for nonprofits and businesses. About half of the sales come from the United States.
“Most people don't realize this industry is explicitly profit-driven and it's explicitly commercialized,” said Michele B. Goodwin, a law professor at the University of Minnesota who teaches bioethics and studies the trade of body parts.
Beenie and George Smith of Greensburg said they had no idea how much money companies could make from their decision to offer the body of their only child, Megan, when she died in a car accident in 2001. Her parents consented to donating her organs and tissues.
All they wanted was a chance to connect with the recipients, yet even that has been difficult.
“I feel like we were duped,” Beenie Smith said. “… These executives are just controlling everything themselves, and there are no checks and balances.”
The nonprofit Center for Organ Recovery & Education in O'Hara receives $6 million a year for bones and skin it recovers from Western Pennsylvania, most of West Virginia and one county in western New York.
CEO Susan Stuart said employees give survivors as much information as they want. Donors' families sign a checklist choosing whether to donate 30 types of organs and tissues.
Across the United States, 190 nonprofits and corporations are registered to collect tissues, negotiating contracts with hospitals. UPMC and Allegheny Health Network work exclusively with CORE.
People who agree to be identified as organ donors on driver's licenses automatically consent to give tissues except in Nebraska, North Carolina and Wisconsin. Even placenta and skin from circumcision ends up in the tissue trade.
More than 1,000 companies worldwide are registered to handle tissues. They turn them into products, called allografts, and market them to hospitals. Tendons, for example, can fix shoulders or knees; heart valves replace failing ones. Skin treats burns or reconstructs breasts.
Companies range from small firms such as RAK Medical, in an alley off Sewickley's tony business district, to larger ones such as Bacterin International in Belgrade, Mont., with revenue of $33 million.
Pennsylvania's 38 registered tissues companies include Orthomedix, which handles bone and tendons out of a two-story home in a cul-de-sac in the Philadelphia suburb of Norristown.
In Pittsburgh's Uptown neighborhood, Promethean LifeSciences manufactures GammaGraft, touted as the first human skin graft that can be stored at room temperature.
The Food and Drug Administration requires companies to register and conducts surprise inspections. It uses a “risk-based approach” of enforcement, a spokesman said, deciding which companies to inspect based on factors such as a failed prior inspection or a tip about poor conditions.
The FDA inspected 592 tissue companies last year and found 15 cases of “objectionable conditions” that needed fixing, such as failing to maintain sterile operations.
Federal law prohibits interstate transfer of human parts for anything of value, though companies can collect “reasonable” fees. No one has defined what “reasonable” means or enforces limits.
“There should be payment for fees,” said Dr. Cyril Wecht, a forensic pathologist and former Allegheny County coroner. “But I do not believe that it should be handled in a commercial fashion as if it were a business selling women's bras or men's undershorts or sneakers.”
Companies said their fees reflect costs of recovery, processing, sterilization, preservation, storage, transportation and implantation.
“All organizations, for-profit and not-for-profit alike, need revenues to cover expenses and to provide services in the long run,” said Sarah Gray, director of marketing and public affairs at the American Association of Tissue Banks, the leading industry group. “... It's critical that tissue banks maintain their financial viability in order to continue to innovate and save lives.”
Demand for allografts continues to drive sales. Sales are expected to double over five years to $2.35 billion in 2015, according to Global Industry Analysts, a market research firm in San Jose, Calif. Human tissue implants have a higher success rate than manufactured products and offer advantages such as reduced pain, shorter surgeries and lower costs, the firm found.
The need to repair injuries in thousands of wounded military personnel from wars in Iraq and Afghanistan accelerated techniques such as using donated femurs to fashion scaffolds to regrow bone.
Rising demand from baby boomers who need reconstructive surgery also contributes to growth, said Raj Denhoy, a medical industry analyst at Jefferies, an investment bank in New York. Financial incentives drive innovation, he said.
Incredible advances have been made in technologies to utilize human tissue, said Molly Mason, Bacterin's vice president of marketing and national accounts.
“Procedures using allografts can reduce pain, restore active lifestyles, and have even helped some patients walk again,” she said.
Industry insiders say some companies allow market forces to dictate prices that rise and fall. Companies declined to provide their price lists to the Tribune-Review.
“There are no guidelines, so (companies) can charge whatever they want,” said Dr. Jean-Paul Pirnay, head of four cell and tissue banks at the Queen Astrid Military Hospital in Brussels, who has tracked the industry for the World Health Organization. “The price of the grafts is not determined by the actual cost of harvesting and processing but by the price acceptors are willing to pay for it.”
More than a decade ago, the Department of Health and Human Services' inspector general warned about commercialization of tissue banking, saying that “large-scale financial operations may overshadow the underlying altruistic nature of tissue donation.”
Making it a commodity sparks tension with donor families whose motivation is helping others, the report warned.
Publicly traded companies that deal in human tissues, such as Bacterin, walk a fine line to make money. Bacterin distributes human bone products through a direct sales network across 13 regions with 39 sales representatives, according to its Securities and Exchange Commission filings.
With the trading symbol BONE, Bacterin had a stock price of $8.75 a share in early 2011. It dropped to less than 50 cents a share this year after failing to meet earnings projections.
The company warns investors in disclosure documents that relying on human donors carries risks. If federal law banning tissue sales is “interpreted or enforced in a manner which prevents us from receiving payment for services we render,” Bacterin states, its business could be “adversely affected.”
Brad McGonigle, Mercer County coroner and president of McGonigle Funeral Home and Crematory in Sharon, worries that families asked for consent to donate tissue are too distraught to understand what happens to a body during the recovery process.
He's not opposed to organ or tissue donation but wants more public education. Removing bones, skin, tendons, heart valves and other tissue is necessarily speedy and somewhat gruesome, often forcing funeral directors to wrap cadavers in plastic bags to prepare for showing, he said.
Discussions with grieving survivors to secure donors is “the transparency that's not there,” McGonigle said.
Survivors should specify body parts they are willing to give and read the fine print in consent forms, Goodwin said.
“A patient does not know that what she leaves behind in a hospital often does go into a stream of research or a stream of profit — actual selling,” she said.
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