The sale of American Medical Systems to private equity investor Warburg Pincus started the company on a new path. Long successful in male-focused markets like erectile dysfunction, part of the new direction for AMS entailed a new management team and a reinvigorated product development effort. But in AMS's case, the development effort was focused not on the company's core business, but in a related area, products to treat female uro-genital problems. Though similar in some respects, the urology and gynecology markets are more notable for their striking differences. AMS's male-oriented lines are market development-driven, aimed at educating and attracting customers among men reluctant to seek care; gynecology is more about product development, getting new therapies into the hands of patients eager to use them.

Acquiring Centocor gives J&J products to help fill the void in its drug portfolio. Will it also use Centocor's core biologics expertise to launch a broader move into biotechnology?

For suppliers, the first generation of orthopedic implant contracts was disappointing, to say the least. Hospital purchasing groups disagree--but their second generation contracts subtly address supplier dissatisfactions. Still, in an era of shifting market leaders and a consolidating industry, will contracting ever really catch on?

J&J's acquisition may or may not be the big deal that finally starts to consolidate the orthopedics implant industry. But it gives J&J a powerful franchise in orthopedics at a time when the company's future in the industry segment was uncertain.