The son of German immigrants has become a billionaire in Naples by combining hard-nosed business tactics with a Euro-style workplace to dominate the arthroscopic surgical instrument market.

In 2011, Arthrex, a company led by one of Collier County’s richest men, asked for $2 million in government incentives to expand in the county.

The request by the company, which designs and manufactures orthopedic surgical tools, devices and implants, generated friction. Collier County Commissioner Georgia Hiller, who represented the district where Arthrex is based, believed the company didn’t meet the law’s standards for the incentives and said she had to oppose it on principle. All the other commissioners supported it.

Reinhold Schmieding, the founder and president of the North Naples company, took Hiller’s opposition personally. In an open letter in the Naples News, Schmieding accused Hiller, a former ally, of more than 40 false statements in connection with his company’s incentives bid and hammered her for her stance toward a project that would create 600 jobs. He called her disqualified as a “trustworthy representative” of her constituents.

Says Donna Fiala, a commissioner then and this year’s chair, “He’s never been confrontational to me, but you can’t mess with him. When he’s going to do something, you’re not going to stand in his way. He knows he’s important, and it shows. I think he’s a genius, quite frankly, and geniuses tend to have a different personality.”

“Reinhold is an incredible businessman, an outstanding entrepreneur and nothing short of a creative genius, and what he’s done for the community is remarkable.” — Collier County Commissioner Georgia Hiller

Schmieding was born in the U.S. six months after his parents emigrated from post-war Germany — his father was drafted at 18 and became a German paratrooper and POW and later a dentist. Young Reinhold grew up in the Detroit suburb of Bloomfield Hills and vacationed in Germany.

Schmieding looked to follow his family tradition into medicine. He studied physiology — with minors in business and German — at Michigan State University, where he played on the varsity golf team and was social chairman at his fraternity.

To his father’s disappointment, Schmieding went into business. After graduating in 1977, he moved to Germany to work in orthopedic implants. A return to the U.S. for graduate school and to start a business didn’t last long, and he left for Germany again — partly because his German fiancée, Erika, wanted to go home to finish her law degree, partly because he was disappointed in the content of an MBA program he enrolled in and partly because he experienced culture shock in reverse.

“I discovered I had actually become more European in my cultural, political and gastronomical leanings,” he wrote.

That comment came in a book he authored in 2006 to commemorate his company’s 25th anniversary. Schmieding gives interviews to reporters about as often as it snows in Naples and wouldn’t agree to an interview with Florida Trend.

The book’s 170 glossy pages, however, tell his story and name the people who helped him and those who ran afoul of him. It’s a mix of mind-numbing descriptions of product design and insights into the mind of an entrepreneur. Sometimes both come in a single sentence: “Lying in bed at 4 a.m. I was contemplating a method for suture fixation in soft bone … .”

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Schmieding and Erika married in 1981 and moved into an apartment in Munich’s Olympic Village, where he created the company logo and designed some of the first surgical instruments for arthroscopic knee surgery on a simple drafting board.

At the time, arthroscopic surgery was in its infancy, and surgeons lacked specialized tools that would work through the tiny, less invasive incisions they make to repair knees and other joints. Schmieding designed the tools himself, got German instrument craftsmen to make them and manned his own booth at medical conferences. He set a stress-inducing goal of attending surgery with every orthopedist in Munich.

“When I drive through downtown Munich today, I still get the same physical reaction of impatience and stress. When you are a young entrepreneur on a mission, sitting in traffic is not something you deal with well,” he wrote.

Schmieding’s widely acknowledged mastery of surgery — knowing “every product and surgical procedure cold,” as he said — gave him a bond with doctors. Fairly early on, he hit on the idea of setting up facilities where doctors could practice arthroscopic surgery with his instruments on anatomical models.

Arthrex today says it’s responsible for 10,000 visitors a year to southwest Florida, 6,000 of them doctors. The company also runs surgical education seminars globally.

In Munich, German taxes took 63% of Schmieding’s income, but he saw a return in a stable social system, good roads and funded health care. Munich also offered low crime, culture “and the best beer and food anywhere,” he recalled.

But to build the business Schmieding knew he needed to be in America. His wife, who had stayed home to raise their two children, agreed to move, provided the family return for at least two months a year to Germany.

Schmieding looked for a “resort environment” in the U.S. that would be hospitable to visiting physicians and potential employees. He chose Naples, where he had visited with relatives. And in the summer of 1991, after a decade in Germany, he moved back to America.

As president and CEO of Collier’s Economic Development Council, Susan Pareigis “inspired us to hire an engineer and actually start manufacturing,” Schmieding says. Pareigis recalls Schmieding as a “unique talent” who always had a vision of what he wanted.
— Susan Pareigis

What happened next is vintage Schmieding. He rented space for his company in Naples from the owner of a company that was also in the surgical field. They talked of joining forces, but after a few weeks, Schmieding sat down with his would-be partner and landlord and told the man there would be no merger. Their business practices and ethical standards were too different. He had made a list.

The man told Schmieding to get himself and his startup out that very day. A loyal aide, a secretary and Schmieding packed. A thunderstorm soaked them and their boxes. The secretary left in disgust. “A dreadful day,” he later said.

In its early days in Collier, Arthrex designed instruments and taught surgeons to use them but did little manufacturing. Susan Pareigis, then president and CEO of Collier’s Economic Development Council, called on Arthrex as part of her job helping local companies expand. Schmieding later said she “inspired us to hire an engineer and actually start manufacturing.”

Pareigis recalls Schmieding as a “unique talent” who always had a vision of what he wanted.

In 2003, Schmieding’s “dreadful day” from a decade earlier was balanced by the “best day of my professional life” when he opened a 132,000-sq.-ft. office complex with labs where doctors could train on cadaveric joints.

Tammie Nemecek-Sweet, former head of the Collier Economic Development Council, remembers visiting it with community leaders. Arthrex treated the group to a vivid video of a surgery. “Everybody’s like … OK,” she recalled, cringing. “He’s in the back of the room as proud as can be.” (Today, the internet is replete with Arthrex how-to videos.)

Relations soured in 2010. The Collier EDC began collaborating with elected leaders in the county to recruit Maine non-profit Jackson Laboratory to Ave Maria, the town Barron Collier Co. is developing in the eastern part of the county. Economic developers favored giving Jackson $260 million in state and local incentives to move and become the anchor of a biomed cluster that they believed would transform the county’s economy.

The usually private Schmieding leapt to a public attack. (He was joined by Georgia Hiller, with whom he would tangle a year later over his own incentive package.) Arthrex filed four court actions to block the use of public money for Jackson. In a Naples News commentary, Schmieding questioned the project’s return on the government’s investment and also raised a question about the state’s efforts to boost biomed with subsidies. The total investment in state and local money to that point in recruiting life science research firms statewide was nearly $1 billion, or about $1.4 million per job created, he said.

Jackson wound up in Connecticut. Nemecek-Sweet left to take a position with GrowFL. Within a year, the EDC that championed the deal was out of business.

Arthrex has been a party to other disputes. It’s in court regularly, suing competitors and being sued. Last year, it paid a $99-million judgment to competitor Smith & Nephew after losing a patent infringement case it appealed all the way to the U.S. Supreme Court.

An intellectual property attorney not involved in the case, Ury Fischer, of Lott & Fischer, an IP law firm in Coral Gables, says court fights over infringement are routine in the medical device industry, a crowded field where innovation is incremental. “If you don’t have a lot of litigation in the medical device industry, you’re not doing it right,” he says.

Another cost of doing business: Paying doctors. Arthrex, at $58.9 million, ranks No. 10 on ProPublica’s national list of the companies making payments to doctors, based on federally collected data. Much of the sum represents royalty payments to doctors, as opposed to paying for meals or making other payments.

Coincident with Arthrex’s growing heft in the public square has been its commitment to philanthropy. Schmieding prefers to keep a low profile, only occasionally appearing at galas and fundraisers. But the company routinely sends Arthrex representatives to charitable functions, and local philanthropies all say it’s apparent Schmieding has directed the company to support the community.

Arthrex is a major backer of Habitat for Humanity, the American Heart Association, Salvation Army and a long list of other groups. Causes it has supported include Bikers for Babies, Stockings for Soldiers, the fight against breast cancer, a school playground, schools in Laos, wells in Guinea and more than 100 local charities. “You see their name everywhere,” says Jennifer Pash, director of philanthropy for Habitat for Humanity of Collier County. “An incredible partner.”

The former collegiate golfer’s company co-sponsored the foundation of the southwest Florida chapter of the First Tee youth development organization for kids to learn life lessons through golf. The company provided iPads to high school STEM classrooms in Collier. All the support put Arthrex on Fortune’s 50 Best Workplaces for Giving Back in the Country. Spokeswoman Lisa Gardiner declined to detail the company’s giving total but told a reporter in 2014 it averaged more than $1 million a year.

Arthrex gives employees a paid day per year to volunteer and matches up to $1,000 annually to each worker’s donations. Local charities get not only financial support but also “boots on the ground” in Arthrex workers, says state Sen. Garrett Richter. Of his interactions with Schmieding, Richter, a banker, says that “some of it’s been more positive than other times. He’s very intense.” But, he says, employees are proud to be at Arthrex. “Not only a great company for southwest Florida but also for Florida.”

Other perks of Arthrex employment: A culinary staff of 32 that makes healthy lunches free for more than 2,000 employees a day. For every five years of service, employees get an extra week off and a company-paid trip of their choosing, which have included African safaris and Mediterranean cruises. There are on-site, free health clinics for workers, free gym memberships, a full-time wellness coordinator, treadmill workstations and seminars on health. Arthrex is an American Heart Association “Platinum-level Fit Friendly” workplace.

Schmieding has said he wants to blend the best of U.S. and European work cultures to build loyalty and limit turnover, which is less than 2%. Like many European companies, Arthrex offers free health care insurance for all employees, employee security “rarely tasted in the U.S.” and a German-style Christmas bonus based on seniority, overall company results, positive team attitude and team and personal performance. From the U.S. comes humor, team decision-making, delegation.

“You wash it all down with German beer, French champagne or Italian wine at frequent corporate events to celebrate individual achievements,” he wrote. Arthrex is on Florida Trend’s Best Places to Work in Florida, a similar Fortune list and has been honored as a workplace for diversity, millennials and manufacturing workers.

The osteoarthritis, sports medicine and minimally invasive surgery markets are great places to be as the developed world’s population gets more active and ages. Arthrex holds the largest share in the arthroscopy/soft tissue market, with a 27% slice of a pie that’s projected to grow 4.2% through 2017, according to Chris Mosby, managing editor of Orthoworld, an industry publication.

“He’s never been confrontational to me, but you can’t mess with him.”
— County Chairwoman Donna Fiala

Spokeswoman Gardiner says the company averages 500 new products a year, makes 70% of its products in Florida and exports more than $1 billion worth of goods to more than 100 countries from its logistics center in Fort Myers.

Schmieding, appearing in March before the county’s board of commissioners, projected Arthrex will grow 15% to 20% a year, with the number of visitors to his company increasing to 15,000 to 20,000 a year. He said he expects employment to grow by 300 to 400 a year. He spoke proudly of hiring engineering graduates of Florida Gulf Coast University and of the capital his company’s export sales have brought into the region. Family ownership of the company enables him to be free of investors and focus on the company’s long-term health and research and development work, he said. In July, Gov. Rick Scott announced the company would add another 560 jobs in North Naples.

As he spoke before the commission, Schmieding also made a cryptic comment on the future, alluding to 10 sports injuries he said he’d experienced himself, including two related to arthritis.

“Arthrex is on the verge of successful treatments for osteoarthritis using biologics. Any of you that have arthritis, you will probably be treated some day with technology that’s been researched and developed right here in Collier County,” he said. He said he treated his arthritis with company biologics and “my symptoms are gone.”

The occasion for Schmieding’s public comments was a love-fest for Arthrex. Commissioners honored it for 25 years in business in Collier and separately honored it for bringing medical tourism to the county. The local Chamber of Commerce, at the same meeting, honored Arthrex as Business of the Month. Praise flowed from commissioners — “lucky to have them,” Chairwoman Fiala said. The “gold standard” for the county, another said.

Then came a group picture, including Schmieding’s nemesis of five years before, Commissioner Hiller. At the meeting, she joined with the commissioners in approving $572,970 in incentives for an Arthrex project, a 161,000-sq.-ft. manufacturing plant in Ave Maria. Hiller says that once county law was changed and Arthrex met the legal qualifications, she was happy to support its request.

“We’re both very committed, very strong people,” Hiller says of Schmieding. “He wasn’t happy at the moment” during their battle over incentives in 2011, she says, but they have since reconciled. He donated $1,000 to support her bid this year to be elected clerk of courts and comptroller.

“Reinhold is an incredible businessman, an outstanding entrepreneur and nothing short of a creative genius, and what he’s done for the community is remarkable, his capital investment and investment in our citizens.” As much as a politician and business head can be, “We’re best friends,” she says.

Research at Arthrex

Arthrex invests heavily in internal and external research in collaboration with surgeons and institutions worldwide. The firm has research staff and laboratories in both Germany and Naples, where the research department was recently renovated and approximately tripled in size. The research ranges from investigations of ortho-biologic treatments to tests of the firm’s shoulder replacement systems for mechanical soundness. The research department completes more than 350 internal research studies a year and carries out more than 100 external research projects each year with surgeons and health care institutions. One major area of research involves efforts to complement less-invasive surgery with biologic solutions — ways to enhance the body’s own ability to heal itself. The firm hopes that its research will lead to successful treatments for osteoarthritis, tendonitis and other joint conditions.

R&D

Arthrex was one of the leading recipients of patents granted to Florida entities in 2015 and is also one of the leading recipients of patents in the state from 2011-15, with 105 patents during that five-year period. The top 20 recipients in 2015:

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