Friday, July 31, 2009

The Future is Now, it goes by the name of Cortoss!

It has been reported that nearly 1.7 million vertebral compression fractures are diagnosed in the United States annually, with an estimated 13.5% that result in surgeons and radiologists performing kyphoplasty or vertebroplasty procedures on these patients. Percutaneous kypho or vertebroplasty benefits the elderly, since conservative treatment bears life-threatening risk. Since PMMA has a drawbacks due to high viscosity and poor handling characteristics in addition to potentially leading to pulmonary emboli and other complications, the time has come for the medical community to look at other alternatives.

That alternative is Cortoss! Why Cortoss? Why is the SpineBlogger promoting this product again? Because if you or I had a VCFx, Cortoss would obviate many of the potential issues associated with PMMA. A low-pressure delivery system this material is hydrophilic allowing it to support existing structure rather than displace it. Since the government, insurance companies, hospitals and physicians have made healthcare a political football, isn’t it time we start thinking about how advances in technology that has been around since 1984 can truly benefit the patient and minimize the cost of care for the elderly. Retrospective data and results confirm that Cortoss is safer and as efficacious if not more so than PMMA. I’m not some fancy analyst that gets paid to put a spin on a company or a product for Wall Street. The one thing I know is that my clinical knowledge and acumen of the industry makes me more qualified to analyze a product and a companies future, as far as the SpineBlogger can see the future is now, and it goes by the name of Cortoss. The SpineBlogger wants to know what you think?

Tuesday, July 28, 2009

First Kuklo, Now Polly, Who will pay the Price?

Today, Barry Meier of the NY Times reported that a second medical consultant, Dr. David W. Polly, Jr. has drawn U.S. Senate scrutiny for his relationship with Medtronic Sofamor Danek. In 2006, Dr. Polly urged a Senate panel to continue government subsidies for medical research into combat related injuries using INFUSE. What Dr Polly failed to disclose during his testimony, was that he was a Medtronic consultant, and, was billing the company $6,000 for his appearance. Without going any further, the SpineBlogger has one simple question to pose; why did the U.S. government subsidize research on behalf of Medtronic, and allow Dr. Polly, or whomever else is involved, to study and validate the product at the expense of U.S. taxpayer dollars. I know the argument, look at the outcomes, but I would argue at whose expense?

If Medtronic is under the microscope, what are these investigations saying about the type of margins that we generate within our industry, in order to pay surgeons the type of consulting fees that they earn? And you think that the federal government is not monitoring this activity? Since Dr. Polly did not acknowledge that he was representing Medtronic at the panel meeting, what does it say about his integrity? As the SpineBlogger has stated before it is these little "white lies" and "selective amnesia" that is beginning to get so many academicians in trouble, not only with the government, but also with their respective institutions. I know some other white knight thespian will take up their cause and say how unjust the people are treating these poor guys, and that the universities are not being transparent. What I have to say to those charges is nonsense. If physicians continue to exhibit this type of arrogance and behavior, there will come a time when federally funded research and grants will become a thing of the past.

Dr. Polly was quoted in the article as saying that his relationship with Medtronic has always been on the up and up. He probably meant that if he shows up, they pay up. If Dr. Polly's study cost the U.S. government nearly $500,000, then Dr.Polly should not only repay the government out of his pocket, he should be charged compounded interest. In addition, the 'evil empire" as we know it should reimburse the government. But isn't it entertaining that now Medtronic is distancing itself by saying that Dr. Polly should have disclosed that the company was paying him for his appearance and travel expenses. In every instance, Dr. Polly has acted honorably, unfortunately, he forgot to tell the government that not only was he doing this for injured military personnel, he was also doing this for Medtronic. The Spine Blogger wants to know what you think.

Is a Storm Looming on the Horizon?

The Obama Administration is attempting to redefine the United States healthcare system. The escalating cost of medical care and emerging technologies is establishing a new paradigm in the medical device industry. Whether you are a member of the Spine Cartel or a fledgling early growth stage company, the question you must ask yourself is how do you protect your marketshare and continue to grow your revenue stream in a zero-sum market? Pricing constraints are being placed on companies witnessed by procedural caps that are being initiated by various hospital buying groups. Physicians are being pressured to make concessions everyday when it comes to personal preference for products. Reimbursement is a major concern whenever new technologies are introduced in the marketplace.

There will be a major shift in how medical device companies manage their relationships with physicians, providers and insurance companies. A conciliatory partnership will have to be developed with the provider (the hospital and physician) and the payor (the insurance industry or potentially a government sponsored program). Concession will not be an option. It will be a mandate. The relationship between the device industry, the insurance industry, and the provider has been adversarial at best.

Hospitals and physicians are now challenged with operating a profitable business at a time when reimbursements will be redefined. As new technologies emerge, hospitals and physicians will be confronted with making decisions whether or not to provide the patient with costly therapies. Financial barriers will have to be removed in order for both the physician and patient to have access to new technology. Unpredictable cash flow and poorly forecasted budgets have created a volatile environment in medicine. A reduction in implant cost will lift a potential barrier to quality healthcare. But, are we willing to do that? And what will physicians decide to do when medicine is no longer the cash cow that it once was. Surgeons still make an exceptional living unless obviously they think they would like to try their hand at plumbing.

The insurance industry has, and the government intends to control cost. The challenge that the medical device industry will have is educating both parties on product differentiation and outcomes. Up until this now we have done a reasonable job, yet not good enough. But reason alone is not enough to overcome controlling cost. By reaching across the aisle and offering an olive branch we have the opportunity to continue to be a viable and innovative industry. Unfortunately, many things will have to change. Companies will have to accept less profits meaning that we will have to manage our budgets with more efficiency than ever before. The companies will have to police themselves in identifying whether a potential new technology realistically will make a difference in patient outcomes. Witness the carnage in our industry that has resulted in over 500 different pedicle screws, nearly 300 cervical plates and countless TLIF, PLIF, ALIF and Cervical PEEK devices. Have all of these products really made a difference in outcomes? Our industry has come to resemble the early years of the automobile industry. Or, have these products saturated an already existing commodity market? As investors hold on to their hard earned capital there will be fewer opportunities for “me too” products to succeed. How will this shift affect the earning capabilities of the salesperson? There will be a shift in the commission structure resulting in less earnings for the distributor or direct salesperson. I know that many of you do not like reading this, but if the company’s bottom line suffers, so will your ability to sustain your earning capacity. Remember a company not only incurs cost of goods to manufacture the product, it incurs general and administrative costs and cost of sales. It all comes down to operating income and remember, any publicly traded company has to answer to the Street. Wall Street has become our own worst enemy.

Salespeople have done a poor job of being business people. Purchasing, materials management, and finance were always viewed as the enemy. But this is not the only looming problem. What happens when companies start believing that they could exist without sales people and start to model their distribution model by selling to the hospitals directly? If you don’t think that’s possible, it has already been piloted by various small companies and tabled by larger organizations. Yes, there is some liability issues involved but I am sure that a remedy could be found if it meant greater profit margins in a constrained market. So where do we go from here? I don't want to be perceived as the Dr. Doom of the Spine Industry but we will face an unpredictable future. This unpredictability will create some people to attempt to manipulate market forces that will not be able to be controlled. The companies that exhibit the wherewithal to change and think out of the box will survive and prosper and the companies that don't will wither away. The Spine Blogger wants to know what you think?

Monday, July 27, 2009

What a Cast of Characters!

Have you ever analyzed what is written in industry related press releases whenever a change in upper management occurs? As we enter the Dog Daze of August, I just put my board up for a few days to catch up on things. The first thing that is evident is that nothing really interesting is going on with the exception of Paradigm raising " $ 21.5 million, mucho dinero." Kudos Marc Viscogliosi on a job well done! I know that some other blogs that you the reader subscribe to have been talking about mergers and acquisitions, but I really don't see any existing technologies out there that would help the "Spine Cartel" in expanding revenue and marketshare. Neither do I see any prudent investors parting with hard currency in this market unless you are giving it to V3 (Tony, John and Marc), I'm trademarking that moniker. So I decided to look at archives of recent management transactions and then all of a sudden it hit me. How entertaining are some of these Press Releases are when you really have an understanding of our industry?

Example # 1: Back in April Scient'X Groupe, S.A., announced the appointment of Oliver Burckhardt as its President and CEO. The release stated, "OB was responsible for the Orthofix/Blackstone spine unit with revenues that exceeded $100 million in 2008. Of course part of this appointment was probably attributed to the fact that Healthpoint had to replace Mike Huggins who had some legal issues leftover from his Synthes/Norian days that have recently been adjudicated. But I'm not writing about Huggins, I am talking about OB, Scient'X and Healthpoint. If anything, OB had a brief stint at Blackstone. But was he really responsible for contributing to any of the $100 million in revenue? He was there for such a brief period that his coffee didn't have a chance to get cold. Yet, if you read the comments that were made about Huggins departure, you start to laugh, "during his tenure he strengthened the companies platform and positioned it for significant growth!" Are you kidding? If my memory serves me correctly, the guy was at Scient'X for less than a year. Just leave it to a bunch of orthopaedic investment bankers to serve up a plate of "BS" to potential investors. Question: What has Scient'X done recently? Outside of raising some capital, not much!

Example #2: Custom Spine: In January (I must be bored if I went that far back in time) CS announced the appointment of Lew Bennett as President. The company announced that "Demolition Lew" brings over 48 years of experience in the medical device industry. I didn't know there were people with that kind of longevity in our industry. The CEO stated; "We are really excited to have Lew taking the helm at Custom Spine." You've got to be kidding! Jack Sparrow has a better chance of surviving this ship wreck! The Board should be fired! The guy is an octogenarian and has left more than his share of collateral damage in the industry! Lew has consulted for over 550 orthopedic and neurological practices and universities, in addition to all the other accolades that he lists. He is legend (Will Smith look out) in his own mind. Some people need to stop living in the past. The only way he could create this much excitement would be if he was playing with his dosing of Viagra.

Example #3: Applied Spine Technology names Craig Corrance new CEO. If this guy isn't Bill Compton (the Vampire) from True Blood, I don't know who in our industry is. Will his return to the head honcho position bring some tranquility to his life? If he isn't warding off threats from a cadre of former Vampires (Altiva, Scient'x and Raymedica) I don't know who is. Didn't this guy get appointed in June of 2008 as the President of Raymedica? World class talent usually last longer than one year. Throw in the responsibilities of his newly turned fledgling Applied Spine, and it almost makes Craig yearn for the good old days of lurking in the shadows.

The Spine Blogger wants to know what some of you real people think?

Is it an Aspen or a Medical Device?

Recently, the Spine Blogger was asked by one of his readers on his opinion about the LANX Aspen Spinous Process System (ASPS). Aspen is the name of a Colorado Ski Resort Town, but the origins of the name come from the genus Populus (a tree) having leaves attached by flattened leave stalks so that they don't flutter in the wind.

But we are not talking about a device that flutters in the wind, nor does it flutter between the Spinous Process. It doesn't take a rocket scientist to see that this is a great device. The Aspen Spinous Process System is an interspinous process device that was design to address degenerative disc disease and spondylolisthesis. This is a fusion device and it is very, very slick. This product can be used in a 360 and can be inserted via a minimally invasive approach. I would assume it can also be used in a TLIF. The Spine Blogger loves the graft cylinder(that's what I call it). For those of you using the X-Stop, remember what Meatloaf sang; " Stop right there, before you go any further......., try the Aspen " I love this product, it is a winner. The SpineBlogger wants to know what our readers think.

PS: The viewing public would like to see Lanx products on their website, enough with the historical perspective on the name of towns in Colorado!

Friday, July 24, 2009

Is there a Doctor in the House?

On Wednesday night, the President addressed the country on his mandate to reform the US Healthcare System. On Thursday morning we started the process of attempting to make sense of how this will affect our personal lives and careers. Have you ever heard the saying; "Change is Good." You know, the one that CEO's in our industry love to use. Well, based on the response that we hear, change is really not good, at least for most Americans. America continues to carry the curse of our puritanical ancestors of having no flexibility and being much more conservative than we like to admit. Before discussing this new healthcare paradigm, some things need to be brought to light regardless of what side of the political spectrum the reader sits on.

Whether you liked what the President had to say or not, 46 million Americans do not have healthcare insurance. I am not going to argue about what category these uninsured people fall into, 46 million is 46 million. (I'll leave that debate to the spin doctor analysts). The U.S. spends more dollars on healthcare than any other advanced nation without better outcomes. Why? Is it because our doctors are poorly trained? No! Is it because we don't have state of the art technology available to us? No! Is it because our hospitals are not managed properly? Yes! Is it because insurance companies are publicly traded and driven by Wall Street's insanity? Yes! Is it because Americans in general don't take care of themselves? Yes! Or, is it because we have become a litigious society?

Just look at our industry, lawyers love medicine, healthcare and the medical device industry. When the President stated that a fee-for-service system creates an incentive for physicians to run more tests and perform additional operations, whether these procedures actually help the patient, misses the point. Yes, there are physicians that know how to manipulate the reimbursement system, but why does the government choose to place a "bullseye" on their back when there are others that need to be held accountable.

Until the Congress and Mr. Obama (a Harvard lawyer by education) comprehend the magnitude of Tort Reform, nothing will be resolved. The fact remains that many physicians are an open target for potential litigation when they do not "CTA" by ordering more tests and potentially not operating. But before we castigate Mr. Obama, let's not forget what Mr. Bush did when he was in office. He claimed to be against excessive government expenditures and did absolutely nothing to rein in the single largest contributor to the federal deficit, Medicare. In addition, "W" was irresponsible when it came to the plight of the uninsured or the concern regarding the cost of healthcare when he stated; "People have access to healthcare, all they have to do is go to an emergency room." But I'm not writing to make a pitch for Obama nor to bury Bush. I'm writing because we need to figure out how to provide healthcare for an estimated 15 million illegal immigrants (do we deport them if they don't become citizens), millions of unemployed college graduates (why isn't Wall Street and Corporate America doing something to help these kids), and people who have fallen through the cracks whether they are between jobs or not.

The potential backlash of not hammering out a realistic public plan could potentially have greater collateral damage than imaginable. Unfortunately, no one likes change, nor does everyone involved want to make concessions. The fact remains that if there is an overhaul of the current healthcare model our industry will pay a price. Why isn't the AMA, the Orthopedic and Neuro lobbying groups, and our own industry addressing the socioeconomic benefit to providing state of the art healthcare to Americans? There has to be a reason why our outcomes aren't better. Could it be that Americans in general don't take good care of themselves? Why don't these lobbyist talk about how the insurance industries main objective has always been to make doctors employees or wards of the state? Why would you take the incentive (fee for service) away from a free-market healthcare system? The bottom line is we're on the clock and if our industry along with its physician allies don't step up, it will be too late once a plan is enacted. The Spine Blogger wants to know what you Cowboys and Cowgirls think?

Tuesday, July 21, 2009

Fool Me Once, Shame on Me! Fool Me Twice Shame on You!

Late this afternoon, it was reported in the WSJ that Jeffrey Wang has lost his position as executive director at the UCLA Spine Center. In addition to this action, he is being investigated by the school for allegedly failing to disclose that he was paid by various companies (Medtronic, Paradigm, FzioMed, Facet Solutions, and DePuy Spine) whose products he was working on.

In a 6-7 year period, Dr. Wang failed to notify the state and the medical school that he was receiving consulting payments, stock options and royalties from the five aforementioned companies. Whether Dr. Wang is entitled to compensation is not an issue. The failure to report these relationships is a violation of university guidelines. Therein "lies" the problem.

The SpineBlogger has raised this question in a previous blogs, how does an intelligent and successful surgeon continue to exhibit a pattern of failing to abide by the disclosure rules of the state and university. One can argue that in a free-market Dr. Wang is entitled to earn whatever the industry affords him for his services. Unfortunately, as an employee of UCLA he is held to a different standard as an employee of the University. The bottom line is that as an employee the University owns his mind. At this juncture the University is considering other sanctions.

Dr. Wang has established a stellar reputation in our industry. Maybe, its time he start thinking about private practice. Maybe now some people are beginning to understand why our industry is being scrutinized under the watchful eye of the DOJ, the SpineBlogger wants to know what you think?


Two senior Synthes executives pleaded guilty to illegally promoting off label use of Norian XR on 200 patients that resulted in three deaths. Michael Huggins and John Walsh pleaded guilty to a single misdemeanor count of introducing adultered medical devices into interstate commerce. They face a $100,000 fine and the potential of spending one year in prison (minimum security I hope). Two other Synthes executives, Tom Higgins and Richard Bohner are expected to plead guilty in the upcoming weeks. So the Norian XR saga comes to an end. I hope Hansjoerg is taking care of your legal fees and fine considering that Person #7 was fully aware of what was going on!

Monday, July 20, 2009

Does the US Healthcare System require a Tune-Up

Today, the President mandated that it is time the Congress work towards enacting new legislation that will truly affect the way all Americans and illegal immigrants are provided with some type of healthcare coverage. The challenge that we as a nation are confronted with is reshaping healthcare due to exorbitant healthcare cost and lack of coverage. The annual cost of healthcare is $2 trillion dollars per year, with an estimated 46 million people whom lack coverage. This includes illegal immigrants, healthy young adults who choose not to have coverage, probably because they cannot afford it, and people eligible for Medicare. Regardless, lack of coverage is lack of coverage. If this group needed medical attention they add to the rising cost of healthcare. The major challenge that Obama faces is that both parties agree to disagree on how this plan should be shaped. How divisive and selfish of a nation have we become? Yet, they do agree on some issues.

Supposedly, the Democrats and Republicans agree on setting a precedent for quality of care rather than quantity of procedures (I think that's funny). That would be like asking a lawyer to be compensated on quality of representation versus quantity of billing hours (leave it to a bunch of lawyers). Who intends on establishing this criteria? Both parties would like to create an on-line market place where consumers can shop pricing. Can we really simplify medicine and offer it on the internet? Has anyone ever looked at CPT and ICD-9 Codes? The parties want to bar insurance companies from denying coverage to a subscriber that has a pre-existing condition, yet, the insurance companies want something in exchange. They would like to make sure that all those young people that have fallen through the cracks are forced to have some type of coverage. This is based on a statistical probability. US Healthcare was once accused of discriminating against elderly subscribers because they wanted young people who tend not to get sick as easily. But would this be affordable coverage? Young people (many college graduates) cannot afford healthcare insurance because they cannot find a job.

So the real question is; what would a public plan look like? And, would it drive private insurers out of the marketplace? The only model that the government has is Medicare and we all know how physicians feel about compensation under a federally subsidized program. You don't think doctors dropped out of Medicare because they were fairly compensated? So the real question is, would a public plan that offers affordable coverage to any of those 46 million drive private insurers out of the marketplace? Probably not! What it would do is cut into their profitability and provide their shareholders with less than optimal return on their investment. Let's be honest, the US insurance industry has taken advantage of the Anti-Trust Laws by colluding with Congress and ripping off its subscribers and particularly physicians that initially wanted to participate in their plans. You don't think doctors dropped out of insurance plans because they were compensated fairly? Doctors are you starting to see the picture?

The REALITY is that most people (you and I) would not even be eligible for a public plan if we already have some existing coverage. What the government needs to figure out is how to provide healthcare for individuals that have fallen through the cracks or are unemployed. So why is the cost of this plan much greater than expected? Because when someone loses their job and needs to continue coverage the cost of COBRA premiums or premiums in general are mind boggling. Recently, someone that lost his job was paying $1,500 premiums per month for a family of five. Someone that was single and lost their job was paying a premium of $500 per month. Even with sound financial planning what are the consequences if you or anyone has a catastrophic illness? Should you have to foreclose on your house because the system has failed us? People who cannot afford insurance or are not covered have to be supported by some type of plan. But why do we continue to debate this issue and what will it take for the government to act? Special Interests!

We live in a country where you the reader has freedom of choice to become what you can be, and make as much as you can, yet when it comes time to paying taxes to offset a national healthcare crisis we bitch and moan about contributing. Let's face economic facts, the government cannot keep printing money unless you want to be a Banana Republic and we cannot keep borrowing money from the Chinese unless you want your grand-children to speak Chinese. How indifferent can we be? For those of you that complain about a senseless war that is costing us trillions of dollars, have you stood up to be heard? Probably Not! The cost of this war alone could have covered a plan. Unfortunately, many people in Congress are subsidized by the military industrial complex. When the Stimulus Package was passed, did anyone complain about how much the Democrats and Republicans took in pork? Probably Not! Did anyone complain about TARP? The bailout of AIG and Goldman Sachs? Probably Not!

Whether we like it or not, everyone is going to get squeezed. Companies are going to have to make concessions on pricing, it's already happening with capitated markets. When that happens, physicians, distributors, and direct sales people will earn less money. The Spine Blogger wants to know what you think?

Thursday, July 16, 2009

What is Innovation?

Recently, Arutz Sheva, an Israeli National News platform ran an article featuring what was called an innovative implant. As usual, the SpineBlogger asked the proverbial question: Is it new? Is it true? Will it make a difference?

Scorpion Surgical Technology (I'll even give them some press) has developed a spinal anchoring device with the intent of replacing fusion and stabilization procedures. The General Manager claims that the technology has particular value for osteoporotic patients. Question: Based on our current state of affairs in spine, have we really had bad outcomes with osteoporotic patients? One of the claims made is that the device is expected to prevent loosening of the construct and revisions. Question: Why does loosening of Pedicle Screws occur? What are the revision rates for primary fusions?

The device is supposedly geared towards minimally invasive applications. The interesting part of the video includes a Trocar Drill Guide that is part of a miniature Crane -like device. Rather than utilize a pedicle screw, this implant is called a "Curved Nail" that is cannulated and is inserted over a guide wire (I would call this percutaneous insertion) and it looks like the nail has some type of perforations for boney ingrowth. Could this be a problem if it is perforated and the surgeon needs to perform a revision? The concern that I have when I assess this technology is whether the design is really cutting down on operating room time and does it have too many parts for assembly?

But the question that SpineBlogger needs to ask is whether Israeli start-ups have an affinity for developing technologies that address questions that are not of major concern in the US Market? Example: Disc-O-Tech's Inflatable Nail or IP? At best they made some money selling the IP. Expanding Orthopaedics Expandable Pedicle Screw for osteopenic patients, Mazor Technologies, around for years, and now the Scorpion device.

Adjacent disc degeneration is a biological and chemical phenomenon that our industry believes can be minimized by designing different products with effective biomechanical variations. The question that must be asked is, will this product make a difference? The SpineBlogger will be keeping a watchful eye on this company. For those investors that are looking for a return on their investment, I have some property along the Pacific Coast Highway that might make a better investment.

The Art of Whistleblowing

"Truth is the most powerful force on earth"

The dictionary defines "Whistleblower" as a person who informs on another, or makes public disclosure of corruption or wrongdoing. Synonyms for the word are foulness, contamination, and pollution. In today's blog, the Spine Blogger discusses the motivation and intent as to why any industry professional would bring legal action against a company, by claiming that an organization would employ fraudulent schemes to increase revenue and market share. These schemes would include; sham consulting agreements (never in our industry), illusory training, bogus research, bogus speaking fees, lavish entertainment lodging expenses, expensive meals and wines, gifts and discounts.

In order to comprehend the magnitude and severity of potential accusations, industry professionals need to understand and abide or be prosecuted for violating the Anti-Kickback Act, 42 U.S.C. Section 1320(a)-7b(b). It states; "IT IS UNLAWFUL TO KNOWINGLY OFFER OR PAY ANY REMUNERATION IN CASH OR IN KIND for referral of any product for which payment is sought from any federal funded healthcare program such as Medicare, Medicaid or Tricare.

So why do we work in an industry where there have been multiple whistleblowing lawsuits brought against various companies? Could it be that there is a lack of ethics, integrity and rationality? In all likelihood many of our readers probably believe that a "whistleblowers" only motivation for retaliation is to make money or that they are a disgruntled employee. If we understand the process in filing a lawsuit, there has to be a chain of evidence, or a claim, that can be substantiated legally. Any attorney that files a frivolous claim on behalf of a whistleblower can be sanctioned by the court. That is why we don't see half as many whistleblower cases as has been reported by another orthopaedic platform. In addition, if the government becomes involved in a "qui tam" lawsuit the process could take years due to investigating the alleged offenses, with a 15-25% payback to the relator. So why the lawsuits, and what are the ramifications for the whistleblower?

The behavior that companies and their executives have exhibited in our industry has been the main catalyst behind these suits. The gross margins are phenomenal (Wall Street can you sink your teeth even further into our industry and make our CEO's insane), the egos are Everest like, and independent distributors and direct sales people have the ability to make more money than many middle or upper managers. In 2006 alone the industry was fined roughly $350 million plus dollars by the federal government. Medtronic was fined $40 million related to kickbacks paid to surgeons in exchange for their business (The Poteet Suit), Zimmer, Biomet and Smith and Nephew agreed to pay $311 million dollars executed under a deferred prosecution payment with the US Attorney's office for the District of New Jersey for violations of the Anti-Kickback statute and the civil Federal False Claims Act. Stryker was spared any monetary punishment because the word on the street was that one of its former CEO's assisted and cooperated with the US Attorney (Christie) to minimize collateral damage. (I don't hear any CEO's crying foul) In 2008, Medtronic paid a $75 million dollar fine to the federal government to settle a whistleblower lawsuit that exposed the company's sales and pricing strategy to defraud Medicare for fraudulent indiscretions by Kyphon. In 2008, Patrick Chan a neurosurgeon pleaded guilty in an Arkansas court to taking kickbacks from medical device suppliers and paid $1.5 million dollars to the government and a whistleblower. This resulted in an ongoing investigation into Blackstone and other medical device companies. It is interesting to note how Orthofix has cleaned house and distance itself from the Blackstone reputation. If the DOJ is truly committed to vigorously investigating, prosecuting, and punishing those healthcare companies and providers who seek to manipulate the system for their own financial game, its time to step up to the plate.

But what about the Whistleblower? Unfortunately, the immediate response is to distance oneself from the individual. But why? Is it because we personally don't have the strength and courage to stand up to an industry that has spun out of control? If it hasn't, why is the DOJ and Big Brother keeping a watchful eye on the industry witnessed by the Kuklo and Blackstone investigations? Are we so driven by money that we put blinders on and frown upon a whistleblower's accusation until it effects us personally? If the argument is that we police ourselves, then our industry is nothing more than a three ring circus. Look at AdvaMed. Look at the lack of power NASS exhibits. Just look at who dictates policy for our trade shows (the Spine Cartel) and you can understand why there is a need for people to stand up and be heard. In all likelihood being the Whistleblower is a lonely journey, yet, one that should be respected. Potentially blackballed and threatened these people should be applauded for their strength and courage. The Spine Blogger wants to know what you think?

Wednesday, July 15, 2009

Synthes and Employees Indicted

On July 14th a Federal Grand Jury charged Synthes and four company executives for allegedly scheming to conduct clinical trials using a bone cement in vertebral compression fractures without the approval of the FDA.

The indictment charges that before the marketing program began the company knew from pilot studies that the bone cement (Norian XR) reacted chemically with human blood causing blood clots. Despite this, the company continued to market Norian XR for VCFx's and didn't stop until three patients died. Even after the third patient died, Synthes and Norian did not recall the product which would have resulted in an MDR.

Michael Huggins, Tom Higgins, Richard Bohner and John Walsh (not of America's Most Wanted Fame until now) were each charged with one misdemeanor count. So now we know why Mike Huggins was sent packing to Scient'x, who probably requested that he bow out gracefully after a brief cup of coffee with the Healthpoint Capital owned company. Higgins whom is a Wyss protege, use to run Boathouse (another Wyss owned company) before being given a promotion to Synthes, probably because of his Harvard background.

The most disturbing aspect of the indictment is that person No. 7 was Hansjoerg Wyss. As the Spine Blogger stated in earlier blogs, das Fuhrer is losing his faculties. Too much money, too much wine, too many women and high altitudes is causing this once respected man to be viewed as a renegade with no conscience when it comes to making money.

Do you want to be a Doctor or a Consultant?

The conversation goes something like this. "Mom and Dad, I have decided that I want to go to medical school and become a doctor." The parents replied; "Why do you want to go into medicine?" "Because I love helping people, and believe that this would be an honorable profession." The parents replied;" but with the state of healthcare in the US (some type of government sponsored healthcare program), are you willing to work in a system that could potentially limit your earning capacity? The child states: "don't worry, not only will I practice medicine, I intend on becoming a consultant for some company in my chosen specialty, and make millions of dollars while I attempt to become the best doctor that I can be." With that the parents gave their blessing.

Somehow, somewhere, something has gone afoul in our industry. As the NY Times reported early this morning (7/15) more information is coming to light regarding the Kuklo/Medtronic affair. (It's starting to sound like the old movie The Thomas Crown Affair). He was a young, talented, and successful millionaire who tried to pull off the perfect crime (that's the story line for those of my younger readers). The question that must be asked is; " How does someone so smart and intelligent get himself caught up in a scenario that could turn out to be, as they like to call it in the US Army, FUBAR? Maybe we are starting to understand why the DOJ is shining a light on our industry, and it's not a flash light.

Accusations of falsified data, Medtronic stating that they had no knowledge of the study at Walter Reed (wink! wink! obviously someone had to know something) and bouts of amnesia during the disclosure process does not bode well for Dr. Kuklo. And now, it seems that both parties are attempting to perform damage control by distancing themselves. At least Dr. Kuklo gets to use his legal education in how he manages himself as this investigation moves forward (that law degree does come in handy). The question that is being asked by many is, "why would someone so intelligent forget to disclose that he had any financial tie to the evil empire." Why would he forge other surgeons names to a study?

In light of the Kuklo article, the question that needs to be asked is, why does every spine surgeon have a calling to be a consultant? Does it start during residency, when they are catered to by every company in the industry? Do they really believe that they have something to contribute? Not every idea is worth its weight in gold! Granted, there are surgeons that are truly innovators and inventors, but what percentage? 5%? 15%? 50%? 80%? It seems like every surgeon that you meet nowadays has a new idea and is looking for a consulting or royalty agreement? (Yes, there are those that deserve to be compensated) Do surgeons believe that one's ability to choose the right product for their patient is not skewed by a consulting agreement or an investment into a start-up or early stage company? Does a surgeon's relationship with a company affect a hospitals ability to negotiate a fair and equitable price if the surgeon demands access to that company's products? Could it be that consulting agreements became in vogue so that legacy companies could protect their marketshare or start-ups could be sold for a greater multiple than what they were really worth? The SpineBlogger's platform is not some "wishy-washy" website that aligns itself with surgeons and industry related companies to generate revenue. Those websites tell you the reader that everything is wonderful, and if you pay for your subscription you have an opportunity to be heard.

The real reason that this insanity exists is because there are a percentage of surgeons that no longer want to be surgeons, they want to be entrepreneurs, angel investors, venture capitalist, and portfolio managers. They want a piece of the action! It's like a drug. As Gordon Gecko once said, "Greed is Good!" They are no longer just doctors, they are now master marketeers, selling themselves to the highest bidder regardless whether they believe in the technology or not. But the blame cannot solely be placed on the surgeon. The real reason is that the industry perpetuates and condones this type of behavior. How many of you have been overheard expressing your disdain or disgust about our industry?

The SpineBlogger knows that between the whistleblower suit against Blackstone, aka The Three Amigos, and the Kuklo Affair it is inevitable that some surgeons and corporate managers will be wearing orange jumpsuits. Until then, its business as usual!

Monday, July 13, 2009

The Future is Still Bright! But..........

Recently an article was penned by Tony (aka Mr. T., even though I like calling him the Golden Oracle) Viscogliosi in Medical Device Link. In this article he discussed a number of scenarios that could potentially affect the future of the Orthopaedic/Spine Industry. He cautioned that the future is still bright, but, that there could be black clouds on the horizon. Despite the recessions of the 1981, 2002, and the recent economic meltdown, our industry has been able to sustain itself and weather the storm. Mr. T (he would look funny in bling) bases his analysis on favorable pricing versus the future of pricing and reimbursements, along with an aging population debilitated by arthritis and diabetes but still yearning for youth (if only we could find that fountain), and the unknown of a national healthcare program (if only Congress could stop pandering to special interests and do their job).

But does the future look bright for our industry? Yes and No! Considering that the median drop in orthopaedic stock was 33%, could it be that our industry like the real estate and stock markets was over-valued and inflated? In 2008, one of the top five orthopaedic practices in the US reported record earnings based on more than 17,000 surgeries. 13,000 or 76% of these surgeries were elective. I would argue that unemployment rates had still not peaked (are they still going up), and the threat of losing one's job and healthcare coverage had not become a reality (do I need my job or surgery), retrospective data does not compare to what the current state of affairs are in our economy. That was then and this is now. In addition, one cannot base an analysis on the findings of one of the busiest practices in the country. But I'm not here to split hairs with "The Analyst", besides when you raise $144 million (kudos during this downturn), $25 million coming from a Malaysian investor with a commitment to develop and manufacture in Asia, how do I stand a chance?

Unless Mr. T. is dialed into the Obama Administrations healthcare plan, it is quite evident that it still is the objective of this President to rein in Medicare and general healthcare cost. Yes, the future is still sunny, but pricing and margins are about to experience a major decline witnessed by the surge of capitated contracts, the increase cost of manufacturing in the States, (oh yes, you can go to Malaysia, India, Ireland, Mexico and China you loyal US Corporations, you Freidman disciples), and the increase in competition. Those smaller companies do tend to be a pain in the derriere for the Spine Cartel, constantly gnawing at there feet.

Considering that it takes 5-7 years at a minimum to bring an emerging technology to the market (IDE), not only does this hurt the patient (if the technology is legit) it could ring a death knell for some of these pre-revenue companies as we have already witnessed. Investors are becoming much more judicious in their due diligence, meaning that they are not throwing capital at anything that breathes. The start-ups and early-stage companies will have to weather a weakening economy that could potentially go on for a year to a year and a half., along with a DOJ watchdog that truly does need to throw some people into jail. The Spine Blogger sees an economic rebound around the time of the next elections. The question remains do these entities have the financial reserves, revenue and fortitude to weather the storm?

As for Mr. T., not only do you have to admire his analytical acumen, but you have to laud his salesmanship. The article starts out as a snap-shot or the industry and turns into the promotion of the S.T.A.R. System. Polo anyone?

Saturday, July 11, 2009

Gee! GE

So what's going on at Synthes? Since David Paul left to start Globus Medical, the Arbeitsgemeinschaft fur Osteosynthesfragen, has never been the same (excuse my German or is it Swiss Deutsch). What happened to this once stoic guardian of the orthopaedic trauma and spine world? The recent Norian indictment raises tremendous questions regarding the current management team and the climate in our industry. Even though Synthes has an estimated market cap of $8 billion (I hope I am not being too generous Hansjoerg) the "old girl" is starting to show some wear and tear.

As Mr. Wyss begins to approach his golden years, one has to wonder whom has the fire power to buy this company? Someone once commented that a monkey could run Synthes and it still would be profitable. Based on this company's marketshare in Trauma, Spine, Maxillofacial, Biologics, and Power Tools that assessment was probably correct. In addition, just look at the "monkeys" that are currently running this company.

Hansjoerg Wyss has to be in his mid 70's, and regardless of someone's education, money or power, those of you that know the Spine Blogger know how I feel about Septuagenarians in politics or running a company. The mind starts to go and life begins to pass you by. Hansjoerg has turned the overall management of the company to his nephew ( a big mistake, but what can you say about nepotism). At this point in his life, he should enjoy playing tennis, flying his Lear Jet, drinking wine at the Halter Ranch and occasionally pinching a young woman's derriere (not necessarily in that order).

So who can buy Synthes? There is only one company that has the capital and leverage; GE Healthcare. A $17 billion dollar unit of General Electric with products in the following clinical specialties, Cardiology, ENT, Oncology, General Surgery, Urology and Orthopaedics this would compliment their portfolio. In addition, this company needs to stimulate its image. Ever since Neutron Jack left, the company has floundered.

The question then becomes, what would the multiple be? In all likelihood somewhere in the area of 3-5X. This would allow Wyss to endow his beloved Harvard, the Sierra Club, and take care of his immediate family.

GE Trauma? GE Spine? GE Maxillofacial? Sounds nice! Let's wait and see, time loves a hero!

Friday, July 10, 2009

Going Once! Going Twice! Sold to the Highest Bidder

Recently the SpineBlogger was at a meeting and happend to run into a few of his colleagues when the topic of discussion turned to early-growth stage companies. As we went through a list of the "who's who" of the group called "OTHERS" by industry related marketing reports, Vertebron came up.

Without knowing all the specifics, there will be an auction held in the late summer or early fall to sell off the product portfolio to the highest bidder (sound familiar IST). It is safe to say that the bankruptcy court appointed a trustee to oversee the sale of the product portfolio and IP if there is any perceived value to the buyer. If there ever was a fire sale, now would be the time to buy some product. But before you jump off the Santa Monica Pier, remember what the Bee Gees once sang, "How could love so right turn out to be so wrong?" What happened to Vertebron? This company once had the potential to set a precedent for start-up companies.

A quick snap-shot of the management team is probably the leading factor in the demise of the company. I'll spare the "Three Kings" any embarrassment by naming the co-conspirators. Then you have the human element in the company's demise GREED. On numerous occasions they had the opportunity to raise capital or even sell the company. Unfortunately, they didn't learn that your company is only worth what a potential buyer is willing to pay. So now they will find out how much money they will have lost because of this selfish and aberrant behavior.

If Cardo-Medical is still interested in buying this product line, they may have saved themselves $10-15 million. Now that's a bargain if you really believe the industry needs another Pedicle Screw, Cervical Plate and Interbody Devices. Going Once! Going Twice! Sold!!!!!!!

Wednesday, July 8, 2009

Orthovita no longer a Paddlepuss!

Recently the Spine Blogger was surfing the web (it is summer and I feel like hanging ten) and stumbled upon Orthovita's website. The new look, which has been around for at least a year, was probably re-designed in anticipation of its newest addition to its product portfolio. Finally, after all the hoopla CORTOSS has arrived? I must admit, I say this with great envy, this is a cool product. And yes readers, I do not work for Orthovita, but I do own stock in this company. Of all the products that have been recently released, I believe that this will put "La VITA Loca" (can you hear Ricky Martin) over the hump. Watch this stock over the next few months. (I'm putting tremendous pressure on Chris Smith and his sales management team) If you did not buy VITA when it was at its all time low, now is the time to invest in a stock that is on the verge of shooting up to $7-8 per share.

Kyphoplasty and Vertebroplasty laid the foundation for an incredible market in treating vertebral compression fractures (VCFx) in spine. The key to Kyphon's revenue was the cost of the balloon to expand or reduce a collapsed fracture so that PMMA could be injected into the space restoring the integrity of the affected vertebra. The average cost for "da balloon" has been reported at $4,000-$5,000 per case. Even though there had been some challenges regarding adjacent vertebral fractures associated with using PMMA, CORTOSS is on the verge of setting a new standard.

So where are the advantages? Cortoss' non-toxic chemical make-up reduces the exothermic quality of this material in comparison to PMMA. In addition, with an excellent modulus of elasticity, it should minimize adjacent vertebral compression fractures. When PMMA is injected into a VCFx the axial loading affect on the adjacent bodies is like bouncing off of concrete, and we all remember those articles in the NY Times regarding the efficacy of Kypo/Vertebroplasty a few years ago. This material will provide the surgeon with a product that has versatility, exceptional viscosity and handling characteristics.

So if you're ready to get "amped" because a "tube" is in site and you want a "bitchin" investment that can turn "epic" now is the time to catch the wave.

Friday, July 3, 2009

Is it a Pharmaceutical or Device?

With the rash of recent newspaper articles by the Wall Street Journal and the NY Times, it's time Medtronic and Stryker stop at the pharmacy and buy some calamine lotion (zinc oxide and ferric oxide help inflammatory conditions). Why has the media placed the spotlight on the efficacy and cost of bone morphogenic proteins? In order to fully appreciate this publicity, the reader has to understand the history of the product. INFUSE was original discovered, developed and manufactured by Wyeth (a major pharma company) with a licensing agreement executed between both parties in 1995. Medtronic originally received FDA approval for INFUSE to be used in conjunction with the LT-Cage, a titanium lumbar cage rarely used in today's spinal fusions. With the advent of PEEK (Poly-Ether-Ether-Keytone) a biomaterial with better modulus of elasticity, the LT-Cage went the way of the Rogazinski Spinal System. (Bye-Bye!) So why all the publicity? OFF LABEL USE!

The cost attributed to the intra-operative use of INFUSE, retrospective data and clinical results when the product is used "off-label" in the cervical spine has led to a maelstrom in the media. It has been reported that on average the cost of INFUSE is $5,000 per level. This means that in capitated markets the minimum implant charge ( lumbar hardware and BMP) for a one-level fusion is anywhere from $10,000-$12,000. In markets where the hospital does not capitate implant cost, the estimates are as high as $15,000. So, why the big fuss?

As recent as last year, July 2, 2008, the FDA was made aware of 38 adverse events following anterior cervical discectomies. There had been reports of swelling, and patients having to be intubated 2-14 days post-op as a result of breathing difficulties. With the Brigham and Women's study, some light is now being shed on the complications of using INFUSE "off-label" in cervical discectomy procedures. But is this only a concern that we should have if the product is used in the cervical spine? For all the good things that have been reported about INFUSE, it is interesting to note that not much has ever been reported about some of the issues related to using INFUSE in the lumbar spine. How many of us have heard stories of bony in-growth into the canal during its early years? The major challenge with any pharmaceutical product is dosing. Yes, readers INFUSE is a pharmaceutical product regardless of how Medtronic got this product past the FDA. Since dosing is important, how does a surgeon determine intra-operative concentration levels needed to effect fusion without excessive bone growth? Retrospective data? Company dosing recommendations? What happens if the surgeon uses more than is needed? We know how some surgeons minds work, if "x cc's" is good, add a little more and you have a better cocktail. What happens if INFUSE is not contained in its delivery system, i.e. a PEEK Cage or Collagen Sponge?

It is interesting to note that the Medtronic spokesperson (she is learning how to perform a great soft-shoe) stated that the company is close to completing a trial to show how to manage use of the product to minimize complications. I guess it's always better to find out the handling characteristics and side effects after the fact. Just what the patient wants to hear, minimizing complications! Maybe the FDA really needs to take a closer look at this product along with its cousin, OP-1 (originally developed by Creative Biomolecules). For as good as these product may be for certain patients with associated medical problems, its not for everyone. Unfortunately, we all know the joke in our industry, "give a doctor a hammer and everything becomes a nail." If I had my druthers I would opt for some of the synthetics that have been offered by other companies in the market place. They are as efficacious and cost a lot cheaper.

In closing, in all the years that I have had the opportunity to be in the operating room with a Medtronic or Stryker rep, I have never heard them state that the product was not approved for "off label" use. The Spine Blogger wants to know what you think?

PS: Maybe it's time the industry stop its practice of teaching surgeons how to use a new product and start educating them on how not to use a product.