Recently, Mike Matson posted a report which highlighted the addition of many new entrants into the spine industry that were visible at NASS. Unfortunately, what Mr. Matson failed to discuss was how many "me too" companies literally littered the convention floor. You know those companies that built newer and bigger booths, and graphics, to create the illusion that everything was wonderful regardless of the above scenario.
If these newer entrants have any innovation, they are coming to the market at an ideal time. If they are not greedy, and have the capital to launch their products in a professional manner, you know, provide sales samples, training if necessary, and provide marketing collaterals, the opportunity does exist to make an honest living. Why should you believe these comments?
Because their is a major shift in how surgeons are operating and doing business. The enemy lies within, and it is the major corporations in our industry mainly the payors, hospitals and manufacturers, slowly yet surely squeezing the life out of what once was a vibrant and exciting industry. You know where the patient comes first! With the advent of modern technology, "me too" products are all playing on an even playing field, unless you have an inherent poor design. That playing field is price. Can you save the hospital money, and are you willing to discount your product. If a surgeon is an "excellent technician and craftsman," he or she should be able to perform any procedure if the product is comparable, and if your organization is willing to respond to their needs. And therein lies the secret.
No longer is it necessary to work for a major company. These organizations have sliced and diced your territories and continue to build their sales force with younger and inexperienced people allowing these companies to shape the future sales model in spine. Essentially, the Spine Cartel, the Payors, and the Hospitals will control how much money you will be allowed to earn. The onus is on you to figure out how to expand your market share with less territory and customers. Smaller margins means less commissions for the individual sales person because the person making these decisions needs to make more money to feed the beast.
So in the spirit of the holiday season, and the gift of giving, open up your hearts and your minds because opportunities do exist. In many respects the surgeons and the salespeople don't even know that they are the foot soldiers that drive the industry. These are the people along with the O.R. Staffs that ensure that the patient has what is needed to make their quality of life better. Remember, you can design product and create a strategy, but if you don't have the foot soldiers, the people operating and selling, you don't have revenue!
I have seen the enemy, and the enemy is within!
A couple things...
ReplyDelete1. TSB: Please define a "me-too" company. Specifically name some companies that are NOT me-too that have a somewhat full bag of products (companies with only a few products don't count). I think you'll find that "me-too" is a term often thrown around but seldomly with full understanding of what it means.
2. One one hand, you often say, "do we really need another pedicle screw?" (usually in the context of "me-too" companies). On the other hand, you talk about the impending doom of declining commissions and salaries for sales reps. Do you not realize that 100 spine companies offering pedicle screws, cervical plates and cages is precisely what allows so many sales reps to make so much money? Economics 101. If "me-too" companies/technologies go away (e.g. through consolidiation) so does your earnings (i.e., sales reps are in less demand). Of course, there will always be a need for good sales reps, but even the best would be making less money if it weren't for all the "me-too" companies out there.
So how much money do you make? In all likelihood if you are an investor, we usually make too much, and you usually too little. As more "me too" products commoditize the market, and price becomes the key selling point everyone's commission is being cut. You know the old expression, you get what you pay for, come on you should know that, or maybe you're just cheap.
ReplyDeleteBeing a capitalist to the core, I believe sales reps SHOULD make what DO make; that is, if companies are willing to pay top dollar for spine reps, spine reps fully deserve it. I have no beef with spine rep salaries/commissions. I just wanted to make sure you understood the relationship between "another company with a pedicle screw" and your commission/salary. I agree that pricing pressures and decreased margins will tend to drive commission rates down, but not to the same extent as fewer "me-too" spine companies. Compare spine to hip 'n knee. Spine reps generally make considerably more. Both are relative commodity markets. The primary difference is that, in Spine, there are dozens of "me-too" companies willing to pay more for revenue. Whether you work for one of these ankle biters or not doesn't matter. The fact that they exist allows spine reps across the board to make as much as they do. Don't bite the hand that feeds you!
ReplyDeleteMedtronic is a me-too company, they just have a lot of it. NuVasive is me-too with an XLIF flavor. K2M is me-too with a deformity flavor. Every company is me-too, plus or minus their own flavor. So, I ask again, please provide a few examples of me-too companies and a few examples of non-me-too companies (with more than a handful of products) so that your readers better understand what you mean when you refer to "me-too."
Defining "me-too" is a fair question, particularly for company executives. If a board room can't have an honest discussion about whether or not they are a me-too company then the company will probably fail to create the right marketing message. Medtronic, DePuy, and Synthes are not, in my opinion, "me-too" because they built this industry through the innovation of products that have ultimately become "me-too". These companies still own the lion's share of the market and are viewed by the mainstream market as the standard against which all others are measured.
ReplyDeleteScrews, plates and PEEK still account for an overwhelming majority of the revenue in today's spine market so in my estimation a "me-too" company is one that has a neat little widget that they have decided would serve as a great platform on which to build an entire spine company that "In 4 years will be the second largest company in spine!". How many times have we heard that one?? The neat little widget serves as a trojan horse to gain access to the account and then the company figures once it can gain access it can "flip the business" and start cranking out the screws and plates. We've all heard that one before, too.
From a trojan horse perspective, NuVasive(XLIF) and Globus (expandable cages) have been successful, although I don't envision either of them coming close to becoming #3, let alone # 2. So perhaps a company is not "me-too" because of the prodcut line but rather because it has a neat little widget that it intends to leverage in order to gain access to the screw & plate business.
And lets not forget that for 80% of the growth companies out there all they really care about at the end of the day is being acquired and cashing out. Screw & plate business = more revenue. More revenue = bigger pay day. Would you like a piece of that? Me too.
Atlas "me too" Spine, Allez "me too" Spine, Captiva "me too" Spine, Choice "me too" Spine, Custom "me too" Spine, , Life "me too" Spine.... The list can go on and on! This is not intended to be derogatory, but where is the innovation, while these companies litter the market with products that are commoditizing the industry and minimizing our profits? The last thing this industry needs is more surgeon backed companies that hope they can hit the lottery! Innovation means changing the clinical landscape, changing the outcomes, not flooding the market with more of the same.
ReplyDeletePlease don't compare today's spine market with hips and knees. If you ever sold for a living, you would be cognizant that hips and knee reps had their day in the sun many years ago. As a by product of commoditization, hip and knee salespeople no longer make what they once did. In addition, demographics and payors have played a major role in the reduction of hip and knee pricing, as these factors are playing a major role in spine. As margins come down across the board, these so called "ankle-biter" companies are no longer willing to pay what they once did. You can't be that good of a capitalist if you are willing to pay 40-50 points while making less in profits because of pricing. Ergo: we are not making as much as we once did.
IMHO, I would bet that neither of the aforementioned companies ever generate any innovation. Are you willing to gamble with your own money and not with someone else's on any of those ponies?
Are Allez, Custom Spine, Choice Spine, Life Spine, etc. getting business by selling their products more cheaply than everyone else? Or are they primarily doing it by paying reps/distributors high commission rates to buy their relationships? I have to believe it's mostly the latter. A distributor doesn't carry Vertiflex because he can more easily get their products approved at a lower price; he's going to carry Vertiflex for the 50% commission on cages.
ReplyDeleteDon't get me wrong. Some companies are willing to low-ball pricing. Hospitals and purchasing groups are getting smarter about negotiating. There ARE pricing pressures. But, to get back to my original point, Spine reps and distributors are the highest paid in MedTech almost exclusively as a result of so many "me too" companies. Do you really think that if every Spine company besides the top few were to vanish tomorrow that you'd enjoy the same salaries/commissions? At that point, pedicle screws wouldn't be the commodity; Spine reps would be.
I don't think you fully understand how the free market works. A "good" capitalist doesn't pay 40%-50% commission in the face of declining margins because they like to; a company pays that because they have to.
Please Google "supply and demand" and get back to me.
I don't need a theoretical class in economics. I know how the free-market works witness by how the government stepped in to bail out Wall Street. There goes your theory of free markets
ReplyDeleteYou're a champ at evading the topic at hand, MM. Lots of Spine companies = High demand for Spine reps = High commissions. I'm simply pointing your hypocrisy in damning the "me-too" Spine companies and, at the same time, crying about impending commission cuts.
ReplyDeleteAnonymous, not interested in debating a topic that we agree to disagree upon. No hypocrisy, just reality! If you are an investor you want me to look at my world through your rose colored glasses and frankly I can only relate to the world that I live in. Thanks for your commentary, unlike other platforms you are entitled to your opinion and ironically I respect that. Peace!
ReplyDeleteI assume we can agree that Spine rep incomes are relatively high (and by that, I don't mean "too high" or "overpaid" -- just that they are greater than most/all ofMedTech). If high incomes aren't a result of the proliferation of Spine companies (me-too or otherwise), how do you explain it?
ReplyDeleteThanks for allowing others to express their opinions and permitting debate!
In the end you are both right and both wrong. Companies will cease to have spine reps at some point and will hire mid managers to keep their accounts happy. No longer will reps stand in cases for hours all for their 15 minutes of fame. As the marketplace continues to consolidate and consulatancies dissapear the reps will go away or become pharmaceutical type reps. Enjoy the ride. In 5 years or less it will all be over.
ReplyDeleteThe street-level reps aren't the problem. If they have good relationships and provide good service then they deserve to be well compensated. The real drain on the system is the middle managers, not the reps. These guys are parasites of the industry, starting 250K plus wasting their days on the golf and dinner circuit. These dinosaurs,and we all know who they are,live expense-account lifestyles as if pedicle screws were still $2500 each. If cuts need to be made, this is where companies should start, not with the reps actually doing the work.
ReplyDeleteSay Amen Anonymous! Why do you need a regional mangler? Yes readers I said "mangler!" To provide a the reps with a Pep Talk? I recently heard a company hired a UPS Manager to manage their reps, now there's an organization that really knows what its doing!
ReplyDeleteSorry to disagree but a small majority of reps actually sell, (very small in fact). They cover cases with accounts that the company fosters through "engagement" with the surgeon. There are very few real salespeople left now. I agree some managers are worthless but the very best bring the support the surgeon is looking for and keep the business in spite of the street level reps' relationship. They carry the company flag whether it is a small company or the big three. The street level rep may survive but be as I said before in a pharmaceutical type capacity. Distributors will cease to exist at some point in time as as well. They will not be needed because most companies will have a direct model similiar to a Synthes type sales force.
ReplyDeleteOr as I have said; " I have seen the enemy and the enemy is within!" Before you react to this statement, please reflect upon what I am saying, no emotion, just pure analysis and you will understand why I say this! Have a great weekend!
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