Yet, hope springs eternal. Based on the climate within the investment community, it is apparent that the days of investing into companies with traditional hardware is coming to an abrupt halt. As was stated in a previous blog, peripheral spine technologies/real innovation is the wave of the future. The companies that continue to slog along bringing out their me too products will eventually crawl to a grinding halt for one reason or another, whether it be lack of capital and sales, market forces driving down the cost of implants and biologics, or just surgeon consultant attrition. The subculture companies that exist to create cheap and quick products, i.e. inter-body devices and pedicle screws, while playing roulette will be limited to local markets or local surgeons. But who will want to buy them? Besides, these ventures are about a quick profit rather than long-term viability, and then it will be on to the next new thing.
If the last few days of stock market activity is a barometer of things to come, the insurance and device companies stand to benefit from this reform. Contrary to opinion, when one door closes another one opens. There will be more people with healthcare coverage, people with pre-existing conditions will not be denied, and young adults up to the age of 26 will be able to be covered under their parents insurance plan. You don't need to argue with TSB just look at the demographics, numbers don't lie. One way or another, those of us that have insurance end up footing the cost, just think about it, there have been greater increases in healthcare insurance over the last few months than over the last few years, and we didn't even have a healthcare bill. There is no question that a government mandate on insurance with a penalty is an infringement on individual rights, but if we were willing to spend hundreds of trillions of dollars (thank you fellow reader) on the two wars without a financial analysis and stood by while Wall Street was bailed out, why do we behave so irrationally when it comes to healthcare? As I have argued, there is a difference between having a right to basic healthcare versus the privilege to pick and choose. For those that argue that it is a fundamental threat to free market enterprise, personal freedom, and innovation, this will likely separate the innovators from the imitators.
Let's be realistic, if the industry is going to be taxed 2.3% per annum beginning in 2013 who will carry the brunt of this tax? Will it be the start-up or early growth stage company, or, will it be the Spine Cartel and major medical device companies? Besides, how many of these large companies actually have the creativity and wherewithal to organically develop emerging technologies? Retrospectively, most of their new products have been acquired rather than developed organically, along with the fact that they have exhibited a poor ability to integrate some of these acquisitions without complete chaos (just look at what Medtronic did). Look at Stryker, NuVasive, Synthes, DePuy, Medtronic, and Zimmer, what have they produced in comparison to a entrepreneurial venture? Not much. The definition of innovation is introducing new things, not buying new things that were developed by entrepreneurs so that you can acquire greater market share. There is a major difference between being a manager of a big company and an entrepreneur. One minimizes risk to maximize profits, while the other relishes risk.
In closing, most of us don't really know how this is going to effect or affect the industry at the end of the day, because until all the final details are hammered out, it's your word against mine. It's funny how all the people in the industry that espouse that change is good are the people that are having the toughest time accepting the fact that either this legislation will succeed or it will fail and only time will tell, because as the late, late, late, Lowell George from Little Feat said, "Time Loves a Hero."