Monday, November 29, 2010

2011 A New Decade In Spine

"Business demands a docile government and unrestrained corporate freedom, there must be balance."
                                                            - TSB -

2010 will be remembered as the year that spine was brought back to earth.   Just like Ziggy Stardust, the industry was technologically promiscuous, almost drug induced. glutting the market with more versions of me too products in hope of windfalls only to destroy a once thriving industry with its own gluttony.  What precipitated the changes that have taken place in the spine?  As the industry enters a new decade, an autopsy on the last ten years is quite revealing.  Our bloggers know that commoditization and capped pricing have become the norm, rather than the exception.  Some companies are holding strong, despite a decrease in revenue due to the economy, and, third party payor denials. The next few quarters will tell a compelling story for those companies. Here are some concerns you have expressed during the past year;
  • Are we developing products that improve clinical outcomes, and benefit patients?
  • Has healthcare economics re-aligned growth expectations?
  • Have our wages/salaries really increased in the past ten years?
  • Why are surgeons and investors concerned with how much money salespeople earn?
  • Will the government step in and outlaw POD's?
  • Have stem cells become the industry's derivatives?
  • When did this transformation really begin?
The years leading up to 2010 have provided the spine industry with many "so-called" breakthrough technologies.  And no fellow bloggers, we are not talking Blackstone Medical type breakthroughs, that corrupted, and shifted practical ethics in spine.  If there ever was an albatross that lingers around the industry like a bad stench, it's name was Blackstone Medical, indicative of the efforts that Orthofix made to distance itself of any association to a sordid past.  The effective demand of the market has been to identify technologies that enhance outcomes, yet at the end of the day, the financial objective is to  make those that lead the crusade, rich.  It's time that some industry executives spare us their stories of how a personal injury changed their life, and sent them on a mission to heal the sick, and feed the hungry. That my fellow bloggers was another lifetime.  Today, profits take precedents over outcomes.  

For better or worse, the crossroad in spine was 1999, when the Viscogliosi Brothers acquired Pro Disc from Aesculap AG.  This marked the first time an investment banker/ research analyst took the reigns of a spine company.  The efficacy of fusion was being hotly debated, and, the Europeans were years ahead utilizing newer technologies, materials and methods.  One has to express cynicism when industry executives decry socialized medicine, but rely on Europe, South America and third world countries to test drive their products on foreign lab rats.  Without them, where would the U.S. market be?  Total Disc Arthroplasty was not only going to return patients to early mobilization, it was touted a superior alternative to fusion.  U.S. investors and surgeons jumped on the bandwagon.   Tony Viscogliosi was quoted as saying, " the Pro Disc will transform spine surgery by replacing a high percentage of fusion procedures with disc replacements."  Just like the Great White, Wall Street and the investment community circled the waters.   By Viscogliosi's estimates, the total disc market would grow to $3 billion dollars by 2008.  Was that anything like his vision that one day we will have one rep for one surgeon?  From God's mouth, to our ears, the race was on.  All of a sudden there were more private equity investors than a roomful of cockroaches, when the lights go on in a New York City restaurant in the middle of the night.  This ushered in an era of investment greater than the California Gold Rush of 1849.  Like any paradigm shift, the new new thing was to leverage others capital to increase one's wealth, and, with that came demands that the spine industry assimilate the persona of financial markets rather than behave like a healthcare oriented industry.  What the oracles of Wall Street failed to grasp was, that healthcare unlike finance, has broader oversight and regulation in the form of third party payors and the FDA, rendering it impossible for quants to create algorthims with super computers that could erase product development protocol and approval guidelines.  Many of these people believed that their money and power would change the rules of the game.  The benefits of TDR is still debatable, contingent on appropriate patient profiling and advancement of disease.   What we have learned is that an industry that was once built on long-term results became short-term oriented.  Things had to get done faster than ever before, witnessed by the constant complaint that the FDA has too much oversight in commercializing products.  Today, product development is in a transitory state.   Dynamic Stabilization is DOA, witnessed by the "For Sale" sign that pioneering Applied Spine threw up earlier in the year.  If Panjabi can't get it done, who can?  Disc Motion Technologies cannot raise capital to keep its posterior disc and dynamic system afloat.  BMP's are under attack as being too expensive in an ever increasing hostile cost environment, and even ISP devices are under scrutiny.   All one has to do is look at facet fusion technologies and wonder how long can this scam go on?  The last few years have led to more failures than success stories with a cadre of start-up and  early-growth stage companies folding while those that survived are in a holding pattern, flying on vapors.  The industry is moving away from hardware and looking for software as an alternative to fusion.

Spine industry stasis.  Essentially, there has been an inactivity in emerging technologies in spine since the total disc.  Since the inaugural stem cell meeting at the Chicago Airport in 2006, stem cell mania has picked up momentum, with more capital being invested in development, marketing, and commercializing what many argue is old technology with a new spin.  Like derivatives, stem cells have a value based on expected future movement as an asset.  The industry is looking to replace BMP's, TCP's, and other biologics with stem cells, in hope of a tremendous payoff.  Spine surgeons are much more fixated with stem cells in comparison to general orthopedists.  The ultimate goal of those leading the crusade is to convince clinicians, third party payors, and hospitals that stem cells are the golden goose.  Unfortunately, stems cells continue to look like an exotic derivative.  Companies are hoping that by leveraging its underlying value it will lead to pull thru revenue.  In essence, companies are hedging their futures on the new new thing.

A concern that we hear from many of you, is that you are making less money, or,  you are earning the same amount that you did five years ago, while our illustrious CEO's continue to line their gilded pockets, behaving as though nothing has changed.  Some have even asked employees to forgo their salary for a period of time, until they can raise more money.  If there is any truth to those rumors, those individuals should be ostracized by the industry for behaving with such arrogance.  The same way that the American political system has been hijacked by special interest, our industry continues to be hijacked by the same CEO's, that are laughing all the way to the bank.  During the third quarter of 2010 only 33 companies in the entire U.S. went public, there isn't another Apple or Microsoft ready to explode in the spine market.  Rumors of certain spine companies going public is comical.  The investment community is not infusing capital into companies that continue to design and manufacturer more of the same.  Banks and investors are more interested in exploiting the day-to-day movements of the market by focusing on trading.  If we are interested in containing the ever rising cost of healthcare, why aren't we developing products that allow us to streamline cost, while allowing us to maintain our profitability?

As for surgeons complaining about how much sales people earn, TSB doesn't feel the need to even address this issue.  If surgeons believe that we are making so much money, they should become salespeople instead of surgeons.   Between being concerned with our earnings and starting POD's, class warfare is here to stay.   Bowie sang;

Ziggy played guitar jamming good with weird and gilly
And the spiders from mars, and he played it left hand
But made it too far, became the special man, then we were Ziggy's band.
It's a new dawn, a new day!


  1. TSB = Don Draper / Richard Whitman

    -Others feel-

    TSB = Julian Assange / Perez Hilton

    Looking forward to 2011 post!

  2. Well hung and snow white tan.

  3. TSB on point! Very nice post.

  4. TSB
    Really enjoying this post, thanks.
    Well said sir, well said.

  5. Good post! Any bets on the extent of market consolidation and/or companies who will fail over the next six months?

  6. I would have read more if TSB threw in an "Enter" or two. Lots of comments for so few paragraphs.

  7. Blackstone was investigated and the case was dismissed by the court earlier this year.

  8. Just because some idiotic judge (Boston based no less) dismissed the civil case, doesn't mean that the criminal investigation has stopped. Word is that it has been elevated to the appellate court.

  9. Sounds like some wishful thinking 7:29. You'll need it.

  10. Maybe the V's can stop flying first class, smoking Cohibas, and making bbq sauce for a few months so that employees from sister companies can get paid their expenses while they "raise more of other people's money" to support "a lifestyle".

  11. What about Flexuspine?

  12. What about it? What's so unique? Are you someone from the company, an investor, or another of the usual suspects that sit on the advisory board looking to hit the jackpot?

  13. tsb, 1st just maybe tcp's are the answer to replace bmp's rather than the new stem cells. 2nd Maybe, new competition in the vertebroplasty market vs. mdt will save the hospitals and patients money and are proven effective in treating pain. Maybe new technology comes from socialist countries because the fda is soooo slow to approve new, cost effective technologies or anything else for that matter. And if the fbi has time to investigate Cam or Barry Bonds is there an interest in Doc's implanting their own, start up co's Chinese Import?!

  14. Great post. You don't even know the half of it.

  15. 1:14 must be an Orthovita disciple.

  16. The post is misinformed.

    I don’t know many CEO's are lining their pockets while requesting employees to take furlough. And if it is true, it is a free country; those same employees are free to find alternative work freeing themselves from complaining about it.

    Innovation is dead when regulations rule the land. Companies must go outside the US to develop, and many times create, innovative products. Cost structures within the US make it virtually impossible to develop & USE "innovative" products; i.e. medical tourism and CE.

    The “more of the same” argument is flawed as well. Certainly, there are a lot of spine companies, but there is demand. This is indeed the American way. In a free market the market will support as many suppliers and sellers as it will; i.e Starbucks, Walmart, Target, Outback, Chilis (all distributors selling variations of the exact SAME thing.) In your socialist model, it would appear as though you favor absolute freedom for the sales force, but control of the company. Be careful, in your utopia you're certain to have neither.

  17. As recently as two years ago, didn't the U.S. Government bailout Wall Street and the Banks? Talk about a socialist model, WTF was that? Welfare for the rich? Now that's utopian. Oh, and by the way, that was supported by both parties. Hey Mr. 4:48, I mean Mr. Freemarketeer, you must of missed class the day they explained how free markets operate. As for regulators, they're always at fault, because people never push the limits, do they? It's called checks and balances. As for all those choices you mentioned, what we need are more of the same don't we? Companies go OUS because they are on a mission of mercy, never would they do that to increase profits because of cheap labor and maufacturing cost. Get serious. Utopia, I'm more of a Nirvana fan. Besides, you're probably too young to remember who fronted Utopia. PS: come back and talk to me when you're competing with the Chinese and Koreans they're knocking the snot out of your ass. You ever see the quality control that goes on in those places? Come back argue with me after you have.

  18. What we should really do TSB is stop patronizing people like the V Brothers and selling their products or working for them. Now that would teach them a lesson.

  19. This comment has been removed by a blog administrator.

  20. Spine & Wine or Spine & Whine...please select the most appropriate name for th sign outside the building in which many of this industry will find itself employed over the next 5 years.

    Or, feel free to suggest other marquis...

  21. Perhaps.... Spine Con Fusion ?

  22. 9:20

    luv it. Or, maybe even Lumbar Lumber..."your only a splint-er away from comfort..."

    In all seriousness, I fully understand and sympathize with those people who suffer chronic pain and, specifically, chronic back pain. However, the factual results of fusion are mixed at best. That is a FACT. As such, a person wishing to embark on the procedure should be willing to pony-up a greater share of the cost AND should never, ever be mislead/coerced by a medical professional who has more financial incentive than patient comfort as an agenda. Further, those companies greasing the palms of such "professionals"...well, let's just say they will get a form of "devine justice"...we are witnessing the first act as we "speak".

  23. I used to feel strongly that TSB=Perez Hilton, but I stand corrected.

  24. 4:48: Blaming FDA is a pitiful copout. The CE-marking process is a joke, as evidence by the fact that EU adverse event rates far exceed those in the US. You mentioned that "innovation is dead when regulations rule the land." In fact, patients are dead when companies are left unchecked.

    In the EU, a rationale and a high-five can get those innovative devices "cleared" to implant in people. If you want to implant your innovative device in an American, you are required by law (and have been since 1976) to prove safety and effectiveness to an independent and objective government agency tasked with protecting the patient.

    So, if you want to market your amazing, game-changing device in the US, do an IDE. If an IDE's not worth it, perhaps your device sucks afterall.

    Also, since you are so madly in love with how devices are regulated in Europe, why don't you relocate? Who knows, the socialism might grown on you too!

  25. @6:28 I can't agree with your position at all. In Europe the onus on the clinical outcome of treatments using devices remains exactly where it belongs, on the surgeon. That's who the patient entrusts with the care, and that's with whom the buck ultimately stops with.

    Surgeons in Europe feel very responsible for carefully choosing the products they use, as they know their professional reputation depends heavily on the performance of their "tools". They are much more inclined to ask for the clinical data in support of the product, and inquire about references of other colleagues using the products. In essence, they feel personally responsible for ensuring the products they are choosing to use are safe and effective. In my view, this is how it should be. As a patient, I'm entrusting my care to the doctor, not the FDA.

    And beyond that, the onus for the performance of the product is on the makers of the products themselves. The CE marking basically ensures that the maker has pursued the proper development avenue and validation steps in the development, manufacture, and marketing of the product, but ultimately the responsibility for how it performs lies at the feet of the company, where it belongs. Make a bad product, and you're finished in the industry, not to mention sued to kingdom come in the courts.

    The problem with the FDA is that by dictating what devices the doctors have access to, they've basically taken the onus on themselves to establish which products are safe and effective for them to use. The US surgeons no longer feel as personally accountable for performing their own due diligence on the products, or adhering to their skepticism in avoiding new technologies. Rather, by having the FDA's stamp of approval, they not only feel free to downplay such thoughts, but almost obligated to give new technologies "a try". Similarly, companies are restricted from making product changes (e.g. porous coating the Charite) or providing educational material (e.g. about off-label use), and thus become no longer responsible for these aspects of their product's performance. The onus is now so much on the FDA that makers of products that have been deemed safe and effective cannot even have those claims or their performance challenged in court. (To be continued...)

  26. ... Sorry, but your argument that we're all better off because the FDA is regulating the tools and corresponding support that are/is available to surgeons falls flat with me. Even without considering all of the health benefit we're losing by not having access to the new technologies the Europeans do, I'm not sure the FDA even does a better job of preventing use of "bad" products. The 'police force' that results from the European surgical community keeping the companies honest likely does a much better job. I'm highly skeptical of your claim regarding adverse events being higher in Europe and challenge you to provide the data to support it. As I'm sure you know, by every objective measure the European health care systems provide comparable, if not better, overall health outcomes to the US system. (Perhaps not as conveniently, comfortably, and luxuriously, as we do, however.) And I can easily name numerous spine technologies that are or have been freely available to the benefit of patients over there much longer than they have here. (Pedicle screws for instance, need I say more?)

    And your point regarding "doing an IDE" shows how completely ignorant of the regulatory burdens you are. One of the greatest losses in innovation we have in this country is precisely the minor product or product change that may be a significant improvement, but doesn't necessarily translate into large sales. Thus there's no business rationale for the expense of performing the IDE. European companies just make the improvement and move on, while here in the US, surgeons and patients are stuck with older or out of date versions of products until the next major change gets run through the full IDE process.

    The bottom line is, when it comes to the heavy regulation by the FDA, we're paying a huge price for little or no actual benefit. When it comes to device regulation, the US FDA is far more of a "socialist" entity than anything the Europeans have. It extracts a much higher price from the public in the name of providing a common good, which in my opinion, it fails to do anyway.

  27. You know what--you might be onto something. If companies weren't motivated to cut corners and unwittingly design shit that breaks in people, we wouldn't need FDA.

  28. 10:20 you might want to read up on the definition of an IDE before you go spewing that diarrhea all over my monitor. IDE's are not required for minor changes. That's why I used the word "innovation." But I'm not surprised you are unfamiliar with that concept.

  29. Too many Crooks are gonna spoil the stew,
    There ain't nobody cooking but me and you...

    ~The Robert Cray Band

  30. Now there's a blogger that understand what great music is all about.

    Coffee for my breakfast
    Shot of whiskey on the side
    It's a dark and dreary morning
    With the clouds covering up the sky
    And the forecast calls for pain..................

    How appropriate for what is going on

  31. Hey 3:59, maybe you should look it up. For changes, it depends on whether the product was subject to an IDE for its initial submission. Needed an IDE for initial approval, probably needs another one for the change. And that doesn't even start to cover all of the products that never or were delayed to market because they needed IDE's to be approved, but the market was too small to justify it. Products for O-C fixation, vertebral body replacements, and many others come to mind. Took forever to get them here in the US, long after they were standard of care OUS. All brought to you late courtesy of the FDA.

  32. No, 10:45, it only depends on the nature of the change (regardless of whether it initially required an IDE). If the change requires another clinical study, then it wasn't minor, and you should congratulate the developer for a bold venture beyond the incremental. Seriously, stop making excuses for rolling out a portfolio filled with exceptionally lame me-too products.

  33. Actually, those products came late not because of FDA but because no company would pony up the money for a PMA given they were doing just fine from off-label cases.

  34. ... exactly! Because the FDA's regulation makes it an unworthwhile business case. It certainly would have been of huge added value for companies who make innovative O-C fixation devices to hype their product, and show pictures of how it worked, and have technique manuals to ensure docs used it correctly, etc., etc., but even that added value didn't add up to exceeding the cost of the IDE/PMA process, or they would have done it!!!!!!! Meanwhile, the European surgeons and patients had these benefits while the "advanced" regulatory system prevented it for patients and surgeons here in the US.

  35. ... and products had to be designed in a manner that their use could be justifiable in an application for which it wasn't even intended! (e.g. long bone fixation) How ridiculous is that! And before you reply with, well they should have done the IDE/PMA for the application, I'll reiterate, IT COSTS TOO DAMN MUCH FOR THE INTENDED MARKET!!!! What good is making a product and pursuing the expensive trial only to have to price it so high to rocoup the costs that nobody could afford to use it for the relatively infrequent cases it's needed for!

    Look, I don't have a problem with someone advocating that the regulatory practices of the FDA has forced companies to jump through new hoops in both safety and efficacy validation that may have saved some complications or lives along the way. And unquestionably the new Level 1 evidence that has come about in the field of motion preservation is in large part due to FDA regulation. But it's ignorant to deny that they also have inhibited innovation and medical advancement along the way, not to mention contributed to increased costs though expensive regulatory hurdles and reduced competition. And in my view, their negative effect through the latter has far outweighed the benefits of the former for the public in general.

  36. Relatively infrequent? Are we talking about the same devices? For many of the spine devices being used off-label, the costs of the study would be recouped within a few years (and some of them have already been on the market for over a decade). It only costs too much if you consider that the devices are already being used off-label, so why should companies bother...