Thursday, April 28, 2011

Anatomy of a Merger

Now comes the fun part.  As many of you know, with the acquisition of Synthes, Johnson & Johnson will be challenged with the daunting task of integrating Synthes into their organization.  Analysis paralysis is already setting in.  Having an integral role in acquisitions and mergers has taught many a valuable lesson.  The first lesson is that just because you have money to buy something, doesn't necessarily mean you are going to be any good at merging a company.  Unfortunately, wealth should never be equated with intelligence or competance.  It just means you are wealthy.   Neither does it mean that hiring a consultant is going to make your life any easier.

The biggest challenge for J&J will be the integration of trauma and spine, where there is tremendous overlap.  Contrary to what some analysts are saying, the worst that can happen would be allowing the trauma and spine business units to continue independently while corporate attempts to figure out how to assimilate the busiess units.  Identify the plan and move swiftly, if not, you will create confusion in the marketplace. Honesty and transparency are important even if you have to hurt some people's feelings. Communicate with your customers.  Regardless whether you believe it or not, a business as usual attitude will come back to haunt you.  Deciding on whether you will continue to sell via distributors or direct sales people will alleviate the trepidation and anxiety that alredy exists in your respective business models.  Today, your sales people are confused and distracted as to what awaits their futures.  By identifying the plan and implementing it, you will establish continuity while transitioning.

The cultural differences will be exasperating.  J&J has always exhibited  a stiff collar mentality, while Synthes has been more of a gunslinger.  The posse will learn quickly that there is a new sheriff in town and that some of the old mores and values will not be tolerated.  It is interesting to read outsiders opinions of how different these two organizations are.  Contrary to what is said, selling is selling regardless whether you work for one or the other organization.  Synthes salespeople have one of the best educational sales training platforms in the industry.   Unfortunately, there will be collateral damage in the rank and file, as well as in middle management.  Like TSB said, this will be a golden opportunity to get rid of  the dead wood in management across the board.  Don't make the mistake that companies like Biomet and Stryker made by allowing total joint reps have access to trauma products and trauma selling recon.  This will diminish your salespeoples focus.  In addition, trauma salespeople are more Type A personalities in comparision to recon salesmen.  It's evitable that there will be people that are on the chopping block, if you haven't begun looking for a new job, now may be the time to polish one's resume.  The bad news is that the market sucks and unless you can flip immediate revenue, good luck in finding a new job in this economy.

So in the spirit of debate, TSB wants to know, will this be easy or is Johnson & Johnson heading into the perfect storm?

Wednesday, April 27, 2011


Spine Nation and Fellow Musculoskeletalvites, if you"ve never been to a Flo and Eddie Concert follow the bouncing ball;

"Imagine me and you, I do, I think about you every night it"s only right to think about the girl you love and hold her tight, so happy together......I can"t keep from loving nobody but you, you"re on my mind, when the wind blows baby the skies will be blue for all my life...."

Well fellow bloggers a deal is a deal.  In the world of high finance Synthes offered her honor and J&J honored her offer and the rest is history.  It was announced today the J&J will acquire Synthes in a cash and stock deal, by offering $21.3 billion or $181.30 per share.  Unlike the Wall Street Journal who called him Dr. Wyss, having worked with Hansjoerg Wyss it was time for the Wyssmeister to hang up the old spurs and move on out, he"s on the clock and desires to add to his legacy and life"s work.  Mr. Wyss owns 47% of Synthes and will be worth an estimated $10 billion when all the papers are signed.  Both companies boards have unanimously approved the transaction.  Now that it"s done TSB would like to send an open letter to William Weldon at J&J.

Dear Mr. Weldon:

Congratulations on winning the Irish Sweepstakes.  J&J/DePuy has a golden opportunity to continue the legacy of a great company.  If you really want this transition to succeed, don"t just think about the challenges that await you in integrating two companies of this size, start thinking how you will replace the dead wood that exists on both sides of the management aisle at both trauma companies.  If there ever was an opportunity for a cultural cleanse, now is the time.  Not only will you be considered a player in trauma, you will have an immediate impact on spine, maxillofacial and power equipment.  Many readers frowned upon the probability of this acquisition two weeks ago, today it is a reality.  In addition to the aforementioned products you will have inherited the greatest marketing tool that the industry has ever seen, the AO/ASIF surgeon and ORP trainng/educational programs.  Who ever said you needed a marketing department?  If you don"t believe it has great value, imitation has always been the greatest form of flattery, that is why companies like MSD and NuVasive have succeeded, they realized that knowledge is power.  For those that had doubt regarding this deal, any company that controls its manufacturing cost with a just in time model and carries minimal debt for a company the size of Synthes is a deal made in heaven.  Once again the Great Vampire Squid prevails,  you know what Bogie once said, "here"s lookin" at you sweetheart."

Saturday, April 23, 2011

What's Going On

Over the last few months, the criticism of spine reps has intensified. Is the spine industry a mirror image of a larger epidemic effecting America? We have become our own worst enemy, a divided society, no less a divided industry. Us against them, rich against poor, business against government, the unregulated against regulation, red against blue, right against wrong. Whether our readers agree or not, there has been a blatant assault on the sales rep.  Some of it is justified. Some of it is not justified. Some of it attributed to good old A1, red, white and blue greed.  So in an effort to set the record straight for our readers, here are the facts.

Whether  management, surgeons, or hospital personnel believe it, your hard work is what makes this industry thrive.  You are the stimulus that pumps life into a company. Whether TSB has been in sales or in management, the bottom line is the infantry gets the job done.  A visit into the Korengal Valley would expose that there aren't too many generals waiting for a firefight. The publics perception is that you are all making $250K per year, drinking Bordeaux, smoking Cohiba's,  and investing in Broadway musicals,  and we all know whom we can thank for that.  People believe that most of you have banking hours, are overpaid, and are the primary reason for the escalating cost of delivering healthcare in the U.S.. Just because you did not go to medical school doesn't make you any less valuable in the food chain.  As baby boomers enter their golden years, they have been programmed demanding the fountain of youth.  They want bionic knees, hips, ankles, and spines, demanding a return to normalcy after all is said and done.  Insanity at its best.  We may be a civil society, but based on what is going on around us, not a very intelligent one.

Unlike salaried employees, sales reps are solely responsible for what they earn. Essentially, you are no different than a stock broker in that you eat what you kill.  You deal with a pernicious, apathetic, and selfish healthcare environment.  Did I miss any other adjectives? You are stonewalled by hospitals, operating rooms, nurses, doctors, and hospital administrators whom frown upon you as a necessary evil until they need something, and then they want you to drop everything you're doing to help them out, and you do it.   When did this assault begin, and whom do some of these people think they are in contributing to the escalating cost of healthcare (Do you hear me Dr. Steinmann)?  Hospitals complain about cost, yet continue to expand and build newer, bigger and better facilities.  There are new cardiac centers, children's centers, women health centers, cancer centers, and parking garages, yet no one seems to be questioning and demanding accountability on their part.  There is no excuse for the behavior that is exhibited by these people.  Unfortunately, courses in professional behavior is not taught in med school or grad school.  80% of your business comes from 20% of your accounts, because your days are spent brokering rather than selling.  Thank you corporate America and Dr. Famous for your contribution to our day. When you do have something innovative or clinically beneficial for the patient, you have to move mountains to motivate a surgeon to try it.  During the interim, the patient suffers.  On average you spend $100-$125 per week on gas (thank you speculators), in addition to tolls and parking (someone needs to pay for the construction) and you are obligated to buy a prospective customer lunch if you have any chance of getting their attention, whom no less has no problem telling you that there will be 10-15 employees attending. TSB usually tells the nurse that I will be glad to meet the surgeon one on one and buy him a sandwich. Some even have the audacity to tell you where they would like it catered from. (that's my favorite).  A shameless society.  Besides these expenses, hospitals want you to register with various vendor management services to protect the patient, a bogus rationalization.  What about your protection?  It's bad enough that hospitals are squeezing you for every penny on the dollar, but some want you to pay to play in their facility. Aren't these people embarrassed? And then you have to deal with management at your respective company.  So in an effort to set the record straight, here are the facts.

Management is in denial when it comes to market dynamics.  Some still believe the party is going on.  Publicly traded companies continue to push you to your limits by promising their Master, Wall Street, that they will continue to grow in spite of all the barriers that you face everyday in growing your business, no less the ones that you cannot control like insurances denying surgeries (can't wait for NuVasive's analyst call).  Attrition has become a norm in sales.  You're on the clock.  If you can't increase revenue in a short period of time, you're gone.  Just look at some of the companies out there.  Management is more concerned about share holders value than whether they have delivered the necessary tools so that you may be successful.  How many empty promises have been made to you?  How many product development timelines have been missed?  Yet, the game continues by increasing your quotas and demanding results.  Some companies can't even provide you with samples and marketing collaterals.   Your middle managers have grandiose expectations.  They accept whatever is spoon fed to them by the senior management team and never question the validity of any strategy let alone revenue expectations, because they cower for their jobs.  They're great at giving you a quota when they have no clue as to the demographics of your territory, or the obstacles that you are confronted with on a daily basis.  Product evaluation committees (what free market), preferred vendor lists (discrimination), vendor certifications (violation of your rights), surgeons protecting other companies turf and their own consulting agreements, if that isn't the decline of the empire, what is?  TSB wants to what's going on?  You know what Marvin Gaye once sang;

"Picket lines, and picket signs, don't punish me with your brutality, talk to me so we can see, what's going on, what's going on, what's going on,  we've got to find a way to bring some understanding today."

As a side bar to our discussion, TSB hopes our Jewish and Gentile brethren had and have a wonderful holiday season!  L'Chaim!

Wednesday, April 20, 2011

Spine Uprising

Paranoia is in bloom
The PR transmission will resume
They'll try to push drugs that keep us all dumbed down
And hope that we will never see the truth around, So come on!
Another promise, another scene
Another packaged lie to keep us in greed,
And all the green belts wrapped around our minds,
And endless red tape to keep the truth confined, so come on


So come on fellow bloggers, the federalis spent the other day touring the office of Dr. Sanjoy Sundaresan at the Texoma Spine Center. By the sounds of it, Dr. S may have some unexpected legal issues with the Federal Government.  Leaving with boxes of evidence, potentially a little more than the practice of medicine was going on at the TSC.

A little pain, a little dream
A potent elixir another scheme
A frequent visit to my dealer
Pharma grade from my healer

"They give me injections  because my lower lumbar is tore,"  Obviously one of Texas finest,.  Ironically, people don't even know what they are being injected with.  Shocking no less.  If it makes you feel good, go for it.  Nothing what a l'il ol morphine will do for you.  So as Dr. Sundaresan makes the news, he now joins Dr. Makker as a one hit wonder, and the hits keep coming.

Saturday, April 16, 2011

Going Once! Going Twice! ............................Sold

Friday's late report on the potential acquisition of Synthes by Johnson & Johnson has raised numerous questions and analyses about the magnitude of such a deal, and, how it would affect the spine, trauma, and maxillofacial markets.  If an acquisition would occur, integration of these two companies could be a logistical nightmare.   Those that are liabilities on one side or the other, would become collateral damage.  Yet, the mere fact that Hansjoerg Wyss would entertain an offers does not bode well for Synthes employees. The current management team is old and tired, and still using the same old tricks of the trade that has been their modus operandi for years. The ride has been good. As TSB stated in the April 15th post, when hasn't Hansjoerg entertained an offer?  It has always made his ego feel good, and rightfully so. Everyone knows that J&J has the financial leverage to consummate this deal, just like Medtronic.  The only question this time is whether Hansjoerg intends on pulling the trigger?   Regardless whether our bloggers like Synthes or not, one must respect Synthes for what they have accomplished. At one time Synthes was a near trauma monopoly.  Synthes has lost some market share due to pricing and a steady decline in a culture that once was the jewel of the industry.  Yet, the company continues to develop and market quality trauma products unlike the lap dogs Zimmer, Richards, Biomet and DePuy offer. Imitation is the highest form of flattery. Like their spine division, Zimmer Trauma could mess up a wet dream, while companies like Biomet and DePuy have been mere contenders.  Richards could be a threat but any implant company run by ex-GE gnomes has no vision.   In addition, Synthes Trauma would be a tremendous boost to the DePuy trauma portfolio, which is mediocre at best.   Outside of the 2006 acquisition of Hand Innovations, DePuy has never been a "real" player in trauma, contrary to what their highly esteemed management team will tell you.  Visionary is not a word that comes to mind, when one thinks of DePuy Trauma.  If there ever was a time for Synthes to be sold, now would be the time.  Why?

In due time, Hansjoerg will be an octogenarian.  At this juncture in life, his days are consumed with the Wilderness Society, the Grand Canyon Trust, Rails to Trails, and the Southern Utah Wilderness Alliance in addition to his 900 acre Halter Ranch, and other philanthropic ventures like his beloved Harvard University.  Knowing Wyss, he would rather be hiking, cross country skiing, playing tennis or flying in his Lear Jet to his next exotic destination than listening to the non-sense that his lieutenants are up to.  The biggest factor is that Hansjoerg has always been ahead of the curve and knows that the industry has changed, and that now may be the time to get out while the going is good.  Yet, before he does, it behooves him to play the market to see whom else has the fire power to buy Synthes. For all we know, Wyss may be posturing to see if J&J is willing to up the ante.  If J&J can entice Wyss, the company stands to increase immediate market share in trauma, spine, maxillofacial, and power tools.  Many bloggers fail to realize that Synthes has a great presence in other global markets.  This will only increase J&J's presence in other markets.

So in closing, many of our bloggers are compelled to talk about Zimmer buying NuVasive (Dvorak doesn't have the Boards backing),  about NuVasive buying Trans1 (wishful thinking), and whether Lukianov wants to exit spine for the entertainment industry, but those are not the story.  The question is whether Woody has a woody for expanding his kingdom and whether Wyss is ready to ride off into the horizon looking for more innovative and challenging things to do?  You be the judge,  As the great Lowell George once sang; "time loves a hero."

Friday, April 15, 2011

Is Synthes on the Block?

It was reported on today's wire services that Johnson & Johnson has been sniffing around the arbeitsgemeinschaft osteosynthesfragen in a potential blockbuster deal, that if it was to go down, would be an estimated $20 billion dollar acquisition.  If capable of executing a deal of this magnitude, how would this swing the pendulum for Johnson & Johnson when it comes to their trauma and spine business units?  For years now various companies have courted Synthes, only to be jilted by the girl they covet.  Years ago, Zimmer sniffed the Holy Grail to no avail.  Then Stryker had delusions of acquiring Synthes prior to acquiring Howmedica only to be laughed at by this smug starlet.  Yes fellow bloggers John Brown and Dave Simpson thought they had an inside track, too stiff to play that riff.  Johnson & Johnson attempted to get to the alter, only to be jilted.  Unfortunately, they just didn't exude the love and affection that the Wyssmeister was seeking back then.  Even though there is some skepticism regarding this deal, one must admit as healthy as Wyss has been, it might be time to sell Synthes and ride off into the sunset so that he could spend whatever time he has on this earth in Big Sky country, riding the range and smelling the sagebrush.  So the question must be asked, will this be the blockbuster deal that everyone expected, or, is Wyss up to his old tricks in hope of driving up the price between Johnson & Johnson and whomever else is lurking in the brush.  There comes a time when every cowboy must ride off into the sunset, either on his horse or lear jet, and drink the fruits of his labor at the Halter Ranch.

You know what Poco sang many years ago;

"you and I counting desert stars and lovers, one by one
While mandolins and steel guitars help our love song along
who could show you, ever know you, fall into my dream
Turn around and, then you are in cowboy boots and faded jeans

TSB wants to know DEAL or NO DEAL?

Open Letter to NASS

Dear NASS:

TSB wanted to write an open letter to your organization commending it for the wonderful job that you continue to do as a medical society.  Your organization is dedicated to promulgating the  professions highest standard of evidence based and quality spine care.  Unfortunately, the past few weeks have cast an image on your profession that leaves many believing that the foxes are guarding the hen house.  Those of you that are members of NASS' executive committee must feel slightly embarrassed by last week's and this week's Wall Street Journal expose on Dr. Makker.  Maintaining and preserving your professions integrity with America's public must be your top priority.  It must be concerning to  each of you that the actions of a few, is casting a black eye on the many spine surgeons that really do care.  Words like honor and trust in your disclosure policy have no meaning if one does not live up to those standards.  

The general public doesn't truly understand the importance of having collaboration with physicians in developing new modalities of treatment, assessing the potential of an idea, or simply providing their clinical expertise, all which result in enhancing the patient's quality of life.  This synergy is vital for our mutual existence.  What is concerning is that there a fundamental breakdown between doctor and patient when the patient is viewed as a profit center.  And it should be a concern.  Recently, TSB reviewed the program for the 2011 AANS meeting, granted another organization whose many members perform spine surgery.  There were over twelve pages dedicated to disclosure along with five pages of surgeons that are not affiliated with any company.  Many of those surgeons were from foreign countries.  If a spine surgeon is working with five or eight companies on projects, how could this individual really focus on the task at hand? Undoubtably, we live in America and no one has the right to tell another person how he or she can pursue one's livelihood, yet, when outside financial interests and bias influence a surgeons decision making process, this behavior is damaging not only to the profession, but also to the patient.

With all the negative press that the Wall Street Journal and New York Times have published regarding the Dr. Makker's, Kuklo's, Polly's and Wang's, just to name a few, is there no concern that only one surgeon had the nerve to stand up, identify himself, and be heard in a public forum?  What does this say about our industry and your profession?   Contrary to what NASS believes, there are many surgeons that still fail to disclose the many side deals that they have initiated for their own financial gains.  If disclosure is important to your organization then you need to expand the scope of the types of financial relationships that your members partake in.   Unfortunately, past members of NASS have set a poor example of how to conduct oneself both professionally and financially by creating an atmosphere of gaming the system, and for those tenured in this business, we know who they are.   How many of your members are investors in companies and have failed to disclose?  How many are actively involved in POD's that have failed to disclose?  How many are owners of Physician Owned Hospitals, and have failed to disclose?  

The bylaws that you espouse can be interpreted as nothing more than lame duck principles in a futile attempt to create an image that you are a governing body for an organization that has no legal authority to police or monitor its own members.  Hopefully, this will be a wake up call.

Thursday, April 14, 2011

Thursday Op-Ed Piece

In the wake of Monday's (4/11/11) Wall Street Journal article, TSB has been deluged with information regarding nefarious business models that have been potentially designed to shift profits that threaten the industry's future. Some readers have accused the Journal of sensational tabloid journalism. Many people in the industry couldn't be any happier that people like John Carreyrou and Tom McGinty of the WSJ, and Barry Meier of the NY Times continue to shine a light on spine companies and spine surgeons in the news.  Those individuals and companies that are directly, or indirectly involved, will argue that this business model is legitimate, based on various legal opinions.  Some bloggers question whether it is politically correct and financially beneficial to attack our customers?  In all likelihood, individuals involved in these schemes rationalize their existence by calling themselves "stronger," "bigger," and "smarter," than those that attempt to earn an honest living.  Based on various complaints in public records, Dr. Makker probably believed that he was smarter, stronger, bigger, and beating the system.  Dr. Makker will be afforded due process under the U.S. judicial system. Unfortunately, the only people that have suffered are those that put their faith and health in a system that has countlessly failed at policing their own. Where was the hospital administration and hospital board the entire time?  If TSB was counsel for the plaintiffs, not only would Dr. Makker be sued, but Providence Portland Medical Center would be sued for failing to provide oversight .  NASS, AANS, AAOS and AdvaMed are lame duck organization. Rarely if ever has the industry disciplined one of its own.  Even the OIG and the DOJ have failed the public.  To this day, industry people ask, will the FBI and the DOJ ever prosecute the former Blackstone Medical executives? Answering that question is the equivalent to answering the meaning of life.

Surgeons rationalize the POD model by saying that this model does not lead to over utilization.  Maybe some are sincere with their intent.  Yet, when one looks at the 25% dividend that was supposedly paid to an L.A. Spine surgeon totaling over $500,000, one must admit that this lends a new definition to paying dividends on investment.  If surgeons are "disenchanted" with the amount of money spent on sales, marketing and distribution of product, maybe some introspective due diligence should be paid to what corporations pay in surgeon consulting fees.  TSB would argue that general administrative costs are dwarfed by consulting agreements.  All one has to do is take a tour of  Medtronic's, Stryker's, Zimmer's, Biomet's and DePuy's websites.  TSB guarantees that this information is incomplete since full disclosure is not mandated for a few more years.   How do small companies rise like a meteor, claiming 20%, 30%, 40%, 50% growth at a time that the market is essentially flat?  Is it their innovation?  Is it their technology?  Most of us know that we continue to compete in a zero-sum market, so what's the incentive?

Surgeons are quoted as saying, "that they feel that they could do this much better, if afforded the opportunity to be the intermediary with the hospital." Have any of us ever met a surgeon that didn't think he could do something better? If the intent is to save the hospital money, and drive down the cost of delivering healthcare, then why not just open the process to closed bidding? Modern technology and product saturation has leveled the playing field.  If surgeons know design preferences, have an ability to forecast volume, and understand product quality then let's eliminate the preferred vendor list that minimize free market competition.

But the bigger question that must be asked is, if the rationale for physician owned distributorships is to drive down the cost of delivering quality care, then physicians shouldn't complain when the government or the insurance industry looks to decrease their reimbursements.  Isn't this just another avenue to driving down the cost of delivering healthcare.  POD's, POC's, POH's are nothing more than an attempt at manipulating the system to increase one's own profits.  In closing, Dr. Makker may have done the industry a favor.  If found guilty will the legal system punish him?  Or, will they slap him on the wrist only to find out he surfaced in another state practicing medicine?

Tuesday, April 12, 2011

Tip of the Iceberg

As the  AANS comes to a close, it's highly unlikely that the Academy of Neurosurgeons will be celebrating  a Rocky Mountain High in Colorado.  With one day left, another black eye has been cast upon the spine industry as the Wall Street Journal continues to pull back the skin on the onion when it comes to Dr. Makker and his potential involvement with Omega Solutions. Could this investigation be the body blow that  finally initiates a federal investigation into POD's?  One has to wonder, how much more will be exposed regarding additional backdoor machinations that exist in this industry?  For starters, we haven't even started investigating workers' comp schemes that involve distributors' and workers' comp attorneys.  How many of these attorneys are in bed with surgeons, whereas they drive up the cost of patient care with the intent of increasing the settlement, and then reap the profits? And what does it say about the supposed esteemed field of law? Attorneys will tell you what you want to hear, especially when you are paying them $275-$450 an hour?  For those of you unaware of what goes on in workers' comp, this does not receive anywhere near the attention that POD's receive.  Like TSB says, this could be the tip of the iceberg.

After reviewing page 2 of the Omega marketing document one has to wonder, what in God's name were these people thinking of?  If the language in this document isn't an inducement, what is?  If this isn't motive, what is?  If this isn't looking to create an incentive for a prospective surgeon, what is? "Our Medical Buying group opportunity has been in existence for over 25 years and has attracted the attention of many surgeons due to its generous dividend return of 25%"  Looks like Hooper, Bookman and Lundy are going to have to do a bit of explaining to their clients regarding their contributions to advance the field of healthcare and changing the shape of healthcare in the state of California and surrounding states. What's even funnier is that Omega provides an example of the potential income a surgeon can generate if one buys into the program.

Foolus Cleared by the FDA

Fellow bloggers, one of TSB favorite quotes is " the difference between truth and fiction is, fiction only has to make sense."  Especially, when you are pandering to potential investors weaknesses.  For a company whose stock dropped from an all time high of $7.62 and today hovers around $2.95 there's a sense of urgency at AlphaWreck.   On April 11th, the FDA, you know, better known as the spine industry's boogie man, approved  the Solus. Now there's marketing ingenuity at its best,  an original name, if ever used in our industry.  Solus means to stand alone, so does this mean that the Solus will be a stand alone device?  In addition, this device is touted as a innovative interbody.  As the Family Guy would say, WTF?  But it gets funnier when one scrolls down through the article posted on OTW.  This device has counter rotating blades, ooooooh!

But here's the kicker, Dirk Kuyper is quoted as saying, "in order to optimize the success of this REVOLUTIONARY PRODUCT,  the controlled launch will be a tiered release with emphasis on both clinician and sales training." You aren't serious?  Surgeons and sales reps will need to be trained on how to activate rotating blades.  TSB would think that at this juncture most surgeons understand how to approach the disc space, or course unless you're one of the surgeons that spends more time in litigation than in operation, or you can't read an MRI, CT or X-Ray.  So in closing, TSB wants to know what our fellow bloggers believe, is this new, is this true and will this make a difference?

You know what the Maestro Eric Clapton once sang;

If I could reach the stars, pull one down for you
Shine it on my heart, so you could see the truth
That this love I have inside, is everything it seems
As for revolutionary innovation, it's all in your dreams
That I could change the world, I would be the solus in your universe....

Friday, April 8, 2011

Spine Blogger Survey

Is Dr. Steinmann's, aka patient zero, POD model just the tip of the ICEBERG?  How many companies are utilizing this model?  How many surgeons are involved in these ventures?  In terms of dollars, how big are some of these entities?  TSB and a colleague were discussing the rise of Physician Owned Distributorships and how it is affecting everyone's ability to earn a living.  Contrary to others opinions, many industry people believe that what we are witnessing is a fundamental breakdown in competitive boundaries in business principles.  Is this just the beginning of the end?  Do Medtronic, Stryker, Zimmer, Synthes, K2M, DePuy, and NuVasive truly condone hinging their futures on this model?  And if so, does this bode well for investors?   How badly are the POD's cutting into some companies margins?  Are some of these POD's really saving the hospital's money, or are they just shifting the profits from the companies into the pockets of the surgeons?  Are the big boys succumbing to pressures from smaller companies?  Has this industry become the poster child for an "anything goes industry?"  Will there be a decline in the need for sales people, and have we evolved into a "coverboy or covergirl" model?  Some will think that these observations are esoteric, yet, the by product of the spine boom in the early part of the turn of the century has made this industry look like more like teenage wasteland than ever before.

As TSB was interviewing some former Blackstone employees, those employees were reminiscing about the good old days when the Three Amigos were cutting deals with surgeons and mandating that distributor principals agree to 50/50 consulting agreements.  Unbeknownst to some distributors, the Amigos would come into their territory in the dead of night, meet with the surgeon du jour, and then inform the distributor that a deal was done.  The result, you pay 50% of the consulting and I pay 50% of the consulting fee.  Some argue that this model still exists, the only difference is that after years of consulting with attorneys specializing in Stark, the language and compliance protocol has been refined to smooth over the edges.

How does this model really help the patient?  Slowly, many layers of veneer have been peeled off the healthcare industry.  What we have today, is a cross between a dystopia and a grifter society.  Dysfunctional truly doesn't define the industry?  Does the industry have no one to blame but itself for what we have evolved into?  We behave no different than the former Mayor of Chicago, who under sold off the parking meters in the City of Chicago to a foreign entity, no different than the former Governor of Pennsylvania who attempted to sell off the Pennsylvania Turnpike to an Arab consortium.When you read stories about surgeons like Dr. Makker and research all of the lawsuits filed against him, one has to wonder, how many of these procedures were influenced by greed, or by clinical necessity?  And what about the patient?  So in closing, TSB wants to know who are these POD's, which companies are building their futures on this model, and will the carousel of life continue to spin round and round like the painted ponies that go up and down?

Wednesday, April 6, 2011

Raiders of the Lost Ark

Indiana Jones would be proud. As many of our bloggers reported, Stryker is suing Zimmer Spine after the new Indiana Jones of the spine industry, Paul Graveline allegedly poached their sales force.  Thank you fellow bloggers.  Just like Indy, Graveline was probably hired to excavate the spine world's Ark of the Covenant, immediate gratification, instantaneous revenue, a real shining star, a feather in his brown Stetson Fedora.  The most entertaining aspect of the suit is that Stryker alleges that it stands to lose millions of dollars of sales as a result.  But here's the irony of this action.

Many years ago Stryker  set the precedent for this type of activity, by raiding the employment ranks of Smith and Nephew, Howmedica, Synthes, and Biomet.  But the plot thickens as one reads that Stryker is accusing Zimmer of "willfully and maliciously" targeting Stryker employees to establish a spine related products division, (does Zimmer have a spine division, or at least an imitation of one?) without expending any effort to build it.  So look at whom is calling the kettle black?  Stryker infamous for its twenty percent growth, the darlings of the Street, known for increasing its market share in their orthopaedic and spine divisions by acquiring other company's people and technology is now going to sue Zimmer.

As for claiming that these former employees will be stealing confidential and proprietary information to unfairly compete is ludicrous at best.  What's so proprietary about Stryker's spine portfolio.  They rarely if ever have created a product from concept, and when they did they couldn't even file it properly. They acquired Dimso to catapult themselves into the spine arena, they acquired the licensing rights to OP-1 from Curis, they acquired Surgical Dynamics and the rights to Theken's products, only to screw the pooch on that deal, in addition to other acquisitions that took place in reconstruction and trauma.  What proprietary secrets?

As for targeting Stryker customers, let's get serious.  For all the spouting off on this blogs site that it comes down to relationships, weren't these relationships fostered by the distributors/sales people?   The only reason doc's get involved in any company's venture is because they are interested in getting paid for their intellectual property, i.e. their knowledge.   Most of them cannot stand the stiff suits.  To accuse Zimmer of devising a scheme to create an instantly successful spine division is laughable at best.   Even with this raid, Zimmer is a spine company operating with one hand tied behind their back.  As for a corporation stating that these employees breached their fiduciary duty to the company, that's laughable at best, considering there isn't a company in spine that operates in a respectful manner.  You're a piece of meat, and once you become expendable you're gone.

Graveline does bring a "fresh new approach" to Zimmer, one that Zimmer never really tried before.  He is using the same old tricks that were taught to him by his mentor, Stryker, offering huge signing bonuses and guarantees at least for a short period of time.  So in closing fellow bloggers, remember the old expression, misery loves company.  Yes, Stryker will flex its financial and legal muscle against Zimmer, and, it will be interesting to see the Zimmer Board of Directors reaction in the long run if this little plot doesn't unfold as planned.  The bigger question is, if Stryker wins the suit, could this be Double D's death knell?  Yes, fellow bloggers, this is how we build revenue in a zero-sum market.  No longer do company's create innovative technologies, today, the trend is to identify distributors and sales people that can bring immediate revenue wishing for the a shooting star, a meteor as it enters the spine atmosphere only to burn out before it hits the ground.  If there ever was a self-immolating industry, look no further, you work in it.

Tuesday, April 5, 2011

How Could Love So Wright, Turn Out to Be So Wrong

It was reported today that Wright Medical announced that it had accepted the resignation of CEO Gary Henley and terminated its CTO Frank Bono.  The resignation of Gary Henley comes at a time that the company's compliance program is being reviewed.  As for Frank Bono, well it seems that Mr. Bono, no relation to the famous Irish Rocker, was terminated for failing to exhibit the appropriate regard for Wright's ongoing compliance program with the Department of Justice.

Wright has named David D. Stevens as the interim president.  Wright Medical had paid the U.S. government $7.9 million to settle false claims allegations and entered into a Deferred Protection Agreement with the DOJ in the fourth quarter in 2010 pertaining to allegations of improper consulting agreements from 2002-2007.  The DPA is contingent on updating company compliance policies and completing a 1 year monitoring program.  You know what Bono sang;

"Early morning, April 4th shots ring out in the Memphis sky, free at last they took your life, they could not take your pride............"

On a colder front, it was reported a few weeks back that an Orchard Park man admitted to stealing medical supplies and equipment from a local hospital and the company he worked for Synthes. Joseph Raymond, 39, pleaded guilty to grand larceny and other charges before the Honorable Michael Petruszka of Erie County.

Mr. Raymond admitted to taking nearly $2 million worth of items from both South Mercy Hospital and Synthes where he worked as a sales rep.  The thefts took place between 2002 and 2010.  In addition, Mr. Raymond failed to report income from the thefts, the result, Judge Petruszka could sentence Raymond to 26 years in the slammer.  One has to wonder what type of oversight exists at hospitals when someone has the ability to steal at least $250K worth of implants without anyone picking up on it?  If Mr. Raymond did this on his own volition, he will pay the price, but if he knows otherwise, now may be the time to start singing like Luciano Pavarotti, I'm sure there are a few nervous people out there.  Mr. Raymond will have plenty of time to sing everyday,

"As I went down to the river to pray, studying about that good old way, and who shall wear that starry crown, Good Lord show me the way."

Bloggers Poll

There have been many rumors regarding the potential acquisition of NuVasive, TSB wants to know what do our bloggers think.  Is this company ripe to be acquired?  And, do industry insiders believe that Orthofix is seriously looking at this acquisition.  Speculation runs rampant, and, product overlap exists.  Yet, in today's competitve environment does it really matter when it comes down to marketshare?  So do you believe its time for the Czar to sell this baby, or does he really believe he will still be at the helm when and if NuVa becomes a billion dollar baby?

Sunday, April 3, 2011

Tipping the Odds, or Plain 'Ol Stacking the Deck

On Sunday, April 3rd, Barry Meier published an expose entitled, "Tipping the Odds for a Maker of Heart Devices."  Mr. Meier has been known to report on the potential nefarious backdoor dealings in the medical device industry. Potential is the only word that TSB can use based on the Department of Justice track record, a little more later on the DOJ in this post.  Yet,  this story takes the reader back to our favorite city, the City of Sin, the city whose commercials should feature Elvis singing Viva Lost Wages, the city that is proud to promote, "what goes on in Vegas, stays in Vegas."   Vegas is homogeneous.  Americans walking around in their shorts, a cigarette dangling from their mouth, white socks pulled up to their knees, some ridiculous looking tee shirt and their belly hanging over their belts, and TSB is just describing the women.  A picture tells a story, don't it?  Americans practice paganism paying homage to false gods like Snooki, and the Jersey Shore crowd, the Housewives of Orange County.  And then we wonder why there is an outright dumbing down of America.

But this isn't about middle and lower income America.  This story is about the magnetic field that surrounds Vegas when it comes to physician and company consulting agreements.  Read the following excerpts and one begins to see that wheeling and dealing has become a standard in the medical device industry.  Within the last few years a little known German company by the name Biotronik has taken Vegas by storm, and cornered the market on defibrillators and pacemakers at UMC Hospital.  Prior to 2008, Biotroniks implants were not used at this facility.  So how did Biotronik end up getting 95% of UMC's business last year?  You guessed it, the old fashion way.  TSB can hear most of you screaming "Consulting Agreement."  With consulting fees reaching as high as $5,000 per month, it seems that l'il 'ol Biotronik went from being a nobody to being a somebody in the Vegas market.  Today, a federal investigation is examining Biotronik's sales and marketing practices.

Many of you know that in recent years compensation to physicians have come under intense scrutiny.  How intense is left up to the imagination.  What is utterly ridiculous is how the government once again fails to monitor this practice.  The most recent federal law mandates that companies will have to provide full disclosure by 2013 for any payments to doctors for consulting, and other services.  Of course, the primary culprit in this activity is the salesperson whom Mr. Meier reports find ways to flatter surgeons or fatten their wallets.  The interesting aspect about this expose is some of the comments that are made regarding the salesperson/surgeon relationship.

"One sales person was said to hold a great influence over a doctor."   A svengali or dominatrix?  "He loves his white wine and being entertained." Never have heard that one before?  The most entertaining aspect of this story is that Biotronik officials were quoted as saying,"that Biotronik adhered to  an industry wide code of ethics." Of course, it depends upon which code one adheres to.  Does Biotronik adhere to the written code, or the unwritten code?  There is a difference.  So how does a little 'ol company like Biotronic take on the likes of a Boston Scientific, a Medtronic, a St. Jude? Probably the same exact way that many companies in the spine industry do, by maintaining a culture of compliance and ethics.  With an ASP of $35,000, and commissions of 25% TSB has to wonder, what the hell are we doing selling in the spine industry?  There's gold in 'em hills!

There are many parallels between this story and our industry.  A salesperson or distributor becomes successful with a product, the company begins to feel threatened or starts playing games with the distributors commissions, a new company comes along, the distributor is unhappy, and next thing you know the distributor is working for a new company leveraging their relationships in one's quest for the holiest of holy.  But contrary to what many perceive about TSB, our opinion is that this behavior is not generated by greed, it is provoked by a lack of respect by corporations in general.  TSB is not going to get into the central cast of characters in this investigation but what is interesting is that the Department of Justice continues behaving like a paper lion.  In January,  St. Jude paid a $16 million dollar fine settling federal charges of giving kick backs to doctors so that they would participate in medical studies, only St. Jude's did not admit to any wrong doing.   TSB must admit that is my favorite aspect of all of these settlements.  You are fined, but do not admit to doing anything wrong.   Incredible.

The plot thickens when Biotronik makes claims that "entrenched relationships between the bigger producers, implant specialists and hospitals have stymied the company's sales growth."  But wait a minute, maybe Biotronik has a point.  Maybe there is a correlation.  As hospitals have become insulated from allowing free market enterprise, ever hear of the Preferred Vendor List (LOL),  companies and sales people have become much more creative in how they go about entering and preserving their marketshare and livelihood. Physician's who once had freedom of choice to use their vendor of choice, have become vassals and serfs to their lords, the hospital adminitrator.  If the reader doesn't believe it,  spare me a minute.  Last week, while showing a surgeon a product that clinically had therapeutic value over what he was using, the doctor said, "I want to use this on my next patient, unfortunately, if you are not a preferred vendor, you will have to go through the product evaluation committee and get approval in purchasing." At minimum a three month process. And then we wonder why the U.S. healthcare industry is totally out of control.

Once again, the focus of what is wrong with the system is solely placed on the shoulders of the sales representative.  This article talks about sales people earning up to $300,000 per year, playing a variety of roles like technical expert, entertainer, and recruiter.   What's disturbing is that the public's and surgeons perceptions of what most sales people earn is immediately tainted with one stroke of a brush.  Keeping a doctor happy is no different than keeping a consumer happy whether you sell cars, stereos, build homes, or run a hotel.  Unfortunately, once this relationship becomes a dependency, the positive is sometimes outweighed by negative behavior.  But Mr. Meier is behind the curve in reporting on old news.  Those of us that work within the industry have known of many of these scenarios.  Maybe, its time that the media focus on the newest business model that is beginning to take healthcare by storm.  The Physician Owned Distributorship.   So in closing, TSB wants to know who are the companies that are mastering POD's and how is it effecting your ability to do business in your territory.

Saturday, April 2, 2011

The Gift of Cutting

After a year long analysis of Medicare records, the Wall Street Journal reported on March 29th , 2011 revealing a troubling pattern of multiple surgeries performed by Portland, Oregon based neurosurgeon V. James Makker, M.D..  The red flag was that Dr. Makker's rate of additional spinal fusion operations was 39 for every 100 procedures that he had performed in 2008 and 2009.

According to this report, Dr. Makker has been sued eight times in nine years of practice, compared to the average norm of one suit every two years for U.S. neurosurgeons.  The disconcerting aspect of this report focuses on patient Ronald Johnson whom Dr. Makker has operated on six (6) times in less than two years. Mr. Johnson says that he felt progressively worse after each procedure, eventually notifying Dr. Makker that he was done with having surgery.

What seems to be concerning is that upon being notified, Dr. Makker took a second look at Mr. Johnson's x-rays and was quoted as saying "actually, you're going to be alright, adding that Dr. Makker had been looking at the films wrong."

Based on TSB's findings, the only public records in the Circuit Court of the State of Oregon for the County of Mutilnomah relate to the case of Dawn D. Johnson and Shane E. Johnson v. V. James Makker, M.D., Frank J. McKowne, M.D., and Northwest Permanente, P.C., an Oregon corporation.  The plaintiffs were/are seeking a jury trial for damages claimed for $ 2,382,935,77.  Yet, based on the names, this seems to be an entirely different case involving surgeries that were performed on the incorrect level  of thoracic spine by the defendant.   You know what TSB says, "one bad apple can spoil the whole bunch girl."