Thursday, October 27, 2011

The Forecast Calls for Pain

Hari Kari is defined as a ritual suicide by disembowelment practiced by the Japanese Samurai. The Samurai is looked upon as a high ranking noble, if ever there were nobles that believe they have entitlement in the upper ranks of society, this may be the story.  The October 26th headline news in Reuters presents an intriguing plot for readers as to an acquisition that smells afoul..  The cast for this drama includes Stryker (the seller), Olympus (the buyer), the Viscogliosi Brothers (the original buyers and advisors), a disgraced CEO (Kikukawa), a fired CEO (Woodford) and a Japanese company that may have been sold futures when it came to their acquisition of OP-1 by a business partner/advisor.

But before we go any further, one must ask the question, what is Olympus doing in making investments and acquisitions into ventures that are totally out of the realm of their business model and expertise? Portfolio diversification? Just for historical purposes, many years ago the Almighty Stryker acquired the licensing rights to BMP-7 from a company named Curis Biomolecules for $200 plus million.  After years of dumping, that's dumping, not pumping capital into this black hole of a product, the best that they could get was an HDE (human device exemption) and a delicate ass whooping from the DOJ for some company related improprieties, advocating off-label use. So why do you think Stryker was selling you OP-1 for $60 million, regardless that the original price that the VBrothers were offering was $50 million? Could it be that Stryker was looking to get rid of  the proverbial Albatross from around their neck, an obvious fitting metaphor, for a product that was sucking capital and placing them under scrutiny with the USDOJ? Could this deal have evolved into an age old act of protective agreements and political marriages in order to accumulate power eventually surpassing tradition, of course that being the traditional way of doing business in the Japanese culture?  Were the Japanese involved in this deal following the bushido, the moral principles to live honorably?

The plot thickens when Reuters reports that the deal may have cost Olympus 50% more, thanks to payments made to its advisors, the V Brothers.  The V Brothers and Olympus are bound by a confidentiality agreement, therefore, the basis for the story is centered around a $25 million dollar loan that Olympus made to the V Brothers that carries an eight year term, with a 7% interest rate, and would be collateralized by the Viscogliosis' interest in Small Bone Innovations (SBI), and Paradigm Spine (how diluted are those companies).  But here is where the deal between both parties gets interesting, the V Brothers utilized the proceeds from the loan to pay back a $30 million debt facility (loan) from Fortress Investment Group of NYC., and under the terms of their agreement Olympus agreed to forgive $2 million of the loan every year, starting in January of 2012 which would leave a balance of $22.8 million and accrued interest if the product received certain approvals by 2015 or 2018.  Yet, in August, Olympus Biotech expressed concerns  about the value of the collateral (surprise), it has with the V Brothers, and former CEO Michael Woodford who challenged Olympus' acquisitions and was fired in a coup by the BOD, was told that Olympus would need to write off the loan.

Reuters reports that the FBI are investigating the massive advisory fee and Woodruff himself has called upon authorities in Japan and Britain to launch investigations of their own.  TSB wants to know what our readers think, is this a House of Cards, or is this a House of Blues?  As Robert Cray sang,

Coffee for my breakfast, shot of whiskey on the side
It's a dark and dreary morning, with the clouds covering up the sky
The forecast calls for pain, I can hear approaching thunder
I can feel the chills run up my spine, I've seen love freeze before
And I know I'm on borrowed time, the forecast calls for pain

Monday, October 24, 2011


Day by day, night after night
Blinded by the Neon light
Hurry here, hustlin' there
No one's got the time to spare
Money's tight and nothin's free
Won't somebody come and rescue me
I'm stranded, caught in the crossfire

Well fellow bloggers, it seems like the Spinal USA debacle won't come to rest.  No it's not Carville and Buchanan, neither is it Begala or Kingsley, some individuals have taken it upon themselves to question the credibility of the Wall Street Journal, calling the article, well...... tabloid sensationalism. A sophomoric attack on the bastion of capitalist publications, you know what Tommy DeVito would say, WTF?  Spinal USA's CEO, compares SUSA (no offense Synthes) to K2M and Kyphon. C'mon Jim, you can't be serious? As Clara Peller use to say, "Where's the Beef?" Granted, we all know that K2M and Kyphon had surgeon investors, but those surgeons were, well....actually designers of systems that have either set a precedent for managing VCFx's, paving the way for investment capital into other companies with VCFx technologies, or arguably, the MESA can be called the best deformity system in the industry. What is it that SUSA has in its IP pipeline that will actually make it a legitimate player in the industry?  Another pedicle screw? Another cervical plate? Here is your chance to set the record straight.  Prior to the this story making headline news, one must ask, where was the transparency? Today, SUSA attempts to perform damage control. After talking to various people in the industry, there were some  people that didn't know this company even existed. Hmmmmm?  It gets even funnier when a surgeon's wife defends the organization in the WSJ, going to the extent of defending the surgeons decision making without identifying herself as the surgeons wife, deflecting the impetus of the story on some disgruntled rep. As usual, its the reps fault, but isn't this class warfare at its best?  Carreyou and McGinty must be shaking in their boots, when their credibility is questioned by the Jimmy Olsen's of the world.  But let's be frank with one another, does anyone believe that the WSJ would run a story for the sake of tabloid sensationalism, unlike some other platforms that sensationalize anything and everything in the industry?  Somewhere between those words a bigger story prevails as to what's been going on for years in this industry, as some people jump from one venture to another in hopes of hitting a financial windfall without any consideration as to how it effects the industry, the investors, the employees, the patients, and one's own decision making prowess.  As for emerging technology or innovation, maybe SUSA will be a new entrant for the Spine Technology Awards to solicit, they could even have a new category called "best me too products."  Considering that Pastena brought up K2M, TSB must ask the six million dollar question, is that company on the move?

Over the last few weeks, there has been much activity down in Leesburg,Virginia. Considering that K2M launched two new products at CNS, which were line extensions for their cervical portfolio, the Pyrennes, translational cervical plate and the Chesapeake zero-profile device now provides K2M distributors with a complimentary armamentarium.  This past weekend at the Society for Minimally Invasive Spine Surgery in Viva Las Wages, K2M debuted the RAVINE lateral access system along with the ALEUTIAN lateral inter body system.  The dual flat blade system should be a less invasive system for splitting the trasnspsoas. Some people will wonder why TSB is writing about K2M?  Well....... considering that Spinal USA attempted to compare themselves to a company that continues to increase its product portfolio and market share on a national level attaining critical mass, let's see what new and innovative technology will come out of Jackson, MS?  TSB wants to know is Spinal USA a nationally based company, or are they nothing more than a physician owned company?  TSB wants to know what the court of public opinion believes?

Monday, October 17, 2011

The Silly Season

Fellow bloggers, as the last vestiges of summer leave us, and we enter the spine silly season, CNS, NASS and of course the Spine Technology Awards, TSB must ask the $10 billion dollar question, where is the innovation and emerging technologies that we have been waiting for?  Our correspondents that attended CNS and roamed the conference room, excuse us they meant, the exhibit hall in Washington, DC, reported that CNS must be concerned with the legitimacy of a meeting whereby attendance may have been at an all time low.  With the exception of K2M, which launched some new cervical products, was there anything that truly was a game changer?  The perception was that some companies hardly had any traffic.  As usual, CNS strategically placed the "big boys" in the center of the exhibit hall where they erected their temples (small one's at least) so neurosurgeons would pay homage to them as they walked to the back to listen to the speakers and papers that were presented.

Interestingly, NuVasive, aka the Billion Dollar Baby, was missing from the festivities.  Could they have been licking their wounds, or, was NuVasive one of the smarter companies not wasting their time and money considering that NASS is right around the corner?  So what is truly happening in spine?  Have we "out innovative" ourselves?  The Spine Technology Awards will be a barometer of where the industry is truly headed.  Who will present in the various categories for OTW?  Will the judges be comprised of the "usual suspects?" Will there be anything different, or, will this be another humdrum performance?   Every now and then our readers provide us with their words of wisdom regarding the state of the industry, but how does one keep their motivation and eye on the ball when some of the companies that you work for have done NADA to create that 6 degrees of separation for you to continue to grow your business and meet sales expectations?  So here is your opportunity for your voice to be heard.  What is it that your company is launching or selling that will provide you with the necessary ammunition to take out the competition?  If anyone knows what's going down, it is always those in the infantry, regardless whether the generals admit it.  Is spine the last frontier for medical devices, and has time caught up with this well insulated industry.  As hospitals continue to drive down pricing, and insurance companies deny procedures, how is this affecting your ability to grow?

It will be interesting regardless whether Obama gets re-elected or not, because as more companies focus  their efforts into foreign markets, they are behaving like the rest of America's titans of industry seeking new markets. The backlash from all of this will be more and more foreign made implants glutting the U.S. market, driving down the actual selling price.  So TSB wants to know where is the technology and does your company have it?

Thursday, October 13, 2011

Thursday Op-Ed

Today, one of our surgeon readers opined about how this blog has "regressed into a dark place where former allies, reps and surgeons, hide in cloaked veils of anonymity to routinely lash out at one another.  Before we elaborate on this post and the state of our industry, one must remember that it is absurd to discuss how one hides behind an anonymous post, when the individual opining is writing anonymously themselves.  But let's be honest with one another, whether you like it or not, this blog has never regressed, it has always been a referendum on the state of our industry. As TSB has stated, "for years it was our dirty little secret," and contrary to what anyone thinks, it has taken some courage from some individuals, god bless you whistleblowers because sometimes it takes a woman to show a man that it takes balls to step up and call out the nefarious arrangements and greed that slowly has become the norm rather than the exception.  Thank you Blackstone, you set a great example.

Contrary to our commentator's opinion, surgeons and reps have always had a mutual respect for one another, at least our generation did, unfortunately somewhere in the journey, there was a change in personal and industry related dynamics. "If my mentor could do it, why can't I?  I'm just as smart, I'm just as talented. If they could start a company why can't I?  Some investment bank told me my company or IP is worth gazillions."  Could these individuals be part of the entitlement generation, could some people be delusional, maybe some of them are nothing more than dreamers? It is difficult to place one's hand on the pulse of how a once respected industry has become so scrutinized in the public arena (thank you Mr. Carreyou), considering that there are many hard working young sales people and surgeons that do their job in a professional manner respectful of one another everyday.  Unfortunately, the current state of the industry may sadly be a reflection of what our society has become, greedy.  There's just never enough.  Just like Democracy is for sale, spine has taken on the persona of its masters. There is never enough, because what were once vices have now become habits.  And contrary to what Gordon Gecko has said, greed is not good when there is no balance in your lives. TSB believes in capitalism, but one must understand life's priorities.  Today, company's still have unrealistic expectations when it comes to growth and market penetration.  20% is a thing of the past, of course unless you are dealing in a POD or POC. Zero-sum means zero-sum, unless you have breakthrough or emerging technology, the question becomes  where are you getting your growth from?  Your competition?  It's difficult to understand the present or the future, if you are stuck in the past.

Yes doctor, the industry is truly in a sad state, and you are correct that life can go on without a rep, just like life will go on without your existence, but before you cast light on the reps, one should look at one's own profession and accept the fact that the patient has a malignancy that has never before been seen in this industry. Maybe what some people need is a good old fashion whipple? Chemo will not cure this malaise. So, who's fault is it?  Is it the sales rep who earns on average $120-$175K, covers their own expenses, has a mortgage and family to feed, just like you and your peers? Free-markets means free-markets, not a specific set of rules that only benefit me and screw everyone else. Is it the surgeons fault, who has spent countless hours educating and honing their craft with the expectation of being compensated commensurate with their expertise, only to find out that enough is not enough? The reason this insanity exists is because of the lifestyle you choose, the personal decisions you make, and that you believe that you are the straw that stirs the drink. There's only so many LeBron James' or Kobe Bryant's and then the rest of you are bench warmers. But in the end, there's no special dispensation for you just because you are a doctor.  When the world suffers, you too suffer. We have become so consumed with money, that it has led people in both our profession and yours to conjure up more schemes and business models in order to make that almighty dollar.

So before you make an off the record statement, Doctor Anonymous, maybe you should look at your peers and wonder what in God's name are they doing?  Believe it or not, there are many sales people that are as disgusted as you are about the current state of affairs, the question is who and how are we going to do something about it before we get back to doing the things that made us all proud to be affiliated with this industry.  TSB wants to know, what will you do?

Saturday, October 8, 2011

Mississippi Burning

TSB can see the Wall Street Journal's John Carreyou and Tom McGinty playing the investigative role of Rupert Anderson and Alan Ward (played by Gene Hackman and Willem Dafoe) roaming the back roads of Jackson, Mississippi looking for answers to serious questions regarding a virus that has spread to epidemic proportions in the spine industry.  Carreyou and McGinty can Duke it out (No pun intended John) at the Journal's office as to who plays the leading role.  In the current climate, at times it still feels like 1964, a country divided with anger, finger pointing, and reckless abandon.  On October 8, 2011, Messieurs Carreyou and McGinty published an article regarding their ongoing investigation into surgeons taking a double cut by manufacturing and implanting their own devices.

What the industry, our readers, and the general public have found out is that there has always been a fine line between medical ethics, surgical treatment, and financial interests. Shhhhh! Let's fly under the radar, and just maybe, no one will notice us.  To use a broad stroke and categorize all spine surgeons as unethical is reckless at best.  TSB has always been a surgeon advocate, unlike those outsiders that have ingratiated themselves and continue to suck on the teat of the industry.  Our credo has always been that as long as surgeons are truly working on a product development, and not getting paid for redesigning a screwdriver in return for VOLUME, more power to them, and make as much money as you can.  If they're willing to pay for your expertise, all we ask is that you be transparent. Yet, one must raise one's eyebrows as you read the WSJ's expose.  As Carreyou and McGinty continue to lift the sheets, kick the tires, and look under the rug of our industry, they are learning and educating the American public on just how tainted this industry has become. Three Mile Island didn't radiate with as much toxicity. Surely, there will be an outcry regarding this story.  Whatever happened to the Wall Street Journal, that bastion of capitalism?  The unfortunate scenario for the surgeon in question, Dr. Lewis, is that this publicity will surely tarnish his reputation in the Jackson community, considering that those of us that have been in this industry for years, know very well that having any past affiliation with Blackstone raises everyone's eyebrows. Can you say, "VOLUME, VOLUME, VOLUME."  If the DOJ is out there reading our blog, and we know that you are, many of us in the industry are waiting for you to deliver the blow that shakes up the industry, especially when it comes to Blackstone.  If Orthofix was smart, and it is apparent that they aren't, they would put a reasonable proposal on the table and get the DOJ off their back, because the more you piss off the DOJ or the FBI, they will dig in their heels and play hardball, just ask Geoff Yielding. TSB would love to be a fly on the wall during those board meetings, but back to the story at hand.

Spinal USA would be a great case study for the Harvard Business Review, along with some of the other illustrious fly by night distributorships that masquerade as legitimate companies. The financial cost of entry into our industry is low, especially if one reverse engineers other companies products, and finds a manufacturer who is willing to get into cahoots with you.  Innovation?  Emerging Technologies? Beauty is truly in the eye of the beholder.  Yet, the reader must question the credibility and acumen of surgeons that take to their soap box and espouse their business skills, especially after reading this story.  In the spring of 2007, the FDA assessed Spinal USA with 14 violations, including failing to maintain master records for its devices, to having no system in place to track and label them.   As a spokesperson for Spinal USA stated, ahem, "rapid growth caused Spinal USA to run afoul of the FDA." You must be kidding, right? Talk about on the job training, or is this another example of the Rudy Giuliani defense, "I had no recollection or knowledge as to how that happened." Anyone running an implant company understands FDA policy and procedure, especially if they have been in this business or have ever donned a gown and gloves.  TSB hasn't met a single CEO, VP of R&D, Regulatory Director (especially the nervous regulatory guy), or Operations person that welcomes that dreaded phone call from the FDA, informing them that they will be on site on Monday, leaving you 72 hours to dot your "i's" and cross your "t's."

But here's a question for our readers, if Spinal USA was looking to contain cost by eliminating salespeople and marketing cost, why were they recruiting surgeons from other states?  Obviously to increase revenue, resulting in more profits.  You're not going to tell us that you were doing it for the love of spine surgery.  TSB can guarantee that this venture wasn't an exercise in fiscal austerity.  And how about expanding into other markets? I guess people in Mississippi must be concerned in sharing the cost savings with those in Alabama.  There is a fine line between fact and fiction, contrary to what some attorney will tell you.  But then again, isn't it the same people that take an oath to uphold the law, the same people that tell you how you can circumvent the legal system to make a profit?  As one surgeon in the article states, "I know some people in the profession don't think its ethical, but I just don't see."  Of course you wouldn't see it if you are making money off of it, neither were the people that were doctoring mortgage applications for people that couldn't afford paying for them. Though the OIG has issued regulatory guidance for complying with federal anti-kickback statutes, a thorough investigation into some of these business models could uncover some interesting ways of laundering profits.  Oh, and by the way TSB would like to know how many reps are making $26,000 per month, such as the good doctor who filed for personal bankruptcy in this story.  By the way, Dr. Famous, how does one file for personal bankruptcy making $26,000 per month on top of what one earns from the practice of medicine?

But here is the bigger question that lies in store for the people that run NASS, AANS and CNS, what's the point of subsidizing your meetings when you can't even keep your own house in order? How many more black eyes does the industry need before someone delivers the knock out punch? If you don't think its going to happen you are in for a surprise. Maybe that's what the doctor ordered, some CEO's, or former CEO's and surgeons serving time being Bubba's Bitch, dropping the soap in some Federal penitentiary. How many times do we have to hear these stories only to be reminded that our industry has run amok?  TSB wants to know what our readers think? 

Tuesday, October 4, 2011

Tommy Can You Hear Me? I Can Hear Your Wind Blow

Welcome to the camp, I guess you all know why we're here, my name is Tommy, and I became aware this year, if you want to follow me you've got to play pin ball, so put in your ear plugs, put on your eye shades, you know where to put the caulk. Unfortunately fellow bloggers, the Tommy that TSB is writing about is not the Tommy that we know and love, that deaf dumb and blind kid that sure can play a mean pinball. Kudos go out to one of our commentators that has posted the link to the Becker's Orthopedic and Spine Company article on Ortho Direct USA.  If you haven’t read this article or watched the You Tube video with Tommy, you’re missing out on the latest and greatest business model to take the healthcare industry by storm.

“Reducing Selling Cost?  Skyrocketing implant costs?  Driving down the cost of Marketing? Retool Sales People? Taking Back the Operating Room? Virtuous Cycle? Hospitals having difficulty in negotiating better pricing? More reps equal higher implant prices? Redefine the culture in the operating room?  Medicare broke?  Hospital having to figure out how to make profits? Take the salesman out of the equation?  Helping hospitals take back responsibility for managing their implant business? Hospitals taking ownership, versus being a renter of our services? Changing the dynamics of organizational behavior? Seasoned, experienced and tenured individuals standing next to their ORDT candidates?”  How many times have we heard the continuous harangue of these echoes of love directed at sales people in the industry?

Sounds a bit like a Jim Jones and Charlie Manson cocktail, a little social engineering mixed in with a bit of the ole Aztec Two-Step. Tommy, TSB doesn't know if you have been in a hospital lately, or whatever it is that their putting in your tap water, but if you have had the opportunity to visit the OR at your local hospital, there are more barriers and cost controls than ever before.  And before you go any further with that wonderful Fort Wayne marketing spiel about outsourcing your own Orthopedic Device Technicians, or that cookie cutter program that you claim that you don't offer, you need to stop urinating on our shoes and telling us its raining.  It's been raining so long, that we are being deluged out in the field. Where do you get your data that substantiates irresponsible information that sales reps are making more than surgeons?  We haven’t seen any surgeons jumping ship to become salespeople lately, Tommy.  The current climate in the industry is pernicious at best, such that hospital administrators and their staffs view sales reps as an adversary rather than an ally. Tommy…..Tommy……Tommy, can you hear me?  Tommy, so let us get this straight, the hospital is going to contract you so that you can audit their process by recruiting sales people or distributors to turn over their accounts to be part of your so-called revolution.  Black Belts in Six Sigma, why Tommy you may be the next coming of Jack Welch.  In addition, if you're talking about driving up the cost of delivering great products at affordable prices, let's begin with Vendomate, Status Blue, and Rep Trax that suck dollars out of companies, distributors, sales people, and other allied healthcare professionals that attempt to do their jobs on a day to day basis? We actually have to pay to play,  $100 here, $150 there, $400 here, $39 over there and after a while you have a “purdy” good scam hidden behind the guise that all someone is attempt to do is protect the patient. What all the PT Barnums in the industry are attempting to do is take money out of the pockets of hard working sales people who are obviously driving up the cost of healthcare, right Tommy, it’s those God awful salespeople that have caused healthcare to become 25% of the GDP by 2012.

But Tommy, maybe you are the wake up call that many people in this industry need, and that is that salespeople must understand that they have become the enemy within, that it is always easier to pick on the weakest link in the chain, than it is to go after the Big Boys.    So before we end this blog TSB must send one message to his followers and tweeters of spine nation, raise your level of professionalism,  learn as much as you can so you are viewed as an asset rather than a liability, increase your clinical knowledge and commitment, and the Tommy's of the world will become extinct rather than you yourselves.  TSB wants to know what our readers think?

You feel me coming, a new vibration, from afar you'll see me, Tommy's a sensation.