Precision Spine - The Silicon Valley of the East?

This is a Special Bulletin! Could Parsippany, New Jersey become the Silicon Valley of the Spine Industry?  Who knows?  Maybe NASS and AAOS could produce a reality television show. We could have Kashuba, Pastena, Gannoe, and Abdelgany stranded in Parsippany at a local taxi station attempting to play a game of survivor. Who will be Louie DePalma? Latka Gravas? The Reverand Jim or Bobby Wheeler?  We'll get Simka out of retirement to judge who actually comes up with something innovative. TSB can envision a new era where downtown Skyscrapers dwarf the landscape of Parsippany. First it was EBI, aka Biomet Spine, then we had Closet Spine, aka Custom Spine, then Extremity Medical, and now we have Precision Spine. The recent acquisition of Spinal USA and Precision Medical left many people shaking their heads, let alone asking who is insane to pay $72 million for Spinal USA and Precision Medical which were companies that were located in Pearl, Mississippi, let alone fund this thing?

Could this be a wolf of a different cloth?  Upon evaluating the management team at Spinal USA, one has to ask whether this is a spine renaissance made up of the old vanguard from EBI/Biomet? It's like being stuck in a time warp, where's Doc Brown when you need him? I could see one of those guys driving a Delorean. Who knows Kim Kardashian might even show up at the Precision Spine booth at NASS 2012 as a spokesmodel touting the companies innovation and technological advancements, and Kanye can provide the entertainment? 

In their press release, Precision Spine's announced that it is positioning itself to address the needs of the aging population. Haven't we heard that before? Think AlphaWreck. Obviously an original line if there ever was one. It seems that PS is going to accelerate its growth with several new initiates. The company grew 30%, but then again 30% of what? TSB must ask our readers, what do they think those initiatives will be, considering that Spinal USA made the big time not too long ago gracing the Wall Street Journal in a physician owned company expose?  If one looks at the current portfolio what you see is something old, something borrowed, something blue. Not much innovation on the home front, now is there?  

Well if ever there was a sign that we are commoditizing ourselves to death, here is another example that doesn't offer anything by way of innovation. Where is the innovation?  Oh we've heard that before,"it's coming." And then we wonder why hospitals are squeezing everyone on pricing, commissions are dropping, and in the end there won't be a need for a sales rep, an R&D team, or any upstream marketing, we will just copy, copy, copy and work around the intellectual property issues, and deliver the implants and place them in a vending machine.

To quote the infamous Dr. Emmett Brown; : "if you're going to build a time machine into spinal implants, why not do it with style?"

SCOTUS 5-4: OBAMACARE

Today's 5-4 SCOTUS split decision brings to light the primary issue with the entirety surrounding healthcare reform. Political misperceptions, false claims made by those that oppose it, and unsubstantiated beliefs play an integral role in how you perceive what has been commonly dubbed Obamacare, but is also affectionately known as Romneycare. If you read research papers written on government programs what surfaces is that Americans in general are much more reactive than proactive. In 1999, 33% of Americans believed that Social Security would run out of money.  How many times did we hear that the program would go bankrupt? Ad infinitum! Your political persuasion helps in shaping and molding your perceptions of the world. That's one of the reasons the TSB household does not watch any talking heads from either party. Don't believe it? First we had the government 9/11 conspiracy theory that Bush had planned this event.  How many of you believed that Saddam Hussein had WMD's? Recently, the man with Cousin It on his head, Da Donald, ran his mouth off about the POTUS' birth certificate. Now does anyone believe that the POTUS is not an American? Wait, don't answer that, because TSB would have more respect for those readers that hate the man if you just admitted its a racial thing. We have become a shameful and disrespectful society, haven't we?

How objective can you be when you seek out opinions that substantiate your beliefs? It's human nature. Wonder why we have become a polarized society? Fox News, CNN, MSNBC, and MSM, and that's not MusculoSkeletal Man that TSB is talking about. That acronym stands for Main Stream Media. 24 hour opinions. Whether it is the internet, television, or radio, 24 hours news has given those that sit behind the microphone the license to stretch the truth. As viewers, many of you don't appreciate journalism because you would rather be entertained. We have developed a tabloid mentality. Ever wonder why there is dilution?  Its easier to control you, when you drink their kool-aid, and you buy into it willfully. Don't believe it?  Recently, TSB was at a meeting with a surgeon in Boston, and this doc was railing about how Obamacare had affected his ability to earn a living. TSB almost felt like asking him if it wasn't Romney who helped legislate the current state of affairs in the Bay State? Since I was the host of this dinner, I deferred to being the gracious host. How do we know whether or not something is going to work, or not going to work, if we base our opinions on ideology? How manipulated were you by the cry of "Death Panels," or the absurdity of Senior Citizens crying out, "government stay away from my Medicare?" Duh? Isn't Medicare a government funded program? Have you ever attempted to formulate your own opinions based on facts, rather than conjecture? When Clinton attempted to address healthcare during his term, the public outcry was that you would not be able to see the doctor of your choice. Fortunately, it was myth rather than fact, but people like Rush Limbaugh railed about the plan. It must had been the Oxycodone that he was buying from Consuela his illegal immigrant housekeeper. Oh, but how insensitive of TSB, didn't he have back problems? Now there's a fusion case if ever one existed. Just give anyone a platform and they can manipulate your beliefs. Wasn't it Mama Grizzly who obfuscated the truth when she claimed that the current healthcare plan was downright evil resulting in death panels?  How irresponsible as she rides off into the sunset maximizing her profitability on your vulnerabilities.  Everyone has a right to their opinion, but no one has a right to make up the facts.

The bottom line: no one has a crystal ball. TSB doesn't know whether or not this plan is a panacea to the current state of affairs, but I'm willing to take the ride. It's not perfect, it needs tweaking and adjustments. If it works, great. If it doesn't, we'll adapt. Either way, something has to be done, regardless whether you agree with the decision or not.  The bottom line is that things have to change, and not just in healthcare, but in America. We were once a proud nation, today we are nothing more than a mere image of our former selves. Will this be the stimulus that is needed to bring back innovation in spine? If you believe Alex Lukianov, no.  But if you believe in the many hard working people that make up spine, TSB believes. We've gone from analog to digital. We place more value on social networking than we do on industry's that actually make products. We use to fight the war on poverty, today we attack the poor.  Insanity?  You can answer that question yourselves.  But you know what Joe Walsh says,

Turn on the tube watch until dawn, one hundred channels nothing is on
endless commercials, endless commercials, endless commercials,
the whole world's glued to cable TV, it looks so real on the big LCD
murder and violence are rated PG, too bad for the children they are what they see.

NJ Spine: The Hotbed of Misconduct

Since the inaugural launch of The SpineBlogger in February of 2009, occasionally we receive e-mails from unnamed sources looking to either promote a business, a practice or even look for medical advice. As has been our policy from Day 1, we have attempted to keep our blog unadultered or free from commercial interests.  Interestingly over time we had been inundated with e-mails promoting the humanitarian efforts of one Dr. Richard Kaul of the NJ Spine and Rehab Center located in Pompton Lakes, New Jersey.  Kaul's publicist would send us e-mails promoting the good doctor's involvement with something known as The Spine Africa Project. 

Well if its publicity that he wants, it is publicity that he shall get.  On June 14th, 2012 the New Jersey State Board of Medical Examiners voted 11-1 (TSB wants to know the name of the "1") to temporarily suspend the license of Dr. Kaul, an ANESTHESIOLOGIST, for performing spinal surgeries without proper training stating that his actions, "put the public at risk."  The irony of the State's decision is that this is not the first time Dr. Kaul has faced disciplinary actions.  In 2003, the Board had prevented Dr. Kaul from practicing for six months for failing to disclose that a London, England jury had convicted him of negligent manslaughter in 2001.

The question must be asked of our readers, "what is an anesthesiologist doing performing cervical and lumbar fusions?" Where is the oversight that is supposed to be provided by the NJ Medical Society? Something is fundamentally wrong  when multiple patients accuse a physician of gross negligence, incompetence and malpractice.  Who would go to a one room surgical practice to have spine surgery?  Dr. Kaul has been lauded as a pioneer in MIS, supposedly performing over 500 procedures including many that no other physician has yet to attempt as quoted in his press release in the Common Good.  Have we lowered our standards, considering that a surgeon performing spine surgery must have an accepted standard of surgical training, experience, and education?  Based on Dr. Kaul's experience, a new precedent is being set whereby all one has to do is attend a hands-on cadaver training on MIS and become a member of the Spine Arthroplasty Society and you can anoint oneself a spine surgeon.

Don't believe TSB, read the complaint. What are we evolving into as a profession? Hucksters, Conmen? Impersonators? Not only have we become a shameless society, we rationalize that if we make money off of whatever it is that we do, it must be okay. Every individual has a right to a fair trial, yet after reading the allegations, there are no excuses for this type of behavior. TSB wants to know what our readers think?  How many of these types of deals do you see in your local areas?  The truth is that the medical community does a very poor job of policing its own living by the Omertà, that cultural code of silence, a non-cooperation with authorities and non-interference of illegal actions of others in the profession.

DePuy Synthes: Collateral Damage

Happy and you're smiling, walk a mile to drink your water
You know I'd love to love you, and above you there's no other
We'll go walking out while other's shout of war's disaster,
Oh we won't give in, Let's go living in the past

Yes fellow bloggers based on the weekend's scuttlebuttin', you continue to validate that the spine nation continues to be living in the past. The ongoing dialogue amongst yourselves and those that have now fallen victim to the DePuy/Synthes acquisition are getting a taste of loyalty when it comes to dealing with Corporate America. If you've never had tasted it before, you are in for a treat. Here are some of your own words, "cutting jobs," " bottom line," "opportunity to put food on your table," "this company is cold and heartless," "cuts are coming," "don't worry about your territories," "they got Medtronic arrogant," "I'm not liking my chances," "start interviewing now," "don't trust what your AVM or RSM says," "there will be high quality talent that will be available to a company who cares about it's people."  Before TSB goes any further let's get one thing on the table, "THERE ARE NO COMPANIES OUT THERE WHO CARE ABOUT ITS PEOPLE!" You are a piece of meat, whether you like it or not.

Hopefully, the infantry at DePuy/Synthes is waking up. TSB endorses all infantry men and women because you do fight the fight and are treated like collateral damage. If you haven't awaken, you're in for a surprise. The more things change, the more things stay the same, and that my friends is not only a problem in spine, it is epidemic in America. The "reverend shareholders" are more important than the people that produce the revenue. Unfortunately, you are learning a hard lesson about words like "loyalty," "integrity," and what it means when the company you work for mandates that you"show a united front" in front of your customers. By playing the common folk off of one another, the top of the pyramid continues to rule. This tactic is not as sophisticated as you think, it's been used since the beginning of time.  Those in power never want to relinquish power. Show a united front my derriere.  This is your opportunity to make a statement. Get out while the going is good. As upper management in both company's fellate each other during the integration process, all along they have been making contingency plans for all of you. That's why there was a lack of transparency up until this point. You are now learning how dispensable you really are. TSB is sure that some corporatist or some gnome is going to get on the blog and start pontificating about the survival of the fittest, or how only the strong survive, unfortunately it's not a 1999 spine market.  Since some of us at TSB have been through multiple mergers, we are empathetic to your plight.  Here's what some of you are going to learn.

1. Starting over with a new product line is not that simple.  There will be wins, but there will be some losses.

2. You will convert some business, but not 100% of your business.  You notice we used the word "some."

3. Learn to be patient in making decision on choosing one of the smaller or mid-cap companies that you may be interested in aligning yourself with.  Not everyone is all that they like to make themselves out to be.

4. Look at the management team, the scope of the product portfolio, the quality of instruments, and ask questions.  As much as you need them, they need you.  The worst thing you can do is become "trigger happy." Many of these smaller companies salivate when they read your comments. They will obfuscate the truth just for the opportunity for an immediate windfall.

5. Negotiate up for your business.  The more options you have, the more you have to leverage. Remember it's a two-way street, especially with the small companies.  

6. Get it in writing.  No one said that some of the people running these small companies are the second coming of Earl Bakken.

Whether you agree with it or not, this is the new world.  The old spine world is dead. It doesn't exist anymore.  It's always been about the bottom line, but short-term has a new meaning. America has set a course in the direction of countries like Greece, Ireland, Spain, and Italy. As a recent visitor to Europe stated, austerity and manipulation doesn't work. Even the bastion of capitalism, the Wall Street Journal is starting to question austerity. If you are making $150-$250K per year, you're not rich, you're lucky. You've got mortgages to pay, you have to put food on the table, you have to run a business, you have overhead, you have to meet tuition obligations, and by time you're done balancing your check book there's nothing left. Unfortunately, the perception by the1% in our industry is that you are spoiled and bring no value. That's plain Bullshit. Just read the crap that people like Robin Young write about. How original was that Moneyball article? Could anyone feed you more propaganda? That formula may have worked for the A's in 2002, but based on their lack of success since that season, money talks and bullshit walks, think NY Yankees. Just keep thinking that you are part of the American Dream and the 1%.  Because those people have you exactly where they want you. You are their "SHEEP." Those ridiculous metrics are especially tailored made for the SHEEP. Do these people have any clue as to what you are dealing with on a day-to-day basis? 

Thursday Op-Ed: Fact or Fiction You Be the Judge

The last few days have validated the anger and frustrations that run rampant within the medical device industry based on the diversions in your comments.  Its also interesting when someone criticizes TSB but can't get off the site and comments incessantly, but we still respect those individuals first amendment rights, regardless.  Anger and Frustration? Definitely. Informed and knowledgeable? Maybe at best. The question that TSB must ask our readers is whether anyone has a comprehension of the nuances that encompass the MDET?  Do Americans have the flexibility or the ability to adapt to change? No. Contrary to that old expression "change is good," everyone would like to keep the status quo even when everything is collapsing around you.  What would happen if we actually attempted to change?  What if we really moved forward and provide medical insurance to an additional 33 million people?  

The facts are self-evident.  We know that the medical device tax will not cause manufacturers to shift jobs overseas because the tax applies equally to imported and exported medical devices, and devices that are manufactured in the United States for export are tax-exempt.  Fact, the tax should have little or not effect on innovation since it may motivate medical device companies to innovate cost effectively.  As more pressure is placed on companies to lower the ASP, how will companies sustain profits?  As many Baby Boomers enter their golden years, who will subsidize your Medicare entitlement in event of a major catastrophic event?  Nuvasive? Globus? J&J? Orthofix? Zimmer? Contrary to your beliefs, you'll be standing in line waiting for your Medicare entitlement because your argument will be that you paid for it, and you're entitled to it. If you deny it, you're not only lying to our readers, you're lying to yourself.

If the Affordable Care Act expands coverage for an estimated 33 million uninsured or unqualified Americans, who will benefit?  Does anyone believe that any of the aforementioned companies will not benefit from healthcare reform?  The medical device industry is a $120 billion dollar industry. Ten of the largest device makers account for 86% of sales which means that they will account for 86% of receipts of the excise tax.  Despite what you read, the tax creates no incentive for these companies to move manufacturing overseas.  This tax is an equal opportunity employer, meaning that the tax will apply whether your products are manufactured in the U.S. or abroad.  The 43,000 potential jobs that would be lost, as cited by AdvaMed is not credible to say the least because it is based on hypothetical assumptions.  AdvaMed hired a consulting firm by the name of Battelle to assess the effect of a "hypothetical event" that would result in an annual decline of $ 3 billion in revenues for the medical device industry.  Batelle utilized a quantitative economic technique called an "Input-Output Model" that measures the interdependency between different sectors of the national economy.  This model measures the output of one industry in relation to the input to another.  The model assumed that an estimated 10,000 jobs would be lost in medical devices, and 29,000 in other sectors.  But the question must be asked whether this model is valid in analyzing changes based purely on a hypothesis, and as many of you know, a hypothesis is nothing more than a mere assumption or guess.  Don't believe it, just ask the geniuses at AIG. In addition, there are severe deficiencies between perception and action. 

Case in point.  When Stryker announced plans to layoff 5% of its workforce they cited the excise tax.  Yet, they also stated that their aims of restructuring was "to allow for continued investment in strategic areas and drive growth despite the ongoing challenging economic environment and market decrease in procedure."  The immediate response, critics jumped on blaming the excise tax. The reality is that whether you believe it or not, or have drank the kool-aid, layoffs in 2011 had nothing to do with a proposed device tax in 2013.  What it comes down to is math, you know the subject that most American children despise.  If you increase coverage for 33 million people, will there or won't there be opportunities to increase revenues? Of course if you're Lukianov, you are concerned that young people will not increase your revenues because their needs for spinal implants are minimal compared to the elderly.  How can you argue that the tax will have a negative influence on innovation?  The Medical Device Industry is driven by the following factors;

• Financial Incentives
• Demanding, Uneducated, and Price Insensitive Patients
• A Supportive Investment Community (where else can you find these margins)
• Regulatory Requirements
• Physical and Human Resources

The reason medical device innovation has slowed over the years may be attributed to a combination of  factors such as stricter regulatory requirements, insurance companies denying coverage, and a real lack of innovation.  Don't believe it, just look at Precision Spine, aka a wolf of a different cloth.  You know Jim Pastena can walk around telling himself its innovation, sooner rather than later he believes it. What have you seen lately?  Line extensions?  Product modifications? More "me-too" products?  The reality is that the system is broken and its not the fault of one party, all parties are accessories to a broken system and must be held accountable.  TSB knows why you're angry and frustrated.  Happy Days just don't exist anymore. You have bilked the system and you don't want things to change, you want them to stay the same.  TSB understands, no one likes downsizing from a Porsche to a Chevy do they?

Are there certain provision in the tax that need modifications?  You bet.  But we will never resolve these challenges if we do not sit down and negotiate.  The spine industry is great at deal making, but sucks at negotiating.  At the end the industry can be proactive or reactive, its up to you.

Next Week:  The IRS

Drops of Jupiter In His Hair

Now that he's back in the atmosphere with drops of Jupiter in his hair, hey, hey

He acts like summer and walks like rain reminds TSB that there's a time to change, hey, hey

Since the return from his stay on the moon, he listens like spring and talks like June, hey, hey

Yes fellow bloggers whom else is TSB talking about than the man that leads the Cheetah Nation who single handedly has been able to make spine surgery "nearly" an outpatient procedure through rapid technological innovation over the past decade.  It seems that our dear friend, Alex Lukianov had the opportunity to participate in a conference call with Representatives Erik Paulsen (MN-R), Medtronics shill and Phil Gingrey (GA-R) addressing how medical device manufacturers will be effected by the medical device tax.

The parties involved in this call cited that 80% of the jobs affected will be within the small companies, those same "ankle-biters" that Pat Miles made reference to in his recent debate where he was TKO'd by Dr. Steinmann.  The Bear claims that if the tax is not killed it will cost Nuvasive $14-15 million translating to 200 jobs.  Is this a threat by the Bear?  Say it ain't so. Nyet.  On the contrary, TSB believes that if Nuvasive cut 200 jobs it would hinder their ability to become the next billion dollar baby in the spine market.  In addition, TSB knows that Alex is pushing for his candidate, Vanilla Ice Romney.  If Alex is so concerned about the tax, forgo your salary and stock options and take it on the chin like a man. What other way can he keep Cheetah Nation moving at supersonic speed.  But then again if Globus has their way, they just may surpass Nuvasive in the next few years if one prognosticates based on the Glo-bus' CAGR.  

Contrary to what companies like Nuvasive, Zimmer, Orthofix, Biomet, DePuy/Synthes, Globus and K2M say, they would love to see many of the so called "ankle biters" disappear since they are creating havoc within the industry.  Who is innovating?  Custom Spine? Eminent Spine? X-Spine? Choice Spine? Phygen? Northcutt and Johnston (haven't they started a new company?), VTI, Life Spine?  Lukianov would be respected if he admitted that his motivation behind using his bully pulpit are selfishly driven.  If Lukianov is concerned about innovation, what has Nuva innovated since the XLiF?   When pressed about Obamacare, aka Romneycare of a different color, Lukianov cites anecdotal evidence from colleagues in Massachusetts.  But then many of the surgeons that bitch about Obamacare in Massachusetts are confused since it was Vanilla Ice that created the circus atmosphere that exists in that state.

Interestingly, Lukianov states that under Obamacare the new customers would be the young and we all know that young people don't need back surgery as much as the elderly, those on Medicare, the government sponsored entitlement program that companies like Alex and his surgeon buddies financially benefit from.  Money is money, no matter how you cut it. The paradox is what will Alex do if Atlas shrugs and cuts those Medicare entitlements? Where will the dollars come for innovation?  And who will pay for Medicare?  In closing, confusion reigns supreme this election year since many aspects of Obamacare has been at the heart of Republican healthcare reform for over two decades.  Don't believe it?  Just read the Heritage Foundations "Assuring Affordable Healthcare for All Americans."  Politics, elections and the quest for power and control can result in a schizophrenic mentality.  Isn't the platform on which the Foundation is built upon to build an America of opportunity, prosperity, freedom and a civil society?  

In closing, extraction equals subtraction and sometimes you have to feed the beast or the beast ends up looking like Greece, or Spain, or Ireland for that matter.  You know what TSB says, it's just another day in spine paradise.

Friday Editorial

On Thursday, June 14th, TSB posted a blog regarding the sudden execution of 25 reps by Care Fusion. Our deepest condolences to those whose job hath taken.  In response to this post and a comment that MSM had, one of our commentators disagreed with our opinion that upper management can be blamed for failure by the ground troops, i.e., the sales people.  TSB agrees with our commentator that no one has a crystal ball, yet, isn't any company's success contingent on those in charge making prudent decisions in product development, in marketing, in continuing education, in customer service, in providing the sales team with the necessary tools to either build the house, or get the job done?  Aren't these people responsible for developing the strategy and tactics needed to effectively execute the plan, and can those individuals effectively convey the plan?  To quote an industry source, if you were in the military and they dropped you in a hot zone and you are engaged in a fire fight with a six shooter, and the enemy had rocket propelled grenades, how long do you believe you would last? Companies that have the ability to sustain or grow market share are companies that understand that practices and behaviors that once worked are constantly evolving.  The market is dynamic regardless whether it is affected by society, your customers, the clinical trends, let alone technological innovation.  If there is no inherent value in your product, why should someone use it?  Do you sell on price?  Do you sell on relationships? Do you sell on features and benefits?  How is your product better?  There is a reason why someone wants to buy your product. Why aren't your products used, and what are those reasons? Diagnosis and analysis is important considering that a degenerative disease will not be cured by procrastination.

Recently TSB spoke to a sales manager at an interbody company.  The company had lost a half a million dollars in revenue from '10 thru '11, there were inventory issues, product design issues, intra-operative implant breakage, no educational platform, no marketing collaterals,  poor instrumentation and a cash flow problem.  The question TSB must ask our commentator is whether or not these problems are symptoms and manifestations of an underlying problem, i.e., could the people in charge, the CEO. the CFO, the VP of R&D, the VP of Sales, be incapable of providing the distributors and its sales managers the necessary tools to grow the business? Executive management teams may not be able to control what the competition does, but it can effectively manage what is in their control.  Our commentator is correct in that we are all responsible for our own performance, and that also includes the people that run a business, they affect everyone's performance by their strengths and weaknesses.  The smartest guys in the room, may not necessarily be the smartest guys in the room. The reason that the spine industry has such a high attrition rate is that upper management still expects 20-30% growth. How can you understand how to build something if you've never built it?  We have become a myopic society, thanks to our shareholders and the Street. The market no longer has five to seven competitors, it has one hundred to one hundred and fifty companies vying for revenue in  a zero-sum market. But then again, do any of these people have the ability to adapt?

Most managers that TSB has spoken with marvel at how people in charge create fiscal objectives that are not only unattainable, they are delusional.  100% growth, no new product extensions, lack of inventory, lack of capital, how does any salesperson execute under those conditions? Sustaining marketshare in today's volatile environment may have more value than you think.  At least a company like Medtronic, Zimmer, Biomet, DePuy, Nuvasive or Globus can throw enough of money around to effect growth, even nominal growth, but small companies do not have that ability of course unless you are a POC, POD, or PIC, let alone a company that is a one-trick pony.  So, TSB doesn't have to be reminded about competition, unfortunately, sports metaphors are nice, but even sports teams don't rely on talent alone, if they cannot execute, they become spectators rather than competitors.

To All our Readers, Happy Fathers Day, go out and play some golf, drink some beer, throw a barbecue, hug your dog and kick the kids, and hopefully you'll get lucky this weekend.  We are outta here!!!!!!!!!!!!!!!!

MSM

Care Fusion: The Gift of Caring

Was it Aesop who once said, "No act of kindness, no matter how small, is ever wasted." It seems that today was a day of giving kindness at CareFusion.  Jim "Crazy Horse" Leitl was in a very giving mood today.  By the way Jim, don't ever stop abruptly especially if your former employees have relatives in the NYC police department.  Jimmy boy it seems pulled the plug on 25 direct sales reps today, that served the company's Interventional Specialties Division.  As usual, Jim delivered everyone's termination with panache.  It seems Jim, a humanitarian at heart, terminated all 25 individual in a five minute phone call.  At the end of it all Jimmy told everyone to "have a good day. 

Two years ago, CareFusion, or should we now call them Idon'tCareFusion (IDCF), launched a "me-too" product line under Andreas "listen to me now or hear me later" Lex to challenge Medtronic/Kyphoplasty.  It didn't take long before the then National Sales Directly abruptly quit, as a result of IDCF's incompetent leadership team. Did TSB actually use the word "leadership?" As TSB always says, "cheap is expensive," and by not increasing the comp plan, IDCF got what they paid for. Lex was bumped upstairs and Crazy Horse was promoted.  So with that said, another promising opportunity goes kaput. Our readers can take comfort that the Glo-bus is now primed to take over the number two spot competing as they do by allegedly borrowing Dr. Mitchell's technology.

So as TSB kicks up one's heels staring out on the evening sky, the faint voice of the Boss serenading can be heard,

"So listen up my Jimmy boy, be ready when they come, for they'll be returning as the rising sun

Now get yourself a song to sing, and sing it 'til you're done, sing it hard and sing it well

As the robber baron you'll be sent to hell, you greedy thief you came around, and ate the flesh of 

everything you found, whose crimes have gone unpunished for now, you walk the streets as a free man now, and brought death to the 25 or so in their home town."

Versace never had style compared to IDCF.  Remember what TSB says Jimmy Boy, pay back is a bitch!

Where Will the Next New Innovation Come From in Spine

As someone who spends time following the industry from a product and business development perspective, TSB must ask our readers, "where will the next new innovation come from in spine?" If you evaluate the current state of affairs, there are more spine companies than ever before. The market is still dominated by Medtronic (35%), DePuy/Synthes (26%), Stryker (9%), Nuvasive (6%), Globus (3%), and Zimmer (3%), with the rest of the world at 18%. It would be fair to say that outside of the major players there are at least 100 plus companies out there vying for a piece of the proverbial pie, and that pie is shrinking faster than expected. K2M is the only other company that TSB would consider grouping with the Big 5.  The last few years has seen an influx of inter body devices in all shapes and sizes creating a traffic jam of "me too" cage products. The disc space has never been so crowded. It is a wonder that surgeons heads don't spin like Regan MacNeil's in the Exorcist, and then we wonder why it's so difficult to sell anymore. If anyone has a hold on the marketplace it has to be Invibio. That $225,000 three year agreement at $75,000 per annum looks prettier as companies line up to enter this marketplace. Occasionally, the market gets a titan of a product that makes one wonder if some are just grasping at straws, or if some of these companies are developing products for a problem that does not exist?  I mean come on, even Monty Python found the Holy Grail faster than some of these start-ups.  

Just for the sake of argument, let's say that the medical device tax is repealed, regardless whether its effected by a SCOTUS decision to overturn Obamacare, or Congressional legislation repeals the tax, where will the next new technology or innovation come from?  If you speak to surgeons, many believe that the evolution of biologics will eventually lead the market to gene therapy as a modality of treatment to remodel the disc space, but that is still a long way off. If that is a viable observation, what would then happen to all these interbody impersonators? Maybe it's time to start building a Spine Museum, now there's something constructive for NASS to endeavor. What would happen to the artificial disc market, considering there are at least 25-30 companies competing in both the  cervical and lumbar arenas?  Whether there is a change in government administration or not, the days of organic innovation at the Stryker's, Medtronic's, DePuy's, Nuvasive and even Globus' are gone. If some of the start-ups were smart they would strategically align themselves with one of the bigger players with the option for big brother to buy whatever technology or IP's that the little guy has. Of course if you are nothing more than a shell company for a POD, POC or whatever it is that you call yourself, that's okay, because there's a place in this space for everyone. Very few companies will be touting double digit growth in spine over the next few years, until the delivery of healthcare is completely overhauled in this country. As TSB has countlessly stated, we are not going back to the glory days. The U.S. healthcare industry is getting its dose of reality.  Old habits may die hard. Adapt and you will survive, don't, you will perish. Those that grow by double digits will have to pump more capital into consultancies than ever before (Nuvasive and Globus) just to sustain their growth and predictions for the Street.  Just look at what Lanx did with Cappuccino.  Capital investments are at a minimum for the spine world because investors are no longer enamored with spine, especially the hardware end of the business.  There  are plenty of surgeons that have pumped enough of money into some of these companies that at times all they are doing is propping up the inevitable. It reminds one of Greece and Spain. As one investment banker stated, "no one is going to make any long-term commitment in some of these companies, especially if one looks at their strategic plan, lack of leadership and expectations that these entities exhibit." Ever wonder why some companies cannot raise any capital, beside overstaying their welcome with the investment community? Some have even resorted to looking for foreign investment. One American company has even been talking about an infusion of Chinese capital for over a year to no avail.  What does that tell you?  Even if there is a change in the administration,   a mandate for more austerity will  lead to more uncertainty, and uncertainty will lead to things coming to a grind. Or, if there is a change, will the opposition come back into power and then effect the same policies and lack of regulations which will lead to more of the same insanity.  Why would any patient take any time off for surgery if it meant losing one's job? As one patient so poignantly stated, "I'll live with the pain if it means keeping my job." What we fail to understand is that there must be a balance in order for everyone to benefit.  Wealth does not have to be shared on an equal basis, but if you want a prosperous society, everyone must have an opportunity to earn a living commensurate with their abilities. Think about it and don't be reactive. 

The numerous companies that have failed over the last few years have left a bad taste in the mouth of many investors. TSB is sure that there will be some more hearts broken over the next few years.  As consolidation continues, the traditional business model that we have become accustomed to will evolve. Don't believe it?  Just read the recent debate between Dr. Steinmann and Pat Miles from Nuvasive regarding PODS and how they are affecting the way you were use to doing business.  TSB believes that this is the future of spine, let alone the device industry.  Many of our bloggers just don't get . They are perceived as a commodity, as replaceable, and as highly overpaid cover reps in a crowded marketplace. What value do you truly bring to the your job? Why does a surgeon need you in the operating room? I mean they are highly trained individuals, aren't they? You are perceived as one of the many factors that have contributed to the escalating cost of healthcare, yet, since you are low man on the totem pole its easy to point fingers at you first. If you think that its only surgeons like the Dr. Steinmann's that have this opinion of you, you're in for a surprise.  Steinmann does make a great point that his POD saves money, as to making the world a better place, well, let's just say that's debatable.  Patients are sheep, they have no clue what goes on in our industry.  Just the facts, Dr. Steinmann, just the facts. Patients are more concerned about spending their money on BS, rather than taking care of themselves.  Don't believe  it?  Look at America the next time you are at an airport, you are looking at a mirror image of yourselves.  Companies should be concerned that the business model that Steinmann espouses is the future, but then again, rather than stand their ground, companies are at fault for creating the circus atmosphere that exists because profits have always taken precedence over people.  Price pressure?  Who's attempting to fool the public?  We have been under assault from U.S. hospitals for the past five years in spine. Everyone is attempting to squeeze every penny out of the system. Even the Dr. Steinmann's of the world.  And if its not the Dr. Steinmann's it's some BS consulting firm that is extracting every penny that they can from a poorly run hospital system. Everyone is profiting from it.  No one is giving it back, are they?  But then don't we have ourselves to blame?  The level of professionalism in our craft is mediocre at best and it goes up the ladder. We take no pride in ourselves. Many of the start-ups and early growth stage companies cannot even develop a training or education platform for its employees, and TSB means a real one, not some BS rag tag "I don't know what I am doing program." And why wouldn't a Nuvasive, Stryker, DePuy, Globus or K2M not play to this model?  By eliminating the sheep, they will streamline their business model, surely their margins will go down, but then, they will not have as much overhead. They will hire new sheep (the young and poor generation), they won't have to innovate, they won't have to invest that 5% into R&D (that is pretty funny Dr. Steinmann that in itself shows how clueless you are about certain things), they won't have to pay exorbitant consulting fees, and we will have solved all of our healthcare problems.  But then again we don't need innovation because "conventional products are generally our best and safest products, but then again, profitability is a result of innovation."  But then again has current innovation really led to improved outcomes? Maybe twenty years ago, but it can be debated that better carpentry would lead to better outcomes, considering TSB has never met a surgeon who wasn't in a rush to finish their case with the few exceptions.

What it comes down to is that there are no winners and losers because we still haven't come to grips that the system must be overhauled, and until then, there are no solutions.  Steinmann is correct that our healthcare system is twice as expensive as it should be, but then again, who is effecting this?  Is it the sales rep?  Is it the surgeon consultant? Is it the Fee-for-Service System? Is it the CEO who is unaccountable for how he manages the company? Is it the incompetent hospital administrator? Contrary to what some people believe, Dr. Steinmann and TSB agree on one thing, we have commoditized ourselves to the point where its difficult to justify charging $6,000 for a piece of PEEK.  So TSB wants to know "Where Will the Next Innovation Come From in Spine?"

Medtronic Acquires AMT Spine Source

Tommy Mitchell have you hit pay dirt?  If you have, it couldn't happen to a nicer dude. The scuttle butt on the Street is that Medtronic announced that they have acquired the portfolio of AMT/Spine Source.  The Big Blue closed the deal a few weeks ago in quest to enhance and expand their inter body offering. Does this bode well for the boys at VTI?  One of our sources has claimed that VTI was attempting to get into a relationship with Medtronic in hopes that they would eventually acquire their IP to the nucleus replacement device.  But back to the real story, AMT is based in Nonnweiler, Germany and has developed a comprehensive line of inter body devices.  The decision to acquire AMT/SS was based on Medtronic's view that this company had the best technology when it comes to expandable cages.

Medtronic is hoping that with the addition of this technology, and an exceptional sales force, great things will happen.  TSB doesn't necessarily believe that this will generate $20 million in new revenue for this fiscal calendar until they build more inventory.  So let's give credit where credits due.  The Big Blue saw a need, and addressed it. Now its time to back up all that talk, get your distributors and sales people inventory, samples and marketing collaterals or else you'll sell bupkus.  Remember what one of our sources has said, you can't sell product if you don't have anything to show, just ask VTI.

Could the acquisition market be heating up?  Are expandable cages where its at?  Whether you love them or hate them at least MDT is keeping up with the clinical trends. But what does it say about good ole American innovation? Those Germans, first it was the Kuntscher Nail to heal the Luftwaffe, then the Porsche, and now its expandable cages, TSB could hear the cry, the FDA and big government is hindering our ability to innovate.  BS.  Investors have caught on to some of these impostors and refuse to invest in people that burn through money like there's no end in sight.  

Monday's Editorial

Wow! Friday's post went off the charts.  In retrospect, our readers quickly went off topic regarding SpineArt's product portfolio and decided to battle over sterile versus unsterile implants.  With the addition of Fat Bastard, El, and their followers,  there were some inane and unrealistic comments made about potential infections arising from using implants that do not come pre-packaged sterile. Eventually, implants such as pedicle screws, end caps, rods, cross-connectors, offsets, cervical plates, and cervical screws will came in sterile packaging. This will definitely provide companies with the rationale to increase the cost of delivering their products to the hospitals, while providing an impetus to further lower your commissions. Whether this makes one bit of difference in a customer or hospital opting to use your product will be irrelevant.  Until state laws are passed similar to the old spore testing laws, it will be business as usual.  Who has the best implant complimented by the sexiest instruments in an organized and efficiently laid out tray will always be the winner.

So let's clarify some things for the general public.  First off, contrary to many of the comments posted on Friday and Saturday, no one is dying from spine surgery because implants do not come pre- packaged sterile. It is ridiculous to argue that point. The standard protocol at nearly every hospital in the country is that instruments and implants must arrive no later than 48 hours prior to any surgery.  If you can't deliver them within 48 hours, you're not getting the business.  Are there occasional exceptions?  Yes. But rarely does this get by the OR Gestapo. Not only are implants washed thoroughly upon arrival in Central Services, they are sterilized by a highly trained staff at extremely high temperatures. If Fat Bastard went into a Sauna at 270 degrees he probably would have to change his moniker to Fried Bastard. Nosocomial infections which are fungal or bacteria related rarely have occurred because of spinal fusion.  Can anyone cite an actual case that was a by product of pedicle screws? These types of infections usually occur when the staff does not take precautionary measures such as washing their hand to minimize passing bacteria from one patient to another.  The patient is usually at risk because of a low immune system.

But as one of our contributors cited, if hospitals mandate that spinal implants come pre-packaged sterile, should we then mandate that instruments come pre-packaged sterile? Where does it stop? Could that be another money maker?  C'mon people, get serious.  How many more hoops do you want the industry and its reps to jump through?  Now you have to have an annual TB test, most people have been inoculated for Hep B, everyone has to take that ridiculous OR protocol screening on RapeTrax, you have to have knowledge on what to do if there is an electrical fire, and there is a minimum as to  how many people can actually be in the OR at most hospitals.  So before we get off on a tangent TSB needs to keep things in perspective.  If our readers wanted a new version of Beavis and Butthead, well, we got a taste of it the last few days.

Fat Bastard: "Hey El, you know I'd like to kiss my derriere"

El: "FatBastard why would you want to kiss your derriere?"

Fat Bastard: "Cause I wanna see what my bunghole looks like."

El: "Be careful Fat Bastard because you might get polio in your holio"

And then we wonder why people make fun of our industry?

Album of The Weekend

Hey fellow bloggers, I know it's Sunday, but I needed to stop by and check out some of the insanity that materialized on our blog after posting on SpineArt on Friday.  Imagine what happens when you look under a rock?  For those that meekly attempt at berating TSB for censorship take note, as stated in the past,  there is a no tolerance rule when it comes to denigrating someone's parents, spouses or children.  With that said, let's move on to TSB's Album of the Week.

On May 22nd, Joe Bonamassa launched his baker's dozen album entitled, "Driving Towards the Daylight."  If you haven't had the opportunity to delve in Blues/Rock, this album is a must.  The title song was penned by Bonamassa and Danny "Kootch" Kortchmar formerly with The Section and the Flying Machine with a little unknown at the time named James Taylor.  JB does a remake of Willie Dixon's "I Got All You Need," with guest vocalist  Jimmy Barnes who performs a kick ass vocal on the remake of the '87 Barnes hit "Too Much Ain't Enough Love."  Who ever said that a Scottish Australian didn't have soul?  Check it out Spinebloggers.  TSB wants to know if Too Much Ain't Enough Love to Satisfy Me? 

SpineArt - The Art of Illusion?

There are many great magicians and illusionist.  The most famous for our entitlement generation was a Hungarian named Harry Houdini, then there was Robert, his brother, David Blaine, PC Sorcar, Doug Henning, one of TSB's favorites right up there with Penn and Teller, Criss Angel, Harry Blackstone, Jr., David Copperfield and the obvious Harry Potter, the most talented of them all. Hey, was he real?  Yet, the more TSB evaluates the spine industry, the real winner must be SpineArt.  Why?

For starters, have you ever looked at their website, or is it websites?  Is the company SpineArt and why does it default the viewer to K-Wireless?  And who is K-Wireless? Since SpineArt is covert in how they present themselves surrounded by mystique and veiled in secrecy, is this really a plot to overthrow the spine world? Where the hell is Etan Hunt when you need him? Last time TSB saw him, he was scaling one of the tallest buildings in the world.  Can you hear the music in the background, actually there's an idea.  If it wasn't an infringement, SpineArt should have the Mission Impossible Theme Song playing in the background on their website. Oh if Jim Phelps was alive. By the way youngsters, he was the real Ethan Hunt.  But back to the chase. Can you hear it fellow Spineophile.  Dat, Dat, Dat,......Dat......Dat, Dat.........Dat, Dat, Da..........Da Ra Ra,  Da, Ra, Ra, Da, Ra, Ra.......Da, Ra.  Come on Spineart its been years since you have been flying the flag of a neutral country, the Butterfly, oops TSB means Switzerland.  Though, it does look cute on your implants. So TSB must quote Meatloaf, "what's it going to be boys?"

Your implants look pretty, but what implant doesn't look pretty when they are presented on the web? A cannulated pedicle screw, an option for a micro open (what does that mean Mr. Marketeer at SA) is it open, or is it micro opened, a percutaneous approach and some, butterflies are free, inter-body devices.  As Peggy Lee sang, "Is that all there is?"  Oh, TSB forgot, based on the latest commentary, you are launching sterile implants,  as Borat would say, "that's a nice," but that isn't innovation, now is it? You  haven't even entered any of your products into the Spine Technology Awards, which speaks volumes about your products. Your testimonials come from Florida, Missouri, and France, but so what?  Based on what anyone can discern by viewing a takeoff on the Rubik''s Cube, you must have some type of disc that comes out of Switzerland, and some bungee cord type of products that must be used for interspinous process cases.  So what is it SA?  Are you going to be a player of are you really an illusionist looking for some sucker who is interested in buying your IP and current portfolio.  TSB must admits Harry Potter would be impressed with the magic that this website creates.  It's precision is as beautiful as Roger Federer's backhand.

Thursday's Editorial: CMS and MDMA - A Marriage Made in Heaven

On February 17th, 2012 the Medical Device Manufacturing Association (MDMA) submitted a letter on behalf of the medical device industry to the Centers for Medicare and Medicaid Services in response to the proposed rule CMS-5060-P regarding "Transparency Reports and Reporting of Physician Ownership or Investment Interests. MDMA represents hundreds of medical device companies.  The commentary submitted by MDMA focused on

• Timelines for implementation
• Expansion of the definition of covered recipients to include manufacturer payments to hospital GPOS
• Recognition of innovation in physician/manufacturer collaborations

Under the PPAC Act medical device companies were required to begin collecting payment recording data on January 1. 2012, yet since CMS did not provide adequate time for companies to provide this feedback MDMA requested that a delay be granted, by which CMS acquiesced. Under the proposed rule, CMS is considering to require companies to begin collecting payment data after 90 days upon publication of the final rule.  At the time of this letter, MDMA did not believe that this was a sufficient matter of time to allow manufacturers to comply with the mandate.  MDMA contends that the majority of medical device manufacturers in the U.S. are small to medium size companies, and that this would be a tremendous burden on those entities, stating that Section 6022 of the PPACA will place an administrative burden on these small companies as they need to develop the necessary information technology to track payments.  The question that TSB must ask Mr. Novelli the signer of the letter, just how much time do any of these small companies really need?  It is rather entertaining the Mr. Novelli writes that these companies need time to ensure compliance, since compliance has rarely been acknowledged in the spine industry.  As for failing to report accurately, TSB highly doubts that the government is going to be running around checking for accuracy.  If companies need 90 days to train someone to manage this mandate, is this a  commentary on the quality of the people that work in our industry? Why would anyone entrust their compliance to an outside source?  The reason that the MDMA has requested additional time is to buy the smaller to mid-size companies the time needed to clean up the many deals and side deals that exist considering that most small companies in today's environment have a slew of surgeons investors and so-called consultants. You know the surgeon that provides you with volume in exchange for his payola, while placing his imprimatur on another variation to your screwdriver.  Since transparency is a word loosely defined in the industry, TSB believes that CMS should expand the criteria so that it will address the various business models that exists to circumvent the lack of transparency.  As for hospital GPO's, its a no brainer that they too should be included since they have done their very best to constrain everyone's ability to compete in a free and open market where it comes down to the best price and implant.

TSB suggests that CMS should mandate that all companies have a link on their updated websites (hint, hint people) that includes all consultants, inventors, investors, and honorariums that have been paid out. This would alleviate much wasted time attempting to sell a surgeon that doesn't give a rats ass about your product because he is on another company's payroll.  An example would be attempting to sell Andy Cappaccino your lateral device when he is the lead Lanx developer of their lateral device. Money talks, bullshit walks.  TSB believes that rather than provide consumers with information on how a product is developed and commercialized, just let the public know how much money surgeons are paid for their services, and the public will understand why the delivery of healthcare is so expensive. Who do you think absorbs these costs?  The request by MDMA to include how a medical device progresses from concept to commercialization and how the interactions between the manufacturer and physician/surgeons is smoke and mirrors.  No one consumer is going to take the time to read or understand this process.  In essence, MDMA is looking to hinder CMS' ability to effect this Act by suggesting unrealistic proposals.  The funniest part of the letter is when it states the MDMA opposed any inappropriate relationship between a manufacturer and a covered recipient. SO WHAT? Who care what MDMA thinks? No need to worry about the publics perception based on the numerous stories that circulate on a weekly, monthly or quarterly basis in major publications.

If CMS caves in to MDMA's recommendation in enforcing a provision of how a medical technology is commercialized, CMS will have lost its battle in enacting this in a timely manner as everyone scurries to hide the bodies as quickly as possible, or find creative ways to circumvent the process. Don't believe it?  Just look at some of the legal forums that are offered regarding compliance.  So in closing, if its transparency that you want, then let CMS enact this mandate and let the device industry stop with their objections to finally putting everything on the table.  Besides if the surgeons want the government to keep feeding the beast, then they along with their partners, the companies must make concessions.  TSB wants to know what our readers think?

Globus and Patent Infringement Attorneys: So Happy Together

Sometimes people have to wonder whether David Paul's sphincter is tighter than a G string on a banjo, does he have cojones the size of basketballs, or is he just that arrogant that he believes that he is beyond reproach?  Considering that Globus is on the verge of going public, an S-1 addendum was filed on May 29, 2012, TSB decided to perform some due diligence on how many ongoing lawsuits or complaints are pending when it comes to the fastest growing company in the spine industry. Could this be karma? Could this be the gestalt of Globus, a patent attorney's dream company? Wow, how do potential investors view this company?  In 2007, Globus settled with Synthes for $13.5 million for infringing upon Synthes patents. Then in July of 2011, once again, Synthes filed suit against Globus for allegedly infringing upon patents '616, '207, and '076. This current claim pertains to the Intercontinental Plate Spacer, the Independence ALIF, the Coalition ACDF. TSB believes that this was a going away present from Hanjoerg Wyss to David Paul, a sort of kiss on the cheek. Then the industry was entertained with the Warsaw Orthopedic/Medtronic v. Globus litigation that resulted in a "reversed in part, affirmed in part and remanded" decision resulting in a slight slap on the wrist for Globus pertaining to  a spine stabilization system. In 2010 Nuvasive filed a suit claiming that Globus had infringed on patents pertaining to XLIF's intellectual property. As the Globus saga continues (let's see how many company's will sue us?) in April of 2012 there was a new  complaint filed by Dr. Sabatino Bianco, a prominent neurosurgeon based in Tyler, Texas. The complaint involves the misappropriation of trade secrets and confidential information, as well as a breach of an agreement not to improperly use information and to keep the said information confidential.  The plaintiff Dr. Bianco, asserts that he developed and maintained his confidential information and trade secrets in Texas, entered into a confidential agreement with Globus in Texas, disclosed the information in reliance on the agreement in Texas, and received various misrepresentations concerning Globus' intent to use the invention in Texas. Basically, what the complaint states is that, once again, Globus is accused of patent infringement on an expandable cage, aka the Caliber L.

If you read the complaint you have to ask the six million dollar question, when are surgeon inventors ever going to learn their lesson? How many times have we heard the story that "a company representative told the surgeon that the company had no intention of utilizing his invention?" Let me count the ways, "They screwed me, they screwed me not." Is there no honor amongst thieves?  Even the Mafia has a code of conduct. This type of behavior has been existent since the dawn of time in spine. Considering that David Paul, his sidekick Tatoo, and the Globus Men in Tights are on the verge of their biggest coup, an IPO, does it behoove Dave the Rave to tuck his tail between his legs (if there is room) and make good with Dr. Bianco?  Whoever Dr. Bianco is, it is quite evident that he is not going down without a fight.  The complaint alleges multiple counts a follow;

Count 1: Misappropriation of Trade Secrets

Count 2: Breach of Contract

Count 3: Correction of Inventorship

Count 4: Unfair Competition

Count 5: Fraud

Count 6: Theft

Count 7: Exemplary Damages

Count 8: Injunctive Relief

Last but not least the plaintiff and his attorney's have requested a trial by jury with jurisdiction in the State of Texas.  Could the Globus luster be tarnished? Does the company have a bullseye on its back? You know a cat has nine lives, but Globus eventually will have its day in court, and may have used its Get Out of Jail card one time too many.  It will be interesting to follow this case, who knows that extra $50 million may be in anticipation of what is coming down the road based on this company's reputation.  If John Q. Public is reading TSB, remember the golden rule, once you buy the stock, Globus can do whatever it desires with your investment. Caveat Emptor.  TSB wants to know who's court is the ball in?

"Imagine me and you, I do, I think about you day and night, it's only right
To think about the surgeon you love and hold him tight, so happy together
I can't see me lovin' nobody but you for all my life, when you're with
me baby the skies'll be blue for all may life.....the only one for me is you,
and you for me so happy together."

Sunday Funnies

Spineophiles:

Recently, one of our commentators asked if TSB would table a discussion regarding Tier 2 companies.  In an attempt to understand the comment, MSM believes that this individual really meant Tier 3 companies.  If one looks at the big picture, Tier 1's are comprised of Medtronic, DePuy/Synthes, Stryker, and Nuvasive.  The Tier 2 are comprised of Globus Medical, K2M, AlphaWreck, Lanx No Thank, Orthofix, Biomet/EBI and Zimmer, and the last two get a nod based on their size rather than their respective portfolios. The majority of these companies have portfolios that allow them to compete on an even playing field, at least that illusion exists at Biomet and Zimmer.  But who are the Tier 3 players and how do some of these companies survive considering their make-up? Which one of these players have brought innovation to the marketplace? The companies that embrace this category are Amedica (Si3Ni4), Allez Spine, LDR, SpineWave (StaXx), Integra Spine, Expanding Orthopedics, Spinal Elements, Medicrea, Pioneer, Choice Spine, X-Spine, Life Spine, Eminent Spine (Is George Thorogood the CEO?), Eden Spine, Custom Spine, aka Closet Spine, Paradigm Spine, Centinel Spine, Spine Frontier (Is William Shatner the CEO?), Trans1, Titan Spine, Wenzel Spine, SI Bone, Vertiflex, and VTI. Some of the newer entrants into this happy go lucky group is little known Zyga Technologies (what is a Zyga?) and OIC ( obviously an original acronym if their ever was one). For the obvious reason, TSB cannot include everyone. But for the vast majority of us in the industry, this scorecard makes up the vast majority of the players.

The impetus for this post comes not only from one of our readers, but it is also influenced by another commentator who attacked the readers by posting the following, "how many of you hotshots took a risk to develop an idea for a spinal fusion device or a nucleus replace devise (sic)?" Our reply would be, "how many of you can fail multiple times at the expense of the investors?" Let's be honest, how many of the Tier 3 companies were developed prior to, or at the time the market began to fold in 2008? The vast majority of these companies had an idea that if they positioned themselves properly they would be sold. Can you spell W-i-n-d-f-a-l-l?  Yet, in response to our wounded CEO's comment on April 23rd, 2012, how many of the T3 companies have or had developed a product as a solution to a problem that doesn't exist? Is Silicon Nitride going to better the outcomes? Investors have pumped at least $100 million dollars into that company and TSB's guess is that they will never recoup their investment. Is a titanium alloy surface a game changer for inter body fusion?  In reality, how big is the SI market, considering the hoopla and money that's recently been infused into Zyga? Don't 7.3mm cannulated screws work, considering they create compression across the SI Joint? TSB forgot, their not as sexy as a plasma sprayed fertilizer plug from Home Depot. There is some interesting technology in the Tier 3 group, but it probably comes out of one or two companies at most. As one engineer so eloquently put it, "in spine, people develop their idea first and then look for an indication." Don't shoot the messenger, just think about the message. How many different ways can the industry address fusing someone's back or alleviating pain? Innovation is important.  It is what drives the human spirit. Yet, TSB has more respect for those Tier 3 companies that are purely driven by profit, no matter how they do it, rather than create the illusion that they are advancing spine technology. It's quite obvious that some of the companies that have reversed engineered products generate more revenue than those that tout their genius, and you know what, kudos to them. Years ago, we were creative. Unfortunately, as more and more companies have surfaced for the obvious reasons, we no longer innovate. We saturate. Think about it. It takes some of these T3 companies three years to bring out a new product.  If a cannulated pedicle screw is all you have to offer, then fall in line. Thank the investing surgeons for being your slaves.

TSB wants to know what technologies do some of these companies have that would benefit the big boys?   Who is primed for acquisition? Is anyone of these companies a contender? As hospitals create barriers for the smaller vendors, what strategy will you use to sustain your business model? Will the government step in to alleviate your angst in competing with POD's?  Or are we heading to the complete destruction of the traditional business distribution model?  It's here, whether you like it not.

"on the day I was born, all the nurses gathered 'round

and gazed in wide wonder, at the joy they had found

The head nurse spoke up and said, "leave this one alone"

she could tell right away that I was bad to the bone"  

  

Lack of Innovation? He Said It

In a recent Financial Times article, the newly appointed CEO of Smith & Nephew, Oliver Bohuon stated that the Medical Device Industry should stop whining about the government and government cut backs in funding health related service, and cast aspersions on the device industry by stating that the industry has no one but itself to blame for not developing state of the art, game changing products that would transform the delivery of healthcare and perhaps even reduce health care cost in the long run.

Bohuon is quoted in saying that "when we talk about price erosion 3%-4% many people are blaming this on government austerity measures, but they are wrong. What is happening is that we as an industry are not bringing in enough innovative products to get higher prices....... Innovation is the bread and butter of this business."

Bohuon's belief is that healthcare providers would pay a premium for devices that would save them money.  A prime example has been the assault on reducing the ASP for  pedicle screws, cervical plates, inter body devices and biologics.  Without aggressive innovation companies are left having to drop prices to maintain their success. Squeeze me but please me. The end result, tighter margins and more pressure and stress on the sales force to generate sales in a zero sum marketplace.

So obviously our readers will ask does Bohuon practice what he preaches?  S&N intends on investing $300 million over the next 5 years into R&D, the irony of the story is that even with this "mea culpa" moment, S&N is trying to boost margins by cutting jobs, a far less ingenious way than holding the company accountable for lack of innovative.  Who knows, maybe if some of the CEO's held themselves accountable the spine industry would be innovative, but its easier to blame the boogeyman than take responsibility for one's actions or lack of actions.  

As cost containment escalates, it will be interesting to follow the small fly by night companies that continue to surface with cheaper pedicle screws while expanding their sales with stocking distributors.