Old News Is, Well Old News!

On December 24th, the Journal Sentinel a Milwaukee, Wisconsin newspaper ran a story "Journal editor gets royalties as articles favor devices" which discussed Tom Zdeblick's consulting relationship with Medtronic Sofamor Danek (MSD) and a potential conflict of interest considering he has been the editor-in-chief of the Journal of Spinal Disorders and Techniques since 2002.

Zdeblick has been an MSD spokesperson and salesman for many years, (I don't remember him ever going through sales training) earning an estimated $20 million dollars in patent royalties.

The reporter, John Fauber, questioned why the readers of JSDT were never informed that Zdeblick, aka Zig Ziglar, was a consultant for the company. Unfortunately, this question should have been asked many years ago. Old news is, well, old news. Mr. Fauber, an industry outsider, must understand that most of us that actually read spine publications have been laughing at Tom for many years, while he has been laughing all the way to the bank.

Six years ago, TSB was sitting in the audience at a spine symposium in Florida when Tom got up to speak about cervical spine disorders. In an instance, a clinical presentation turned into a promo for Medtronic's then new cervical plate. If you closed your eyes you almost felt like it was Dan Aykroyd selling the The Super Bassomatic 76. If Saturday Night Live ever revives this skit, I know just the right guy to play that role. The pathetic side to this story is that most of us, including surgeons, started to snicker about the study let alone Tom's sales pitch. Surely some laughed with envy.

TSB has no problem with Zdeblick getting paid for products that he truly developed. What bothers TSB and others is that as editor-in-chief he is potentially using his clout in publishing studies that commercially benefit Medtronic and financially benefit himself. Would he publish an article that compares the clinical efficacy of a Medtronic plate to a competitors using the same criteria only to find out that both products produce the same results in ACDF's? To paraphrase one of our surgeon readers, "Iz it the Plate or the Playa?" Rarely, if ever, does the surgeon- author(s) ever criticize the product's efficacy or design, why would they, if the study is funded vis-a-vis a grant by the company itself? Isn't that why products are named in studies in order to promote a companies product? Yet, this article raises a bigger question. Is this an assault on the integrity of the medical profession? Today, spine surgeons complain that they do not earn as much money as they had in the past, yet, with the advent of sham consulting agreements, sham royalty agreements, and the proliferation and commoditization of the spine market TSB would argue that there are many more opportunities for greater earnings than ever before.

But what about the publisher? How entertaining is it when Robert Dekker, director of communications for Wolters Kluwer Health/Lippincott Williams & Wilkins is quoted as saying that "all manuscripts go through a rigorous review process using reviewers who have an objective viewpoint." Objectivity is in the eye of the beholder. Is there any surgeon at JSDT that would question the commercial aspect of the white paper? How many of these reviewers have their own consulting agreements? Obviously Dekker declined to provide a list of reviewers. The reader has to laugh at the level of transparency at WKH/LWW. TSB thought the whole purpose of a white paper was to provide the company clinical/commercial visibility? Dekker claims that coverage given to Medtronic products is in no way tied to their relationship with Zdeblick. As Scrooge once said, Bah humbug. Where does Mr. Dekker think his advertising revenue comes from?

If Senators Grassley and Kohler are really serious about enacting the Physicians Payment Sunshine Act of 2009 one of the guidelines should be that spine surgeons be required to wear the logo of the company that they represent on their lab coats in their office and have a promotional billboard in the waiting room for patients and sales people. Considering that surgeons have become personal spokespeople for companies, this really isn't a bad idea. Think of how much more efficient this would make the salespersons life. No more cold calls, no more free lunches, more focus and better time management. Maybe its time that patients have the right to choose the product that they would like the surgeon to implant considering it is their body? In the end, nothing has really changed, and like TSB said old news, is well, old news. You know what Sonny and Cher once sang, "And the beat goes on, And the beat goes on..........drums keep pounding the rhythym to my brain, la de da de de, la de da de da."

The Readers Poll

In closing out 2009 and bringing in the New Year, TSB would like to poll our readers for their feedback on which blogs hit home. This poll can be construed as a referendum by our readers to measure which blogs were topics of interest during the past year. The rationale for the blogspot was to provide the people a platform where your voices can be heard. Your vote counts. Once again thanks for your support and to a successful and prosperous New Year.

Spine The Year in Review: Winners and Losers

February 7th, 2009 was the official launch date of TSB. Our staff felt it appropriate to provide our readers with a snap shot of the year in review. Our objective was to highlight the winners and losers of '09.

During the first quarter of '09 various rumors began circulating within the industry regarding companies that were beginning to exhibit financial and managerial cracks in their organizations. Word on the street was that Vertebron, Inion, Innovative Spine Technologies and Pegasus were taking on water faster than they could bail themselves out. Vertebron was considered the industries first casualty because rumor had been circulating over the past year that they were in trouble. They were offered $10 million by Cardo Med and thumbed their nose at the offer, only to be sold in a bankruptcy auction to Cardo Med for $1.3 million. Cardo Med was the winner by saving themselves $8.7 million, and Vertebron a loser for being so arrogant. Now the question remains, what will Cardo Med do for an encore with this portfolio in 2010? The question must be asked, is there a business model? Innovative Spine Technologies figured out how to burn through $70 plus million, Stephen Hochshuler pointed the finger at Scott Schorer, Schorer refused to comment, not only was IST a loser, so were the investors. Inion couldn't raise capital fast enough to resuscitate itself, and Pegasus went south only to be sold for pennies on the dollar. Chris Lee (Inion) and Michael Will (Pegasus) are the losers. The biggest surprise was Archus which burned through $63 million and eventually failed to raise additional capital via bridge financing only to sell its technology and IP to Facet Solutions. Archus the loser, Facet Solutions....... let's wait and see.

TSB published various blogs about distributors getting stiffed on their commissions by various companies, the art of selling, the future of sales distribution models, ending the year with a blog about surgeon owned distributorships raising the question whether this was a new trend or passing phase? Based on the majority of comments by our readers, it was evident that you questioned the legality, ethics and potential conflict of interest of surgeon owned distributorships, and even wondered whether a new generation of physicians exist, those that are in it purely for the money rather than the art of medicine. Another interesting aspect surfaced, it became evident that physicians and investors believe that sales people make too much money. Could we be on the verge of industry related class warfare?

In February a Boston District Court unsealed a formal whistleblower complaint against Blackstone Medical by two former employees. Much to the readers chagrin, the DOJ has yet to act on the potential criminal charges against former principals and employees of Blackstone. Many of our readers question whether the government will ever bring this to trial, or will the DOJ behave like the paper lion that they are perceived to be, where its bark is bigger than its bite? If anything good has come out of this complaint, it has put many early growth stage and surgeon owned companies on the defensive. Stryker had its own legal issues with former employees convicted or indicted from Stryker Biotech for advocating off-label use of OP-1. Some of the veneer was knocked off of Synthes with the Norian debacle, and as we move into the New Year the industry awaits sentencing of one former and three current Synthes employees for their complicity in this case. In addition, Synthes will have to defend itself in 2010 as the government attempts to prosecute Synthes.

TSB wrote about the value of attending trade shows, these consist of NASS, AAOS, CNS, ISASS (you gotta love that one, couldn't they just left it SAS?) CNS, CSRS, ISSLS, Motion Preservation, Spine Technology Summit, Stem Cell Summit, The Spine Study Group, and various regional meetings. The consensus from our readers was that these meetings were getting stale, can you hear us NASS? The lack of new science and clinical data was knocking the luster off of these meetings. Readers even questioned the integrity and financial interests of some of these platforms. In light of the economy, many of you felt that attending these meetings was becoming an inefficient use of capital.

Speaking of NASS, they had a rough year with some of its respected members in the spotlight. Tim Kuklo, David Polly, and Jeff Wang were in the limelight at various times having to defend their fiduciary responsibilities as employees of the military and educational institutions in relationship to their consulting and employment agreements. The only saving grace for these surgeons was that the spotlight was taken off their conflicts when Mark Kabins was convicted for his conspiratorial role in the Medical Mafia Case that is ongoing in the City of Lost Wages awaiting the trial of Howard Awand and Noel Gage, Esquire. Doctors and Lawyer conspiring, you gotta love it.

TSB published various blogs on Einstein's definition of insanity, "doing the same thing over and over while expecting different results." This was in response to many of our loyal followers e-mails about why does the industry and investors have the propensity to keep hiring the same individuals that have exhibited a track record for mediocrity to run their companies? Could it be that the industry lacks talent, or is this a barometer of what an old boys club this industry has turned into? These individuals have come to be branded as the emperors with no clothes. PT Barnum once said, "there's a sucker born every minute."

As we approached year end the hot topic became NuVasive's XLIF and potential reimbursement issues based on reports that Cigna, AETNA and United Healthcare were questioning the coding on this procedure. Some of our readers expressed their dismay as to why so much ink was dedicated to this story. With a market cap of $1.1 billion, TSB felt that this story warranted attention especially after the stock fell to an all time seven month low. The Analysts felt that NuVasive deserved to be carefully scrutinized. Some of our readers commented that there were no reimbursement issues while others, including Alex Lukianov stated that this was a local not a national issue. Let's wait and see. In all likelihood, NuVa and NASS will work together to find a solution to a potential problem.

In closing, 2010 will probably be a year of challenges for everyone considering that Healthcare Reform is on the horizon, pricing will become the industries main challenge, and though there is investment capital sitting on the sidelines in a holding pattern until investors get a clearer picture as to how this all shakes out.

Merry Christmas, Happy Chanukah to Our Readers!

To my fellow readers, on behalf of those that contribute to what's been heard on the Street, TSB would like to wish you and your loved ones, a Merry Christmas, Happy Chanukah and healthy and happy New Year. As TSB approaches the celebration of its first anniversary in early 2010, we are feverishly working on new ideas.

With over 50,000 hits and 8,200 returning readers in November we continue to be humbled by your interest in our blog site. TSB believes that everyone of our readers is entitled to their opinion with the intent that democracy will rule. As controversial as some topics have been, we hope that our forum has provided an outlet for The People that make a difference in the industry. Many times all we hear are the management talking heads and analysts telling everyone that everything is wonderful, and who wouldn't be if you were attempting to manipulate the market and your financial interests. TSB wouldn't expect it otherwise. In some respects our blog site will keep some of the industry's Usual Suspects honest that probably cast this forum as an agent in provocation.

In closing, please remember that we are fortunate to work in spine. We are afforded an opportunity to earn a great living while being part of an industry that actually provides a social and medical utility (or as Lloyd Blankfein would say, we are doing God's work) hopefully enhancing the patient's quality of life. As you open presents during this Chanukah and Christmas season reflect not only on how much money you have made, but on how we can better the industry, and the world in 2010. Once again, we appreciate the anonymous e-mails regarding industry news and look forward to seeing you down the road in 2010! PEACE!

Surgeon Owned Distributorships: New Trend or Passing Phase?

TSB has learned that a new academic program is being added to the syllabus in medical schools and fellowship programs across the United States. It is called the SOD or Surgeon Owned Distributorship program. It's an attempt to bolster the spine surgeons ability to increase their earning capacity. This program could become part of the standard core curriculum, integrated into a dual M.D./MBA degree program. If approved, many medical schools that are affiliated with universities having law schools intend on offering classes on how to navigate the legalities of this business model so that the surgeon is in compliance with Stark and CMS guidelines. In response to this program, many Deans have reported that they intend on eliminating their course on medical ethics.

Why is this business model picking up momentum at a time when the government is scrutinizing healthcare, let alone the spine industry? The reader can only surmise that the old adage applies; when one door closes, another door opens up. Ten plus years ago as surgeon consulting agreement were picking up momentum, law firms started sending promotional flyers on legal seminars that addressed how to comply with Stark I and II in managing your agreements. These seminars do exist, run by the same profession that surgeons love to complain about, the legal profession. Today consulting agreements have become so rampant that it has become commonplace to broker a surgeon before they have even tried a new product. As sham consulting agreements have become prevalent, ever so more scrutinized by the DOJ's microscope, a different business model is starting to emerge. The surgeon owned distributorship.

Rumors have surfaced that this model has picked up momentum, especially on the West Coast. One of the most important aspects of starting a surgeon run distributorship is to receive legal clearance that what you intend on doing, and how you intend on doing it is within the law. The surgeon investor is looking for a legal opinion to assure that there is no inherent conflict of interest. In all likelihood, the surgeon's role in this business model is usually as a silent partner funding the distributorship, that is run by a non-surgeon. It helps if you have a three to six man group that has a high volume surgical practice because that would produce immediate volume. So the question must be posed, how desperate have some of these surgeons become?

Over the last ten to fifteen years, the medical device industry has used every legal advantage to stretch the rule of law and get an advantage on the competition. This behavior threatens the core of free-market enterprise. Starting around 1991, the evolution of the surgeon has gone through multiple phases, those include; surgeon educator (let's have them teach our sales reps and the residents about surgical technique at company sponsored meetings), surgeon marketeer (let's fund a controlled study to emphasize the efficacy of our product), surgeon consultant (let's hire the surgeon as consultant based on volume), surgeon designer (let's buy their IP), surgeon owner (let's invest in a start-up company and maybe we'll hit the lottery), surgeon owned specialty hospitals (let's profile our patient selection and we'll show the government on how to run healthcare), surgeon investment banker (let's go work for a private equity firm), and last but not least, surgeon owned distributorships. It's a wonder that some surgeons even know how to operate? Could it be that all that is left for spine surgeons is to become salespeople. But doesn't that already exist?

It is debatable as to whether Stark I and II are truly an unwarranted intrusion into the practice of medicine when we deal with the above stated scenarios on a daily basis in our business. Many surgeons including NASS respond to these concerns by stating that while these problems exist, they are not widespread. Of course every parent wants to believe that their children are behaving. If you have invested or own a hospital, company, or distributorship and are a surgeon could this not constitute a potential conflict of interest? Sometimes you have to wonder whether some people would just focus on what they were trained best to do and let others do their job. TSB wants to know what our readers have heard?

The End of a Decade in Spine

In ten days, the industry will close the door on the first decade of the twenty-first century in spine. The industry has come a long way considering our history. When TSB entered spine, there were a few companies in the market. Most of us did not have any idea how quickly the industry would grow in twenty plus years. You know the old Virginia Slims (a now defunct brand of cigarettes) marketing and advertising platform, "You've Come a Long Way Baby!" The industry has come a long way since the Harrington Rod was developed by Dr. Paul Harrington, and the constrained Caspar, Raveh and Morscher plates set off a new wave and craze in anterior cervical discectomy fusions, Orion and CSLP shortly followed, and we were off to the races. We had surgeons like Roy Camille, Magerl and Anderson inventing techniques in posterior cervical plating using lateral mass screws, Jurgen Harms contributed to interbody devices with the invention of the Harms Cage, the TSRH established a new standard in pedicle screw fixation, while a little known product developed by Alan Olsen, aka Danek, came to be known as the cross connector. In 1965 Marshall Urist discovered intramuscular implantation of demineralized bone matrix marking the beginning of the development of what has come to be known as bone morphogenic proteins. These were some of the pioneers and emerging technologies that established a new paradigm in the future modality of treating patients with chronic and debilitating spine disease. These surgeons were the visionaries that provided future generations with a versatile armamentarium in treating their patients.

The last decade has provided the industry with technological and scientific advancements in materials, dynamic stabilization, total disc arthroplasty, minimally invasive surgery and biologics including stem cells. Similar to the automobile industry of yesteryear, the industry has exploded with companies claiming that not only were these products innovative, but that these products would improve upon the patient's quality of life. Nearly ten years ago, the clinical mantra from the podium focused on anterior motion preservation utilizing the first commercially available artificial disc in the U.S. marketplace, whereas today, thought leaders have shifted their focus to the tri-complex of the spine to address pain relief. One has to wonder if the practitioner resects enough of the patients anatomy and replaces it with anterior, posterior and interbody hardware with biologics, will the patient have pain relief? Minimally Invasive Surgery was the marketing buzz word for companies to differentiate themselves from their competition, soft-tissue preservation became important in enhancing the healing process. Today there are more dynamic stabilization systems with variations in design that claim one over the other even though many questions remain as to what constitutes the optimal design. In addition to many of these wonderful technologies, an entire new mind set developed due to economic forces affecting the industry. Questions remain unanswered about the true intent of some of these ventures. Were and are some of these technologies looking for an indication? The commercialization of medicine, and especially spine, has changed the way we once did business. No longer was it honorable to build a foundation and establish a business, entrepreneurial fever became an epidemic in the earlier part of the decade. The acquisition of the ProDisc by Synthes, and Charite by DePuy set off an entrepreneurial frenzy. "If they could do it, why can't we?" Unfortunately, timing and serendipity are important factors in becoming rich in today's economic environment.

So, what does TSB expect as we move into the next decade? Industry consolidation will become key if the we are to survive the many unexpected changes that are in store with the enactment of a new healthcare bill. Research and development along with manufacturing will be exported to countries with a cheaper labor force and product cost as a response to the ever increasing pricing pressures in the US market. The business development model will evolve based on investors need to increase or sustain margins resulting in a more direct-to-consumer (the hospital) by- passing the old sales model. Product development will become more focused. Transparency and accountability will become a tenet of the industry. Money will be always be available, but there will be greater scrutiny in providing capital. This will not be a bad thing, because it will force the industry out of its comfort zone, one that has layered companies with the same executives that still continue to do the same thing over and over expecting different results. TSB wants to know what our readers think?

Bacterin: I Will Survive?

I could hear the old Disco Diva Gloria Gaynor, singing in the deep recesses of my brain, "first I was afraid I was petrified," word on the Street is that potentially Bacterin could be showing some chinks in its armor. There have been many rumors swirling around the current solvency of this organization. TSB has received many e-mail from anonymous readers asking what have we heard?

Having reached out to various sources, and they are not disgruntled employees, TSB has heard that there is a definite cash flow problem at this company. Everything from farming out receivables, bounced checks, to delinquent expense checks, to a confused management team that is causing consternation between independent distributors and direct sales people. Having a plausible distribution strategy usually helps the business model.

When a company starts having these types of issues, "Sirens" have to start going off for the employees. Though the Bacterin Sponge has had a good reception in the market place (n0 this is not an endorsement) there's a difference between having a viable product and having a strong management team in place. TSB wants to know what its readers have heard?