Sunday Op Ed Piece - Good Night and Good Luck!

The turn of the millennium saw the beginning of the spine bubble where there were more start-up and early growth stage companies than any of us would have imagined. To paraphrase former Fed Chairman Alan Greenspan, along with the boom came an irrational exuberance. Parallels exist between what was developing on Wall Street and what was happening on Spine Street. The same way investors bought CDO's, collateralized debt obligations, without worrying what was inside of them, surgeons were investing in start-ups without really understanding whether the companies that they were investing in had product and intellectual property with any real short-term let alone long-term value. Many contend that the watershed moment for the industry was defined by the acquisition and eventual sale of ProDisc by the Viscogliosi Brothers. Many surgeons saw their peers cashing in and cashing out on the spine boom and they rushed to get in on the action. The consensus seemed to be, if they can do it, why can't we? As TSB likes to say, timing is everything.

The start-ups and early-growth stage companies that began surfacing were the equivalent of financial vehicles creating, packaging and selling potential emerging futures in the form of their own credit default swaps to surgeons. Surgeon investment was their insurance policy for future survival and minimizing risk. Unfortunately, change can be unexpected since markets tend to be dynamic in real time. Yet, the key to many of these companies survival would be that with surgeon investors, and a continuing trend in price increases, much would remain status quo. Rising implant prices created a false sense of security and their own momentum as bubbles do. But markets are never stable. Just like the housing bubble, we are in the spine bubble. The market is correcting itself not because of some recent post on pricing, but because of a dynamic called supply and demand. As less innovative products emerge, the so-called "Others" will be starved of growth revenue and market expansion. If we believe in free-markets, look at what happened to the price of flat-screen televisions as an example. Could it be that many of these companies are not in the bubble, but on the bubble waiting to burst?

Like any business if you are not innovating new products that change outcomes meaning improving the quality how can one continue to command the same pricing and margins that the industry once expected? What has happened over the last five years is that with a glut of commodity products the ordinary trajectory for profits begins to decline as competition increases. This just doesn't apply to the manufacturers, it also applies to the providers. These dynamics not only affect profitability, it also affects the industry's code of conduct.

The success of others, regardless of how it was achieved, has driven many in the industry to extremes. It has raised many legal and ethical questions because of the underlying intent. Imagine what this market would be like if there were no laws or regulations that provided oversight for what can and cannot be done. Many of the side deals that exist are reminiscent of the deals that existed on Wall Street, and many of you know that eventually it caught up with everyone. So today, many of these early growth stage companies are experiencing their own "stress test." In some respects, the structure resembles a ponzi scheme. As pricing continues to fall, many of these companies will teeter on the brink collapse.

In closing we marvel at physician owned distributorships, surgeon investors, distributor brokers, and illegal inducements when all of this is a by product of an industry that was hyped and hyper inflated. TSB wants to know what our readers think?