2011 Spine Outlook!

As the U.S. economy continues to churn and burn, it has become evident that double digit growth in spine is a thing of the past.  If you're willing to listen to the analysts' and other talking heads, the primary culprit is an unemployment landscape that has not been witnessed for many years.  Patients refuse to have surgery if it could mean losing one's job or having to incur additional out-of-pocket expenses.    The insurance industry continues to wreak havoc on procedural reimbursements as medical device companies attempt to roll out new and potentially emerging technologies.  Today, many companies, especially early-growth stage organizations, are re-evaluating their capital needs to launch new products,  while assessing their fiscal viability.   Finally we have come to our senses and accepted the fact that spine is no longer the "run and gun" industry it once was.

The industry is in the throes of a fiscal healthcare/spine environment that will be defined by cost containment.  If one cannot substantiate that the product will improve outcomes, it will be deemed another commodity product.  Yes, fellow bloggers, medical devices will continue to have high margins, yet, those 80-90% gross margins will be a thing of the past, spine will continue to be a lucrative investment only by adjusting the overall financial model to attract future investors.  This will mean lower commissions, even lower than what they are today, a proliferation of physician owned distributorships, fewer jobs,  and less hardware with a focus on stem cells and biologics.  Many of our readers are in denial if they continue to believe that things will remain status quo.

Hospitals are putting tremendous pressure on companies to make pricing concessions.  How can a company justify a premium if there are multiple options when choosing a product, especially me-too products?   Regardless of one's opinion, legacy companies will still have a hold on the market with their flexibility to adjust pricing, much more so than start-ups or early growth stage business models.  There will be a premium on convenience and conciliation.  The one-stop shopping mentality will prevail.  So whom do we blame?

Obviously, no one is willing to accept responsibility.    It is easier to deflect the blame on everyone else except ourselves.  For many years we have been warned, only to look into the eye of the storm and defy reality.  As an industry, we have spent time analyzing primary symptoms without looking at the secondary and tertiary drivers.  Maybe that's where we have gone astray?  Today, there has been a shift in how companies must manage themselves and their research and development in order to survive.    Many years ago, when the reconstruction and trauma markets were being reigned in, spine thumbed its nose at the hospitals and third party payers, laughing all the way to the bank.  Today the joke is on us.  The battle lines are being drawn in such a manner that it is pitting us against them.  A chasm that has never before existed.  So who will be hurt?  Unfortunately, only the patient.  Because in the end our arrogance and avarice will come back to haunt us.  TSB wants to know what our readers think?  Are we heading into the eye of the storm, or will we stare down the monster?