2011 A New Decade In Spine

"Business demands a docile government and unrestrained corporate freedom, there must be balance."
                                                            - TSB -

2010 will be remembered as the year that spine was brought back to earth.   Just like Ziggy Stardust, the industry was technologically promiscuous, almost drug induced. glutting the market with more versions of me too products in hope of windfalls only to destroy a once thriving industry with its own gluttony.  What precipitated the changes that have taken place in the spine?  As the industry enters a new decade, an autopsy on the last ten years is quite revealing.  Our bloggers know that commoditization and capped pricing have become the norm, rather than the exception.  Some companies are holding strong, despite a decrease in revenue due to the economy, and, third party payor denials. The next few quarters will tell a compelling story for those companies. Here are some concerns you have expressed during the past year;

• Are we developing products that improve clinical outcomes, and benefit patients?
• Has healthcare economics re-aligned growth expectations?
• Have our wages/salaries really increased in the past ten years?
• Why are surgeons and investors concerned with how much money salespeople earn?
• Will the government step in and outlaw POD's?
• Have stem cells become the industry's derivatives?
• When did this transformation really begin?

The years leading up to 2010 have provided the spine industry with many "so-called" breakthrough technologies.  And no fellow bloggers, we are not talking Blackstone Medical type breakthroughs, that corrupted, and shifted practical ethics in spine.  If there ever was an albatross that lingers around the industry like a bad stench, it's name was Blackstone Medical, indicative of the efforts that Orthofix made to distance itself of any association to a sordid past.  The effective demand of the market has been to identify technologies that enhance outcomes, yet at the end of the day, the financial objective is to  make those that lead the crusade, rich.  It's time that some industry executives spare us their stories of how a personal injury changed their life, and sent them on a mission to heal the sick, and feed the hungry. That my fellow bloggers was another lifetime.  Today, profits take precedents over outcomes.  

For better or worse, the crossroad in spine was 1999, when the Viscogliosi Brothers acquired Pro Disc from Aesculap AG.  This marked the first time an investment banker/ research analyst took the reigns of a spine company.  The efficacy of fusion was being hotly debated, and, the Europeans were years ahead utilizing newer technologies, materials and methods.  One has to express cynicism when industry executives decry socialized medicine, but rely on Europe, South America and third world countries to test drive their products on foreign lab rats.  Without them, where would the U.S. market be?  Total Disc Arthroplasty was not only going to return patients to early mobilization, it was touted a superior alternative to fusion.  U.S. investors and surgeons jumped on the bandwagon.   Tony Viscogliosi was quoted as saying, " the Pro Disc will transform spine surgery by replacing a high percentage of fusion procedures with disc replacements."  Just like the Great White, Wall Street and the investment community circled the waters.   By Viscogliosi's estimates, the total disc market would grow to $3 billion dollars by 2008.  Was that anything like his vision that one day we will have one rep for one surgeon?  From God's mouth, to our ears, the race was on.  All of a sudden there were more private equity investors than a roomful of cockroaches, when the lights go on in a New York City restaurant in the middle of the night.  This ushered in an era of investment greater than the California Gold Rush of 1849.  Like any paradigm shift, the new new thing was to leverage others capital to increase one's wealth, and, with that came demands that the spine industry assimilate the persona of financial markets rather than behave like a healthcare oriented industry.  What the oracles of Wall Street failed to grasp was, that healthcare unlike finance, has broader oversight and regulation in the form of third party payors and the FDA, rendering it impossible for quants to create algorthims with super computers that could erase product development protocol and approval guidelines.  Many of these people believed that their money and power would change the rules of the game.  The benefits of TDR is still debatable, contingent on appropriate patient profiling and advancement of disease.   What we have learned is that an industry that was once built on long-term results became short-term oriented.  Things had to get done faster than ever before, witnessed by the constant complaint that the FDA has too much oversight in commercializing products.  Today, product development is in a transitory state.   Dynamic Stabilization is DOA, witnessed by the "For Sale" sign that pioneering Applied Spine threw up earlier in the year.  If Panjabi can't get it done, who can?  Disc Motion Technologies cannot raise capital to keep its posterior disc and dynamic system afloat.  BMP's are under attack as being too expensive in an ever increasing hostile cost environment, and even ISP devices are under scrutiny.   All one has to do is look at facet fusion technologies and wonder how long can this scam go on?  The last few years have led to more failures than success stories with a cadre of start-up and  early-growth stage companies folding while those that survived are in a holding pattern, flying on vapors.  The industry is moving away from hardware and looking for software as an alternative to fusion.

Spine industry stasis.  Essentially, there has been an inactivity in emerging technologies in spine since the total disc.  Since the inaugural stem cell meeting at the Chicago Airport in 2006, stem cell mania has picked up momentum, with more capital being invested in development, marketing, and commercializing what many argue is old technology with a new spin.  Like derivatives, stem cells have a value based on expected future movement as an asset.  The industry is looking to replace BMP's, TCP's, and other biologics with stem cells, in hope of a tremendous payoff.  Spine surgeons are much more fixated with stem cells in comparison to general orthopedists.  The ultimate goal of those leading the crusade is to convince clinicians, third party payors, and hospitals that stem cells are the golden goose.  Unfortunately, stems cells continue to look like an exotic derivative.  Companies are hoping that by leveraging its underlying value it will lead to pull thru revenue.  In essence, companies are hedging their futures on the new new thing.

A concern that we hear from many of you, is that you are making less money, or,  you are earning the same amount that you did five years ago, while our illustrious CEO's continue to line their gilded pockets, behaving as though nothing has changed.  Some have even asked employees to forgo their salary for a period of time, until they can raise more money.  If there is any truth to those rumors, those individuals should be ostracized by the industry for behaving with such arrogance.  The same way that the American political system has been hijacked by special interest, our industry continues to be hijacked by the same CEO's, that are laughing all the way to the bank.  During the third quarter of 2010 only 33 companies in the entire U.S. went public, there isn't another Apple or Microsoft ready to explode in the spine market.  Rumors of certain spine companies going public is comical.  The investment community is not infusing capital into companies that continue to design and manufacturer more of the same.  Banks and investors are more interested in exploiting the day-to-day movements of the market by focusing on trading.  If we are interested in containing the ever rising cost of healthcare, why aren't we developing products that allow us to streamline cost, while allowing us to maintain our profitability?

As for surgeons complaining about how much sales people earn, TSB doesn't feel the need to even address this issue.  If surgeons believe that we are making so much money, they should become salespeople instead of surgeons.   Between being concerned with our earnings and starting POD's, class warfare is here to stay.   Bowie sang;

Ziggy played guitar jamming good with weird and gilly
And the spiders from mars, and he played it left hand
But made it too far, became the special man, then we were Ziggy's band.
It's a new dawn, a new day!