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Just for the sake of argument, let's say that the medical device tax is repealed, regardless whether its effected by a SCOTUS decision to overturn Obamacare, or Congressional legislation repeals the tax, where will the next new technology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?"