U.S. Spine - Is the Ship a Sinking?

Today, the SpineBlogger received a call from an industry source that informed him that there was a purge at U.S. Spine. If this is true, could it be that Paul Sendro brought his famous "rack" when he was hired as the new VP? For those of you not familiar with the "Rack," its what was used in the closing scenes of Braveheart to cleanse William Wallace. So what's going on at U.S. Spine?

From the looks of things, not much. Is the Facet Gun innovation? I'm not quite sure, since most surgeons that I have spoken to are not enamored with this product. Could this be the beginning of another Vertebron scenario? Remember, Sendro grew Vertebron threefold, as reported in the U.S. Spine press release, only to result in Chapter 7 and Chapter 11 bankruptcy. In addition, how many medical advisors can a company of this size have? The Spine Blogger would be surprised if this company generates $12 million in sales per annum. If so, that would be $1 million per medical advisor. The Spine Blogger wants to know what you foot soldiers have heard, could this be the beginning of the end for another spine company?

Who will win the Oscar?

Sometimes the SpineBlogger believes that we all need some levity in our lives. Recently, Orthopedics This Week announced the 2009 Spine Technology Awards. The intent of the Awards Show is to bring recognition to the engineers, companies, and physician inventors who create breakthrough technology (definitely not Blackstone). By the looks of things, our industry is on a roll!!!! Could this be the next Academy Awards, the Country Music Awards, (God, I love that Carrie Underwood chick) or the American Music Awards, and are we heading for the Kodak Theater on Hollywood Boulevard next year? Could we start seeing engineers and surgeons with Stars on Beale Street in Memphis? Will this ceremony have the potential for a Janet Jackson moment? Can this inaugural festivity have the potential of picking up momentum and becoming an annual Red Carpet extravaganza like Oscar? Will we see James Lipton (The Actors Studio) playing Alexis Lukianov in a documentary on NuVasive in the near future? Will OTW eventually build a Spine Technology Hall of Fame in Warsaw, Indiana, the Orthopedic Capital of the World, where sculptures of engineers and surgeons will be enshrined? Will we have to listen to winners get up on stage and tell us how they would like to thank their fans. How many times will we have to endure someone yelling from the audience, "We love you, Tony!"

How subjective will the judging be when surgeons and clinical research experts will be doing the voting? I mean come on, even Jeopardy has rules! Will Deloitte and Touche be monitoring the voting? I always thought award shows were a venue for the public to acknowledge their stars? All in all, it should be a fun night. So dig deep into your pockets (pony up boys) and be a participant in what could turn out to be an annual classic that is something beautiful. Individual tickets are $850 and a table of eight will run you $7,000. Let the party begin!

Can Doctors Step Up to become Healthcare Innovators?

Recently, an article in the New Yorker entitled; “The Cost Conundrum” compared the cost of Medicare per enrollee between two Texas towns, McAllen and El Paso. The author, Atul Gawande, M.D. explored the question as to why two border towns of similar demographics would cost Medicare such enormously different amounts of money per enrollee. The bottom line was McAllen cost Medicare fifteen thousand ($15,000) per enrollee, while El Paso, the same size as McAllen, and with similar demographics, spent $7,500, which was half as much.

What the reader will find is a poignant analysis that was not only made by the author, but by physicians that work in the McAllen area. What concerned me was the comment that was made by a veteran physician in observing that even though the medical community has more technology, “young doctors do not think anymore.” Not only was this a frightening statement, it made me wonder whether physicians whom are supposed to be smarter than most, are really no different than us, in that they are likely to believe that more is better. Nothing in medicine is without risk. In recent years surgeons have markedly increase surgical procedures. In 2006, it was reported that sixty million procedures were performed, what amounted to one for every five Americans. The question posed was; “are we any better off for it?” It was reported that 100,000 people die each year from surgery related complications. That is far more than die in automobile accidents. Unless we control cost, will we be better off?

So I started to think about our industry and asked myself is McAllen a microcosm of the Spine Industry? How many needless spine procedures and tests are performed annually in our industry? I could already hear the uproar, who does theSpine Blogger think he is? Unlike most industry professionals, I know my place, but I also know what I’ve seen during my tenure in the industry. Let’s face facts, like any other profession, there are those surgeons that are craftsmen, and then there are those that want to be businessmen. Unfortunately, the waters can become murky when you are both. How many MRI’s are performed that are not really needed, or, how many bone density test are performed because it is a revenue generator? When does an individual draw the line between what is really needed, and what is padding one’s pocket? Greed is part of human nature. When the head of a physician owned hospital was questioned about the high cost of healthcare at his hospital, he was quick to point a finger at the other facilities and the federal government. When it comes down to understanding the cost of healthcare, most physicians are not evasive, when it comes to understanding the truth, they really just don’t understand the entire picture. How many understand the new Healthcare Bill, let alone have read it? Even then I am not sure one would understand all the nuances of it. Just leave it to the lawyers and the media talking heads to represent individual special interests.

But let’s look at the anatomy of a surgeon. He has the freedom to own a strip mall, real estate, imaging center, surgery center, or he may be a partner in a physician owned hospital. This is America. There are innovative ways to increase revenue in patient care. As one doctor in McAllen stated, “it’s a machine, my friend.” Many physicians have a difficult time in understanding the financial implications that their decisions make. There are those that only see their practice solely as a revenue stream. The reality is that maybe physicians need a course that teaches the ethics of medicine and business.

There is an underlying subculture in the spine industry. Just look at the physicians that represent special interests on the dais. I don’t need to name them, since we all know the Usual Suspects. But how much of an advantage does a company have when they hire these individuals? The day of champion surgeons are over, it’s a thing of the past. Just like our industry, surgeons have become a commodity product. All you have to look at is disclaimer after disclaimer when you attend a scientific and clinical symposium. Are these companies hoping that these champions steer their residents and fellows towards their products? Absolutely.! It’s scary when some of their peers view them no different than sub-prime mortgage lenders treating their patients as profit centers.

Just because doctors make a lot of money, doesn’t mean each and every one of them is a good businessman or a good doctor. By rooting out problems like poor preventive practices, unnecessary back operations and unusual hospital complication rates, maybe quality of care would go up. But Dr. Gawande makes an interesting observation, “are we witnessing a battle for the soul of American medicine?” I will paraphrase his comment; ”somewhere in the US at this moment, is a patient with some type of medical condition, and the damning question that must be asked is whether the doctor is set up to meet the patient’s need or his he looking to maximize his revenue?” As one surgeon in McAllen observed; “we took a wrong turn when doctors stopped being doctors and became businessmen.” So how do we solve our healthcare dilemma? Could it be that until we collaborate as a society on quality of care, over and under treatment, and sheer profiteering do we stand a chance? Someone needs to be in charge, because at the present moment no one is, and the result is a wasteful and less sustainable healthcare system. The Spine Blogger wants to know what you think?

The Future is Now, it goes by the name of Cortoss!

It has been reported that nearly 1.7 million vertebral compression fractures are diagnosed in the United States annually, with an estimated 13.5% that result in surgeons and radiologists performing kyphoplasty or vertebroplasty procedures on these patients. Percutaneous kypho or vertebroplasty benefits the elderly, since conservative treatment bears life-threatening risk. Since PMMA has a drawbacks due to high viscosity and poor handling characteristics in addition to potentially leading to pulmonary emboli and other complications, the time has come for the medical community to look at other alternatives.

That alternative is Cortoss! Why Cortoss? Why is the SpineBlogger promoting this product again? Because if you or I had a VCFx, Cortoss would obviate many of the potential issues associated with PMMA. A low-pressure delivery system this material is hydrophilic allowing it to support existing structure rather than displace it. Since the government, insurance companies, hospitals and physicians have made healthcare a political football, isn’t it time we start thinking about how advances in technology that has been around since 1984 can truly benefit the patient and minimize the cost of care for the elderly. Retrospective data and results confirm that Cortoss is safer and as efficacious if not more so than PMMA. I’m not some fancy analyst that gets paid to put a spin on a company or a product for Wall Street. The one thing I know is that my clinical knowledge and acumen of the industry makes me more qualified to analyze a product and a companies future, as far as the SpineBlogger can see the future is now, and it goes by the name of Cortoss. The SpineBlogger wants to know what you think?

First Kuklo, Now Polly, Who will pay the Price?

Today, Barry Meier of the NY Times reported that a second medical consultant, Dr. David W. Polly, Jr. has drawn U.S. Senate scrutiny for his relationship with Medtronic Sofamor Danek. In 2006, Dr. Polly urged a Senate panel to continue government subsidies for medical research into combat related injuries using INFUSE. What Dr Polly failed to disclose during his testimony, was that he was a Medtronic consultant, and, was billing the company $6,000 for his appearance. Without going any further, the SpineBlogger has one simple question to pose; why did the U.S. government subsidize research on behalf of Medtronic, and allow Dr. Polly, or whomever else is involved, to study and validate the product at the expense of U.S. taxpayer dollars. I know the argument, look at the outcomes, but I would argue at whose expense?

If Medtronic is under the microscope, what are these investigations saying about the type of margins that we generate within our industry, in order to pay surgeons the type of consulting fees that they earn? And you think that the federal government is not monitoring this activity? Since Dr. Polly did not acknowledge that he was representing Medtronic at the panel meeting, what does it say about his integrity? As the SpineBlogger has stated before it is these little "white lies" and "selective amnesia" that is beginning to get so many academicians in trouble, not only with the government, but also with their respective institutions. I know some other white knight thespian will take up their cause and say how unjust the people are treating these poor guys, and that the universities are not being transparent. What I have to say to those charges is nonsense. If physicians continue to exhibit this type of arrogance and behavior, there will come a time when federally funded research and grants will become a thing of the past.

Dr. Polly was quoted in the article as saying that his relationship with Medtronic has always been on the up and up. He probably meant that if he shows up, they pay up. If Dr. Polly's study cost the U.S. government nearly $500,000, then Dr.Polly should not only repay the government out of his pocket, he should be charged compounded interest. In addition, the 'evil empire" as we know it should reimburse the government. But isn't it entertaining that now Medtronic is distancing itself by saying that Dr. Polly should have disclosed that the company was paying him for his appearance and travel expenses. In every instance, Dr. Polly has acted honorably, unfortunately, he forgot to tell the government that not only was he doing this for injured military personnel, he was also doing this for Medtronic. The Spine Blogger wants to know what you think.

Is a Storm Looming on the Horizon?

The Obama Administration is attempting to redefine the United States healthcare system. The escalating cost of medical care and emerging technologies is establishing a new paradigm in the medical device industry. Whether you are a member of the Spine Cartel or a fledgling early growth stage company, the question you must ask yourself is how do you protect your marketshare and continue to grow your revenue stream in a zero-sum market? Pricing constraints are being placed on companies witnessed by procedural caps that are being initiated by various hospital buying groups. Physicians are being pressured to make concessions everyday when it comes to personal preference for products. Reimbursement is a major concern whenever new technologies are introduced in the marketplace.

There will be a major shift in how medical device companies manage their relationships with physicians, providers and insurance companies. A conciliatory partnership will have to be developed with the provider (the hospital and physician) and the payor (the insurance industry or potentially a government sponsored program). Concession will not be an option. It will be a mandate. The relationship between the device industry, the insurance industry, and the provider has been adversarial at best.

Hospitals and physicians are now challenged with operating a profitable business at a time when reimbursements will be redefined. As new technologies emerge, hospitals and physicians will be confronted with making decisions whether or not to provide the patient with costly therapies. Financial barriers will have to be removed in order for both the physician and patient to have access to new technology. Unpredictable cash flow and poorly forecasted budgets have created a volatile environment in medicine. A reduction in implant cost will lift a potential barrier to quality healthcare. But, are we willing to do that? And what will physicians decide to do when medicine is no longer the cash cow that it once was. Surgeons still make an exceptional living unless obviously they think they would like to try their hand at plumbing.

The insurance industry has, and the government intends to control cost. The challenge that the medical device industry will have is educating both parties on product differentiation and outcomes. Up until this now we have done a reasonable job, yet not good enough. But reason alone is not enough to overcome controlling cost. By reaching across the aisle and offering an olive branch we have the opportunity to continue to be a viable and innovative industry. Unfortunately, many things will have to change. Companies will have to accept less profits meaning that we will have to manage our budgets with more efficiency than ever before. The companies will have to police themselves in identifying whether a potential new technology realistically will make a difference in patient outcomes. Witness the carnage in our industry that has resulted in over 500 different pedicle screws, nearly 300 cervical plates and countless TLIF, PLIF, ALIF and Cervical PEEK devices. Have all of these products really made a difference in outcomes? Our industry has come to resemble the early years of the automobile industry. Or, have these products saturated an already existing commodity market? As investors hold on to their hard earned capital there will be fewer opportunities for “me too” products to succeed. How will this shift affect the earning capabilities of the salesperson? There will be a shift in the commission structure resulting in less earnings for the distributor or direct salesperson. I know that many of you do not like reading this, but if the company’s bottom line suffers, so will your ability to sustain your earning capacity. Remember a company not only incurs cost of goods to manufacture the product, it incurs general and administrative costs and cost of sales. It all comes down to operating income and remember, any publicly traded company has to answer to the Street. Wall Street has become our own worst enemy.

Salespeople have done a poor job of being business people. Purchasing, materials management, and finance were always viewed as the enemy. But this is not the only looming problem. What happens when companies start believing that they could exist without sales people and start to model their distribution model by selling to the hospitals directly? If you don’t think that’s possible, it has already been piloted by various small companies and tabled by larger organizations. Yes, there is some liability issues involved but I am sure that a remedy could be found if it meant greater profit margins in a constrained market. So where do we go from here? I don't want to be perceived as the Dr. Doom of the Spine Industry but we will face an unpredictable future. This unpredictability will create some people to attempt to manipulate market forces that will not be able to be controlled. The companies that exhibit the wherewithal to change and think out of the box will survive and prosper and the companies that don't will wither away. The Spine Blogger wants to know what you think?

What a Cast of Characters!

Have you ever analyzed what is written in industry related press releases whenever a change in upper management occurs? As we enter the Dog Daze of August, I just put my board up for a few days to catch up on things. The first thing that is evident is that nothing really interesting is going on with the exception of Paradigm raising " $ 21.5 million, mucho dinero." Kudos Marc Viscogliosi on a job well done! I know that some other blogs that you the reader subscribe to have been talking about mergers and acquisitions, but I really don't see any existing technologies out there that would help the "Spine Cartel" in expanding revenue and marketshare. Neither do I see any prudent investors parting with hard currency in this market unless you are giving it to V3 (Tony, John and Marc), I'm trademarking that moniker. So I decided to look at archives of recent management transactions and then all of a sudden it hit me. How entertaining are some of these Press Releases are when you really have an understanding of our industry?

Example # 1: Back in April Scient'X Groupe, S.A., announced the appointment of Oliver Burckhardt as its President and CEO. The release stated, "OB was responsible for the Orthofix/Blackstone spine unit with revenues that exceeded $100 million in 2008. Of course part of this appointment was probably attributed to the fact that Healthpoint had to replace Mike Huggins who had some legal issues leftover from his Synthes/Norian days that have recently been adjudicated. But I'm not writing about Huggins, I am talking about OB, Scient'X and Healthpoint. If anything, OB had a brief stint at Blackstone. But was he really responsible for contributing to any of the $100 million in revenue? He was there for such a brief period that his coffee didn't have a chance to get cold. Yet, if you read the comments that were made about Huggins departure, you start to laugh, "during his tenure he strengthened the companies platform and positioned it for significant growth!" Are you kidding? If my memory serves me correctly, the guy was at Scient'X for less than a year. Just leave it to a bunch of orthopaedic investment bankers to serve up a plate of "BS" to potential investors. Question: What has Scient'X done recently? Outside of raising some capital, not much!

Example #2: Custom Spine: In January (I must be bored if I went that far back in time) CS announced the appointment of Lew Bennett as President. The company announced that "Demolition Lew" brings over 48 years of experience in the medical device industry. I didn't know there were people with that kind of longevity in our industry. The CEO stated; "We are really excited to have Lew taking the helm at Custom Spine." You've got to be kidding! Jack Sparrow has a better chance of surviving this ship wreck! The Board should be fired! The guy is an octogenarian and has left more than his share of collateral damage in the industry! Lew has consulted for over 550 orthopedic and neurological practices and universities, in addition to all the other accolades that he lists. He is legend (Will Smith look out) in his own mind. Some people need to stop living in the past. The only way he could create this much excitement would be if he was playing with his dosing of Viagra.

Example #3: Applied Spine Technology names Craig Corrance new CEO. If this guy isn't Bill Compton (the Vampire) from True Blood, I don't know who in our industry is. Will his return to the head honcho position bring some tranquility to his life? If he isn't warding off threats from a cadre of former Vampires (Altiva, Scient'x and Raymedica) I don't know who is. Didn't this guy get appointed in June of 2008 as the President of Raymedica? World class talent usually last longer than one year. Throw in the responsibilities of his newly turned fledgling Applied Spine, and it almost makes Craig yearn for the good old days of lurking in the shadows.

The Spine Blogger wants to know what some of you real people think?