Tuesday, September 8, 2009

Synthes 1 - Medtronic 0

35 USC Section 284:

"Upon finding for the claimant, the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and cost as fixed by the court.

Section 285:

" The court in exceptional cases may award prevailing attorney fees to the prevailing party, in either event the court may award up to three times the amount found or assessed."

On August 26th, 2009, the United States District Court in Memphis, Tennessee ruled on behalf of the claimant's (Synthes) petition permanently enjoining Medtronic from infringing on U.S. Patent No. 6,936,071 covering the Synthes ProDisc-L artificial lumbar disc. The award and damages amounted to $21 million. Based on recent rulings, Medtronic got off easily.

Yet, considering that Synthes overpaid for the ProDisc-L (but what's an additional $50-$100 million for Hansjoerg Wyss) it seems that "the worm has turned" for the Arbeitsgemeinschaft Osteosynthesfragen! Once again, under the "leadership" of "Buffalo Bill" Hawkins, Medtronic has taken another beating, no less on it's home turf. Could they possibly rebound and beat NuVasive? Time will tell. The Spine Blogger wants to know what its readers think?






Sunday, September 6, 2009

There's Something Toxic in the Water in Vegas!

Since the Spine Blogger last posted the Medical Mafia article, our crack staff decided to look further into the said allegations regarding "kick backs" paid to surgeons by various distributors and companies in Las Vegas. It is quite evident that members of our "honorable spine medical community" have either lost their minds, let alone ethics, when they decided upon practicing in Las Vegas, aka as the "City of Sin." Could it possibly be something toxic in the water? Or, could it be good old AMERICAN GREED?

Initially, when these rumors surfaced, the good people of Las Vegas were taken aback that such an elaborate scheme not only involved middlemen and medical malpractice attorneys, but also notable spine surgeons, potentially judges, and local distributors. Yet, all of our readers know the old adage; "where there's smoke, there's fire!" The question that the Spine Blogger must ask is; "how long is it going to take the Department of Justice to move forward with their criminal case against the "Three Amigos" and Blackstone Medical? Many people in our industry and the companies involved are laughing at the DOJ and the FBI. Some believe that this case will never come to fruition. Up until a few years ago, the word on the street was, that the FBI were interviewing every former Blackstone employee to find out what they knew about how this elaborate scheme was hatched. Those of us at The Spine Blogger speculate that there would be many people willing to line up to throw a little more gasoline on the fire to finally burn the Three Amigos! How arrogant were these people?

This fall, the DOJ will get their day in court against the alleged middleman, and the main attorney involved in this case. The scenario that potentially may unfold will deliver a blow to our industry that has never been seen before. Surgeons may be whisked off to a federal penitentiary in ORANGE JUMPSUITS, only to be trailed by conspiring distributors. As this on-going investigation had unfolded, the added twist was the arrest of a sub-rep for a distributor in Las Vegas for allegedly molesting his children in concert with his spouse. This sub-rep had well-known ties to a prominent spine surgeon involved in the on-going investigation. Between the so-called Medical Consultant and the Sub-Rep, the Blogger speculates that someone is going to "roll-over" on behalf of the government. Let's face it, if you were in your 60's or even in your 40's and your defense attorney looks over at you and states, "it's time to make a deal," someone is going to start singing like a Rat Pack saloon singer! Besides, who would be willing to spend jail time without having company?

If and when this happens NASS and AdvaMed (what a joke!) can take great pride in their accomplishments as organizations promulgating ethical standards for the industry. The Spine Blogger wants to know what its readers think?

Friday, September 4, 2009

Archus, The Anatomy of a Meltdown

As the news broke that Archus was filing a certificate of dissolution, many questions were running through my head, some that made sense and some that did not. Yet, our readers have to be wondering, how does a company that had the ability to raise $63 million, plus another $2.3 million as recent as this summer, meltdown?

Having had the opportunity to look at this device in detail, I always wondered who was willing to invest in this product, and who would want this product implanted in them? Maybe my later observation is based on the fact that I have never had back problems. The question that needs to be answered is; whom are these investors listening to when they are making their decisions to infuse an incredible amount of capital into a potential emerging technology? A surgeon who had hit a grand slam with a previous product? What ever happened to the X-Stop? A medical device consultant? A certified financial analyst? I know that there are no guarantees, it's a crap shoot! Yet, as investors become conservative from The Spine Industries Roadkill Tour of '09, will they have learned their lessons when it comes to investing in "fools gold!" As it stands, there still are investors willing to take a calculated risk, but the trend seems to be going away from hardware ventures. I would suspect if surgeons resect enough of the structural elements (tricomplex) of the spine and replace them with hardware, they should eliminate pain.

In today's market the average financial outlay for a 450 patient IDE is an estimated $15-18 million dollars, and that's not including associated training cost. So what happened to the other $50 million dollars? Based on what we learned from some of the other meltdowns, it probably resulted in nice offices, beautiful artwork, marketing expenditures, sculptures in the lobby, and senior management paying themselves an incredible salary, smoking Cohiba's, and drinking Cristal, all on pre-revenue dollars! If some of these investors would see the way their money is being managed, they would probably pull the plug themselves on their investments.

So as we wind down The Spine Industries Roadkill Tour of '09 here is our list of headliners:
  • VERTEBRON
  • INION
  • INNOVATIVE SPINE TECHNOLOGIES
  • PEGASUS
  • ARCHUS
Who will be next? Will it be an Impliant, Facet Solutions, Disc Motion Technologies, Hydrocision, Life Spine, U.S. Spine, Custom Spine? The word on the street is that some of these companies are hemorrhagging cash, and some are using unscrupulous methods to deleverage themselves. Recently, we heard from former employees from some of these companies, informing us that they have terminated distributors and replaced them with scrub technicians and cut commissions. Others are using their consulting surgeons/medical advisors as public relations spokesperson's to generate interest from private equity or investment banking. Do these investors understand that there is a conflict of interest when your medical advisor is the person selling the snakeoil? The problem that we see with our industry, is that many of these companies don't know how to manage themselves and their money conservatively. I am sure Mr. Fitzsimmons is a nice person, unfortunately, he wasn't that good at managing the money. Hopefully, he will be able to sell the product in an auction or fire sale for at least $15 million and repay some of his investors. The Spine Blogger wants to know what its readers think?

Thursday, September 3, 2009

Another One Bites the Dust! Archus going, going, gone!

On August 21st, 2009 Archus filed a notice of dissolution in the Office of the Secretary of the State of Delaware. The Certificate become effective that day.

All claims or potential claims must be presented in writing and contain sufficient information to inform Archus (James Fitzsimmons, CEO) of the identity of the claimant and the substance of the claim. All claims must be received by October 28th, 2009. A copy of the claim should be addressed to Archus c/o James Fitzsimmons and Cooley, Godward, Kronish, LLP, Attention J. Michael Kelley, 101 California Street, 5th Floor, San Francisco, CA 94111-5800.

Since the Spine Blogger has been involved with product development, one question must be posed to our readers, how does anyone "burn" through $63 million dollars in eight years? How much of this capital was spent on wasteful pre-revenue marketing? How much was spent on creating the "buzz?" How many people gambled their careers on hitting a grand slam? Is this a sign of things to come for companies like, Disc Motion Technologies? Impliant? Facet Solutions? How many years does it take to realize that your device is being driven up a dead-end street? How many surgeon consultants don't have the nerve to tell the company that the product will not work? Based on recent reports, there are private equity investors willing to invest in medical device companies, unfortunately or fortunately, they are not hardware based. The Spine Blogger wants to know if anyone has heard anything else on the street?

Wednesday, September 2, 2009

Unhappiness at Medtronic, Trouble in the Sand Box!

Recently one of our loyal and trusty readers linked me to a site that for all intense and purposes is one of the most unprofessional forums in cyberspace. So I proceeded to read some of the posts and gasped at the animus that is directed at Mr. Medtronic himself, Bill Hawkins.

The Spine Blogger is not that far off when he says that so many of our legacy companies have lost their innovation, out-of the box thinking, and moral compass. Even the smaller companies have started to behave that way. Why is that? Could it be that publicly traded companies no longer have people running companies? I know that sounds ridiculous to our readers, but, what happens when you are more concerned with your own personal portfolio and compensation than you are about the present and future of your organization? Non-sense cries out some CEO! Medtronic sounds very much like Stryker when you talk, listen and read what their employees say. You know, drink the kool-aid and remember if any analysts come into the booth just direct them over to PR.

It seems that "Buffalo Bill" has everyones knickers in a spit. Having laid off 1,800 it seems that the Board has taken care of "BB" for nothing more than a mediocre performance, at least by Medtronic standards. The funny thing is that the blood sucking analysts believe all the non-sense that Mr. Bill feeds them. Yes, there has been an exodus of many talented distributors from the organization, some reluctantly, some bought out, and some because they just got tired of working for a publicly held company.

Remember, what I said in a previous blog, once the darling of the industry, today they are the angry child. So who's betting that "Buffalo Bill" will be riding off into the sunset in the near future? Remember when he was quoted as saying that he is looking for innovate leaders, maybe he was talking about replacing himself? The Spine Blogger wants to know what its readers think?

Healthcare and the AAOS, Where Are We Going?

As we approach the home stretch of another beautiful summer, hopefully Congress has re-energized its batteries and read all of the pages of the Healthcare Reform Bill that will dominate the halls of the Capitol this fall. Depending on the architecture of the Bill, the future of our industry and this country lies in the hands of a divided government and its citizens. Not only will this division exact a toll on our lives and careers, it will affect our children and grandchildren's future standard of care. Fortunately, the Spine Blogger does not have to attempt to use scare tactics to persuade its readers that some change needs to be made as major financial fissures have exhibited themselves in the U.S. Healthcare System much longer than we would like to admit. The last three to four weeks has been pictures at an exhibition in mediocrity by both parties. The Democrats fumbling over their inability to convey a Healthcare Reform Bill in simplistic and concise terms, the Republicans behaving like the bogeyman telling grandma and grandpa that they will be put to death (I've already notified grandma that I won't let the government take her). America is a great country, reactionary as it may be, as long as it doesn't ask its people and the medical industrial complex to have to make a sacrifice.

Let us look at healthcare in the U.S. Over the past eight years we have seen an attempt to pass on the cost of medical care to the consumer. The objective was to have consumers make prudent, educated and cost-efficient decisions about their healthcare. People would take ownership. Employers loved it because this platform would offer high-deductible/low premium policies, health savings accounts, therefore, shifting a greater portion of medical bills to the patient, and attempting to create a publicly accessible database that would help patients make their own decisions ( I don't believe this ever materialized). But what this plan failed to address was the behavior of the insurance industry, fee-for-service payment to physicians, the ongoing confusion over hospital reimbursements, nor did it mandate a change in the way healthcare is organized and delivered.

The fact remains that the greatest percentage of healthcare expenditures in the U.S. is for serious diseases. The sickest 10% of the population accounts for about 70-75% of all healthcare expenditures. I am not sure what percentage of that figure includes illegal immigrants (illegals will not be covered under the proposed plan), young people electing not to be insured or underinsured, and those eligible for Medicare. However, there has been a tradeoff. New developments in technology, the increasing number of specialists, the high fees paid for new procedures, and intense market competition to increase revenues for those in the medical industrial complex contribute to the ever rising incentive to provide expensive healthcare. Consumer Driven Healthcare is utopian, yet, what happens if the consumer is seriously injured? I will argue that I have never met a prudent shopper in the emergency room. Usually I have heard, "God, don't let me die!"

Do our readers believe that we can create a price-sensitive and consumer driven industry that would result in competitive pricing? Is health-care another consumer driven business? Does the asymmetrical relationship between healthcare providers and consumers allow for ordinary free-market forces to occur? Should the public be made solely responsible for managing the cost of his or her healthcare? What happens if you lose your job? What kind of information would you need to make potential life threatening decisions? Will pay for performance work? Life or death decisions are always better left to the individual and their physician, yet, has Consumer Driven Healthcare really worked? This commentary does not mean that I believe government should have any say in making a final decision on your life.

So what can we do to make the system efficient. Let's start with a single payer system. I can hear the uproar! This would eliminate the confusion that exists between doctor and insurance company, patient and doctor, hospital and insurance company when it comes down to reimbursement. This would have to be built around a central reimbursement entity. If you believe in the free-market, why shouldn't those who cannot afford insurance have the option to purchase some form of reasonably priced, publicly funded insurance, that would also be available to people that lose their job, have no insurance and become terminally ill (I think it would be called Catastrophic Healthcare, duh)? Has anyone had to pay for COBRA? The cost is criminal! Do you really care that the government would be the gatekeeper for the uninsured or underinsured. As long as you have the option to keep your existing plan, how does this effect your liberties as an American? Besides, if we believe in freedom of choice, who are we to tell those that cannot afford healthcare coverage what is right for them? Is it because we are so arrogant to believe that we know what is best for others? Why can't we overhaul the system? Is it because we are truly afraid of change (remember my comparison to our Puritanical ancestors in a previous blog)? Let's face it, we have failed in an attempt to modify our healthcare system incrementally, it hasn't worked. Most of the previous programs have either increased the cost of delivery, reduced coverage, or reduced the quality of healthcare (read on). As much as we love to deny the facts, whenever the uninsured seek medical care in the emergency room, a tremendous financial burden is place on the current payers into the system in the form of higher costs.

Major reform will require a rational discussion with all parties involved to understand the basic problems with the current healthcare system. Yet, we continue to see hard working, good Americans ranting and raving without knowing the facts. Recently, the AAOS responded to the ongoing healthcare debate as a result of inaccurate remarks that were made by the POTUS. Sometimes its better to leave some things unsaid! The Academy had every right to deliver a response to what is wrong with healthcare, constructive as those remarks were, here are some observations. HIGH ADMINISTRATIVE COST is a by product of the insurance industry taking an estimated 10%-25% off the top for profits, the only remedy for senseless litigation is TORT REFORM, and will that ever happen, an INCREASING SHIFT IN CHRONIC DISEASES is a result of the "bigger is better" mentality that pervades Americans diets, as well as their lifestyles, no need to elaborate on the SHIFTING COST of the uninsured to those of us that are insured because the cost is passed on to us,, and lastly UNNECESSARY PATIENT CARE. My question to the Academy would be, who should share the responsibility of policing unnecessary patient care, the consumer, physician, or the insurance company? Generalities are wonderful, but where's the beef? Who becomes the gatekeeper?

The Academy's position on what policy makers should consider follows; shift responsibility on control of spending dollars to consumers. Hasn't this concept been experimented with and been shown to have flaws? Ensure unencumbered access to specialty care (isn't that what PPO's offer). What does that mean? Make healthcare coverage more affordable. Who is going to absorb the cost, and what does affordability mean? Improve the quality of Care. Basically, the Academy is admitting that the standard of care is "sub-standard" by making that recommendation. If the physician is the gatekeeper, how do you measure quality? Extend coverage to the uninsured (who absorbs the cost) and the underinsured? Where does this money come from? The Chinese? The US Taxpayers? Avoid new unsustainable programs. What does that mean? That sounds quite nebulous. If the current programs aren't working, should we sit back and watch Rome burn?

As heated as the debate has become, all complicit parties do not offer any remedy. They offer a diagnosis. Let's face it, if the U.S. Healthcare System was a patient, right now the patient is on life support and the we cannot find anyone that can agree on the modality of treatment. The Spine Blogger wants to know what its readers think!


Tuesday, September 1, 2009

Trinity Evolution Is on Backorder!

The Spine Blogger is reporting that the word on the street is that Trinity Evolution is on backorder. For all you cowboys selling Osteocel, DBM or Synthetics this is a golden opportunity to get in on the ground level. The Spine Blogger wants to know what our readers have heard?