Other Articles

AAOS Political Action Committee
Active players in the orthopedic field know the importance of the AAOS Political Action Committee (PAC). On the cusp of hot topics affecting physicians and patients, the AAOS PAC works diligently to provide data to members of Congress and improve the present and future of orthopedics.

Who ARE These Guys?
Every 60 seconds or so a surgeon tears the cover off an Integra LifeSciences package. Quietly, this company has become the seventh largest medical implant manufacturer serving orthopedic surgeons in the world. Where to now? Would you believe $1 billion in two years? How about $2 billion by 2015?

Redemption in a Mechanism of Failure: The TOPS™ Story
Impliant’s TOPS™ System had a “squeaker” in its clinical study. After a voluntary suspension of the study by the company and finding the mechanism of failure, the FDA has approved a resumption of the study. What insider lessons were learned? Class starts here.

Who is Numero Uno in the PearlDiver Database!! Are You Surprised?
The answer may surprise you. Is it sore backs, aching hips, sore knees, fingers? PearlDiver details 3.8 million spine related complaints—complete with demographic information and charging information. But that’s not #1. PearlDiver also lists 3.5 million large joint complaints. Sorry, still not #1. What could the most common orthopedic complaint possibly be? To get the surprising answer…read on.

What the Knees Need: Baby Boomers and Their Options
Knee patients often show up at the doctor’s office with recurrent mechanical symptoms. It is up to the orthopedist, says Dr. Giles R. Scuderi, Director and orthopedic surgeon with the Insall, Scott & Kelly Institute in Manhattan, to thoroughly assess the patient and then determine if nonoperative treatment will do, or if the person needs a unicompartmental or total knee procedure.

Physician: Report Thyself
The government says its healthcare anti-fraud efforts are working and it wants to encourage physicians to self-report possible fraud. How well did the government do in 2007 and what about those deferred-prosecution deals with undisclosed evidence? Read about it here.

Revising the Statistics
The word that orthopedic patients least want to hear is “revision.” Who, in the universe of large joint patients, do we expect to see on the receiving end of this news? If you guessed “the elderly” you would have been wrong. The reality of who is hearing “revision” may come as a surprise. Read what we found when probing PearlDiver’s database.

Where Is Ben Now? Trends in Venture Capital
What is being funded by VCs and why? First of all, spine is having to share the spotlight, says Gary Stevenson, Managing Partner at MB Venture Partners, LLC. Here Stevenson outlines what constitutes an attractive investment…he also highlights issues that are affecting the distribution of VC funding.

The Hounds of Wall Street
Conventional wisdom on Wall Street is that ArthroCare is in a bare-knuckle fight to the finish with short sellers. Which leaves us with the dominating question: If ArthroCare is essentially a “lame duck” growth stock, then why are sales, earnings, and the stock price contradicting the short seller’s dire predictions and even outperforming consensus analyst forecasts? We have the answer.

The Era of “Tell Me Right Now” Dawns at FDA
The FDA wants the next phase of post-market oversight to change from self reporting to proactive surveillance. How? Through the Sentinel Initiative. Read what it means to device manufacturers here.

The Day After Tomorrow: Complication Rates and Instrumentation Trends in Posterior Lumbar Fusion
Could PearlDiver be the Nostradamus of spinal instrumentation? This most commonly performed surgery on the lumbar region of the spine increases fusion rates and improves spinal stability—but what about complications? Using PearlDiver’s database we find the answers. Are you ready for some quatrains about what happens next?

You Try It. No You Try It First: New Technology Adoption
What are the forces working for and against new technology adoption? Youth versus age, risk taking versus conservatism, and the economic realities of the day, says Dr. Rick Guyer, President of the Texas Back Institute.

Cheaper, Thinner, Faster, Stronger
In this, the second of our series of three articles on innovation, we tackle the question: How do you measure medical technology innovation? While difficult, measuring innovation is NOT impossible. Why? Well to start, and in the immortal words of Supreme Court Justice Potter Stewart, “We know it when we see it.”

SAS Crosses the Rubicon in Miami Beach
The SAS 8th Annual Global Symposium in Miami Beach may have crossed the Rubicon. How? Read about the Society’s opportunities for growth and collaboration as its new President lays out a vision for the future.

Arthroscopic Treatment for Tennis Elbow: Coming on Strong
“Tennis elbow” or lateral epicondylitis is, according to our PearlDiver database, one of the most reported diagnosis for problems with the elbow. Lately clinical evidence has shown that arthroscopic treatment for tennis elbow can provide long-term stability and, in most cases, return of the elbow to its optimal function. Check out the data from PearlDiver.

Do Republicans Make Better Orthopedic Surgeons?
A recent Nature Neuroscience journal study of the decision making differences between liberals and conservatives appears to argue in favor of Republican surgeons! Which, frankly, explains a lot—to BOTH sides and, to stretch an analogy almost to its breaking point, it may also explain why McCain’s health care plan is different from Obama’s. Read OUR take here.

"Sound of Music" Turns to Greek Tragedy for Smith & Nephew
Smith & Nephew’s Swiss (mis)adventure with Plus Orthopaedics is turning into a Greek Tragedy. The company’s whole acquisition strategy is being called into question. Read how CEO Illingworth explained it to the brutal British press.

“Dear John Letter” for Hip Resurfacing?
“Dear John H. Resurfacing: I hope this little note finds you well. We certainly have had some great times and, gosh, I’ll never forget those wonderful moments when the FDA approved your PMA. We’ve just celebrated our second anniversary together and, well, I’m just not feeling the magic anymore….” Two years after FDA approval, how happy are orthopedists with hip resurfacing? Read our analysis here.

In the Beginning, There Was the End: Manuscripts 101
Dr. Paul Manske, Professor of Orthopaedic Surgery at Washington University School of Medicine in St. Louis and Editor-in-Chief of The Journal of Hand Surgery, shares his thoughts and experience on the details of shepherding a manuscript through publication.

Did ConMed Get Re-Wired?
Ever hear about the neurosurgeon who used an $80 Bosch power drill to do brain surgery? It really happened. Surgeons like their power tools. Increasingly they also like a particular line of sterilizeable power tools from ConMed’s Linvatec unit. Did ConMed get re-wired? We have the details here.

“A rising tide lifts all boats.” The tide is made up of over 30 million physician visits for back-related symptoms each year, and over a million spine-related surgical procedures performed annually. We estimated this translated into $7.1 billion in spine-related revenues for medical device companies in 2007. The 800-pound gorillas are still instrumentation and interbody fusion devices. What’s driving this market? Later in this article, we’ll see what surgeons said in San Francisco at AAOS 2008. Also, it’s time to consult the PearlDiver database on posterior instrumented interbody fusions.

4th Quarter 2007 Earnings: It’s Still Spacers and Implants

While new technologies are on the horizon in spine, one takeaway from the 4Q is that while emerging technologies may displace traditional revenue drivers related to spine surgery, non-bone interbody fusion devices, cages, and instrumentation are still behind a significant portion of spine revenues. But don’t take our word for it…take it right from the conference calls.

• Speaking during Zimmer’s 4Q conference call, CFO Jim Crines said the 17.8% year-over-year advance in spine revenues “was lifted by sales of thoracolumbar outerbody fusion products, interbody spacers, and Dynesys.”
  
  
• Speaking on Stryker’s 4Q conference call, CFO Dean Bergy said of the company’s fifth straight quarter of spine growth north of 20%, “Interbody spacers led our U.S. spine growth, but growth was also extremely strong in the thoracolumbar and cervical categories.”

Overall, interbody spacers and fusion-related instrumentation drove growth in the quarter.

Interbody Fusion: Titanium to PEEK

Improved instrumentation, MIS (minimally invasive surgery) technology, innovative anatomical approaches, high fusion rates, and good clinical outcomes all drive interbody fusion volumes. Increasing revenues for companies marketing interbody fusion devices follow suit. Interbody fusion should remain a sweet spot in the spine market. Classic interbody devices include cylindrical threaded titanium cages such as the Zimmer BAK® cage and Stryker Spine’s Ray Threaded Fusion Cage™. There is also, of course, Medtronic’s LT Cage® approved for use with INFUSE®, which is available in both PEEK and titanium.

Overall usage of titanium and bone interbody fusion devices has declined. PEEK (polyetheretherketone) devices are on the move. Higher price points with respect to PEEK devices have shifted the revenue mix in the spacer market. The advantage of PEEK is that it is radiolucent, which allows the surgeon to better examine the progression of bone growth after a spine fusion is performed.

PearlDiver Data

To determine trends in the use of posterior instrumentation and interbody fusion devices, we consulted the PearlDiver Patient Records Database. By analyzing the CPT codes used for reimbursement, we can broadly track the usage of these devices in applicable surgeries. By using ICD-9 procedure codes in combination with CPT codes related to spine procedures, we can analyze trends in the usage of posterior instrumentation and interbody fusion devices in spine fusion.

Chart 1 below displays the use of posterior instrumentation and interbody fusion devices in lumbar spine fusions employing a posterior approach. As can be seem, posterior instrumentation is employed in 80% of posterior lumbar fusions. Beginning in 2005, the data show that over 50% of the time, an interbody fusion device was implanted in addition to the instrumentation. This is a trend that has grown from 2004-2007, according to PearlDiver data.

As one would expect, with this trend revenues have grown. In fact, fusion adjuncts and interbody devices make up close to 60% of spine industry revenues, which amounts to over $3 billion! The pedicle screws and rods for a one-level fusion can cost from $4,000 – $6,000, while for a two-level construct their cost can range from $8,000 – $10,000.

Chart 1: Use of Posterior Instrumentation and Interbody Fusion Devices in Posterior Lumbar Fusion

Source: PearlDiver Patient Records Database 2004-June 2007

Chart 2 below illustrates usage of posterior instrumentation without an accompanying interbody spacer. According to PearlDiver data, less than 25% of posterior lumbar fusions as defined by ICD-9 code 81.08 had posterior instrumentation implanted without an interbody fusion device. The increased use of spacers and instrumentation could bode well for medical device companies. Spacers can cost between $2,000 and $5,000, depending, in part, upon height and material.

Chart 2: Use of Posterior Instrumentation Without an Interbody Fusion Device

Source: PearlDiver Patient Records Database 2004-June 2007

Revenue Drivers

Based on an analysis of PearlDiver data, several macro trends can be observed, each of which contributes to the increasing revenues seen in these sectors.

1. While there is no doubt fierce competition in the industry, which could cause pricing pressures on implants, the increased usage of implants in spine fusion may offset pricing pressure on a volume basis.
2. Posterior instrumentation and interbody fusion devices are increasingly being used together.
3. The use of posterior instrumentation alone in fusion has declined, according to PearlDiver data.
4. Fusion volumes are a clear driver of revenue; more specifically, interbody fusion volumes.
5. Spacers used in proprietary surgeries such as NuVasive’s XLIF® (Extreme Lateral Interbody Fusion) and Medtronic’s DLIF (Direct Lumbar Interbody Fusion) should become revenue drivers as these approaches gain surgeon acceptance and familiarity.
6. A myriad of surgical approaches to interbody fusion allow for a flood of approach-specific products into the market. Current interbody fusion approaches include anterior lumbar interbody fusion (ALIF), posterior lumbar interbody fusion (PLIF), transforaminal lumbar interbody fusion (TLIF), and the MIS approaches mentioned in point 5. Currently, research is also being conducted as to the efficacy of innovative MIS approaches to TLIFs. These approaches are being undertaken with various retractor systems.

AAOS 2008: Instrumentation Costs and Paper Related to Interbody Fusion Outcomes

During a symposium at AAOS 2008 in San Francisco, entitled “The Process of Developing Novel Technology for the Spine,” Dr. David Wong explained that both the cost and usage of instrumentation has increased in spine fusion. As an example, a comparison was made between the instrumentation costs for an L5-S1 posterior lumbar fusion performed on a male smoker in 1997 and in 2003. In 1997, the instrumentation for this procedure could have been a Sofamor Danek TSRH® rod and screw system, which cost $3,207. In contrast, in 2003, an L5-S1 anterior/posterior lumbar fusion on a 51-year-old male smoker could include significantly more instrumentation-related costs. Table 1 below highlights the possible components and costs for the 2003 procedure as shown in the presentation.

Table 1: L5-S1 Posterior /Anterior Fusion Estimated Instrumentation Costs

Source: AAOS 2008, “The Process of Developing Novel Technology for the Spine,” by Dr. David Wong

Also seen at AAOS 2008 were papers showing continued interest in MIS techniques with respect to interbody fusion, a trend which we believe will be a major revenue driver. Below are summaries of two papers presented dealing with TLIF and XLIF.

Paper Number 086: Clinical Outcome of Minimally Invasive Versus Open Transforaminal Lumbar Interbody Fusion

This paper was written by Dr. Benedict Peng, Dr. Wai Muun Yue, and Dr. Seang Beng Tan. According to the abstract, “The purpose of this study is to compare the clinical results of minimally invasive versus open transforaminal lumbar interbody fusion.” In conclusion, the doctors stated: “Minimally invasive transforaminal lumbar interbody fusion is a safe and efficacious technique. It is associated with less blood loss, less analgesic use and shorter hospitalization when compared to open procedure. It appears that the benefits of minimally invasive surgery are in the early postoperative period with no significant difference in the clinical outcome at 6 months and 2 years postoperation compared to open surgery.”

Other studies will continue to examine the benefits of MIS. However, studies such as this begin to confirm the efficacy of these approaches. Successful outcomes related to surgical approaches that employ interbody implants should be viewed positively with respect to interbody spacer revenues.

Paper Number 528: Extreme Lateral Interbody Fusion (XLIF): Evaluation of Safety and Short-Term Results

This paper was written by Dr. Victor Hsu, Dr. Behrooz Akbarnia, Dr. Bruce van Dam, Dr. Ramin Bagheri, and Tina Chen. According to the abstract, “The purpose of this study is to evaluate the safety and early clinical results for this technique.” In conclusion, the doctors stated: “The complications associated with anterior approach to interbody fusions can be avoided using the XLIF technique. XLIF is performed through a minimally invasive retroperitoneal approach to the spine that allows excellent disc space visualization to place large anterior grafts. Our review shows excellent clinical results are safely obtained using this novel procedure.”

This paper is a positive for NuVasive’s XLIF. And, it helps support one of our theses on revenue drivers in the spine market: Implants used in proprietary surgeries could continue to drive revenues.

These two papers viewed MIS in a positive light. As always, there will be further scrutiny and study of the approaches, as physicians continue to learn about these exciting innovations.

Single-Sided Posterior Instrumentation

With respect to interbody fusion, there may be a possible reversal of trends in instrumentation. Over time, the use of instrumentation has increased in fusion, hence driving revenues. A reversal in the use of instrumentation would obviously affect revenues. Research is currently being conducted with respect to single-sided instrumentation in PLIFs. If outcomes and fusion rates are equivalent to current practice, this approach could be viewed favorably by both surgeons and hospitals given the potential cost savings.

The Rising Tide

The tide of interbody fusion has been a major driver of revenue growth in the spine market. This has been accomplished, in part, through increased usage of spacers and instrumentation. Innovation with respect to materials, surgical approaches, a better understanding of the biomechanics of the spine, and issues surrounding devices made of bone have all contributed to growth in this market.