Stabilizing the Spine

November 17, 2009

Industry experts provide insight on new technology and market forces driving innovation.

Stabilizing the Spine

Industry experts provide insight on new technology and market forces driving innovation.

Michael Barbella

The spine is perhaps the single most important part of the human body. It provides us with the support and flexibility we need to stand and move about freely, or bend and twist with relative ease. It also houses the spinal cord, a column of nerves that connects the brain with the rest of the body and gives us control of our movements. Without the spine, our bodies would be motionless cadavers with no real purpose.

Its various functions, however, make the spine extremely vulnerable to injury, possibly more so than any other body part. It is not surprising then that technologies focusing on preserving the natural motion of the spine are becoming more popular with researchers and surgeons and are driving growth in the spinal implant market.

“Motion preservation technologies are believed to revolutionize spinal surgery,” said Kamran Zamarian, president and CEO of iData Research, an international market research and consulting group. “The market is expected to continue experiencing tremendous growth globally, slowly cannibalizing spinal fusion procedures.”

That cannibalization is expected to propel the U.S. market for spinal motion preservation devices to a net worth of $2.54 billion by 2015, according to iData Research figures.

The spinal fusion market is not about to become extinct any time soon, though. Improvements in minimally invasive surgery (MIS) and an increase in demand for the procedure will help drive growth over the next six years, an iData Research report concluded. The number of MIS procedures, according to the report, is estimated to increase at a compound annual growth rate of 18 percent through 2015, with companies such as Medtronic Inc., NuVasive Inc. and DePuy Inc. leading the charge.

Smaller firms such as Globus Medical Inc. are expected to capture some market share too, as an aging Baby Boom population increases the need for minimally invasive treatments that work quickly to relieve back pain caused by arthritis or fractures. Globus attributed its record third quarter (2009) revenues of $66.2 million on sales of products such as the Coalition System, Independence System and Signature MIS TLIF Spacer system. The latter device includes an articulating implant that enables surgeons to utilize a single instrument—from insertion through final placement—to deliver the spacer into the biomechanically ideal position through a portal or small incision while performing a transforaminal lumbar interbody fusion (TLIF) procedure.

To gain a better understanding of the new kinds of technology that will be driving growth in the spinal implant market over the next few years, Orthopedic Design & Technology spoke with several industry experts who provided their expertise on current market conditions, sector trends and the challenges currently facing orthopedic firms:

Alexander J. Ghanayem, M.D., director, Division of Spine Surgery, and professor, Department of Orthopaedic Surgery and Rehabilitation, Loyola University Chicago, Maywood, Ill.; and member of the board of directors, North American Spine Society.
Bryan Hughes, director, P&M Corporate Finance, Southfield, Mich.
Tony Koblish, president and CEO, Orthovita Inc.

ODT: What are the overall market trends that have characterized the spinal implant market over the last few years?

Ghanayem: The market is expanding. We’re able to gain access to the spine that is much different than in the past through novel minimally invasive techniques. Our ability to diagnose and recognize problems is improving, and the development of technologies to address these issues is also expanding at a very rapid rate. People are getting older and are more active. It’s no longer acceptable to say to people, ‘do nothing’ or ‘don’t try to exercise and be active’ or be ‘[don’t] be productive in society.’ Everything is changing. Our understanding of technology is better and our ability to do things is enhanced. With those basic principles, the market is showing expansion. More novel technologies are coming about and being developed to address the underlying problems and functional challenges that people have. Simple things like MRI scans are getting better. Our ability to understand what a finding may mean pathologically and functionally to a patient is enhanced. If you look at MRI scans 20 years ago, they were great—for the time—but their clarity has become better and we’re doing things like functional MRI scans [now]. Through years of research, we’ve been able to look at certain patterns of problems, follow them and understand what they mean to the patient.

Hughes: There are three trends that have characterized the spinal implant market over the last few years: the continued dominance of fusion related procedures; a handful of device introductions that spurred growth in fledgling product categories; and M&A [merger and acquisition] transactions that transformed the industry.

Approximately five years ago, it was widely believed that motion preservation devices for the spine would soon transform the way physicians alleviate patients’ spine-induced pain. Major players such as Johnson & Johnson’s DePuy, Medtronic and Stryker were paying hundreds of millions of dollars for artificial discs, a motion preservation device, that were still several years away from receiving approval in the United States. These acquisitions encouraged the venture community to invest in scores of start-up companies solely focused on motion preservation technologies, seeking to hit the next home run. Unfortunately for many companies in the market, the majority of motion preservation technologies still have not received approval from the U.S. Food and Drug Administration (FDA) or have encountered considerable hurdles in receiving reimbursement post-regulatory approval. Therefore, while several years ago industry pundits were forecasting motion preservation technologies to expand the patient population and cannibalize the fusion product category, that has largely not come to fruition yet and the market size for motion preservation technologies is just a fraction of what it was projected to be.

Within the motion preservation technology category there have been a few products in particular that spurred competitors to devise devices with similar design and objectives. One example is the Dynesys from Zimmer, a pedicle screw-based dynamic stabilization device that received 510(k) approval. While the Dynesys was approved as an adjunct to fusion, many surgeons used the device “off-label” as a motion preservation device, and the product has become a commercial success with a reported run rate of more than $60 million in U.S. sales. Witnessing this success, several companies patented similar devices, received 510(k) approval as an adjunct to fusion and began to market them to surgeons; examples include Applied Spine’s Stabilimaxx BAR, Synthes’ Spine Ngarde and Vertiflex’s Dynabolt. In October 2009, the FDA ordered 12 spinal implant manufactures to initiate collecting post-market data to determine the efficacy of these pedicle screw-based dynamic stabilization devices for what they were cleared for, as adjunct to spinal fusion. Depending on the results of these studies, it may deter other spinal implant companies from pursuing this regulatory path for this product category.

The composition of the companies participating in the spinal implant market has changed dramatically over the last several years. While the top 5 companies still collect nearly 75 percent of the revenues generated in the United States, there are now more than 100 companies developing and marketing products to orthopedic and neurosurgeons, a tremendous growth from just five years ago.A large percentage of these companies were founded after the M&A frenzy in the artificial disc product category from 2002-2004 and after Kyphon’s 2006 acquisition of St. Francis Medical Technology and its lone commercial product, the X-Stop, for $750 million. These landmark transactions encouraged the venture capital community to invest unprecedented amounts of capital in the spinal implant market in order to achieve superior financial returns. However, given the current economic environment and new challenges facing spinal implant market, many industry experts believe there is going to be a decrease in the number of new companies entering the spine industry. In addition, many spinal implant companies have been forced to shut their doors in 2009, including Innovative Spine Technologies, Archus Orthopedics and Vertebron.

Koblish:It seems like the spine market is interested in three major areas. The first area would be biologics to help in healing and help the hardware that’s installed work better. Biologics would be one of the major trends that we see evolving. The second would be minimally invasive spine surgery—there’s a lot of interest in this area both for spinal fusion and certainly for treatment of vertebral compression fractures. And the third would be searching for a non-fusion solution to the spine. Those are the three major areas that I’ve seen emerging over the last several years in the spine market.

ODT: What do you mean by a “non-fusion solution?”

Koblish:Looking for a solution that would allow physicians to retain mobility in the spine, approximate what a healthy disc used to do before it degenerated or became damaged and without having to fuse the vertebrae together. Finding the right solution that is useful across a broad spectrum of patients and across a broad spectrum of surgeons that’s reimburseable has been elusive this far. But there’s certainly a lot of interest in that area.

ODT: What are some of the key challenges currently facing the market? How are
companies overcoming these challenges?

Ghanayem: One of the key challenges is that the financial pot is not endless. Innovation, novelty, development and research are all extremely important, but those things need to be cost-effective and incorporate evidence-based medicine. There’s a lot of “me-too” products, where a company develops a portfolio of products to compete with the next company. That’s being done in parallel with true innovation. The “me-too” development doesn’t really advance the market at all; it just advances somebody’s investment. The novel development is very important, but it needs to be done with an eye toward really making a difference in a patient’s health and well-being. At some point a question has to be asked: You can develop a new widget to do something 5 percent better, but how does that really translate into a benefit for the patient? That’s part of the research process, so you need to make that development and think about that development, but then you need to study it in a way that looks at patient safety, efficacy and the true functional gains for patients. What you have now are competing interests for the R&D [research and development] dollar and for the spine market. Are we going to support “me-too” products or change for the sake of getting around somebody else’s patent or are we going to support things that are truly innovative and make a difference in patients’ lives? For a while the money has been great but with what’s been happening with the global economy, the money isn’t great [anymore]. The talking heads in New York keep telling us the spine market is ripe for development and expansion and there’s going to be glorious profits. People were buying into that hook line and sinker. I think what’s going to probably happen is, like anything, there’s going to be some consolidation or a contraction on the business side. But there will also be an expansion in real research that’s being done for true patient benefit.

Hughes: The two largest challenges currently facing the spinal implant market are the lengthening and narrowing of regulatory and reimbursement pathways and the limitation of financial capital for start-up companies, or those seeking to expand their operations. Spinal implant companies have been forced to re-evaluate their timelines and budgets to bring new products to market. From a regulatory perspective, as the new post-market studies required of pedicle screw-based dynamic stabilization systems illustrates, even devices approved through a 510(k) are being scrutinized to a higher degree and requiring more biomechanical and clinical data. Devices requiring premarket approval (PMA) have experienced significantly longer timelines as the number of patients per trial has increased and the pace of enrollment has not met original targets, resulting in trials considerably over budget. From a reimbursement perspective, the public and private insurance payers in the United States have been increasingly strict on approving compensation for new devices under current codes and on creating new codes for truly novel devices. As an example, TranS1 is currently in a battle to receive a new reimbursement code for its AxiaLIF because current codes are limiting surgeon adoption because it is not easily reimbursable. Lastly, given the current economic environment, companies have been forced to advance devices further in development on less capital than just a couple of years ago. The venture capital community has largely pulled back from investing in startup spinal implant companies and many firms have re-evaluated all current portfolio companies to determine if each is viable in the new economic and competitive environments. All spinal implant companies are confronted with these challenges to some degree and strategies are emerging to address them. Due to the new regulatory and reimbursement environment, companies are spending more time and resources to determine what device categories have a suitable risk/reward ratio. Further, if a new device is approved for development, companies are focusing as much on obtaining favorable reimbursement rates as they are on regulatory approval, which was certainly not the case five years ago. Companies are now designing “health care economics” into trials by more diligently tracking improvements such as return-to-work which can significantly reduce the total financial expense to treat a condition. Market participants need to prove that while the cost of their spinal implants may be a substantial portion of a surgical procedure, in the long run, this course of treatment is the least expensive and provides the patient with the best clinical results.

Concerning the capital environment, private companies have had to reduce cash burn considerably by rationalizing all expenses in order to lengthen their runways as long as possible. By doing so, it may be possible to survive until the capital markets improve, or even reach profitability without raising additional capital. As Archus Orthopedics bankruptcy has illustrated, even after raising more than $72 million, there is a considerable amount of risk in pursuing a one-product strategy that relies on receiving a PMA to market in the United States. By cultivating a product portfolio of traditional spinal hardware, augmented by innovative devices requiring investigational device exemption (IDE) clinical trials, appears to be a more reliable strategy for success in today’s market conditions.

Koblish: If you look at the three areas of interest, each one of those areas can be representative of the overall schematic challenges that spine companies face. If you look at the biologics area, one [challenge] would be the long regulatory timelines requiring complex clinical trials in some cases where good guidance documents and clinical protocols don’t exist yet. If you take a look at the minimally invasive [area], the challenges there are less than biologics for regulatory and more around training, developing good surgical techniques that can be done reproducibly, and securing reimbursement for some of those techniques. [With] discs, [the challenge] has been one of searching for the right technology and the development of reimbursement. If you look across all three major areas, the major challenges would be the regulatory and complexity in clinical trials that are going to be required now and in the future, and securing reimbursement for new technologies, which is going to be based on a true value proposition that includes an economic value proposition and is supported and driven by clinical data. Those are the major areas of complexity facing spine companies today. And all of that is required to develop differentiation. To develop truly novel proprietary technology that offers benefits to patients and surgeons and is truly differentiated, you’ve got to focus on not only the R&D side but on the clinical trial, regulatory development and reimbursement environments as well.

ODT: What is driving innovation in the spinal implant market?

Ghanayem: What drives innovation in anything? There is an unmet need or a problem that needs to be solved. Those are some of the best ideas that come about. The other thing is the potential for profit, and that’s not unique to the spine world. Some of the drug innovations would be great but there’s no profit in it so they don’t go anywhere. Other drugs are developed because there’s huge market [potential]. The aging population is really going to present a challenge to us because people are going to live longer. They are going to want to be more active, and they’re better at taking care of their overall health. Osteoporosis, arthritis and maintaining functional capabilities are going to be more of an issue because there’s simply going to be more people that are living longer and are healthier. The operation you may do in a 30-year-old laborer to help a certain spine condition may not be the right operation for a 75-year-old that isn’t a laborer but wants to be physically active and involved in exercise or day-to-day activity. People want to be active and have the ability to do so. But there are challenges with the 75-year-old compared with the 30-year-old—there’s arthritis that is not present in the 30-year-old, there’s a degree of osteoporosis, there’s mobility issues and compensatory mobility issues. The older person doesn’t have the reserve that a younger person does to recover. An operation or a procedure is a tool. Using that tool for the 30-year-old may look okay on an X-ray and it may be okay for the patient as a whole. But applying that tool to the 75-year-old because of those other challenges related to osteoporosis, impaired mobility, and impaired reserve may not be the right thing to do. You have to be able to adjust what you do to match the patient and the [patient’s] specific needs. That’s where true innovation comes in.

Hughes: While the treatment of spine induced pain has advanced considerably in the past 15 years, surgeons are demanding devices that produce better clinical results more reliably, generate fewer side effects and that tackle specific patient conditions. Compared to other physical conditions (e.g., cardiovascular or ophthalmologic conditions), the diagnosis and treatment of spine induced pain are still as much an art as it is a science. Pain experienced in the arms, neck, back and legs can be attributed to the complex combination of joints, nerves and musculature comprising and surrounding the spine. Each company in the marketplace is attempting to develop new devices and methods that will satisfy the surgeon community’s desire for better solutions. Another factor driving innovation in the spinal implant market is the necessity of participants to differentiate from competitors. With well over 100 market participants selling conventional fusion devices in the United States, companies must commit significant resources to developing devices that not only provide superior clinical and economic results, but that are also patentable. To fuel this pursuit, the venture capital community invested approximately $1.6 billion dollars between 2005 and 2008 in spine companies that were utilizing new materials, different designs and unique access techniques. While not every new device is a revolution to spine care, as a whole each new device represents an opportunity to provide an evolutionary advance to the treatment of spine care, whether it be through clinical results or economic savings.

Koblish: What’s driving innovation is that the spine and spine problems are very complex. You’re dealing with bones, nerves, muscles, soft tissues, and sometimes the source of pain can be elusive. There’s almost a never-ending search for products or techniques and solutions to solve patients’ pain or stability issues. Surgeons always need more tools in their toolbox when it comes to the spine. What drives innovation is simply unmet needs and the need for better clinical outcomes across almost all the areas of spine. There’s more room to go in terms of improving clinical outcomes for patients and I think that’s what drives the innovation overall. If you look at one of the most successful surgical procedures ever developed—hip and knee replacement for painful arthritic joints—these surgeries have evolved over long periods of time, from the 1950s and 1960s. There’s been many iterations and refinements through hard work with physicians, manufacturers, designers and developers, and the outcomes now are fairly good. I think spine is just tracking a little bit behind in terms of time. There’s been a tremendous amount of research in clinical trial focus on the spine that only dates back to the late 1980s or late 1990s. The problems might be a little more complex in the spine but also we’re probably a little bit early in the technology evolution in spine relative to some other major orthopedic procedures.

ODT: What conditions of the spine affect mature athletes (those over the age of 65)? What specific factors affect surgical decision-making in adult athletes with cervical spine conditions?

Ghanayem: There is more arthritis associated with the aging process that can cause some narrowing around the nerves, or cervical [spinal] stenosis. The incidence of asymptomatic stenosis increases with age—it’s just part of the natural process. The concern is whether or not people are at risk for relatively minor trauma or moderate trauma causing the asymptomatic condition to become symptomatic. When you have asymptomatic cord compression—the narrowing around the spinal cord—there is a risk that it can become suddenly symptomatic because of some relatively minor event. And by minor, it could be tennis, for example. Maybe you’re playing doubles and your partner whacks you on the head with a tennis racket or you fall and hit your head against the fence or the netpost. Someone that has radiographic stenosis but no symptoms can aggravate that much easier than a 20-year-old playing tennis that has no arthritis buildup and no radiographic cord compression. We’re always trying to return somebody to the highest functioning level possible while maximizing their safety. In the older patient, that margin or reserve is not as good as it is in a younger patient. People say ‘it’s much harder for me to recover, my bones hurt every morning.’ Well yes, you’re losing muscle mass. Your discs are starting to narrow and become arthritic. Your reserve or functional capabilities are diminishing with age and that’s natural. You can still be very active in sports and other activities.

Koblish: As you get closer to 70 years old, osteoporosis can become a factor, lower bone metabolism and healing capability can become a factor and pliability and flexibility of thesoft tissue around the discs, your joints, etc. can be a factor. Any of those factors can combine to create a painful situation for the patient where they’ve got pain due to some type of deformity or collapse, nerve impingement or just lack of flexibility. For older patients, we have to make sure the therapies that we develop are very well suited for lower bone healing capability, or for less pliable soft tissues like discs, etc. We have to make sure that we’re taking care of the nerves, and that there are no bones or soft tissue impinging on them. For older patients, I think those are the major factors. We need biologics solutions to help patients heal up when their bones are not as young as they used to be, and certainly, managing the nerves and soft tissues as well.

ODT: What new technologies have been or are currently in development for spine surgery? What are the advantages and disadvantages of these newer procedures compared to existing ones?

Ghanayem: Minimally invasive surgery is a means of access. The basic principles of spine surgery don’t change because of the nature of the access. What the access is trying to do is minimize the effect you have on the soft tissues and the muscles that occur with open surgery. Not every spine problem is amenable to minimally invasive surgery. Some conditions are and that falls back to basic principles—if it’s a disease process that’s amenable to [MIS] then it can be helpful. If it’s one that can’t be addressed through a minimally invasive technique, then applying it is the wrong tool for the job. [MIS] doesn’t broaden the scope of spine surgery; it enhances certain spine operations. But it comes with direct costs and indirect costs. The indirect costs may be how much time somebody is off work, how long they have to wait before they can start rehab, or their inability to lift weight to a certain level compared to their pre-spine problem days. The direct cost is how much the technology costs. When we look at the cost of healthcare, sometimes we don’t measure all those things. All the insurance company or Medicare looks at is the direct cost—how much did it cost in the hospital to take care of this disease process? The indirect costs are really not measured because the payers of healthcare aren’t the ones responsible for the costs associated with those indirect activities. This is where some of the innovative research has to be done in terms of looking at how new technology not only helps a patient directly, but how it helps them indirectly. There’s also the question of value. Can we value somebody getting back to gardening or non-professional sports, six weeks earlier, two months earlier or at all? That’s a societal question. What price are we willing to pay for that? I think it’s very important personally but I’m not in control of the purse strings. MIS is a pretty hot topic.

The whole issue of motion preservation is a hot yet controversial topic. We’re trying to do things to the spine to maintain its motion. My guess is the stuff we have now is kind of neat, it’s kind of cool, but I bet you in 30 years we’ll look back at it and say, “what were we thinking?” It will be the equivalent of a Model T. We would never drive a Model T on the expressway and I think that’s what our current motion [preservation] technology is. However, we wouldn’t have a Ferrari [now] unless we had a Model T to start. You have to start somewhere. These are tools and just because you develop a technology or a tool doesn’t mean it’s going to be the best thing for a patient. The [technology] has to be studied in a way that’s appropriate, and it’s ongoing, it’s difficult, and it’s expensive. With the limited healthcare dollars, people don’t want to pay for it. Some projects and some technologies will fail, that’s just part of being novel. Nobody wants to shoulder that cost. But we have to ask ourselves where are our priorities at?

Hughes: Device categories receiving a substantial amount of attention from the spine and venture communities include diagnostic devices and minimally invasive approaches. As mentioned in the discussion regarding what is driving innovation in the spinal implant market, the accurate, reliable diagnosis of what specifically is causing spine induced pain is still largely a mystery. While X-rays and even MRI scans may be helpful in deducing some spine conditions, more sophisticated devices and methodologies are necessary to confidently conclude the cause and severity of most spine conditions. Due to this need, several companies are in the process of developing and commercializing new devices and methods to provide better diagnostic tools to the physician community. If technologies can be proven to be accurate and reliable, physicians are able to address the source of pain earlier in the continuum of care and thousands of dollars can be saved in unnecessary or inappropriate surgical treatments. Further, due to the non-invasive nature of diagnostic procedures, the risk to the patient is minimal. The development of minimally invasive procedures to treat spine conditions has advanced considerably over the past several years. In contrast to motion preservation devices which require extensive IDE clinical trials, minimally invasive devices and instrumentation can typically be approved through the less rigorous 510(k) pathway with the FDA, significantly reducing the time to market and cost of development. The alleged benefits of MIS include shorter hospital stays, more rapid return to work for patients, and superior cosmetic results. The disadvantages include steeper learning curves for surgeons and the amount of radiation exposure a patient receives if the surgical procedure is significantly extended. As more data is collected on procedures performed through minimally invasive means, spinal implant manufactures will continue to refine and improve these systems for the surgeon community.

Koblish: Orthovita has a great new technology for patients who are a little bit older than 65. We just got FDA approval for a bioactive bone augmentation material called Cortoss. It’s the first new injectable, settable polymer designed to fix fractures [that has been] invented and FDA cleared in 50 years. It’s the only alternative biomaterial available other than Poly(methyl methacrylate) bone cement which has been around since the ’50s. It was approved in June 2009 for treatment of vertebral compression fractures. We ran the largest, most rigorous vertebral compression facture clinical trial that resulted in some great clinical data. We’re currently in the process of launching and rolling that product out. It’s a new technology that’s targeted at patients that tend to be older, perhaps have osteoporosis and are in need of fracture fixation in their spine.

ODT: Is this product strictly for older patients or can it be used on younger patients as well?

Koblish:It certainly would work on patients that are younger. But one of the major factors in fixing compression fractures of the spine causative effects is due to osteoporosis and that tends to be a patient population that’s older. However, Cortoss certainly would be able to treat younger patients that have fractures of their spine as well. In fact, the profile of Cortoss is quite a bit different than the older technology PMMA bone cement in that it doesn’t release any MMA [methyl methacrylate] monomer, it’s got a bioactive ceramic component to it and bone tends to grow to it. So it would definitely be a good implant choice for younger patients.

ODT: Is Cortoss used only for spine fractures?

Koblish:Right now, it’s been (FDA) approved for use in the spine. But it can be used in other parts of the body. In fact, we are currently studying opportunities to expand the label outside of the spine into other areas of the skeleton. Hopefully we’ll have some more to say about that publically at some point in 2010 once we develop our label expansion strategy. We’re not going to promote off-label use.

ODT: To what extent are surgeons and patients involved in the development of new products?

Ghanayem: They are two of the most important people involved. It’s in that interaction where problems get discovered. Engineers and venture capital people are part of the process, but the problems are those of the patient and the patient goes to the doctor to express those problems. Unless you have those two [groups] involved and engaged, the rest of it is a waste. There’s no room for venture capital- or engineer-driven development. It has to remain patient-focused as part of an optimal healthcare delivery system.

Hughes: Surgeons have been and will continue to be a critical component in the development of new spinal implants, instrumentation and access techniques. Nearly every device in the spinal implant market has been invented by an orthopedic or neurosurgeon, or has received a significant amount of refinement through a surgeon or a number of surgeons. In the second case, these relationships are often formalized through a consulting agreement, which compensates a surgeon for his or her time to review a device and provide constructive feedback in order to improve the device. While these consulting agreements have come under considerable scrutiny in recent months due to cases of compensation being exorbitant, the necessity of surgeons to be involved in device development requires the industry to standardize these agreements in such a way to be law abiding and ethical. Patients may have begun to have a larger impact on which implants and techniques are utilized in their procedures, however it’s debated to what degree. Patients have unprecedented access to information through the internet to research non-surgical and surgical options to treat their back pain. Generally, patients are coming to physician offices prepared with a plethora of printouts to discuss, however, the number of patients that “shop” surgeons to find one that will perform a new, controversial procedure is likely less common than anecdotal stories may suggest. Surgeons still remain the key decision maker in recommending treatment options, and while patients are becoming more educated, they will never have the expertise of a trained physician.

Koblish: We collaborate very closely with surgeons. We are an orthobiologics and bio-surgery company, so we want to make sure that our materials meet surgeon and patient needs. We have to interact with surgeons for the most part to give us feedback and help us develop these products. We also rely on surgeon input and feedback for delivery instrumentation—how you deliver these materials into the body. You can’t really design these instruments without surgeon input since they are ultimately going to be the users of the product. We also rely on surgeons to help us characterize materials preclinically if preclinical testing needs to be done with surgeons who want to see data. Clinical trials are important too. All of our products are supported by extensive clinical trial programs and clinical data. We rely on surgeons to help us run those clinical trials. From a patient perspective, we really rely on patients to be open-minded to participate in our clinical trials, receive some of these novel therapies and help get new products approved such as Cortoss. We ran a very large clinical trial comparing Cortoss to PMMA and we’re very thankful to our investigators who participated and enrolled the patients. But we’re also very, very thankful to the patients who agreed to participate in the trials. It was a lot of work for them—they had to come back for multiple follow-ups and they had to be willing to try a novel implant material. We’re very thankful for their participation—we were able to show great clinical success and results, and we ultimately got the clearance for this new technology. We’re very reliant on surgeon input and participation with the company and patients as well.

ODT: Where do you find a pool of surgeons to give you input?

Koblish:We have relationships with key opinion leaders and thought leaders in the field. Part of having a commercial organization is that you have the ability to interact with some very intelligent physicians. The way you establish relationships is through working with thought leaders at major centers and through interacting with customers.

ODT: What possible impact will healthcare reform have on the spinal implant market?

Ghanayem: There’s going to be limited dollars to take care of healthcare. Where do you spend those dollars? Things that are high-priced that have a relatively narrow impact are probably not going to be the ones that survive. The things that are going to be embraced are the ones that are both cost-effective and beneficial together. Some of the research and development may not happen because there’s no money to do so. Who’s going to pay for the application of this stuff? There’s going to have to be studies done in patients. Who’s going to pay for that? It just may not happen. People like to do a little comparison to some of our colleagues that have limited access to [healthcare] funds in different countries. Some of those countries don’t have the research and development or the evolution of procedures and techniques because there are no resources to do so. The places where a lot of this is occurring is in countries that don’t grace that type of expenditure right now. You see that coming out of the United States, you see that coming out of Japan. You see it coming out of Germany or South Korea. There are certain people there that can innovate, do things outside the box and study things in patients, and do so in a system that supports it. There is a limited supply of money; it’s not endless. There are going to have to be some decisions made as to what we value and what we’re willing to spend on it.

Hughes: What type of healthcare reform that passes will obviously determine what the impact is on the spine market. Reform that modifies or expands the current healthcare system to be more inclusive to those who are uninsured or underinsured may bring tens of thousands of additional patients into the physician’s office for treatment. [That is] a tremendous opportunity for the spinal implant market, even if the reform requires costs to be held flat or be reduced over a reasonably period of time. However, if legislation passes that considerably reduces the economic incentive to spinal implant manufacturers or physicians, there may be negative consequences. First, if spinal implant manufacturers are not rewarded for spending millions of dollars and years of development on new devices and methods to treat the spine, then the number of innovative devices will decrease dramatically and the implant market will be commoditized by a handful of market players. Second, if payments to physicians for performing spine surgery is severely reduced, then students currently in medical school may be lured away to other areas of medicine that compensate them for the hundreds of thousands of dollars [spent] and years of medical training. Ultimately, this may result in a dramatic shortfall in qualified spine surgeons in the next 10-20 years. The issue of healthcare reform is being closely monitored and opined on by physician groups such as the Spine Arthroplasty Society and commercial interest groups such as AdvaMed.

Koblish: For medical device companies in general, there’s going to be two factors at play. One is the proposed medical device revenue tax. We believe that’s going to be detrimental to companies like Orthovita that are almost profitable. Taxing revenue instead of profit would mean that they might tax us to the point where it would be even more difficult to become profitable. It’s almost an innovation penalty for companies that invest tremendous amounts of time and capital in clinical trials to develop new technology. While you’re developing a commercial business that’s selling and developing revenue, it may serve as a disincentive to invest in a large clinical trial program. The tax just might come right out of the R&D budgets for companies like Orthovita which are spine specialty companies that a lot of times are doing the innovative work. So I think it could be detrimental. The other factor that is inevitable as far as the healthcare debate goes is the concept of evidence-based medicine and comparative effectiveness. The medical device companies and spine companies are going to have to make sure that all their products are supported with clinical data; that they have a clear and concise clinical value proposition to the patient and to the surgeon, as well as an economics value proposition and good outcomes for the payers. I think comparative effectiveness is going to be part of the future and medical device companies are going to have to adapt to that. We believe Orthovita has been ahead of the curve. Every one of our products—whether it’s a Vitoss bone graft substitute product, Vitagel or Vitasure, and certainly Cortoss, which was just recently FDA-cleared—are supported by large, rigorous clinical trials. The clinical data associated with our products has a good solid value proposition around the data. For example, in a head to head comparison with PMMA, an older technology, Cortoss showed a therapeutic benefit to patients. There was a statistically significant improvement in pain at three months which we believe led to a statistically significant improvement in function and mobility for patients at 24 months. In one major subset of patients, there was a 43 percent less adjacent fracture [rate] in patients that received Cortoss compared to those that received PMMA bone cement. I think that all of our products are well supported with clinical data, particularly Cortoss. I think that’s the wave of the future and I am confident we are well prepared.

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