Several factors have come together in the past few months to create a perfect storm of disincentives to spine surgeon inventors.
First, beginning Jan. 1, 2013, the federal government enacted the 2.3 percent medical device excise tax. For months before the tax was enacted, device companies began slimming their workforce in anticipation. By July, some estimates reported the tax cost companies $1 billion already. Some companies are cutting research and development funds and others are quietly becoming acquired by larger companies.
"We are going to see consolidation between implant companies," said Hyun Bae, MD, co-director of the spine fellowship program at Cedars-Sinai Spine Center in Los Angeles in a Becker's Spine Review report. "Most spine companies will go to a direct model to pay sales reps and keep profits. Maintaining high implant costs will be difficult as hospitals are hiring more surgeons. This in effect allows hospitals to dictate pricing and implant usage. The decreased margin and the Obama device tax will hurt the bottom line and mean less innovation, less educational grants and probably less company sponsored meetings."
Stryker recently announced it would acquire Mako Surgical, which focuses on robotic solutions for hip and knee surgery, for $1.65 billion. Biomet Spine announced it would acquire Lanx, a minimally invasive spine device company, pending approval under the Hart-Scott-Rodino Antitrust Improvements Act, by the beginning of December.
Many spine surgeon "tinkerers," who worked on device designs and developments based on their clinical needs and ideas were able to develop the device and then sell it to larger companies that would then put it through the device process. Now, many companies prefer to acquire a device that has already been through the FDA clearance process.
Additionally, most companies today are using the FDA 510(k) approach for improvements on current technologies and inventions, but the requirements for a truly novel device are more demanding. Investigational device exemption trials typically cost between $10 million and $60 million, and even after the device receives FDA approval there's no guarantee insurance companies will reimburse for it.
"For instance, minimal access surgery and biologics involved in a sacroiliac joint fusion or spinal deformity implants are more elaborate and evolved than generic implants," said Dennis Crandall, MD, founder and CEO of Sonoran Spine Center in Phoenix in a Becker's Spine Review report. "Anything that is more evolved than the typical generic implant would fit into the innovation segment and if it is better than the traditional treatment, we have to show the value of cost. It has to decrease pain, shorten operating room times and have more reliable outcomes than the standard treatment. That will be the way they decide whether to pay for the incremental improvement of the technology."
Some companies have decided to forego the United States market all together.
"The M6 artificial disc from Spinal Kinetics was going to undergo a clinical trial in the United States, but it was withdrawn because of the amount of money it takes to go through the FDA process," said Dr. Bae in a Becker's Spine Review report. "I think we'll go through a bit of a quiet phase where we're going to see some improvements on the devices we utilize, but I don't think we'll see the innovation we saw in the early 2000s."
The second huge factor for spine surgeon inventors is the Physician Payment Sunshine Act implementation, which began Aug. 1. Under the new Act, financial relationships between the device industry and physicians will be made public on a Centers for Medicare and Medicaid Services website that will be launched September 2014.
According to a report in AAOS Now, payments related to research will be included on the website whether the device was cleared by the FDA or not. Some surgeons have already begun disclosing this information publicly on their personal websites, but others report they are less comfortable working with device companies because that information will be made public.
The past few years have brought tremendous backlash in the professional and lay press for Medtronic's payments to surgeons through a variety of arrangements, including for working on clinical trials and inventing new products.
However, despite many of these challenges, surgeons who are passionate about device and procedure development will continue to see opportunities for growth. The biggest question is whether there will be a marketplace to support their ideas.
"Everything is happening in biologics," said Dr. Crandall. "There are some cool computer monitoring that we are involved in to try to identify where the stress in the bone is when we instrument the spine for degenerative disc disease. Our population is aging, so there is a lot we are doing there. Our thinking is, if we come up with these wonderful new techniques that are good for the bone, is there going to be a market place for that, especially if the payor is Medicare?"
So where will we end up?
"A lot of surgeons are like me and do research truly for the fun of it; its great fun thinking and developing new technology to treat patients better," says Dr. Crandall. "I envision a scenario where I would continue to tinker and think of new things with engineers even if the funding isn't there, but at some point to get the ideas off the paper and computer and into biomechanical testing, regardless of how altruistic I am, it wont' be made or tested if it can't show improvements."
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